The Federal Deposit Insurance Corp. (FDIC) Chair Martin Gruenberg is under more scrutiny from the House Financial Services Committee (FSC) over his leadership of the agency. Committee leaders are demanding a briefing and documents related to proposed alterations to the agency’s asset manager passivity agreements outlined in a notice of proposed rulemaking (NPRM).
In a letter endorsed by FSC Chair Patrick McHenry (R-N.C.), as well as subcommittee chairs Andy Barr (R-Ky.) andBill Huizenga (R-Mich.), the legislators outlined concerns over changes proposed under the Change in Bank Control Act (CBCA) requiring two asset management firms to enter into new passivity agreements with the agency.
“The proposal amends FDIC regulations by eliminating a provision that currently exempts firms from providing notice to the FDIC when acquiring voting securities of a depository institution holding company if the board of governors of the Federal Reserve System is already reviewing a notice pursuant to the CBCA,” the legislators wrote.
The firms are required to comply with the changes by Oct. 31 but the deadline for comments was extended to Nov. 18. The lawmakers said they are concerned this would mean the proposed changes would go into effect prior to the finalizing of the rulemaking and would take place without a board vote, potentially violating the law and raising questions regarding the FDIC’s internal rulemaking process.
“The FDIC is taking such action almost three weeks before the comment file closes,” the lawmakers explained. “Additionally, it is unclear whether the new requirements imposed in the NPRM have been approved by the entire FDIC Board, or the extent to which there is interagency coordination.”
The lawmakers also raised questions about interagency coordination on this matter, specifically from officials at the Office of the Comptroller of the Currency (OCC) and the Consumer Financial Protection Bureau (CFPB). They noted acting Comptroller of the Currency Michael Hsu did not support the first CBCA amendment proposal submitted by CFPB Director Rohit Chopra on April 25, stating “[the FDIC should not be] creating more process and opportunities for turf battles or fragmentations.”
They further noted Chopra proposed the change for a second time on July 30, prompting Hsu to state “the NPRM includes a commitment by the FDIC to work with the Federal Reserve Board and the OCC to develop an interagency approach…. Should the agencies agree upon an approach, I would expect them to issue an interagency NPRM prior to finalizing.”
“The FDIC’s actions to move forward on a rule without accommodating full input from all FDIC directors nor substantively reviewing public comments raise serious legal questions regarding the agency’s internal rulemaking processes,” the lawmakers wrote. “To that end, please produce any documents provided to asset management firms related to the proposed amendments to the CBCA in question, including the letters and term sheets sent to such firms on Aug. 2, and Oct. 4, 2024, respectively. Additionally, please provide a briefing to committee staff to address the justification for the enforcement of passivity agreements by Oct. 31, and any interagency and intra-FDIC dialogue on the NPRM."
The letter concluded by asking the FDIC to provide the requested briefing and aforementioned documents no later than 5 p.m. on Nov. 8.