CSBS says FDIC board nominees lack state bank regulatory expertise
On November 29, the Conference of State Bank Supervisors sent a letter to Senator Sherrod Brown (D-OH), Chairman of the Senate Banking Committee, and Rep. Pat Toomey (R-PA), Ranking Member of the House Financial Services Committee, to express their disappointment that none of the nominees to the FDIC Board of Directors have state bank supervisory experience. Last month, President Biden nominated Martin Gruenberg, who has been serving as acting chairman, to serve as chair and member of the board, and in September, Travis Hill and Jonathan McKernan were nominated to fill the board’s two vacant seats (covered by InfoBytes here and here). At the time of the announcement, CSBS President and CEO James M. Cooper issued a statement encouraging the U.S. Senate to ask nominees how they intend to work with state bank regulators. Cooper reiterated in his follow-up letter that the FDI Act requires that at least one board member have state bank supervisory experience, especially since having the Comptroller of the Currency seated on the board represents the interest of national banks. According to Cooper, fulfilling this statutory requirement “can only be met by a person who has worked in state government as a supervisor of state-chartered banks, and as the legislative history notes, [is] someone with ‘state bank regulatory expertise and sensitivity to the issues confronting the dual banking system.’” Cooper asked that the slate of nominees confirmed by the Senate includes at least one individual who fulfills this requirement.
The following day, during the Senate Banking Committee’s nomination hearing, Republican senators questioned Gruenberg’s role in a dispute between Democratic board members and former Chairwoman Jelena McWilliams related to a joint request for information seeking public comment on revisions to the FDIC’s framework for vetting proposed bank mergers. McWilliams eventually announced her resignation at the end of last year (covered by InfoBytes here). Senator Pat Toomey (R-PA) called Gruenberg’s participation in the dispute “very disturbing,” and expressed concerns that his actions, along with some of his colleagues, “really undermines the  FDIC and could have lasting implications.” Gruenberg countered that under the FDI Act, “the authority of the agency explicitly is vested in the board of directors, and the majority of the board has the authority to place items before the board.”
Some Republican senators also raised concerns with Gruenberg’s past involvement in Operation Choke Point, with Senator Steve Daines (R-MT) requesting that Gruenberg commit to actively preventing FDIC employees from “criticizing, discouraging or prohibiting banks from lending or doing business with any industries or customers that are operating in accordance with the law.” Gruenberg agreed to do so, saying this has been the FDIC’s policy. The FDIC’s current approach to cryptocurrency was also addressed, while Senator Cynthia Lummis (R-WY) took issue with the fact that none of the board nominees fulfill the Biden administration’s push for diversity and inclusion.