Concerning Recent Developments at the FDIC An Interview with Former FDIC Board Member and Banker Joe Neely The Federal Deposit Insurance Corporation (FDIC) is an independent agency created by Congress to maintain stability and public confidence in the nation’s banking system by insuring bank deposits. It has served this function since its creation in 1933, in a purposely designed, balanced, non-partisan manner. However, in December, some members of the Board of Directors bypassed the normal agenda and staff vetting procedures in an unprecedented move that seems to be politically motivated. These actions led to the FDIC Chair’s abrupt resignation and have led some to question the remaining leadership’s objectiveness, including former FDIC board member, Joe Neely. He is a former career banker, a state Commissioner of Banking and Consumer Finance, retired Chief Executive at First National Bankers Bank, and currently principal of Neely and Associates, LLC, a banking consulting entity. Neely’s broad banking experience including his time on the FDIC board gives him unique knowledge of this situation. His perspectives are informative to all bankers in order to raise their awareness of recent developments and the current environment at the FDIC.
FDIC Background 101 The FDIC is governed by a five-person Board of Directors that includes the Comptroller of the Currency and the Director of the Consumer Financial Protection Bureau, and three independent FDIC Directors all of whom are appointed by the President and then confirmed by the Senate. Each board member must meet certain statutory requirements. For example, one must have state bank supervisory experience. The number and composition of board seats has varied somewhat due to changes made by Congress over the almost 90 years of the FDIC’s existence. Importantly, no more than three board members can be from the same political party. Currently the Vice Chairman seat is vacant and, as of February 4, 2022, Chairman Jelena McWilliams’ resignation leaves the Chairman position officially vacant. FDIC Director Martin Gruenberg will likely function as Interim Chairman until which time the White House elects to nominate a Chairman and that nominee is subsequently confirmed by the Senate. As of publication, the board members are Martin Gruenberg, Director, FDIC; Michael Hsu, Director, Acting Comptroller of the Currency; and most recently appointed, Rohit Chopra, Director, CFPB. All three are considered Democrats and were appointed by Democratic presidents, meaning there is currently no voice from the Republican party on the board.
What Happened in December Newly appointed member Chopra and longtime member Gruenberg acted unprecedentedly when they held a private, unscheduled vote to solicit public feedback on potential changes to the FDIC’s bank merger approval process. The FDIC Chair controls the agenda, and Chopra and Gruenberg attempted to override that protocol. McWilliams did not participate in the vote and cited the maneuver as improper and out of 30 | KENTUCKY BANKER MAGAZINE
order. In an official statement, the FDIC said the action was not valid. This then led to debate over whether a majority of the board can force items onto the board agenda without the consent of the Chair. “The FDIC has three responsibilities,” said Neely. “To effectively supervise state-chartered banks, to protect and preserve the integrity of the deposit insurance fund, and to provide for the orderly liquidation of failed institutions. For 88 years, the FDIC has successfully and efficiently accomplished this mission. And for that time, the Chairman has managed the agenda [of Board meetings]. Chopra and Gruenberg circumvented 88 years of process and protocol, as well as bypassed FDIC staff, with their attempt to publish their proposed rule for comment.” Then, at a December 14 board meeting, McWilliams rejected a bid by Chopra to add a record of the vote to the FDIC’s official minutes. Just two weeks later, McWilliams submitted her resignation letter. McWilliams had been FDIC Chair since 2018 and she was appointed for a term extending through 2024. Her resignation leaves key regulatory agency leadership positions for President Biden to fill, pending Senate confirmation. President Biden’s recent pick for Comptroller of the Currency, Saule Omarova, withdrew after facing bipartisan Senate opposition in December.
