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FDIC Power Struggle

posted by Adam Levitin

Remember when there were two dueling claimants for the title of CFPB Director? Well, we're now seeing a repeat of that conflict play out with the FDIC.

The FDIC is governed by a five member board, consisting of the FDIC Chair, a Vice-Chair, the CFPB Director, the Comptroller of the Currency, and at-large director. By statute, no more than three of the board members may be from the same political party. The Chair, Jelena McWilliams, is a Trump appointee. The vice-chair position is vacant. The other three directors are all Democratic appointees. That means that three of the four directors on the board are Democrats, but the chair is a Republican. So who is calling the shots at the FDIC?

The issue just came up because the three Democratic appointees voted to direct the FDIC's Executive Secretary to transmit a Request for Information for publication in the Federal Register (which provides the notice required under administrative law of a proposed action). That vote and instruction only appear in a statement released on the CFPB's website. The FDIC's website (presumably controlled by Chair McWilliams) states that no such action was approved by the FDIC.

What's going on here?

Neither side has fully spelled out their legal arguments (some here from FDIC board member at-large Martin Gruenberg), but as far as I can fathom, Chair McWilliams' argument is that she gets to set the agenda for FDIC board meetings and because she didn't put the item on the agenda, it cannot be voted on.

If that's the argument, it is plainly wrong. The FDIC is governed first and foremost by federal statute and then secondarily by its own bylaws. Federal law vests management of the FDIC in its board of directors. Federal law also gives the FDIC the power to adopt bylaws. There is nothing in federal statute specifically empowering the FDIC chair to set agendas. Indeed, there is very little that federal statutes prescribe for the FDIC chair.

Turning to the bylaws, then, the only reed Chair McWilliams seems to have to stand on is a provision that "the Chair shall preside at all meetings of the Board". Nothing else in the bylaws gives the Chair any real power. So what does it mean to "preside" at a meeting? The bylaws don't say, and I cannot find anything in federal law that explicates the issue, but turning to Roberts Rules of Order, we find a very clear statement in the official FAQ section that it does not mean "control the agenda":

Roberts Rules
Under Roberts' Rules, the agenda for a meeting is controlled by the majority of the votes at the meeting. That would see to be checkmate for Chair McWilliams.

Now, apparently, according to an unnamed FDIC staff member, “It's been a longstanding legal interpretation that because the FDIC doesn’t follow Robert's Rules of Order, that the process is that the chairman always sets the agenda. While a [special] meeting could be held, the chairman would still hold the agenda and hold the pen on what would be voted on. The statute, the bylaws and nearly 90 years of historical practice have had no deviation from that.

I'm very curious where one would find evidence of that "longstanding legal interpretation." Is there an official interpretation from the FDIC's General Counsel about Robert's Rules? If so, let's see it. Perhaps traditional dictates that the Chair sets the agenda, but tradition is not law. And are we really to believe that someone researched whether this has actually been the case for 90 years of historical practice? My bs meter is showing a high probability of hyperbole.

[Update: I'm told that the vote happened pursuant to an FDIC bylaw that allows for "notational votes"--that is votes taken on the papers without a meeting, so the idea of the "Chair presiding" would never come into play, whatever it means. FDIC bylaws allow for a member to move an item from a notational meeting to an in-person meeting (but the implication is that the item is then on the agenda at the in-person meeting), but Chair McWilliams failed to do so.


The notational vote move sure seems to leave Chair McWilliams without a legal argument.]

If Chair McWilliams has some real basis for legal argumentation, she needs to present that case to the public. Otherwise, she's acting in bad faith here. And even if she does have a legal basis, she ought to recognize that elections have consequences and not stymie the democratic process.

I expect Chair McWilliams to try and drag out this fight for a while: she loses nothing by fighting (even in bad faith) and by fighting she effectively (if illegally) stymies Democrats' actions. She might be able to block things for a good part of her remaining term as Chair. But that does raise the question of whether she would even want to remain as Chair in this situation. And frankly, her actions do no service to the banking industry. Banks need clear rules of the road for how to operate. A power struggle at the FDIC does not help them, as there will be confusion about which rules require compliance. It's time for Chair McWilliams to recognize that elections have consequences and allow the FDIC Board to operate as it is authorized to do by law. 



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