A cohort of Democratic Senate Banking Committee members Thursday demanded answers from the nation's deposit insurer regarding an ongoing Department of Government Efficiency-led effort to cut over a thousand agency staffers.
In the letter to acting Federal Deposit Insurance Corp. Chair Travis Hill, Senators Elizabeth Warren, D-Mass.; Raphael Warnock, D-Ga.; Chris Van Hollen, D-Md.; and Lisa Blunt Rochester, D-Del., expressed concerns that DOGE's actions — which include accessing sensitive bank data and reducing FDIC staff — could weaken the agency's already strained ability to resolve failed banks and harm the agency's central mandate: upholding consumer confidence in the U.S. banking system.
"Despite the critical importance of the agency, the FDIC is severely understaffed and unable to adequately execute its statutory obligations," the lawmakers wrote. "Allowing the Elon Musk-led DOGE to degrade it in a moment of broader economic turmoil is deeply concerning."
As part of the Trump administration's
Well before DOGE had announced its intention to cut bank regulatory staff, a number of official reviews of the agency's capacity have said understaffing at the agency posed a risk to its ability to resolve failed banks — as was the case in 2023 with the failure of Signature Bank. Between 2020 and 2023, the years leading up to Signature's failure, the FDIC's chief risk officer
DOGE's presence at the FDIC, the senators wrote, could lead to a spike in bank failures by slashing staff at an already understaffed agency.
"Providing deposit insurance and administering bank receiverships are not self-effectuating," they wrote. "These functions require expert staff to manage the resolution of a failed bank. ... Severely hollowing out the FDIC's staff increases the likelihood of errors in the resolution process, which could have a detrimental impact on financial stability and public confidence in the banking system."
The letter accuses Hill of ceding authority to DOGE, despite the FDIC's status as an independent agency. Given what the senators allege is a history of mishandling sensitive information by the DOGE team, the lawmakers worry incompetent stewardship of highly sensitive information could compromise the Deposit Insurance Fund — a reserve the agency taps to fund the rescue of failed banks and protect insured customer deposits.
"The FDIC has access to highly sensitive confidential supervisory and investigative information on every insured bank in the country, including the list of banks on the FDIC's Problem Bank List," the lawmakers wrote. "The careless disclosure of this information could have serious consequences for the safety and soundness of banks, and the misappropriation of this information could permanently undermine the credibility of the FDIC."
The senators directed Hill to provide detailed documentation by May 8, including the agency's plan for reorganization, the names and roles of DOGE personnel with FDIC systems and facilities access, and a full list of systems and data to which DOGE employees have gained access. They also pressed for answers to whether DOGE staff at FDIC had completed security clearances, whether they've transferred any data and if they're bound by FDIC ethics rules. The letter also questioned whether the agency believes it lawful or appropriate to cancel contracts at DOGE's request based on the race, sex or religious beliefs of the contractor.
In an internal email obtained by American Banker earlier in April, the FDIC's deputy to the chairman and chief operating officer said DOGE personnel working at FDIC were full-time federal employees who had received what the agency described as "appropriate clearances" and were working with FDIC management under "formal interagency agreements." In its internal communication, the agency also noted that sensitive bank information was not currently being shared by the two parties, nor had it been requested.
