‘You’re on a short leash’: Lawmakers blast FDIC chief over toxic workplace

FDIC Chair Martin Gruenberg faced a bipartisan grilling on Capitol Hill Wednesday over a blistering report that found pervasive harassment and mistreatment of employees at the agency on his watch.

Democrats blasted Gruenberg’s leadership and openly questioned whether he should stay at the agency. But they stopped short of joining Republicans in calling for his removal, which would imperil a crackdown on big banks and halt other pending financial rules opposed by the industry.

“I do not have confidence that you can continue to lead in this role because there is a deficit of trust and your credibility has been undermined,” Rep. Ayanna Pressley (D-Mass.) said at the hearing of the House Financial Services Committee, adding that she was angry that Gruenberg’s failures may jeopardize important policies at the FDIC.

Gruenberg appeared before lawmakers for the first time since the independent report last week portrayed a workplace culture that for years was rife with sexual misconduct, discrimination and other mistreatment of employees that managers did little to stop.

The investigation also found bad behavior by Gruenberg himself, detailing incidents as recently as May 2023, in which he lost his temper and berated staff in a “demeaning and inappropriate manner.”

“The fact that you have yet to resign proves you take no responsibility for your actions,” Rep. Patrick McHenry, the committee chair, told Gruenberg. “And let me be clear, showing up today is not an act of courage, it’s an act of hubris.”

McHenry and other Republicans reiterated their repeated demands that Gruenberg step down, pressing him over how he could preside over the agency for 10 of the last 13 years without knowing about or addressing the wide range of workplace misconduct issues.

Only one Democrat — Rep. Bill Foster (D-Ill.) — has urged Gruenberg to resign. And Gruenberg appeared to survive Wednesday’s hearing without any additional Democrats calling for his ouster.

“You’re on a short leash; a lot of people here would like to see you gone,” Rep. Stephen Lynch (D-Mass.) warned him. “I’m not so sure you’re the guy to make the changes, but maybe you are. Maybe you can prove that to us, I don’t know.”

Rep. Maxine Waters, the top Democrat on the committee, mounted the most forceful defense of Gruenberg. She said the FDIC had allowed workplace misconduct issues to fester for years under both Republican and Democratic leaders.

Waters told reporters after the hearing she wasn’t concerned about additional Democratic defections. “Gruenberg did well for himself,” she said, calling him “believable in terms of accepting responsibility and following through with a plan to deal with the issues.”

In his testimony, Gruenberg again apologized and told lawmakers that he’s working on overhauling the agency’s culture and process for addressing workplace misconduct, such as proposing a new independent office to investigate complaints. He also said in response to questioning that he would agree to attend anger management training.

He cited what he said was progress toward improving the agency’s culture. “This year, four individuals have been separated from the agency for misconduct,” he said. “We have made management changes in key positions related to this issue."

“We’ve got to break the good ol’ boys network that is at the core of the report,” Gruenberg said.

Democrats lined up to express outrage at the working conditions for FDIC employees. Several expressed serious misgivings about Gruenberg staying in his job. Some suggested that he would have been ousted if he were in the private sector and pressed him on his plans to reform the agency.

Yet despite their concerns, they equivocated on whether he should resign.

“I’m pissed off,” said Rep. Gregory Meeks (D-N.Y.), who said that “employees suffered from racial and gender discrimination, bullying, mistreatment and harassment at the FDIC for years” and people weren’t seriously disciplined for it.

Meeks told reporters after leaving the hearing that he was still deciding whether to call for Gruenberg’s resignation. “Something or somebody has to convince me that this thing can be repaired,” he said.

Rep. Jim Himes (D-Conn.) said Gruenberg should make his case directly to employees who were victimized by harassment why he should be in charge of reforming the culture. “If they’re not persuaded, I hope you do the right thing,” Himes said.

Gruenberg’s removal would elevate the Republican vice chair of the FDIC board, Travis Hill, and strip Democrats of a majority on the panel. A 2-2 partisan split on the FDIC board would effectively shut down much of the Biden-era financial regulatory agenda, much of which Republicans and the industry are fighting against. That includes rougher new capital requirements on large banks known as the Basel III Endgame and other policies, such as tougher requirements for big bank mergers.

“Let's not confuse a political scalp with changing culture” at the FDIC, said Rep. Sean Casten (D-Ill.), warning that pushing a new, replacement nominee through Senate confirmation could be difficult and time-consuming.

Republicans accused Democrats of turning a blind eye to misconduct to protect policy priorities. Sen. Thom Tillis (R-N.C.) called it “despicable” that Democrats were standing by Gruenberg. “Is your political agenda so important that you can look past ... what an abject failure he is as a manager?” Tillis said in an interview. “There's not a Fortune 500 company in the world that would allow that sort of behavior."

The White House has sidestepped questions about whether President Joe Biden still has confidence in Gruenberg. Press Secretary Karine Jean-Pierre last week pointed to Gruenberg’s apology and pledge to fix the agency.

Michael Hsu, the acting comptroller of the currency who sits on the FDIC board, also came to Gruenberg’s defense during the hearing. Hsu, a Democratic appointee who co-led the special committee to investigate problems at the agency, said he had confidence in Gruenberg’s ability to continue leading the FDIC and implementing reforms.

McHenry said Wednesday the committee may consider additional hearings on Gruenberg, who is also set to appear before the Senate Banking Committee on Thursday.

Eleanor Mueller contributed to this report.