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Watching the Watchdogs
A bomb went off at the Federal Deposit Insurance Corp. this week: The agency published an independent review of its workplace culture from the law firm Cleary Gottlieb Steen & Hamilton, where more than 500 current and former employees accused their colleagues of sexual harassment, discrimination and misconduct.
“Women in one field office recounted how, to their dismay, it became routine to hear their supervisor talk about their breasts and legs and his sex life.” Even worse, “senior executives with well-known reputations for pursuing romantic relations with subordinates enjoy long careers without any apparent consequence.”
Perpetrators were sometimes moved to other offices or roles but rarely faced discipline. Of the 92 harassment complaints made through the FDIC’s anti-harassment program from 2015 to 2023, not a single one resulted in removal, reductions in grade or pay, or any discipline more serious than a suspension, the report said.
In addition, numerous FDIC employees, including senior executives, noted instances where Chairman Martin Gruenberg, who has been at the agency nearly 20 years, lost his temper. His demeanor led to a “chilling” impact on open communications, the report said.
This week, Gruenberg personally apologized and pledged to go above and beyond the recommendations in the report. “We will spare no effort to create a workplace where every employee feels safe, valued, and respected,” he wrote in a statement. Meanwhile, members of Congress — including Republican Rep. Patrick McHenry and Sen. Tim Scott, and Democratic Rep. Bill Foster — have called for Gruenberg’s resignation.
The report followed an investigation by The Wall Street Journal in November of 2023 that discussed similar allegations, which landed at an awkward time for the agency. The FDIC has been struggling to find and retain examiners for years, as Kiah Lau Haslett reported for Bank Director last year.
The agency charged with examining the nation’s banks and ensuring their safety and soundness appears to be struggling with its own safety and soundness. In my view, the accusations paint a picture of a watchdog that couldn’t watch itself.
The banking system benefits when its regulators function at a high level. My hope is that the FDIC can turn itself around, although it won’t be easy.
• Naomi Snyder, editor-in-chief for Bank Director
*This newsletter was last updated at 3 p.m. CDT Friday.
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