The nation’s embattled chief regulator of federal banks, identified in an independent audit as easily angered and quick to berate employees, deliberately spoke softly and measuredly Wednesday on Capitol Hill as he fended off calls for his resignation.
Martin Gruenberg, chairman of the Federal Deposit Insurance Corp., explained, apologized, and took responsibility after the audit last week found poor management and allegations of discrimination and sexual harassment.
“I accept the findings of the report and as chairman, I take full responsibility,” Gruenberg said early in the hearing before the House Financial Services Committee. “To anyone who has experienced sexual harassment, discrimination, or other misconduct at FDIC, I again personally want to apologize and express how deeply sorry I am. I also acknowledge my own failures as chairman both in failing [to appreciate] how my temperament in meetings impacted others and for not having identified the deeper cultural issues.”
Gruenberg announced the agency is proposing an independent office of professional conduct to investigate and discipline misconduct. Under later questioning, he agreed with lawmakers’ suggestions that he go through anger management training.
House Financial Services Chairman Patrick McHenry, R-N.C., who already had called for Gruenberg’s resignation, said the FDIC workplace issues likely played a role in the bank failures of 2023.
“The report indicates that when presented with bad news, your first reaction is to yell, scream, or berate the person presenting the bad information,” McHenry said. “Do you think a bank failure is bad information?”
Gruenberg replied, “It is.” But the FDIC chairman added that he didn’t respond to that information with anger.
McHenry and Gruenberg went back and forth.
“You have led the agency for 10 of the last 13 years. We’ve had significant bank failures,” McHenry said to Gruenberg, who has served on the FDIC’s board since 2005 and was appointed chairman by Presidents Barack Obama and Joe Biden.
“Do you think the fact that you respond to bad information by attacking or yelling at the person presenting that information makes those people less willing to present that bad information to you?” McHenry asked.
Gruenberg replied, “I endeavor to treat every employee with courtesy and respect.”
McHenry noted that the audit says a staff reluctance to bring bad news to the boss could have the result of “chilling” conversations and “hampers the free flow of communication.”
During his opening remarks, McHenry read a January 2021 quote from the president, in which Biden said: “I’m not joking when I say this: If you’re ever working with me and I hear you treat another colleague with disrespect, talk down to someone, I promise you I will fire you on the spot.”
The Federal Deposit Insurance Corp., a government corporation and independent agency, supplies deposit insurance for customers of U.S. commercial banks and was created as part of the New Deal in response to the Great Depression. Its deposit fund stands at about $122 billion, covering 4,500 financial institutions across the United States. If a bank fails, bank customers are insured for up to $250,000.
The law firm of Cleary Gottlieb Steen & Hamilton conducted the independent audit, which found that about 1 in 10 employees at the FDIC said discrimination, sexual harassment, and other workplace misconduct occurred there. The agency had 5,952 employees as of the fourth quarter of 2023.
Biden appointed Gruenberg for a full stint as FDIC chairman in 2022, at the urging of Sen. Elizabeth Warren, D-Mass.
The political news site Punchbowl News reported that Democrats want to keep Gruenberg in place, writing: “The chair of the FDIC holds a linchpin vote for the Democratic financial policy agenda. Major pieces of banking regulation … need Gruenberg as a tie-breaking vote on the FDIC’s five-member board.”
During the hearing, Rep. Maxine Waters, D-Calif., ranking member of the Financial Services Committee, said that under Gruenberg the FDIC has done a lot of important work. Waters attempted to move the focus to former President Donald Trump.
“As the report states, tone does start at the top. But I am concerned that Republicans who have been quick to call on Chairman Gruenberg to resign are selectively applying that standard,” Waters said. “After all, the top Republican and nominee to be president is currently on trial regarding the first of a series of criminal indictments and has been found liable of sexual abuse. Hopefully, this concerns them too and they will call on the former president to step down and withdraw his nomination.”
The FDIC is overseen by a five-member board of directors, including a chairman, appointed by the president. The board currently has a 3-2 Democrat majority.
Gruenberg, now 71, briefly was acting chairman of the FDIC in 2005 and 2006, during the George W. Bush administration. Obama appointed Gruenberg as chairman in 2011 and he served until 2018, over a year into Trump’s presidential term.
Earlier this month, the House Oversight and Accountability Committee announced the opening of an investigation into the FDIC. Several Republicans on the committee called for Gruenberg’s resignation over the FDIC controversies.
Democrats were less aggressive, but several lawmakers during the hearing questioned whether Gruenberg could address the problems effectively.
White House press secretary Karine Jean-Pierre took a question on Gruenberg earlier this week.
“I don’t have any personnel announcements to make at this time. The FDIC administrator—chairman, to be exact, made—apologized and spoke to this,” Jean Pierre said. “And so, certainly, I would—I would send you there. The FDIC is an independent agency, so [I] would refer you to them as to anything else coming out from the FDIC on this particular matter.”