Mulvaney Shouldn’t Be Anywhere Near FDIC’s Volcker Rule Changes, But He Is
FDIC Board Members Mired in Conflicts of Interest as They Consider Massive Gift to Big Banks
WASHINGTON, D.C. – Today, the Federal Deposit Insurance Corporation (FDIC) Board of Directors will meet and consider dangerous changes to the Volcker Rule which has protected consumers and the economy by keeping big banks from engaging in the type of risky behavior that led to the 2008 economic collapse. Among those considering these changes is Mick Mulvaney who, as CFPB “Acting Director,” also sits on the FDIC’s Board. Consumer advocacy organization Allied Progress criticized Mulvaney’s participation in today’s proceedings, noting the Board is designed to be independent from the White House. Mulvaney is a senior administration official.
“Mick Mulvaney doesn’t belong anywhere near this decision. The FDIC is a financial regulator that is designed to be independent from the White House – where Mulvaney serves as a senior official. How on earth can he be trusted to be objective when his boss, President Trump, has advanced an agenda to go easy on big banks and weaken the Volcker Rule?” asked Karl Frisch, executive director of consumer advocacy organization Allied Progress.
He further stated, “Big banks are making record profits but that just isn’t enough for them. They are hell bent on regaining the ability to gamble, knowing it’s other people’s money on the line. Worse still, it looks like Mick Mulvaney and President Trump are doing everything they can to reopen the casino. Millions of Americans lost their jobs, retirement savings, and homes during the 2008 economic collapse caused by the risky behavior of big banks and Mulvaney and Trump couldn’t care less.”
Allied Progress also pointed out the massive conflicts of interest of other FDIC board members. New FDIC Chair Jelena Williams was previously an executive for Fifth Third Bank which was a vocal opponent of the Volcker Rule. Similarly, Comptroller of the Currency Joseph Otting, also an FDIC board member, previously worked for US Bancorp and OneWest Bank which would benefit greatly if the Volcker Rule is watered down or eliminated.
What You Need To Know
- The incoming FDIC Chair was previously an executive for Fifth Third Bank. Recently-confirmed FDIC Chair Jelena Williams was previously a top executive for Fifth Third Bank. Prior to joining Fifth Third, McWilliams was a Republican staffer who worked for the Senate Banking Committee, including for its current chairman, Sen. Mike Crapo (R-ID). [Andrew Ackerman and Lalita Clozel, “Senate Confirms FDIC Nominee Jelena McWilliams,” The Wall Street Journal, 05/24/18]
- That same bank was a vocal opponent of the Volcker Rule as it was being developed. Fifth Third Bank was a vocal opponent of the Volcker Rule, which it claimed would “‘unduly restrict'” its activities. In 2012, the bank’s chairman – also a former FDIC chairman – denied that “proprietary trading caused or even contributed to the recent financial crisis.” [Steve Watkins, “Fifth Third signs letter to Fed protesting Volcker Rule,” Business Courier of Cincinnati, 02/15/12; William M. Isaac and Richard M. Kovacevich, “How to Simplify the Volcker Rule,” American Banker, 08/22/12; and “Fifth Third Bancorp 2017 Annual Report,” 2017]
- Comptroller of the Currency and FDIC Board Member Joseph Otting has previously worked for US Bancorp and OneWest Bank. In April 2018, Comptroller of the Currency Joseph Otting told a group of bankers gathered for a conference in Washington: “I like bankers.” Otting is “the first banker in decades to run the OCC,” and previously worked as an executive with U.S. Bancorp and then OneWest Bank, which was run by Treasury Secretary Steven Mnuchin. [Jesse Hamilton, “Trump Watchdog Tells Banks He Really, Really Likes Them,” Bloomberg, 04/09/18]
- Proposed changes to the Volcker Rule could put the onus on regulators to spot bad behavior, by removing or changing the “rebuttable presumption” portion of the existing Volcker Rule. The proposed changes to the Volcker Rule will address the 60-day “rebuttable presumption,” which currently prohibits investments held for less than 60 days unless the bank argues that a trade was exempted. Under a revised rule, the onus may be on the regulators to proactively identify bad behavior. [Rachel Witkowski, “Cheat sheet: How regulators plan to revamp the Volcker Rule,” American Banker, 05/29/18]
- Despite this proposal to shift the burden to regulators to identify prohibited behavior, the FDIC has cut staff by 4.5% since 2017. Weakening the Volcker Rule may require regulators to take increased steps to assess prohibited investments. However, the FDIC cut their operating budget 3 percent and cut staffing by 4.5 percent from 2017 to 2018. [“FDIC Board Approves 2018 Operating Budget, Down 48 Percent from Peak in 2010,” Federal Deposit Insurance Corporation, 12/19/17; Rachel Witkowski, “Cheat sheet: How regulators plan to revamp the Volcker Rule,” American Banker, 05/29/18]
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