Martin Gruenberg, chairman of the Federal Deposit Insurance Corporation (FDIC), was “personally disturbed and deeply troubled” by allegations against the FDIC of sexual harassment and workplace misconduct.
The article outlined claims by current and former employees that the federal banking regulator maintained a toxic work environment and misogynistic culture described as a “sexualized boys’ club environment.”
“I am personally disturbed and deeply troubled by this report,” Mr. Gruenberg told lawmakers at a Senate Banking Committee hearing on Nov. 14.
He confirmed that the agency has initiated “a comprehensive review” and engaged with an independent third-party entity “to ensure that we understand the nature of these issues and take all appropriate actions to address them.”
He said he expects that a report will be completed in 90 days.
Mr. Gruenberg acknowledged that management must ensure that employees feel confident and safe to submit complaints.
“Let me underscore, I have no higher priority to ensure that all FDIC employees work in a safe environment where they feel valued and respected,” the FDIC head said.
When Sens. Mike Rounds (R-S.D.) and Thom Tillis (R-S.C.) asked if he knew of the allegations before the story was published, Mr. Gruenberg said he was unaware of the claims. Mr. Rounds, who says he thinks other related reporting will be coming, also inquired if the FDIC chief would be central to future news reports.
“I can’t speak to that. You’d really have to speak to the news organizations, senator,” Mr. Gruenberg responded.
Nearly all committee members expressed concern over the report and fielded other questions related to the matter.
‘Animal House’ CultureThe senator alluded to a 2020 report from the FDIC’s inspector general that he says described FDIC employees as acting like they were in the 1985 film “Porky’s Revenge!” and the 1978 movie “Animal House.” The inspector general identified multiple sexual harassment complaints and presented 15 recommendations for the agency’s policies.
Mr. Gruenberg had served on the FDIC board then, although he wasn’t chairman. However, he noted that the agency adopted the 15 recommendations but didn’t change the culture.
“That’s the underlying issue here,” he said. “It’s not simply a matter of policies and procedures but trying to get at the underlying issues that make it challenging for employees to utilize them.”
“The Committee on Financial Services (Committee) takes these allegations very seriously, and any misconduct must be addressed,” Rep. Patrick McHenry (R-N.C.) co-wrote in the letter.
Banking RegulationSince the collapse of Silicon Valley Bank, Signature Bank, and First Republic Bank earlier this year, the Federal Reserve and other top banking watchdogs have initiated a new regulatory blitz for the financial sector.
Mr. Gruenberg, alongside Fed Vice Chair for Supervision Michael S. Barr and other top regulatory heads, fielded questions on heightened financial regulation in the fallout of the banking crisis this past spring.
These measures would contain a three-year phase-in period to allow the industry to adapt and adjust operations accordingly.
GOP lawmakers pushed back against some of these ideas, arguing that these new regulations don’t adequately address the root cause of why these financial institutions failed—ineffectively managing interest rate risk.
“It would directly address that because for large banks, their interest rate risk would be brought into the capital, their unrealized losses and gains would be reflected in capital,” Mr. Barr said. “So it does directly address the kinds of risks that we saw.”
The industry has launched lobbying efforts against these proposals that they warn will hamper lending and harm a fragile economy.
Federal regulators are in the middle of the comment period for the public to weigh in on these plans. It’s scheduled for completion by Nov. 30.
“If there are areas that we can improve the rule, we’re very open,” Mr. Barr said. “We want to make sure the rule works right for households and businesses.”