The Fracas at the FDIC

Abstract

In December 2021, the Democratic members of the Board of Directors of the Federal Deposit Insurance Corporation (FDIC) attempted to use their majority to issue a request for information but were blocked by the Republican Chair. Although the Democrats outnumbered the Chair three-to-one, the agency’s General Counsel declared the move invalid, and the request went unpublished. After weeks of hostility, the Chair resigned, effectively conceding her inability to lead the agency. Although governance at the FDIC is now settled, concern over the Democratic directors’ actions and the Chair’s resignation have reverberated beyond that singular agency. Republicans are concerned that the fracas at the FDIC could be replicated elsewhere — particularly at the Board of Governors of the Federal Reserve System, where a Republican chair leads a Democratic-majority Board. But could it?

This essay examines the membership of the FDIC’s Board and the legal authorities underlying its decision-making to explain how and why the fracas occurred. It also examines the structure and authorities governing the Federal Reserve’s decision-making to conclude that not only is it structurally unlikely that a majority of Federal Reserve governors would wish to override the Chair, but also, associate governors lack authority under existing policy and case law to compel votes on items. However, there is limited case law on the issue and imbuing agenda authority solely in multimember agency chairs is antidemocratic and inconsistent with statutes that bestow policymaking authority to collective bodies. Accordingly, it is conceivable that a court could create new legal doctrines were associate governors to take the unprecedented step of suing the Chair.