| 
Photo by Matthew G. Bisanz | CC BY-SA 3.0
The controversy over proposals to review bank merger regulations continues to play out publicly, with Federal Deposit Insurance Corp. Chairman Jelena McWilliams saying that FDIC board members are attempting a “hostile takeover” of the FDIC.
McWilliams made the claim in an op-ed appearing in Thursday’s Wall Street Journal.
The controversy stems from a request seeking public comments about bank mergers that the Consumer Financial Protection Bureau said last week had been approved by the FDIC, prompting the FDIC to release a statement saying that it had not approved the document.
Rohit Chopra, director of the CFPB, said in a joint statement last week that the FDIC had approved a request for information on bank mergers. Chopra, who as CFPB director is automatically a member of the FDIC board, issued the statement with Martin Gruenberg, another FDIC board member and former FDIC chairman.
In the op-ed, McWilliams said Chopra had sent her a draft request for information on bank mergers on Oct. 31. McWilliams said whoever prepared the document “didn’t understand the FDIC’s merger-approval process,” noting that FDIC staff found omissions, misrepresentations and technical inaccuracies in the document.
McWilliams said she told board members she would be willing to work with them on a document drafted by FDIC staff. The board received the document on Dec. 6, McWilliams said, but later that day voted on the original CFPB-drafted document instead.
The FDIC board typically has five members, though currently the vice-chairman position is vacant. Michael Hsu, the acting comptroller of the currency, is another automatic member of the board. Chopra, Gruenberg and Hsu are Democrats while FDIC Chairman Jelena McWilliams is a Republican who was appointed to the position by then-President Donald Trump in 2018.
McWilliams in her op-ed noted that nine other FDIC chairmen, including Gruenberg, have been faced with an FDIC board where the majority of the members come from the opposing party.
“Never before has a majority of the board attempted to circumvent the chairman to pursue their own agenda,” McWilliams said in op-ed. “This conflict isn’t about bank mergers. If it were, board members would have been willing to work with me and the FDIC staff rather than attempt a hostile takeover of the FDIC internal processes, staff and board agenda.”
The FDIC held a board meeting on Dec. 14 that did not resolve the conflict. Hsu, who did not sign Chopra and Gruenberg’s letter last week, issued a statement through the OCC saying that he supported the CFPB’s document but had concerns about legal and procedural delays. Hsu did not reference the FDIC’s document.
“I support the view of the majority of the FDIC Board members that the Bank Merger Act (BMA) guidelines are ripe for review,” Hsu said. “I am particularly focused on the financial stability prong, given large bank merger trends and my experience in the 2008 financial crisis with too-big-to-fail firms.”
Banking trade groups sent a joint letter to board members that touched on the controversy. In a letter Monday from the American Bankers Association and state bank associations, including the Massachusetts Bankers Association, the trade groups reminded board members of “the importance of an independent FDIC and an orderly, transparent policymaking process.”
“[W]hen change comes, it is vital from a governance and regulatory expectations standpoint that federal banking agencies not create ambiguity about what constitutes an official action,” the ABA said. “Independence, adherence to longstanding institutional norms, and an orderly, public policy process are important elements of the FDIC’s 88-year tradition, and they are also key ingredients in the safety and soundness of the world’s largest and most diverse financial system.”
