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FDIC Chair Resigns After Devastating Report on Agency’s Toxic Culture

S.J. Steinhardt
Published Date:
May 21, 2024

Buffeted by reports of abuse and harassment at his agency, Federal Deposit Insurance Corp. (FDIC) Chair Martin Gruenberg said he would resign once a successor is confirmed, The New York Times and other news organizations reported.

Gruenberg came under fire last year after a Wall Street Journal series revealed a toxic atmosphere at the agency. The story prompted the FDIC to commission an investigation by the law firm Cleary Gottlieb, which released its report this month, the Times reported.

Investigators spoke to more than 500 employees at the FDIC, most of them current, who “painfully and emotionally” recounted their experiences of misconduct at the agency, the Journal reported. The agency lists 5,280 employees in its permanent workforce. The 234-page report included examples of misconduct, such as executives who engaged in interoffice relationships with subordinates but were promoted or moved rather than facing discipline. It also reported on one examiner who sexted a female colleague, and another examiner who visiting brothels with colleagues during work trips.

The Journal reported that many female bank examiners quit as a result of such experiences. 

Gruenberg was also accused of having a volatile temper, and the report stated that FDIC staff "felt disrespected, disparaged, and treated unfairly."

After a U.S. Senate Finance Committee hearing with Gruenberg last week, its chair, Sen. Sherrod Brown (D-Ohio), said that he no longer believed that Gruenberg could put an end to a culture of sexual harassment and discrimination at the agency. He called for President Joe Biden to nominate a successor and for the Senate to quickly confirm that person, the Times reported.

“There must be fundamental changes at the FDIC,” said Brown. “Those changes begin with new leadership, who must fix the agency’s toxic culture and put the women and men who work there—and their mission—first.”

On May 20, Gruenberg emailed employees saying he was willing to step aside.

“In light of recent events, I am prepared to step down from my responsibilities once a successor is confirmed,” Gruenberg wrote to employees,  the Times reported. “Until that time, I will continue to fulfill my responsibilities as chairman of the FDIC, including the transformation of the FDIC’s workplace culture.”

“The president will soon put forward a new nominee for FDIC chair who is committed to those values and to protecting consumers and ensuring the stability of our financial system, and we expect the Senate to confirm the nominee quickly,” said Sam Michel, a White House deputy press secretary, in a statement emailed to the Times.

Members of the special committee that the FDIC formed to oversee the probe said on May 21 that they were deeply troubled by the findings.

Linda Miller, CEO of the consulting firm Audient Group and a nonvoting member of the special committee formed by the FDIC to oversee the Cleary Gottlieb investigation, told the Journal that the accountability recommendations in the report didn’t go far enough to address the problem. She called for the FDIC to establish a mandatory 14-day suspension policy for staff who are credibly accused of sexual harassment, among other measures.

Ninety-seven people reported 145 incidents of sexual assaults, unwelcome sexual advances, unwanted touching and attention and other sexual conduct, the report found. Ninety-one additional people reported 141 incidents of gender or sexuality-based discrimination, the Journal reported. In addition, 187 people reported 320 incidents of bullying, threats and other verbal abuse, and 191 people reported 295 incidents of other discriminationincluding racial. 

The report also documented structural problems at the FDIC; the agency lacks a policy on intimate relationships between employees, including between supervisors and subordinates. As a result, investigators said, the agency has a culture in which “pursuing romantic relationships with colleagues, including subordinates, has not been viewed as problematic.”

Among the recommendations in the report was the appointment of an external “Transformation Monitor” to audit the FDIC’s work to address its problems, the creation of a 360-degree review process for the chairman and other senior leaders, improved training and improved disciplinary processes and record-keeping, the Journal reported.

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