Given the recent role that the Federal Deposit Insurance Corporation (FDIC) has played in preventing systemic bank collapse, questions remain regarding the resignation of former Chair, Jelena McWilliams. Specifically, what role did a Consumer Financial Protection Bureau’s (CFPB) Fellow allegedly play in what McWilliams referred to as a “hostile takeover.” In a statement released in May 2022, Congressman Tom Emmer (MN-06) and other Republican leaders demanded answers regarding the program and its numerous red flags. The CFPB has yet to respond.
Congressional concerns stem from the actions taken by some unknown CFPB Fellows that were outside the scope of normal Fellowship roles and responsibilities, as listed in the Fellowship description. These include some high-paid fellows who may have assisted in an improper power grab to take control of the FDIC’s agenda from McWilliams.
The specifics of this incident allegedly appear in documents and emails that show a Fellow circulating a Notational Voting Sheet (NVS) and other material to the FDIC Board of Directors and then declaring, two weeks later, “the Board has approved all matters in NV-2021–12.” Notional voting usually involves distributing a memorandum and voting material, often for noncontroversial and routine voting. The FDIC’s Office of the General Council had instructed the Board not to approve this motion, raising suspicion about the anonymous Fellow’s role in getting the Board to do otherwise. Such an action demonstrated the ability to influence agency activities beyond what is expected of a Fellow.
In a Wall Street Journal Op-Ed, McWilliams spoke about the episode without mentioning the role of the Fellow. The incident allegedly began when CFPB Director Rohit Chopra presented McWilliams with a finished request for comment on FDIC merger reviews. McWilliams was concerned about this highly unusual break from FDIC procedure but remained congenial and offered to work with the Board and FDIC staff on the subject. Later, when McWilliams was on a flight to Switzerland, the Board proceeded with the original proposal and began instructing staff to review it (an action only McWilliams was entitled to do).
On November 26th, McWilliams mentions that a “deputy” of Chopra circulated a vote to board members. This lines up with allegations from Sen. Emmer and others that a Fellow had distributed an NVS on that same day. There is speculation that both the deputy mentioned in McWilliam’s op-ed and the Fellow mentioned in Sen. Emmer’s letter are one and the same. If this is not the case, the CFPB should clarify. Finally, these actions culminated on Dec. 6 when the Board attempted to execute a vote without McWilliams scheduling it, a break from procedure.
Not long after, McWilliams submitted her resignation. Though she does not mention this incident in her resignation letter to President Biden, the timing of the act leaves questions as to the relationship between the two events.
The role of the Fellows in this incident raises further concerns. In a statement by Chopra on April 27, 2022, he expressed knowing a handful of Fellows before taking the directorship and “encouraged a lot of people to apply.” Questions have been raised regarding preferential hiring, which is prohibited by civil service laws and Executive Branch guidelines, but the Fellowship program could serve as a loophole according to Rep. Emmer.
These concerns remain relevant as the FDIC addresses recent failures in the banking sector. McWilliams left the FDIC fearful that decades of agency political independence were being undermined. A politicized FDIC would distort the organization’s original purpose and expose it to the whims of party politics.
Since Fellows appear exempt from filing financial disclosures, assessing who they are and their financial interests is difficult. A financial disclosure would illuminate the concerns of Rep. Emmer and others. If the events of November 26th were in part orchestrated by a Fellow, they must be subject to the same level of transparency as other CFPB employees. Speculation runs rampant in lieu of transparency, and questions will continue to arise as long as the CFPB Fellowship program remains opaque.
Isaac Schick is a policy analyst at the American Consumer Institute, a nonprofit education and research organization. For more information about the Institute, visit www.TheAmericanConsumer.Org or follow us on Twitter @ConsumerPal.