The White House believes the U.S. Federal Deposit Insurance Corp needs a “fresh start” with a new chair who is not part of the leadership that presided over its long-running cultural problems, a White House official told Reuters on Tuesday.
FDIC Chair Martin Gruenberg finally succumbed on Monday to a months-long scandal over sexual harassment at the agency, announcing that he would step down once the Senate has confirmed a successor, in a move that could kill bank capital hikes and other major Wall Street bank rules sought by Democrats.
Washington insiders and analysts said the White House is under pressure to quickly fill the role and preserve Democratic President Joe Biden’s financial regulation agenda just six months ahead of the U.S. presidential election.
They expect the White House would seek a female nominee already in government who would be better placed to overhaul the agency’s toxic culture and get through the nomination process faster.
“Assuming that the White House were to announce a nominee tomorrow to replace Mr. Gruenberg, the best it could hope for is a vote on the Senate floor in September,” Stifel Chief Washington Policy Strategist Brian Gardner wrote on Tuesday.
The administration is “very conscious” of the tight Senate calendar and wants to put a nominee in front of the Senate Banking Committee as soon as possible, said the official who spoke on the condition of anonymity.
Gruenberg, a Democrat, had clung to his job since the scandal erupted in November, despite many lawmakers demanding he step down. A Monday statement by top Democrat and Senate Banking Chair Sherrod Brown calling for fresh leadership appeared to tip the balance.
A top bank regulator, the FDIC faces a critical moment as regional banks remain under stress following last year’s turmoil, and as it finalizes capital hikes and other major new rules for Wall Street banks.
Under the law, the only way for the administration to replace Gruenberg without handing control of the agency to Republicans is to have the Senate, which Democrats control by one vote, confirm their new pick. But many Washington analysts believe Gruenberg may struggle to hold onto his job much longer, as Republicans continue to pile pressure on Biden to fire him.
A damning independent review this month found widespread misconduct at the FDIC went unaddressed for years, and cited instances in which Gruenberg – who has spent nearly two decades in leadership at the agency – lost his temper with subordinates.
The agency’s deep-seated problems, combined with the uncertainty created by the election, may put off the relatively small pool of viable candidates, said analysts.
“I don’t know who they’re going to find who can get the number of votes quickly and even if they find the perfect person, I wonder if that perfect person would be interested,” said Isaac Boltansky, director of policy research for brokerage BTIG.
POSSIBLE CONTENDERS
Among the candidates who could fit the bill is Christy Goldsmith Romero, a Democratic member of the Commodity Futures Trading Commission (CFTC), said one regulatory and one industry source.
Goldsmith Romero, who declined to comment, is in the process of being re-nominated to the CFTC role, meaning the White House could switch her nomination to FDIC chair quickly, one said.
Treasury Undersecretary for Domestic Finance and former top Federal Reserve official Nellie Liang would also be a strong candidate, having already been Senate confirmed, one of the people said.
While New York State Department of Financial Services Superintendent Adrienne Harris is not Senate-confirmed, she was in contention for Gruenberg’s job back in 2022 and could also be a potentially strong candidate, said two other people.
Spokespeople for Liang and Harris declined or did not respond to a request for comment.
Gruenberg, 71, had been at the FDIC since 2005 and is the longest-serving FDIC board member in the agency’s 89-year history. During that time he served as its chair twice – once under President Barack Obama and the second time under Biden.
While Gruenberg was not found to be directly responsible for the agency’s broad cultural issues, he apologized for misconduct under his leadership and for his own transgressions.
Should he leave the agency without a confirmed replacement, its leadership would fall to Travis Hill, the agency’s vice chair and a Republican who has voted against some of the proposed new rules. The agency would then be deadlocked 2-2.
That could delay indefinitely the Basel capital hikes, and other major draft rules the agency is working on with fellow regulators; those include requirements for some lenders to hold more long-term debt to boost their resilience; restrictions on banker executive pay; and changes to bank merger policies.
White House press secretary Karine Jean-Pierre told reporters on Tuesday that the president “is taking this very seriously.”