WASHINGTON, D.C.— Dennis Kelleher, President, CEO, and Co-founder, issued the following statement in response to Trump’s Acting FDIC Chair Travis Hill’s release of formerly nonpublic confidential documents regarding the FDIC’s supervision of crypto-related activities.
“In a highly political move, the Acting FDIC Chair this morning released formerly nonpublic, confidential supervisory documents with the apparent intent of influencing pro-crypto hearings scheduled by Republicans today in the Senate and tomorrow in the House. This appears to be part of a coordinated two-part plan. First, the crypto industry and its allies are attempting to pressure banking regulators to ignore crypto’s known risks and overlook its potential risks. Second, they are attempting to turn the FDIC into an industry booster that prioritizes innovation, crypto, and fintech above the FDIC’s mission to protect the 126 million U.S. households that have bank savings accounts. The FDIC, however, does not exist to promote industry profits above depositor protection, as pointed out here. Innovation is great, but it often comes with great risk, and the FDIC’s job is to protect Americans’ savings and deposit accounts from those risks.
“The FDIC’s record of doing that has made it the gold standard in protecting Americans’ savings. That’s because the banking regulators and supervisors at the FDIC and elsewhere are vigilant in looking for, finding, analyzing, and ensuring banks mitigate risks, regardless of where those risks come from. Doing that job well requires them to be on heightened alert for new, novel, untested, unknown, and potentially dangerous risks. Viewed through that lens, the regulators’ actions regarding crypto were justified. Crypto, in particular, had a proven track record of being very high-risk with extreme volatility, causing boom-bust cycles, and engaging in massive, widespread manipulation, fraud, and criminal activity. FTX and its now-imprisoned former CEO Sam Bankman-Fried (SBF) are just the most visible examples of the very long crypto-RAP sheet.
“Another example is the so-called ‘crypto winter’ of 2021-2022, which is a misleading euphemism for a breathtaking crypto crash that resulted in the loss of $2 trillion in value in less than one year. That was real money lost by lots of Americans. If the regulators had not aggressively policed banks’ riskiest crypto activities in 2021-2022, then it’s likely that the $2 trillion crypto crash would have spread to the banking system, almost certainly causing trillions of dollars more in losses and leading to bank failures and bailouts likely much worse than the 2023 crisis.
“The FDIC and other banking regulators are not heroes or flawless, but they are the front-line protectors for Americans’ savings accounts, and the FDIC’s work, if they are allowed to do it, also prevents crashes and bailouts. That’s what is being put at risk if the agenda of crypto and its allies at the FDIC and elsewhere succeed in putting industry profits first and risk analysis second. Those regulators definitely should be nondiscriminatory as to products and services, but they must look for risks wherever they appear regardless of product or service. Depositor protection and risk-neutral analysis are what the crypto industry is threatening and that has broad and deeply dangerous consequences for America’s banks and economy.
“While the Acting Chair stated that the release of these previously nonpublic, confidential supervisory documents was in response to a lawsuit and FOIA request, we do not recall the FDIC issuing a press release under such circumstances in the past. It’s not even clear that the documents were provided in the lawsuit or to the FOIA requestors prior to the press release. It is against the law to improperly release nonpublic confidential supervisory materials, and it is not clear based on the public record if this release was consistent with those laws. We urge the FDIC inspector general to review these actions and provide a public report on the outcome of that investigation.”
