The Federal Deposit Insurance Corporation (FDIC) must implement a comprehensive overhaul to handle widespread toxic culture allegations after over 500 individuals testified against FDIC Chair Martin Gruenberg.
Widespread racial discrimination, sexual harassment, and bullying across the firm were found to be tolerated by senior leaders for years, with misconduct complaints reportedly treated with retaliatory actions, as reported by a law firm, Cleary Gottlieb.
The FDIC neglected to create a safe workplace environment for many employees, and individuals accused of misconduct were often reassigned to different roles. According to a report from WSJ, the officials responsible for addressing the issues were accused of wrongdoing.
A Call for The Ouster of Chair Gruenberg
The report's findings sparked demands for Gruenberg's removal. Gruenberg is a long-serving Democrat in a senior role at the agency.
While the Republican representative and chair of the House Financial Services Committee, Patrick McHenry, urged Gruenberg's resignation, citing a new leadership at the FDIC, Sherrod Brown, chair of the Senate Banking, Housing, and Urban Affairs Committee, echoed the same sentiment, requiring the agency's significant reform to improve its culture and treatment of employees.
The report described Gruenberg as "harsh," "aggressive," and prone to losing his temper. However, when questioned by investigators, Gruenberg stated that he did not recall misbehaving. Some employees also positively interacted with him and perceived his demeanor as more "prosecutorial."
In a statement addressed to the staff, Gruenberg acknowledged the report's findings as "sobering" and pledged to enact its recommendations. He emphasized his ultimate responsibility for all agency matters and regretted his shortcomings, reiterating his deep sorry.
FDIC's Dramatic Leadership Overhaul
While the report suggests appointing new officials dedicated to transforming the FDIC's culture and advocates hiring an independent third party to aid in the transition, it does not recommend whether top leaders should resign.
The report also urged the agency to create an anonymous hotline for reporting misconduct and abuse, enhance the timeliness and transparency of complaint handling procedures, and implement measures to safeguard and support victims. Although the report determined that Gruenberg's aggressive behavior was not the primary cause of the agency's more severe issues, it expressed skepticism about his capacity to oversee the required dramatic overhaul.
As the FDIC's workplace culture crisis, Chairman Gruenberg's reputation raises doubts about the leadership's credibility in addressing the crisis and its moral authority to lead a cultural transformation, per the report. The potential departure of Gruenberg, appointed by President Joe Biden in 2022, could jeopardize the administration's push for stricter financial regulations, including a pending proposal on bank capital requirements, which has faced opposition from Republicans and industry figures.
A request for comment from a White House spokesperson went unanswered.
FDIC Vice Chair Travis Hill, a Republican, would assume leadership according to agency bylaws, resulting in an evenly split board between Republicans and Democrats should Gruenberg resign or be removed.
