FDIC chairman to step down following report on agency’s ‘toxic culture’

Federal Deposit Insurance Corporation Board of Directors Chairman Martin Gruenberg, testifies during the House Committee on Financial Services hearing on oversight of prudential regulators on Nov. 15, 2023, on Capitol Hill in Washington. The most powerful Democrat in Congress on banking and financial issues called for President Joe Biden to replace the chairman of the Federal Deposit Insurance Corporation on Monday, May 20, 2024, saying the agency is broken and there must be “fundamental changes at the FDIC.” (AP Photo/Mariam Zuhaib, File)

NEW YORK — Martin Gruenberg, the chairman of the Federal Deposit Insurance Corporation, will step down from his post once a successor is appointed, the White House said Monday.

Gruenberg’s announced departure comes after a damning report about the agency’s toxic workplace culture was released earlier this month and political pressure from the top Democrat on the Senate Banking Committee, who called for his resignation earlier in the day.

In a statement, the White House said that President Joe Biden will name a replacement for Gruenberg “soon” and called for the Senate to quickly confirm the person’s nomination.

‘Agency is broken’

The most powerful Democrat in Congress on banking and financial issues called for President Biden to replace the chairman of the FDIC on Monday, saying the agency is broken and there must be “fundamental changes at the FDIC.”

This follows the report about the agency’s toxic workplace culture which was released earlier this month and the inability of FDIC chief Gruenberg to convince Congress in testimony last week that he is able to turn the agency around despite the report saying Greunberg himself was often the source of the problems.

READ: US bank regulator grilled over ‘toxic culture’ at agency

“After chairing last week’s hearing, reviewing the independent report, and receiving further outreach from FDIC employees to the Banking and Housing Committee, I am left with one conclusion: there must be fundamental changes at the FDIC,” said Sen. Sherrod Brown, D-Ohio, and chairman of the Senate Banking Committee.

Up until Monday, no Democrats had called for Gruenberg’s replacement, although several came very close to doing so in their own statements. Brown’s statement will likely lead other Democrats to call for Gruenberg’s removal.

In his statement, Brown did not call for Gruenberg to be fired. He is in the middle of his six-year term as chairman of the FDIC and if Gruenberg were to step down, Vice Chair Travis Hill, a Republican, would lead the agency. Brown instead called on President Biden to nominate a new chair for the FDIC “without delay,” which the Senate would then confirm.

Republicans have been calling for Gruenberg to step down for some time. At Thursday’s hearing, Sen. Tim Scott, R-S.C. and the top Republican on the committee, detailed several stories of female FDIC workers who outlined extreme harassment and stalking by their coworkers, complaints that were dismissed by supervisors, according to the report.

“Marty — you’ve heard me say this to you directly — you should resign,” Scott said. “Your employees do not have confidence in you. And this is not a single incident. This spans over a decade-plus of your leadership at the FDIC.”

Scott, who called for Gruenberg to step down in December when the initial allegations were made public, is now calling for the Banking Committee to hold a separate hearing on the FDIC’s workplace issues.

Harassment, other workplace issues

Gruenberg has been been involved in various levels of leadership at the FDIC for nearly 20 years, and this is his second full term as FDIC chair. His long tenure at the agency at the highest levels of power has made him largely responsible for the agency’s toxic work environment, according to the independent report outlining the problems at the agency.

The report released Tuesday by law firm Cleary Gottlieb Steen & Hamilton cites incidents of stalking, harassment, homophobia, and other violations of employment regulations, based on more than 500 complaints from employees.

Complaints included a woman who said she was stalked by a coworker and continually harassed even after complaining about his behavior; a field office supervisor referring to gay men as “little girls;” and a female field examiner who described receiving a picture of an FDIC senior examiner’s private parts.

The FDIC is one of several banking system regulators. The Great Depression-era agency is best known for running the nation’s deposit insurance program, which insures Americans’ deposits up to $250,000 in case their bank fails.

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Sheila Bair, who was chair of the FDIC through the 2008 financial crisis and was one of the most prominent voices from the government at that time, posted on Twitter on Monday that it would be best for the agency if Gruenberg would step down.

“This controversy is hurting him and his agency. For his own sake and everyone at the FDIC, he should announce his intention to resign effective with the appointment,” she said.