Toxic Atmosphere at FDIC Spurs Calls for Chair's Resignation

Gruenberg will not skate by so easily when he testifies before Congress this week. Republicans in both the House and Senate are hell-bent for leather. And his scalp.

The report was published by law firm Cleary Gottlieb last week and followed a Wall Street Journal investigation last November that documented a federal agency akin to “a good ol’ boys club” where female employees were subjected to stalking, unwelcome illicit messages, and sexual harassment.

The episode is an embarrassment to President Biden, who promised on the first day of his administration to fire “on the spot” anyone who engaged in such behavior.

It is also a political liability. If Gruenberg, a Biden nominee who served in both the Obama and Trump administrations and the Senate confirmed by voice vote, exits under pressure, it would leave the FDIC board deadlocked during an election year. “A 2-2 vote would stall and probably doom politically sensitive banking policy,” observed Renaissance Macro Research. The regulatory policy of the administration would then hang in limbo.

These realities are not lost on many in the FDIC workforce who want reform. In a statement obtained by RCP, current employees expressed their concern that “the egregious issues documented in the Cleary report by over 500 employees have become partisan.”

Working at an agency now under scrutiny for a history of reprisals against whistleblowers, the statement was left unsigned, though the drafters noted that they “have a wide range of political views, ranging from far left to far right.”

“The FDIC employees behind this statement do not have confidence that the chairman and executive management have the willingness to truly make the cultural and structural changes necessary to fully address the [matters] identified in the report,” they write.

For his part, Gruenberg has already offered an apology.

“I want to also thank everyone who shared their experiences throughout this process. I know that doing so was difficult. To anyone who experienced sexual harassment or other misconduct at the FDIC, I again want to express how very sorry I am. I also want to apologize for any shortcomings on my part,” he said in a statement when the Cleary Gottlieb report was published.

“As chairman, I am ultimately responsible for everything that happens at our agency, including our workplace culture,” Gruenberg added.

The chairman, whom the report found has a history of anger and belittling staff, plans to announce a new, independent office devoted to professional conduct at the agency, according to prepared testimony before the House Financial Services Committee Wednesday. But the head of that committee, Republican Chairman Patrick McHenry, has already called for his resignation. And some FDIC employees are already registering their dissatisfaction.

“The Chairman has communicated the action plan that he oversaw the creation of as proof of his commitment to improving conditions at the FDIC. We, however, do not have confidence that this action plan is meaningful,” they wrote.

More than a dozen Republicans now oppose Gruenberg. South Carolina Sen. Tim Scott, the ranking member on the Senate Banking Committee, has called for his resignation. Iowa Sen. Joni Ernst has called on the Department of Justice to open an investigation. Only one Democrat, however, Illinois Rep. Bill Foster, has followed suit, calling for the FDIC chairman to step down.

Rep. Maxine Waters, the top Democrat on Financial Services, blasted the report, not the FDIC chairman, for focusing too much on current leadership. Democrats are expected to circle the wagons to protect Gruenberg during his testimony – an irony given the propensity of Democrats, not Republicans, to rail against toxic workplace environments.

Treasury Secretary Janet Yellen signaled her displeasure, telling reporters Tuesday that “the kind of abuses that were documented in the report are a totally unacceptable way to treat employees at the FDIC and not in line with the core values of the Biden administration.” She stopped short, however, of joining Republican calls for his resignation.