U.S. Sen. Elizabeth Warren (D-MA) speaks to a crowd gathered in front of the U.S. Treasury Department in protest of Elon Musk and the Department of Government Efficiency on Feb. 4, 2025 in Washington, DC.
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In response to a request from Sen. Elizabeth Warren, the Federal Deposit Insurance Corp. will review President Donald Trump’s recent move to lay off more workers at the watchdog agency.
Backed by the Trump administration, Elon Musk and his advisory group, the Department of Government Efficiency, reduced the FDIC staff by around 1,000 employees so far this year through buyout offers and the layoffs of probationary employees, according to reports. The additional firings were part of a larger effort to shrink the federal bureaucracy.
The FDIC is already severely understaffed, which “threatens the stability of the banking system,” Warren, D-Mass., said in a letter sent on Feb. 10 to Inspector General Jennifer Fain and shared exclusively with CNBC. Sens. Raphael Warnock, D-Ga., Chris Van Hollen, D-Md., and Lisa Blunt Rochester, D-Del., also signed the letter.
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Fain responded to the lawmakers in a letter dated Feb. 19, which was also shared exclusively with CNBC, saying “the full effect and impact on the structure and mission of the FDIC due to the hiring freeze, deferred resignations, and any reshaping and restructuring remain to be seen.”
Further, Fain said, “we will be adapting our oversight work to better understand and determine the effect of recent changes and their impact on the FDIC to maintain stability and confidence in nation’s banking system.”
In a statement Thursday, Warren said she was “pleased that the FDIC Inspector General will review the threats to the stability of the banking system caused by the Trump Administration’s recent buyouts, terminations, and job rescissions to bank examiners and other FDIC staff.”
“These cuts threaten the reliability and integrity of federal deposit insurance and inhibit the FDIC’s capacity to ensure the stability and confidence that underpin our nation’s banking system,” she said.
Risks of ‘a shortage of cops on the beat’
In the initial letter to Fain, the senators said staffing shortages directly contributed to Signature Bank’s failure in March 2023.
The lack of examiners “led to a series of supervisory delays, canceled or postponed exams, and quality control issues in the supervision of Signature,” the letter said.
“The lesson learned in this case was that a shortage of cops on the beat can threaten the safety and soundness of the banking system and pose risks to the Deposit Insurance Fund,” the letter stated.
The incident marked the largest U.S. banking failure since the 2008 financial crisis, and one of the biggest bank failures in U.S. history. The unexpected shutdown also caused widespread concern among consumers about their deposits, their bank and the banking system.
