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U.S. Federal Deposit Insurance Corporation Chair Replacement Soon To Be Decided
The selection of a nominee to replace the current chairperson of the U.S. Federal Deposit Insurance Corporation (FDIC) can be expected as early as next week, according to sources familiar with the matter. This comes amidst mounting evidence of misconduct within the agency.
Martin Gruenberg’s Decision to Step Down
Current FDIC Chair, Martin Gruenberg, announced earlier this week his intention to resign once his replacement is Senate-confirmed. Argumentation from legislators seeking a change in leadership at the FDIC, following an independent inquiry unveiling pervasive sexual harassment and other misconduct, led to his decision.
Additional allegations show that the FDIC’s internal auditor was not immediately informed of misconduct charges involving high-ranking FDIC officials. This position fuels Republican demands for President Joe Biden, a Democrat, to remove Gruenberg.
The Impact on Biden’s Financial Regulation Agenda
The White House is under pressure to quickly appoint a new FDIC chief to safeguard Biden’s financial regulation plans, which includes critical banking sector capital increases, just six months before the U.S. presidential election.
A decision on the nominee could be made in the coming weeks or possibly as soon as next week, according to a senior administration official. The White House has reached out to Senator Sherrod Brown, the Senate Banking Committee chair that oversees FDIC, about arranging a quick confirmation hearing, another White House official stated.
Looking for Leadership Outside the Agency
Earlier this week, Reuters reported that the White House is looking for a new agency head beyond the organization. The administration is also looking for a candidate with strong management skills necessary to solve the agency’s cultural issues, an administration official declared.
Kristin Johnson, a Democratic member of the Commodity Futures Trading Commission (CFTC), is being considered, according to two knowledgeable individuals. The news was initially reported by Bloomberg last Thursday.
Other favoured candidates among Democrats include the CFTC’s other Democrat, Christy Goldsmith Romero, top Treasury official Nellie Liang, New York’s Department of Financial Services’ superintendent Adrienne Harris, and the Federal Housing Finance Agency’s director, Sandra Thompson.
Allegations of Misconduct Not Reported
Last week, Inspector General Jennifer Fain sent a memo to Gruenberg stating the watchdog had “learned of several allegations of misconduct regarding senior FDIC officials that were not reported … in a timely manner.” The office is currently reviewing the accusations and looking into possible unreported cases.
As a response to an appeal for comment, the FDIC shared its message to the OIG’s office earlier this week. The agency said it looks forward to establishing a procedure to swiftly notify the OIG of alleged misbehavior by senior FDIC officials.
Implications of Gruenberg’s Exit
While Gruenberg was not directly implicated in the widespread cultural issues at the agency by the independent inquiry, he did apologize for the misconduct occurring under his leadership, as well as his own shortcomings.
On Thursday, the Republican-led House Financial Services Committee declared its request for Gruenberg and other top officials to testify on June 12 about the independent inquiry’s findings. If Gruenberg resigns before a successor can be confirmed, the FDIC’s board of directors could face a 2-2 partisan deadlock, potentially thwarting the Biden administration’s bank regulation plans.
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