McWilliams to resign as FDIC chief in sudden end to power struggle

WASHINGTON — Federal Deposit Insurance Corp. Chair Jelena McWilliams announced she will resign early next year, a decision that comes just weeks after a partisan struggle on the agency's board threatened her leadership.

In a letter to President Biden, McWilliams said her departure will be effective Feb. 4. Her resignation means former FDIC Chair Martin Gruenberg, now an internal member of the agency's board, will likely lead the agency on an acting basis until the Biden administration nominates a successor. It will be his third time at the helm of the FDIC.

McWilliams, an appointee of former President Donald Trump, told Biden that it has been “a tremendous honor to serve this nation.”

“When I immigrated to this country 30 years ago, I did so with a firm belief in the American system of government. During my tenure at the Federal Reserve Board of Governors, the United States Senate, and the FDIC, I have developed a deep appreciation for these venerable institutions and their traditions,” McWilliams wrote in the letter, which the FDIC released Friday. “Serving the American people alongside the dedicated career professionals of the FDIC has been the highlight of my professional life.”

Bloomberg News

The resignation puts an end to a power struggle that burst into public view in early December, when three Democratic-appointed directors on the FDIC’s governing board — including Gruenberg — used a notational voting process to issue a request for public comment on the FDIC’s bank merger policy without McWilliams’s support. McWilliams claimed that as chair she controlled the FDIC’s voting agenda and called the comment request invalid.

McWilliams’s departure will hand control of a key federal bank regulator to Democratic policymakers almost 18 months before her Senate-confirmed, five-year term was set to end in June 2023.

The unexpected leadership handoff could prompt a change in the FDIC's policy focus, with the FDIC board soon to be exclusively Democratic. Other regulatory agencies led by Biden administration appointees have emphasized issues such as climate change risk, diversity in the financial services industry and the need to be cautious about fintech's emergence in the banking system.

Besides McWilliams and Gruenberg, the FDIC board currently consists of acting Comptroller of the Currency Michael Hsu and Consumer Financial Protection Bureau Director Rohit Chopra.

McWilliams’s early tenure at the agency was defined by a focus on regulatory relief for the banking industry alongside fellow Trump-appointed financial regulators, including former Federal Reserve Vice Chair for Supervision Randal Quarles and former Comptroller Joseph Otting.

From 2018 through 2020, the regulators pared back key capital and liquidity requirements for banks, narrowed the scope of the Volcker Rule and issued an updated regulatory framework for banks’ use of brokered deposits.

McWilliams also initially worked with Otting on a controversial reform of the Community Reinvestment Act, though the onset of the COVID-19 pandemic and widespread pushback to the approach taken by Otting in 2020 ultimately led McWilliams to back out of the process.

Following the arrival of the Biden administration, McWilliams’s tenure focused on administrative initiatives, including a “mission-driven” capital fund to support smaller financial institutions and “tech sprints” to foster fintech and bank collaboration.

McWilliams’s letter to Biden praised FDIC staff for their performance throughout the pandemic, which ultimately did not result in a wave of bank failures as some had feared in the early months of 2020.

“The core of our financial system not only weathered the storm, but was a tangible source of strength for the American economy,” McWilliams wrote. “The committed staff of the FDIC deserve great credit for these results, and they have my profound gratitude.”