Written by Nandita Bose, Pete Schroeder, and Douglas Jellison
WASHINGTON (Reuters) – The White House believes the U.S. Federal Deposit Insurance Corporation needs a “fresh start” with a new president who is not part of the leadership that has overseen its long-standing cultural problems, a White House official told Reuters on Tuesday. .
The administration is “very conscious” of the Senate's tight timeline and wants to put a nominee before the Senate Banking Committee, which oversees the FDIC, as soon as possible, said the official, who spoke on condition of anonymity.
FDIC Chairman Martin Gruenberg finally surrendered Monday to a months-long scandal over sexual harassment and other misconduct at the agency, announcing that he would step down once the Senate confirms his successor.
Gruenberg, a Democrat, has clung to his position since the scandal broke in November, despite several lawmakers calling for him to step down. A statement from the top Democrat and Senate Banking Chairman, Sherrod Brown, calling for new leadership on Monday appeared to tip the scales.
The Federal Deposit Insurance Corporation (FDIC), a major bank regulator, supervises lenders and insures deposits. It faces a critical moment as regional banks remain under pressure following last year's turmoil, and with capital raises and other key new rules for Wall Street banks being finalized just six months before the US presidential election.
Under the law, the only way for a Democratic administration to replace Grunberg without losing control of the agency to Republicans is for the Senate, which is controlled by Democrats by one vote, to confirm their new pick.
Many analysts in Washington believe that Grunberg may have difficulty keeping his position much longer, as Republicans continue to pressure President Joe Biden to remove him, putting the White House under unusual time pressure.
A damning independent review this month found that widespread misconduct at the FDIC went unaddressed for years, and cited instances in which Gruenberg — who spent nearly two decades leading the agency — lost his temper with subordinates.
Washington insiders said the White House would likely prefer a female nominee who is better positioned to reform what staff described in the report as a patriarchal and misogynistic culture. A current government official with banking experience will be able to pass the nomination process faster.
That leaves a relatively small pool of candidates, many of whom may be postponed due to the uncertainty created by the election, analysts said.
“I don't know who they will find who can get the vote count quickly, and even if they find the perfect person, I wonder if that perfect person will be interested,” said Isaac Boltanski, director of policy research at the institute. PTIG Financial Brokerage.
Potential contenders
Among the candidates who could fit the bill is Christy Goldsmith-Romero, a Democratic member of the Commodity Futures Trading Commission (CFTC), a regulatory and industry source said.
Goldsmith-Romero, who declined to comment, is in the process of being renominated for the CFTC role, meaning the White House could quickly switch her nomination to FDIC head, one of them said.
Treasury Under Secretary for Domestic Finance and former Federal Reserve Board official Nellie Liang would also be a strong candidate, having already been confirmed by the Senate, one of the people said.
While Adrienne Harris, the supervisor of the New York State Department of Financial Services, has not been confirmed by the Senate, she was vying for Gruenberg's job in 2022 and could also be a potentially strong candidate, two other people said.
Spokespeople for Liang and Harris declined or did not respond to a request for comment.
Gruenberg, 71, has been a member of the FDIC since 2005 and is the longest-serving member of the FDIC board in the agency's 89-year history. During that period he served as its president twice – once under President Barack Obama and the second time under Biden.
While Gruenberg has not been found to be directly responsible for broad cultural issues at the agency, he has apologized for the misconduct that emerged under his leadership and for his transgressions.
If he leaves the agency without a confirmed replacement, leadership of the FDIC will fall to Travis Hill, the agency's vice president and a Republican who voted against some of the proposed new rules. Then the agency will reach a 2-2 deadlock.
This could indefinitely delay the Basel capital increase, as well as other key draft rules the agency is working on with fellow bank regulators. These include proposed requirements for some lenders to hold more long-term debt to enhance their resilience; restrictions on banking executive salaries; and changes in bank merger policies.
Earlier Tuesday, White House press secretary Karine Jean-Pierre told reporters that “the president takes this matter very seriously.”