Last week, the Senate did something a little bit odd at the FDIC.
Acting chairman and sitting vice chairman Marty Gruenberg was confirmed for another six-year term on the FDIC board, but was not confirmed as chairman, and Tom Hoenig, Republican and President Barack Obama's nominee for vice chairman, got basically the same treatment.
That may seem like inside baseball, but what it means, in effect, is that whoever wins the presidential election in November will be able to nominate the chairman, who serves a five-year term, according to Rob Blackwell and Joe Adler at American Banker.
It's a presidential election year. Senate Minority Leader Mitch McConnell is reserving the right for a potential Republican administration to nominate its own chairman. Had the Senate confirmed Gruenberg as chairman outright, he would have had a five-year term, meaning that he could not be removed until 2017, past even the next presidential election cycle.
Democrats, meanwhile, were unwilling to allow Hoenig to serve as the agency's vice chair because it would have, by law, put him in charge of the agency. As a result, Gruenberg retains his vice chairman status, and Hoenig serves as an independent board member (along with Norton, who was nominated for that role).
As we saw during the term of maybe the most influential FDIC chairman of all time, Sheila Bair, the head of the FDIC wields a significant amount of power and influence, especially when the economic chips are down. Not only does the FDIC set a lot of the rules for how banks operate and are wound down should they fail, but the FDIC is one of the most well-known and well-respected government agencies out there, and the head of the FDIC has a pretty substantial "bully pulpit" from which to champion his or her preferred policies and influence the news cycle.
That was particularly evident with Bair, whose fingerprints were all over the Dodd-Frank financial reform law -- from the "living will" provision that forces too-big-to-fail banks to provide the FDIC a blueprint for how they would wind down in the event of a failure, to tougher capital requirements for financial institutions, to the permanent increase of FDIC insurance limits from $100,000 to $250,000.
This bit of Senate subterfuge means, depending on the outcome of the election, Gruenberg will have to either wait until after the election to be confirmed as chairman and get a chance to really advance his own agenda, or end up taking orders from a chairman appointed by the new Republican president.
For the record, I can't say I'm happy to see political gamesmanship effectively hamstring a rather important part of the U.S. banking regulatory system. Regardless of the politics, it seems self-evident that the FDIC should have top leadership firmly in place so that it can effectively go about the business of policing the banking system and protecting consumers' deposits. Hoenig and Gruenberg both appear very qualified and deserve to be confirmed.
What do you think? How important is the FDIC chairman? Should the Senate have just filled the chairmanship without worrying about politics?
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