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US FDIC needs ‘fresh start’ with new chair, White House official says By Reuters

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By Nandita Bose, Pete Schroeder and Douglas Gillison

WASHINGTON (Reuters) -The White House believes the U.S. Federal Deposit Insurance Corp needs a “fresh start” with a new chair who is not part of the leadership that presided over its long-running cultural problems, a White House official told Reuters on Tuesday.

The administration is “very conscious” of the tight Senate calendar and wants to put a nominee in front of the Senate Banking Committee, which oversees the FDIC, as soon as possible, said the official who spoke on the condition of anonymity.

FDIC Chair Martin Gruenberg finally succumbed on Monday to a months-long scandal over sexual harassment and other misconduct at the agency, announcing that he would step down once the Senate has confirmed a successor.

Gruenberg, a Democrat, had clung to his job since the scandal erupted in November, despite many lawmakers demanding he step down. A statement by top Democrat and Senate Banking Chair Sherrod Brown calling on Monday for fresh leadership appeared to tip the balance.

A top bank regulator, the FDIC oversees lenders and insures deposits. It faces a critical moment as regional banks remain under stress following last year’s turmoil, and as it finalizes capital hikes and other major new rules for Wall Street banks just six months ahead of the U.S. presidential election.

Under the law, the only way for the Democratic administration to replace Gruenberg without losing control of the agency to Republicans is to have the Senate, which Democrats control by one vote, confirm their new pick.

Many Washington analysts believe Gruenberg may struggle to hold onto his job much longer, as Republicans continue to pile pressure on President Joe Biden to fire him, putting the White House under unusual time pressure.

A damning independent review this month found widespread misconduct at the FDIC went unaddressed for years, and cited instances in which Gruenberg – who has spent nearly two decades in leadership at the agency – lost his temper with subordinates.

Washington insiders said the White House would also likely prefer a female nominee better-placed to overhaul what employees cited by the report said was a misogynist and patriarchal culture. And an existing government official with banking experience would get through the nomination process faster.

That leaves a relatively small pool of candidates, many of whom may be put off given the uncertainty created by the election, said analysts.

“I don’t know who they’re going to find who can get the number of votes quickly and even if they find the perfect person, I wonder if that perfect person would be interested,” said Isaac Boltansky, director of policy research for brokerage BTIG.

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Among the candidates who could fit the bill is Christy Goldsmith Romero, a Democratic member of the Commodity Futures Trading Commission (CFTC), said one regulatory and one industry source.

Goldsmith Romero, who declined to comment, is in the process of being re-nominated to the CFTC role, meaning the White House could switch her nomination to FDIC chair quickly, one said.

Treasury Undersecretary for Domestic Finance and former top Federal Reserve official Nellie Liang would also be a strong candidate, having already been Senate confirmed, one of the people said.

While New York State Department of Financial Services Superintendent Adrienne Harris is not Senate-confirmed, she was in contention for Gruenberg’s job back in 2022 and could also be a potentially strong candidate, said two other people.

Spokespeople for Liang and Harris declined or did not respond to a request for comment.

Gruenberg, 71, had been at the FDIC since 2005 and is the longest-serving FDIC board member in the agency’s 89-year history. During that time he served as its chair twice – once under President Barack Obama and the second time under Biden.

While Gruenberg was not found to be directly responsible for the broad cultural issues at the agency, he apologized for misconduct that emerged under his leadership and for his own transgressions.

Should he leave the agency without a confirmed replacement, leadership of the FDIC would fall to Travis Hill, the agency’s vice chair and a Republican who has voted against some of the proposed new rules. The agency would then be deadlocked 2-2.

That could delay indefinitely the Basel capital hikes, as well as other major draft rules the agency is working on with fellow bank regulators; those include proposed requirements for some lenders to hold more long-term debt to boost their resilience; restrictions on banker executive pay; and changes to bank merger policies.

Earlier on Tuesday, White House press secretary Karine Jean-Pierre told reporters “the president is taking this very seriously.”



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