Friday, February 4th, marked Chairman Jelena McWilliams’ final day as head of the Federal Deposit Insurance Corporation (FDIC). Although her term, which began June 2018, was not scheduled to end until June 2023, McWilliams officially resigned prematurely at the end of 2021.[1] She will be replaced by interim Chairman Martin Gruenberg, who was the previous Chairman of the FDIC from 2012-2018 (appointed by Barack Obama) and who remained on the board after his leadership role ended.[2] Gruenberg will remain the interim director until Joe Biden nominates a replacement who is approved by the Senate.[3]
The FDIC was created by President Franklin D. Roosevelt through the Banking Act of 1933, in response to the thousands of bank failures throughout the 1920’s and 1930’s.[4] Its mission is to “maintain stability and public confidence in the nation’s financial system”.[5] The agency has many duties such as examining and supervising financial institutions and managing receiverships, but it is most known for insuring consumers’ deposits at banks.[6] The FDIC insures deposits for up to $250,000 per depositor per bank, and the agency is funded by using premiums they receive from banks on these deposits.[7] Thus, the FDIC has played a crucial role in managing commercial banks, minimizing bank runs, and ensuring the safety and soundness of consumer banking.[8]
Recently, there has been plenty of debate as to why McWilliams, the Trump-appointee, unexpectedly resigned. Most argue it was due to the political unrest within the (typically nonpartisan) agency,[9] although she did not say as much in her resignation letter.[10] Only two weeks before McWilliams’ resignation, the Democratic majority of the board tried to put certain action items to a vote (namely, issues regarding bank mergers) without the approval of McWilliams, because they were aware McWilliams did not agree with their ideas.[11] This caused a legal debate to take place revolving around whether the chair can be outvoted by the majority in such a way.[12] McWilliams insisted a vote cannot be cast without the consent of the chair and later referred to the issue as a “hostile takeover” attempt by the Democrats to oust her from office.[13] The question of whether such an overruling of the chair is allowed was never answered. However, since it is still a question up for debate, when decided, it will likely have a large impact on how the FDIC will be run going forward. Yet, regardless of her reasons for resigning, McWilliams’ resignation will bring a lot of change to the FDIC.[14]
A change in leadership at the FDIC brings a change in politics. The agency, which already had a democratic majority of the board, is now also headed by a Democrat with widely different goals and objectives than the resigned Republican McWilliams. Even while McWilliams was in charge, as a member of the board, now Chairman, Gruenberg vehemently opposed many of her actions to loosen rules on banks of all sizes.[15] His step-in to leader could lead to reversal of such moves. In his opening remarks Gruenberg made it clear he will focus on preparing banks for risks posed by climate change: a topic far from the focus of McWilliams’ work.[16] Other focuses Gruenberg touched upon in his opening remarks included strengthening the Community Reinvestment Act (CRA), reviewing the bank merger process (the issue that caused the political debate with previous Chairperson McWilliams), and evaluating cryptocurrency risks.[17]
As McWilliams touched upon in her outgoing remarks, regardless of anyone’s views on her actions in charge, she is the quintessential example of what someone can accomplish in this country.[18] As an immigrant from former Yugoslavia, she came to the U.S. knowing absolutely nothing on what she could go on to accomplish.[19] Just 30 years later, she was head of one of the most important and impactful functions of the U.S. economy. She has truly encompassed the “American dream.”
[1] See Press Release, Fed. Deposit Ins. Corp., FDIC Chairman Jelena McWilliams Announces Her Resignation (Dec. 31, 2021), https://www.fdic.gov/news/press-releases/2021/pr21107.html.
[2] Katanga Johnson & Pete Scroeder, Trump-appointed McWilliams resigns as U.S. FDIC chair after power struggle, Reuters (Dec. 31, 2021), https://www.reuters.com/world/us/trump-appointed-mcwilliams-resigns-chair-democrat-majority-us-fdic-board-2021-12-31/.
[3] Id.
[4] See History of the FDIC, Fed. Deposit Ins. Corp. (June 22, 2021), https://www.fdic.gov/about/history/.
[5] See What We Do, Fed. Deposit Ins. Corp. (May 15, 2020), https://www.fdic.gov/about/what-we-do/.
[6] Id.
[7] Id.
[8] See id.
[9] See Aaron Nicodemus, FDIC Chair Jelena McWilliams to resign after partisan feud, Compliance Week (Jan. 4, 2022), https://www.complianceweek.com/regulatory-policy/fdic-chair-jelena-mcwilliams-to-resign-after-partisan-feud/31218.article.
[10] See Press Release, supra note 1.
[11] See Victoria Guida, FDIC’s GOP Chair to Resign After Partisan Brawl, Politico (Dec. 31, 2021), https://www.politico.com/news/2021/12/31/fdic-chair-jelena-mcwilliams-to-resign-526295.
[12] Id.
[13] Id.
[14] See id.
[15] See id.
[16] See Press Release, Fed. Deposit Ins. Corp., Acting Chairman Martin J. Gruenberg Announces FDIC Priorities for 2022 (Dec. 31, 2021), https://www.fdic.gov/news/press-releases/2022/pr22015.html.
[17] Id.
[18] Jelena McWilliams, Chairman, Fed. Deposit Ins. Corp., Remarks by Chairperson Jelena McWilliams at the Bipartisan Policy Center (Feb. 3, 2022), https://www.fdic.gov/news/speeches/2022/spfeb0322.html.
[19] See id.
