US FDIC candidate to be questioned on agency and bank regulations

Authors: Pete Schroeder and Michelle Price

WASHINGTON (Reuters) – Christy Goldsmith Romero is expected to face a Senate hearing on Thursday, where she will be asked whether she has the experience to overhaul the scandal-plagued Federal Deposit Insurance Corporation (FDIC) and oversee the nation’s banks.

Goldsmith Romero, a Democratic ranking member of the Commodity Futures Trading Commission, was nominated last month by President Joe Biden to succeed Martin Gruenberg, who is stepping down as FDIC chairman after an investigation found widespread sexual harassment and other misconduct at the banking regulator.

In prepared testimony released Wednesday by the Senate Banking Committee, she promised a “complete overhaul” of the agency’s organizational culture, adding that she intended to bring “accountability” to the watchdog.

Beyond protecting deposits and supervising banks, the FDIC has been a key player in efforts to craft rules that impose new barriers on banks and their executives, including controversial new capital increases. Confirming Goldsmith Romero before the November presidential election could cement Democratic leadership at the agency for years to come and ensure that those rules are implemented.

Analysts say senators are likely to question Goldsmith Romero on how he plans to address cultural problems at the FDIC, how he will handle Basel capital increases and regulations on bank debt and banker compensation, and whether he has enough experience in bank supervision.

“Commissioner Goldsmith Romero has little experience with bank regulation, so the hearing will be the first opportunity for industry stakeholders, including bank investors, to hear her views on regulation,” Brian Gardner, chief Washington policy strategist at Stifel, wrote in a note this week.

Goldsmith Romero referred Reuters to the White House, which did not respond to a request for comment.

Investors and regulators remain concerned about the health of the nation’s regional banks, which have been squeezed by high interest rates that contributed to three bank failures last year. They could face questions about the agency’s handling of that crisis, as well as recent problems at fintech firms that partnered with FDIC-regulated banks.

A lawyer with a law enforcement background who previously oversaw the 2008 bank bailout program, Goldsmith Romero is backed by progressive Democrats but is generally seen as the no-brainer and has influential supporters in Republican circles, Reuters reported. She has been unanimously confirmed by the Senate twice before.

“Goldsmith Romero’s leadership style — unbiased, inclusive, rigorous and data-driven — that holds people accountable is exactly what the FDIC needs,” Dennis Kelleher, CEO of Better Markets, a Washington-based group that advocates for tougher regulation, said in a statement.

Sherrod Brown, the Democratic chairman of the Banking Committee, did not comment Wednesday.

The nominees need 51 votes to be confirmed in an evenly divided Senate, where Democratic Vice President Kamala Harris could break a tie. But with contentious issues on the table and intransigent Republicans vowing to oppose Biden’s nominees to protest former President Donald Trump’s conviction in May, some analysts expect the trial could drag on.

“The question is whether Republicans will try to turn some Democrats against her,” Ian Katz, managing director of Capital Alpha Partners, wrote in an email to Reuters.

“They won’t vote for her, but that’s not the same as doing everything they can to stop her.”

Senator Tim Scott, the senior Republican on the Senate Banking Committee, intends to pressure her and other nominees to outline their qualifications and wants to know whether they will follow through on their assigned duties, his spokesman said.

Kristin Johnson, another Democratic CFTC commissioner, and Caroline Crenshaw, a Democratic member of the Securities and Exchange Commission, will also testify at Thursday’s hearing.

Biden nominated Johnson to be deputy secretary of the Treasury Department for financial institutions and re-nominated Crenshaw to be SEC commissioner.

Johnson declined to comment, and Crenshaw’s office did not immediately respond to a request for comment.

(Additional reporting by Christine Prentice and Douglas Gillison; Editing by Nick Zieminski)