When 1-3 is a majority, until it isn’t

Trump’s FDIC chair, Jelena McWilliams, wasn’t ousted; she quit. (Story here.)

The FDIC is the federal agency that insures bank deposits (details here). McWilliams was appointed in 2018 to a 5-year term expiring in 2023. By December 2021, she was the only Republican on the 5-member board, with the vice-chair slot still vacant.

The other 3 members are Democrats, 1 an Obama appointee, the other 2 ex-officio members by virtue of heading other federal agencies as Biden appointees (details here).

McWilliams (bio here) has a compelling personal story. She grew up in Serbia and came to the U.S. as an exchange student just before the outbreak of the vicious Serbia-Bosnia war. She worked her way through Berkeley with minimum-wage jobs, earning highest undergraduate honors, then graduated from the Berkeley law school, and was hired by a Silicon Valley law firm. A few years later she was hired by the Federal Reserve Board of Governors, where she was involved in rulemaking. She then was chief counsel for the Senate Banking Committee, then was hired by a major bank. With a personal story like that, how can you not like her? And she’s obviously a very bright person.

As you would expect, there are policy differences between Republicans and Democrats within the arcane realm of bank and financial institution oversight and regulation. Trump, of course, is in a unique category going beyond merely “Republican.” He wanted, among other things, to let banks to offer “loan products” competing with payday lenders. (!!!)

The authority structure at the FDIC is even more arcane than the subject matter. As Politico explains (here), the agency’s staff “technically work for the chair,” who “has certain prerogatives and … the Democratic appointees need to respect the authority of the independent chair.” In other words, the chair runs the agency, and the board functions as somewhat of an advisory body.

But that doesn’t make her an autocrat. As Politico points out, “At the same time, the independent chair needs to determine where the consensus lies on her board. And if she doesn’t have consensus, she needs to schedule a meeting and figure out a path forward and dissent if necessary.” (Is your head spinning yet? Mine is.)

The blowup started when “McWilliams circulated a staff draft of a request for comment on bank merger policy that she was willing to use as a basis of negotiation” to which Biden’s appointee to the federal consumer protection bureau objected. McWilliams then allegedly stonewalled his agency. The White House backed its appointee.

What is the big picture here? “Peter Conti-Brown, co-director of the Wharton Initiative on Financial Policy and Regulation, said the fight … invites partisan analysis of governance and procedure — ‘that is, all Dems see the rules pointing one way, Rs see it the other,'” the Politico article says. Conti-Brown tweeted, “I doubt very much that most of the commentary we are seeing would stay where it is if the partisan teams switched,” whatever that means. The point is that ideological differences lay at the heart of the dispute between McWilliams and the Democrats on the board.

The Politico story continues, “The president has given instructions to agencies to review competition standards, and McWilliams should allow the request for information to be published in the federal register, Conti-Brown says. [But] Democrats, even if they are legally in the right, should proceed more cautiously.”

“I really think it’s bad for the agency and I hope they can all rise above whatever tensions there have been and try to sit down and get this worked out,” [a] person familiar [with the situation] said.”

Well, they didn’t. McWilliams sent a resignation letter to Biden on Friday, December 31, 2021, effective February 4, 2021.

This makes for quite a study in democratic governance. In the little microcosm of the FDIC, where the boss is the boss, and the board are rebels, the North seceded from the Union and proceeded to conquer the South, and the FDIC is one country again. There are times when one outvotes three, but it seems that in the natural order of things, that can go on for only so long.

Or maybe McWilliams just likes the bank salary better.

Photo: McWilliams with Sen. Roger Wicker (R-MS) before her confirmation as FDIC chair

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