FDIC Chairmanship in Play at Pivotal Time for Nation’s Future — and Banking’s

In the wake of a scandal over widespread discrimination and sexual harassment, the administration has nominated Christy Goldsmith Romero to take over the FDIC chairmanship. She's pledged for a deep cleanup at the deposit insurer and says she has the chops for the agency's key financial regulatory roles.

For much of the American public, confidence in the banking system rests at least in part on four initials: FDIC. The early 2023 banking crisis underscored how quickly conditions can change, and one of the industry’s responses was to emphasize Federal Deposit Insurance Corp. coverage and to provide ways for depositors to maximize their protection.

The FDIC faced a crisis of its own — or, rather, a multi-layered scandal came to light — when the Wall Street Journal published a detailed exposé about the deposit insurance agency last November.

The report included allegations of longstanding sexual harassment and discrimination against women, minorities and LGBTQ+ individuals. The publication also indicated that agency leaders often did not investigate or discipline people committing these activities or only punished them lightly. In the end, in May FDIC Chairman Martin Gruenberg agreed to resign once a successor was confirmed by the Senate.

Now the process of replacing the chairman and addressing the causes and effects of the scandal begins — while keeping FDIC at its key regulatory, insurance and system protection jobs. A major challenge for Gruenberg’s replacement will be rebuilding FDIC’s internal culture.

Administration Nominates Replacement FDIC Head

In mid-June President Biden nominated Christy Goldsmith Romero, a veteran federal financial services enforcement attorney who currently serves as a commissioner at the Commodity Futures Trading Commission. She serves in that position as a Biden appointee, and received unanimous Senate approval for that job.

Prior, Goldsmith Romero worked at the Treasury Department for 12 years, most of that as Special Inspector General for the Troubled Asset Relief Program. TARP was an effort to restore confidence in the banking system as part of the federal plan for recovery from the 2007-2008 financial crisis. This effort entailed federal investments in hundreds of banks, and Goldsmith Romero’s operation conducted oversight, audit and law enforcement roles over those institutions.

In nomination papers, the administration claims that “SIGTARP” recovered more than $11 billion for the government and sent 75 bankers and nearly 100 bank borrowers to prison in the course of investigations involving fraud, corruption and money laundering. Goldsmith Romero takes pride that the $11 billion was 27 times the cost of running SIGTARP.

Goldsmith Romero also served at the Securities and Exchange Commission for six years, including posts as counsel to two different commission chairs.

A Senate confirmation hearing including Goldsmith Romero and other financial agency candidates took place on July 11, with much of the attention on the FDIC candidate.

Christy Goldsmith Romero FDIC confirmation hearing

CFTC Commissioner and FDIC nominee Christy Goldsmith Romero testifies at her confirmation hearing.

“As employees need to be supported in the FDIC’s critical mission, I would prioritize a complete overhaul of the FDIC’s workplace culture,” said Goldsmith Romero in her opening statement to the committee hearing. “The reporting is deeply disturbing and describes deep-seated cultural issues that have caused pain for many employees. It must not continue and I would bring accountability.”

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Senators Dig into FDIC Nominee’s Thoughts and Plans

Committee chairman Senator Sherrod Brown, an Ohio Democrat, gave a hearty endorsement to the nominee and asked Goldsmith Romero what she thought of the scandal and what she would do.

First, she condemned the state FDIC had fallen into. “When I read the [law firm’s] report, it read like a bygone era, particularly for women, minorities and members of the LGBTQ+ community,” said Goldsmith Romero.

She said that she would modernize the FDIC workforce policies and make them uniform through the agency’s entirety. She said she would “herald” employees who do the right thing and investigate and act on charges of harassment and discrimination. A priority is to establish a process where employees will feel safe when they file complaints.

She also noted under questioning that she had cleaned up cultural issues at SIGTARP. “Cultures can change,” said the nominee.

In response to Sen. Mark Warner, a Democrat from her home state of Virginia who supported her with an opening statement, Goldsmith Romero said that “Changing the culture is going to take a bit of time, but at the same time we can’t take our eye off the ball of the mission [regulation and oversight]. We had bank failures in spring 2023. We have to be sure everyone is focused on the mission.”

Senator Mike Rounds, a S.D. Republican on the committee, was among those who probed the nominee’s thinking about the controversial Basel III endgame capital standards and pending revisions to the proposed system.

“I’m not looking to get something done fast. I’m looking to get something done right,” Goldsmith Romero said. She added that she had not yet seen any pending changes.

In this context, Goldsmith Romero said she supported the aims of S. 2155, signed in 2018. The law, the Economic Growth, Regularly Relief and Consumer Protection Act, calls for tailoring of federal banking regulations to banks based on their size and complexity.

Goldsmith Romero had further back and forth with Rounds over the recent Chevron Supreme Court decision that calls for regulators to hew closely to the intent of Congress in implementing legislative mandates. “Everything I do now concerns what’s the authorization of Congress,” she said. Rounds extracted from her an agreement to consult with Congress when she was unclear on its legislative intent.

The nominee also spoke in some detail of her work at SIGTARP, describing much of it as paralleling the work of bank examiners, visiting institutions and reviewing documentation and auditing records in the course of investigations.

“We could see if there was a culture of risk management or if there wasn’t,” she said. Some of this came in response to probing by Sen. Tim Scott, the ranking Republican member of the committee, from South Carolina, who questioned her qualifications for the post.

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How Long Will the Job Last? It Depends in Part on the Election

No date has been set yet for the confirmation vote at the committee or full Senate level for Goldsmith Romero.

If confirmed, Goldsmith Romero would face a fork in the road in the form of the upcoming presidential elections. Officially FDIC Chairmen serve five-year terms. If President Biden or another Democratic nominee wins, she could serve for at least four years.

However, if Donald Trump wins another term, things could become uncertain for Goldsmith Romero not long after getting the job.

Case in point concerns former FDIC chairman Jelena McWilliams, predecessor to Gruenberg. McWilliams was appointed by former President Trump and her term was set to run until June 2023, though under President Biden. However, McWilliams resigned her post in February 2021, far ahead of its expiration.

McWilliams had been confronted by Democratic members of the board, Gruenberg, Acting Comptroller Michael Hsu and Rohit Chopra, director of the Consumer Financial Protection Bureau. The specific issue was FDIC policy on bank mergers, but the episode ran its course as a power play. Subsequently McWilliams called the board members’ actions “a hostile takeover” of her authority. She resigned in the wake of the episode, leading to Gruenberg, a member of the board and a Democrat, becoming acting chairman until he was appointed and confirmed to the role by Biden.

Should Donald Trump regain the presidency, the balance of affiliations on FDIC’s board could change drastically. Board member Michael Hsu has never been nominated to the post of Comptroller of the Currency, serving only on an acting basis before and since the failed Biden nomination of academic Saule Omarova. He could be replaced quickly by Trump.

For his part, Chopra heads an agency that Trump at one point wanted to eliminate. Trump’s first pick as CFPB director was Mick Mulvaney, who as a member of Congress had wanted to kill the bureau. Its approach was softened for a time, but CFPB survived the Trump years, and Chopra’s appointment and confirmation ushered in what is arguably the most aggressive CFPB yet. Whether Chopra holds onto his post, and with it his seat on FDIC’s board remains to be seen. In June 2020 the Supreme Court ruled that a president could dismiss a CFPB director without cause, no matter when the person’s term expired.

The remaining two current members of FDIC’s board are Travis Hill, vice-chairman, and Jonathan McKernan, board member. Both are Republicans. Under the Federal Deposit Insurance Act, as amended, no more than three members of the five-member board can be from the same political party.

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