WASHINGTON — The unexpected withdrawal of the administration’s nominee to lead the Federal Deposit Insurance Corp. triggered new uncertainty over who will lead the agency in the coming months.

James Clinger, a former adviser to GOP chairmen of the House Financial Services Committee, cited "family-related obligations" Wednesday in his decision to ask the White House to pull his nomination as FDIC chairman.

The withdrawal prompted immediate questions over naming a new nominee, whether an interim chief would be appointed if current Chairman Martin Gruenberg departs when his term expires and how the potential leadership void will affect the Trump administration’s regulatory agenda.

FDIC Vice Chairman Thomas Hoenig
If no Senate-confirmed successor is in place when the current FDIC chairman's term ends, one option is for Vice Chairman Thomas Hoenig to run the agency on an acting basis. Bloomberg News

“Clinger's decision to withdraw his nomination for family reasons means there is less certainty about the future of deregulation,” Jaret Seiberg, an analyst at Cowen Washington Research Group, said in a research note. “This is because it is unclear whom the President will nominate as a replacement."

To be sure, the administration can deploy interim leadership options if no Senate-confirmed chair is in place by the end of Gruenberg’s term. This includes letting Gruenberg stay on or appointing an acting chairman from among the current FDIC board members.

“They're not going to leave it leaderless,” said Mitchell Glassman, a former FDIC official.

Gruenberg’s term as head of the agency is set to end on Nov. 29. This gives the Trump administration little time to nominate and vet a new candidate, let alone push one through the Senate confirmation process.

In the absence of a successor, Gruenberg, a Democrat, could be allowed to serve beyond his term, although he did help implement a regulatory agenda under President Obama that the current administration wants to roll back.

“He could stay on until a new chairman is nominated and confirmed,” said Michael Krimminger, a partner at Cleary Gottlieb and former FDIC general counsel.

Though Gruenberg has stated publicly that he plans to serve out his term, he has not indicated what he might do if asked to stay on longer.

An alternative scenario is for another Senate-confirmed, internal member of the FDIC board, namely Vice Chairman Thomas Hoenig, to run the agency on an acting basis. Hoenig’s term as a member of the FDIC board expires in April 2018. (The only other internal FDIC board seat is currently vacant.)

“A current director could serve as acting chairman,” said Krimminger. But “the only candidate would be Tom Hoenig.”

This is not the first time that the leadership transition at the FDIC has hit a speed bump. Indeed, before serving as chairman, Gruenberg himself ran the agency on an acting basis twice. Appointed as vice chairman, he was the interim chief after former Chairman Donald Powell left to run Hurricane Katrina recovery efforts in the George W. Bush administration. He was acting chairman for a period again in the Obama administration when his own nomination as chairman slowed in the Senate.

Clinger’s withdrawal was seen as a potential blow to Trump’s regulatory agenda after the administration had appeared to be making progress filling key regulatory positions.

"I am deeply grateful to President Trump for nominating me to chair the Federal Deposit Insurance Corporation. It is therefore with a sense of regret that I have asked the White House to withdraw my nomination," Clinger said in a statement, which was released by an attorney at the law firm Brownstein Hyatt Farber Schreck.

“I did so after concluding that the family-related obligations that prompted me to leave government service earlier this year — which have grown more challenging in the interim — are incompatible with the demands of leading an important federal agency like the FDIC."

In addition to Clinger, the administration had chosen key leaders for both the Federal Reserve and the Office of the Comptroller of the Currency. Joseph Otting is awaiting confirmation to lead the OCC, while Keith Noreika runs the agency on an acting basis, and former Treasury Department official Randal Quarles was recently named as the administration’s pick as vice chair of supervision at the Fed.

Seiberg said the choices of Clinger, Otting and Quarles were seen as encouraging for the likelihood of the agency easing the regulatory burden.

“This is because all three picks were pragmatists whom we believe would ease regulatory burden without putting the safety and soundness of the banking system at risk,” he said.

Seiberg added that a search process for a new FDIC nominee “gives the populist and conservative wings of Team Trump another chance to hand the job to FDIC Vice Chairman Thomas Hoenig or others who favor higher leverage capital requirements on the biggest banks.”

Clinger is a well-respected longtime former Capitol Hill staffer, having served under four House Financial Services Committee chairmen. He was most recently chief counsel for House Financial Services Committee Chairman Jeb Hensarling, R-Texas.

“Jim is a public servant at heart, proven by his 22 years of government service, but his family will always come first,” said Travis Norton, a policy adviser and counsel at Brownstein Hyatt. “Jim was eager to continue his service and was honored by the president’s nomination to chair the FDIC, where the full range of his financial services policy acumen and talent as a manager would have greatly benefited the agency and the regulated community.”

In a brief interview Wednesday, Hensarling called the news "unfortunate," but said he understood that Clinger "has a family situation he has to deal with."

"He would have made a great FDIC chair, but he is not the only person who can be a great FDIC chair, so we will see where it goes from there," Hensarling said.

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Lalita Clozel

Lalita Clozel covers fintech regulation, anti-money-laundering, cybersecurity and the Federal Deposit Insurance Corp. in American Banker's Washington bureau.