WASHINGTON — The Department of Justice has sided with the Federal Deposit Insurance Corp.'s board over its former chair.
The department of legal counsel at the Department of Justice has released an
"The Chairperson of the Federal Deposit Insurance Corporation does not have the authority to prevent a majority of the FDIC Board from presenting items to the Board for a vote and decision," according to the DOJ opinion.
The issue came to a head at the end of last year, when then-board member Martin Gruenberg, along with Consumer Financial Protection Bureau Director Rohit Chopra and acting Comptroller of the Currency Michael Hsu, moved forward with its review of bank merger policy
McWilliams, at the time, said that the Democratic policymakers didn't have the authority to place an item on the FDIC board's meeting agenda, or to circulate it for a vote. In the aftermath of the scuffle, McWilliams resigned from the agency and Gruenberg became acting chairman.
The issue snowballed into a
The Justice Department in its opinion favored the argument made by the Democratic appointees — that the chair of the agency can't block the will of the majority of the board when it comes to putting up an item for consideration and vote.
"The power to present matters for Board vote and decision is not explicitly addressed by the Act," the department said in its opinion, referring to the Federal Deposit Insurance Act, passed in 1933. "The Act, however, is perfectly clear that the Board, not the Chairperson, has the authority to determine how the FDIC should exercise its substantive powers, as well as the authority to prescribe procedures for making such substantive decisions."
Historically, the opinion says, the board has "without controversy" given the chair the ability to set the agenda for meetings.
"The authority to set the agenda of a business meeting is distinct, however, from the authority to prevent the Corporation's Board from voting on FDIC business by unilaterally blocking Board consideration of certain items entirely," according to the opinion.
The FDIC declined to comment on the Justice Department opinion.
The issue of McWilliams's resignation and the events leading up to it has drawn criticism from lawmakers, who have
"House Republicans will not be deterred from our investigations into the lawless tactics of rogue Democrat regulators," said House Financial Services Committee ranking member Rep. Pat McHenry, R-N.C. "The newly released opinion from the Office of Legal Counsel does not change the fact that Democrats' power grab at the FDIC upended an 88-year tradition of considering the Chair's agenda on a collegial basis."
The DOJ opinion helps give Chopra, as well as Gruenberg and Hsu, political cover, and helps guard against a set of brewing legal challenges that the industry or Republicans could make to try and roll back rules made under the current FDIC board.
Consumer and watchdog groups cheered the Justice Department opinion. Better Markets co-founder CEO Dennis Kelleher said in a statement that the department's statement "upholds the rule of law by confirming the power and authority of the majority of the Board of the FDIC and rejects the brazen claim of power and minority rule by the former Chair."
"This, of course, was entirely predictable due to the clarity of the FDIC's Act, Bylaws, and practices," he said.
The Revolving Door Project likewise praised the opinion, saying it marks a "significant victory for the rule of law that former FDIC Chair Jelena McWilliams doesn't get to just nullify the lawful vote of the Board even when she lost."
