The Federal Deposit Insurance Corporation must make sweeping changes to handle widespread sexual harassment and other misconduct, based on an independent report released Tuesday that raises questions on the long run of banking regulator leadership.
The report, based on a Wall Street Journal investigation, cited accounts from greater than 500 people, including some who alleged that FDIC Chairman Martin Gruenberg engaged in bullying and verbal abuse.
Overall it’s Report from the law firm Cleary Gottliebpaints an image of an agency where sexual harassment, racial discrimination and bullying were pervasive in any respect levels and tolerated by senior leaders for years, while complaints of misconduct were met with retaliation.
“For far too many employees and for far too long, the FDIC has failed to create a workplace that is safe from sexual harassment, discrimination and other interpersonal misconduct,” the report says, adding that those accused of misconduct often latest roles were assigned.
The Cleary-Gottlieb report found that officials tasked with addressing the issues uncovered within the WSJ reports were themselves the topic of misconduct allegations, underscoring the agency's toxic culture.
The results renewed calls for the ouster of Gruenberg, a Democrat who had been a senior executive on the agency for nearly twenty years.
Rep. Patrick McHenry, a Republican and chairman of the House Financial Services Committee, called for Gruenberg's resignation after the report, saying it made clear the agency needed latest leadership.
“The FDIC needs to be fixed. The women and men who work there deserve better,” said Sherrod Brown, chairman of the Senate Committee on Banking, Housing and Urban Affairs, in an announcement. “Chairman Grünberg must take responsibility and work immediately to bring about fundamental changes in the agency and its culture.”
Some employees described Gruenberg as “harsh” and “aggressive” and susceptible to losing their temper, the report said. When talking to investigators, Grünberg said he never remembered acting inappropriately. According to the report, some employees reported positive interactions with him and thought of his nature to be more “prosecutive.”
In an announcement to employees, Gruenberg said the report was “sobering” and he vowed to implement its recommendations.
He said he was ultimately liable for every little thing that happened on the agency and apologized for any shortcomings. “I would like to express once again how deeply sorry I am,” he added.
Leadership cloud
The report recommends appointing latest officials to work on changing the FDIC's culture and hiring an independent third party to support the transition. However, it doesn’t keep in mind whether top politicians should resign.
It also called on the agency to determine an anonymous hotline to report misconduct and abuse, develop a more timely and transparent grievance handling process, and take measures to make sure that victims are protected and supported.
While the report found that Gruenberg's aggressive behavior was not the foundation explanation for the agency's more serious problems, it expressed doubts about his ability to oversee the dramatic transformation needed.
“As the FDIC faces a crisis in its workplace culture, Chairman Gruenberg's reputation raises questions about the credibility of leadership's response to the crisis and the 'moral authority' to lead cultural change,” the report said .
The departure of Gruenberg, who was appointed by President Joe Biden in 2022, could jeopardize government efforts to impose tougher financial rules, including the federal government a pending regulatory proposal on bank capital requirements, which has sparked a backlash from Republicans and industry officials.
A White House spokesman didn’t reply to a request for comment.
Should Gruenberg resign or be removed, the agency's bylaws require FDIC Vice Chairman Travis Hill, a Republican, to take over and the agency's board to be made up of an equal variety of Republicans and Democrats.
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