Federal Deposit Insurance Corp. Chair Martin Gruenberg on Friday resisted lawmakers’ calls to resign.
In a video to staff, he took responsibility for the agency’s culture — spotlighted in a searing report last week by The Wall Street Journal that alleged Gruenberg turned a blind eye to sexual misconduct by FDIC staff and a “boys’ club environment” that alienated women.
“I bear responsibility for setting the tone for our culture,” Gruenberg said in the video Friday, seen by The Wall Street Journal. “I want to assure you that I’m committed to addressing these issues, including my own shortcomings.”
The House Financial Services Committee, meanwhile, will open an investigation on the FDIC’s workplace culture, three Republicans on the panel told Gruenberg in a letter Friday.
Perhaps most damning, the lawmakers asserted the FDIC’s cultural issues may have contributed to a shortage of bank examiners the agency highlighted in its April report on the failure of Signature Bank.
“The FDIC experienced resource challenges with examinations staff that affected the timeliness and quality of SBNY examinations,” Reps. Patrick McHenry, R-NC; Bill Huizenga, R-MI; and Andy Barr, R-KY, quoted the April report as saying.
“Your report’s limited discussion of staffing challenges related to bank examiners did not consider how the longstanding toxic FDIC culture inhibits employee retention,” the lawmakers wrote Friday. “By ignoring or choosing to remain silent about workplace misconduct at the FDIC, your leadership may have contributed to the financial instability and threats to financial security of Americans that were observed in March.”
The lawmakers warned Gruenberg the committee would “use its full arsenal of oversight and investigative tools” — that includes subpoenas — “to ensure that our banking system remains safe and sound.”
“Chairman Gruenberg, the viability of your leadership is in question,” the Republicans wrote Friday.
In a separate letter Friday calling the sexual misconduct allegations “nothing short of appalling,” the 12 Democrats on the Senate Banking Committee also pushed for an investigation — though rather than open their own, they urged the FDIC inspector general’s office to conduct it.
“It is imperative that the FDIC recruit and retain talented public servants and create a safe and professional work environment,” the Democrats wrote Friday. “Allowing employees that have engaged in misconduct to stay on the job, while losing talented employees because of the failure to meaningfully address these systemic issues, compromises public trust in the FDIC.”
The Democrats are asking the FDIC OIG to consider, in a new probe, the allegations — particularly of sexual harassment and misconduct — made in the Wall Street Journal report, as well as “the process that led to a lack of meaningful disciplinary action against individuals who engaged in misconduct.”
The lawmakers are also asking the OIG to determine whether the agency “implemented meaningful changes” after the office concluded, in a July 2020 report, that the “FDIC had not established an adequate sexual harassment prevention program and should improve its policies, procedures, and training to facilitate the reporting of sexual harassment allegations and address reported allegations in a prompt and effective manner.”
“It appears these issues continue to persist,” the Democrats wrote Friday.
The Republicans, too, referenced the 2020 OIG report, asserting, “While the agency implemented the OIG’s 15 recommendations to its satisfaction, it is not clear whether any of those corrective actions address the core culture issues identified by the allegations reported this week.”
Republicans and Democrats are each also seeking answers regarding Gruenberg’s 2008 investigation for misconduct. McHenry asked the FDIC chair Wednesday, during a hearing, whether he had ever been investigated for misconduct. Gruenberg initially said he had not but later acknowledged he had and that the complaint was dropped.
The House Financial Services Committee “will further investigate your personal conduct and whether it conformed to the standards expected of our banking regulators,” the Republicans wrote Friday.
“Our concern is underscored by your nearly 20-year tenure in all aspects of leadership and management at the FDIC, including serving twice as Chairman,” the Republicans wrote Friday. “It has failed to instill the confidence the public needs to know their banking system is and will be safe and secure in the future.”
An FDIC spokesperson told Reuters the agency would be "fully transparent and cooperative" with the committee's investigation. The agency declined, however, to comment to The Wall Street Journal regarding Gruenberg’s video to staff.
“To everyone that has been affected, and particularly anyone who has experienced sexual harassment, I want to say how very sorry I am,” Gruenberg said in the video, adding that he would visit every region and hold all-staff meetings on the matter.