FDIC Chair Faces Pressure From Lawmakers to Resign Over New Misconduct Claims

Martin Gruenberg, chairman of the Federal Deposit Insurance Corporation, testifies before the House Financial Services Committee in Washington on Nov. 15, 2023. Madalina Vasiliu/The Epoch Times

Martin Gruenberg, Federal Deposit Insurance Corp. (FDIC) chairman, is facing growing pressure from Republican lawmakers to resign over additional claims that the top U.S. banking regulator tolerated a toxic environment and inappropriate behavior.

Two reports published by The Wall Street Journal last week revealed a climate of alleged workplace misconduct and sexual harassment. According to the newspaper’s reporting, which featured interviews with more than 100 current and former employees, an agency official left a voicemail cursing at an employee.

Following that incident, the FDIC allegedly paid out a $100,000 settlement, and the individual received a promotion soon after.

“Female examiners left the FDIC because of what they say was a sexualized, boys’ club environment and the belief they were consistently given fewer opportunities than their male counterparts,” the paper reported.

During his appearance before the House Financial Services Committee hearing on Nov. 16, Mr. Gruenberg told lawmakers that he hadn’t been investigated for inappropriate behavior. However, it was revealed that the FDIC head faced a probe surrounding alleged misconduct in 2018 before becoming director.

Following the publication of these new claims, Mr. Gruenberg is facing increasing pressure from lawmakers in the House and Senate to step down.

Republicans Demand Resignation

Sen. John Kennedy (R-La.) wrote in a letter to the FDIC chair that he should resign “so that a new chair can restore the professional culture at the FDIC that the American people expect from its institutions.”

“Given the vital role the FDIC plays in upholding America’s financial and economic systems, it is imperative that its leader be one with irreproachable demeanor and character,” Mr. Kennedy wrote. “These troubling allegations call into question your ability to continue leading and present a troubling picture of your tenure.”

Multiple lawmakers, including Mr. Kennedy, explicitly asked the FDIC chief if he had ever been investigated for workplace misconduct. Mr. Gruenberg denied facing an investigation or being inappropriate at the office.

Sen. Joni Ernst (R-Iowa), ranking GOP member of the Senate Small Business Committee, has said he should resign.

“FDIC Chair Gruenberg’s reported behavior and the reports of sexual harassment, misconduct, and abuse permeating this agency under his watch are damning. Not only did he fail his employees, he lied to Congress. Accountability is coming. He should resign,” Ms. Ernst stated on X.

Rep. Patrick McHenry (R-N.C.), House Financial Services Committee chair, called Mr. Gruenberg’s conflicting testimony “alarming” and confirmed in a letter that the committee will open an investigation into the FDIC’s “toxic workplace.”

“Notwithstanding the toxic environment over which you presided in some leadership capacity over the last 18 years, your conflicting testimony in this week’s hearing before the Committee was alarming,” Mr. McHenry and other GOP committee members said. “As we conduct our investigation, it is our expectation that the FDIC and its employees will be cooperative, fully transparent, and timely in responding to the Committee’s requests.”

Additionally, Mr. McHenry requested in a separate letter a briefing on the agency’s workplace culture later this month with Tyler Smith, the acting inspector general for the FDIC.

Some Democrats are taking a more cautious approach to the situation.

Sen. Sherrod Brown (D-Ohio), the Senate Banking Committee chairman, requested a new investigation by the FDIC’s Office of the Inspector General.

Mr. Gruenberg confirmed to both chambers in his testimony that the FDIC has begun a comprehensive review and engaged with an independent third-party group “to ensure that we understand the nature of these issues and take all appropriate actions to address them.” A report is expected to be finished in 90 days.

Sen. Sherrod Brown (D-Ohio) delivers remarks during a hearing on Russian sanctions on Capitol Hill in Washington on Sept. 20, 2022. Kevin Dietsch/Getty Images

He testified in the Senate and House hearings that he was “personally disturbed and deeply troubled” by the reports.

In 2020, the FDIC’s then-inspector general published a comprehensive report that offered 15 recommendations to prevent and address sexual harassment after complaints were submitted. However, Mr. Gruenberg conceded that while these recommendations were implemented, they didn’t “change the culture.”

‘Difficult Week’

FDIC Vice Chairman Travis Hill and Director Jonathan McKernan published a statement, noting that it “has been a difficult week” for the federal agency.

Mr. Hill and Mr. McKernan highlighted two specific actions in response to the report. First, the review will need to look at all of the news reporting and investigate all parts of the organization. Second, the FDIC board, rather than the management, should determine the scale of the probe, the structure, and who leads the inquiry.

Mr. Gruenberg and general counsel Harrel M. Pettway should recuse themselves from the investigations, the FDIC officials added.

“News stories like these make it more difficult for the FDIC to do its job and undermine public confidence in the agency,” they said in a statement.