“P.“Grab.” An “attempt to politicize our regulators for our own benefit”. “Extreme destruction of institutional rules.” Listening to speeches flying around Washington, it seems that President Donald Trump was once criticized for hot-button issues ranging from border security to pollution control. Instead, the Republicans who have pointed these barbarians at Democrats in recent days have focused on something that seems much more dull on the surface: the Federal Deposit Insurance Corporation, the body tasked with protecting savers from bank losses.
The heated language suggests, the bet is actually higher. In addition to insuring bank accounts, FDIC One of the institutions authorizing bank consolidation in the United States. This makes it an important player in the Biden administration’s plan to impose strict rules on the financial system. And Democrats have now taken full control of it after a bad boardroom war.
Democrats have already won three of the five seats FDICIts board, which should theoretically give them their way. But the chairman was Jelena McWilliams, a respected lawyer appointed by Mr. Trump. He had the power to set the agenda for the meetings. Democrats have accused him of using it to block a review of bank consolidation policy, which he has denied.
The controversy erupted last month when two Democrats on the board, including Rohit Chopra, the director of the Consumer Financial Protection Bureau, tried to surround Miss McWilliams. They announced that the democratic majority had voted in favor of reviewing the bank-consolidation rules without his support. Mrs McWilliams countered that a valid vote had not taken place. In an article The Wall Street JournalHe accused them of conspiracy “an unfavorable occupation FDICOn December 31, as the board split outside of repairs, he announced his resignation.
The conflict is a window into the efforts of progressives within the Democratic Party to make their mark on the institutions that oversee the economy. Mr. Chopra is an ally of Elizabeth Warren, a senator who is a champion of the Democrat Left. Others in Mrs. Warren’s favorites include Lina Khan, head of the Federal Trade Commission, and Gary Gensler, chairman of the Securities and Exchange Commission.
The progressives did not win the battle of all the workers. After Republicans called him an “extremist,” Saul Omarova, a banking regulator, withdrew from the nomination process in December, their preferred candidate for the post of head of the currency controller’s office. The reappointment of Jerome Powell as head of the Federal Reserve is another disappointment for the Left. Yet with three seats open on the Fed’s board, progressives could enter. Most importantly, Mr. Biden will nominate Sarah Bloom Raskin, another preferred candidate for Mrs. Warren, to oversee the Fed’s vice-chair of oversight, the most important regulatory position in the financial system.
What do progressives want to achieve? It is already clear that they want to block big technology. In row FDIC Reveals that they want to limit the formation of large banks. For the time being, the bank-consolidation policy review is a request for information only. But questions posed by Mr. Chopra in a blog post in December cast little doubt on his preferred direction: “Should financial institutions that regularly violate consumer protection laws be allowed to expand through acquisitions? How should we ensure that a consolidation does not increase the risk that a bank is too big to fail?
Many bank analysts prefer the idea of merging medium-sized American firms into the big four (JPMorgan Chase, Bank of America, Citigroup and Wells Fargo). Progressives would argue that it takes things backwards. If the power of giant banks disrupts financial stability, the creation of more giants will only exacerbate it, an official said. Other possible changes include consolidating climate concerns into financial control and increasing the need for some capital. Democrats, as always, have to overcome legislation and lobbying barriers to make any of this happen. But with FDIC Now firmly in their fists, the path is a little clearer. 3
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This article is published under the heading “Regulatory Flex” in the Finance and Economics section of the print edition.