The U.S. FDIC needs a “fresh start” with a new chairman, a White House official said.

Written by Nandita Bose, Pete Schroeder, Douglas Gillison

WASHINGTON (Reuters) – The White House believes the Federal Deposit Insurance Corporation needs a “fresh start” with a new chairman who is not part of the leadership that has presided over its longstanding cultural issues, a White House official told Reuters on Tuesday. .

One official, who spoke on condition of anonymity, said the administration is “very aware” of the tight Senate schedule and wants to get a nominee before the Senate Banking Committee, which oversees the FDIC, as quickly as possible.

FDIC Chairman Martin Gruenberg finally gave in Monday to a months-long scandal of sexual harassment and other misconduct at the agency, announcing he would resign once the Senate confirms his successor.

Gruenberg, a Democrat, has held on to his position since the scandal broke in November, despite calls from many lawmakers for his resignation. A statement Monday from top Democrat and Senate Banker Sherrod Brown calling for new leadership appears to have tipped the balance.

As the top banking regulator, the FDIC oversees lenders and insures deposits. Community banks remain stressed from last year’s turmoil and face a critical moment as they finalize capital increases and other key new regulations for Wall Street banks six months ahead of the U.S. presidential election.

According to the law, the only way for the Democratic administration to replace Gruenberg with a successor without losing him to the Republicans is to confirm a new candidate in the Senate, which Democrats control by one vote.

Many Washington analysts believe Gruenberg may have difficulty retaining his post much longer as the White House is under unusual time pressure as Republicans continue to pressure President Joe Biden to fire him.

An independent review this month found widespread misconduct at the FDIC that had gone unaddressed for years and cited instances where Gruenberg became angry with subordinates during his nearly two decades of leadership at the FDIC.

Washington insiders said the White House would likely favor a female candidate who would be better positioned to overhaul what staffers cited in the report said was a misogynistic and patriarchal culture. And existing government officials with banking experience may be able to get through the nomination process more quickly.

Analysts said this leaves a relatively small pool of candidates, many of whom could be put off by the uncertainty posed by the election.

“I don’t know who will get the votes quickly, and even if we found the perfect person, I wonder if that perfect person would be interested,” said Isaac Boltanski, director of policy research. Brokerage firm BTIG.

possible competitor

A regulator and an industry source said among the candidates eligible for the bill is Christy Goldsmith Romero, a Democratic member of the Commodity Futures Trading Commission (CFTC).

Goldsmith Romero, who declined to comment, is in the process of being renominated to the CFTC role, meaning the White House could quickly transition her nomination to chair the FDIC, one of the people said.

One source said Nellie Liang, Treasury’s undersecretary for domestic finance and former top Federal Reserve official, would also be a strong candidate, having already been confirmed by the Senate.

New York State Department of Financial Services Superintendent Adrienne Harris has not been confirmed by the Senate, but she was vying for Gruenberg’s position in 2022 and could potentially be a strong candidate, two of the people said.

Representatives for Liang and Harris declined or did not respond to requests for comment.

Gruenberg, 71, has been with the FDIC since 2005 and is the longest-serving FDIC director in the agency’s 89-year history. During that time, he served as chairman twice, once under President Barack Obama and a second time under Biden.

Although Gruenberg has not been found directly responsible for the institution’s broader cultural problems, he has apologized for his own transgressions and for misconduct that occurred under his leadership.

If he leaves the agency without a confirmed successor, leadership of the FDIC would pass to Vice Chairman Travis Hill, a Republican who has voted against some of the proposed new regulations. That would leave the agency deadlocked at 2-2.

This could delay the Basel capital raise and other key rule drafts the agency is working with fellow banking regulators on indefinitely. This includes a proposed requirement for some lenders to hold more long-term debt to increase their resilience. limits on bank executive salaries; Changes in bank merger policy.

On Tuesday morning, White House press secretary Carine Jean-Pierre told reporters: “The president is taking this very seriously.”