By tradition, the top senator of the president's opposition party is entitled to recommend nominees for two seats on the board of the Federal Deposit Insurance Corp. But President-elect Donald Trump may be poised to shake up that tradition, potentially setting up a partisan tiff next year.
The FDIC board is composed of five members: a chairman, a vice chair, the heads of the Office of the Comptroller of the Currency and of the Consumer Financial Protection Bureau, and one board member of the opposition party.
In 2019, the two vacancies reserved for non-Republicans were left vacant, despite New York Senator and then-Senate Majority Leader Chuck Schumer's recommendations of Graham Steele and Marty Gruenberg for director and vice chair, respectively.
Democrats are historically entitled to fill two FDIC board positions. Democratic recommendations often are pulled from Senate staff and agency veterans who are transitioning out of power. Treasury Deputy Chief of Staff
Whether Trump will honor this tradition remains uncertain. Schumer's recommendations must pass through internal Democratic consultations — involving figures like Sen. Elizabeth Warren, D-Mass. — before reaching the White House. Tensions may rise if Republicans delay or reject these nominations outright, potentially setting the stage for prolonged negotiations, according to Aaron Klein, a senior fellow at the Brookings Institution.
"There's nothing that precludes Trump from nominating any [non-Republicans] he wants, but historically, the president has deferred to the Senate leader of the other party, and those people have been packaged with the president's own appointees to speed confirmation of everyone," Klein said. "The idea being that there's a package of minority and majority appointees to a board, they all move together, freeing up precious Senate floor time for other nominations."
In addition, Klein notes the FDIC board does not have to be fully staffed.
"There's nothing that requires the president to put forward a full board," he said. "You can have the minority spots sit vacant, [even though] generally, that means a minority will be less cooperative and confirming majority appointments."
Industry analyst Ian Katz of Capital Alpha Partners said that eschewing such procedural tradition could lead to partisan turmoil in the early days of the Trump administration.
"The issue of Trump rejecting the Dem proposals is very tricky," Katz said. "They are entitled to get a couple of people on the board, but the Republicans can delay that [and] it might take some negotiating. There's a chance that gets contentious between the White House and the [Democrats]."
Adding further ambiguity is the issue of whether independent nominees can fulfill partisan balance requirements. According to FDIC rules established in 1993, not more than three of the members of the board of directors may be members of the same political party, but that opens up the potential for members to be drawn from members of smaller parties like the Libertarian Party or Green Party.
"They just can't be registered Republicans," Klein said.
Filling out the board
FDIC Vice Chair Travis Hill is seen as the frontrunner to lead the FDIC in the second Trump administration, although reports indicate other candidates have lobbied Trump personally in recent weeks, according to sources familiar with the matter.
Jones Day partner Jonathan Gould — formerly chief counsel of the OCC and of the Senate Banking Committee — is a leading contender for comptroller, as is former acting comptroller from the first Trump administration, Keith Noreika.
George Mason University law professor Todd Zywicki, former CFPB Deputy Director Brian Johnson, former Treasury official Craig Phillips and former FHFA Director Mark Calabria are circulating as potential names to lead the CFPB after Trump takes office in January.
Johnson, Phillips and Calabria each served during Trump's first term and are relatively known quantities to lawmakers. Zywicki could have a harder time gaining bipartisan support because he filed an amicus brief defending Trump's unofficial Georgia electors in 2020, arguing that the electors had acted in a responsible, proper and lawful manner.
The president can fill positions such as the heads of the OCC, the CFPB and the Federal Housing Finance Agency with temporary appointees at will, thus bypassing a Senate vote. This could allow Trump to install more radical figures in acting roles while nominating moderate candidates for permanent positions. The Senate would then deliberate on the permanent nominees, giving the acting officials time to implement Trump's banking priorities — powers they hold despite their temporary status.
CFPB board member Jonathan McKernan also looms large, with most in the industry predicting his return to the FHFA. His appointment would leverage the Federal Vacancies Reform Act, which governs temporary appointments in many federal agencies. This law is significant because it enables the president to fill certain roles without immediate Senate confirmation, allowing acting officials to wield full authority. However, the Vacancies Act notably excludes multimember independent agencies like the FDIC, because they operate under separate enabling statutes designed to maintain bipartisan governance and independence from the administration's direct control.
Klein said that while there is substantial uncertainty about how the administration proceeds, Trump's choice of Scott Bessent for Treasury secretary may indicate his picks, like in the last administration, won't be as radical as his opponents feared. That view seems substantiated by Trump's appearance over the weekend on the DC political Sunday show "Meet the Press," in which he said he would not move to fire Federal Reserve Chair Jerome Powell.
"The picks Trump has made for Treasury are somewhat standard Republican choices [similar to] the last time Trump was in charge, [when] most of his financial regulatory nominees were traditional Republicans," Klein said. "What he does in this next term is unclear, but you've already seen signs of him acting more normal than he spoke on the campaign. The top two people at Treasury are more traditional nominees, on 'Meet the Press' he backed away from his threats to fire Powell."
Klein said it is important to remember that Trump often says one thing and does another.
"When Trump campaigns, he promises what he thinks will get him elected, and when he governs, he behaves differently," he said. "Through the entire first term of his presidency, Washington insiders kept taking Trump literally when the American public understood he was speaking figuratively."
