WASHINGTON — A day after members of the Senate Banking Committee grilled federal bank regulators, members of the the House Financial Services Committee said they want to take a deeper look at alleged workplace misconduct at the Federal Deposit Insurance Corp.
When FDIC Chairman Gruenberg was initially asked by Rep. Patrick McHenry, R-N.C., if he had ever been investigated for misconduct himself, he said he hadn't. But later on in the hearing, Gruenberg corrected the record by saying that he had in fact faced a single internal investigation 15 years ago that was subsequently dropped. Gruenberg is the longest serving member of the FDIC board.
"In 2008 I was interviewed, pursuant to a review done in response to a concern raised by an employee, and I'm not aware of anything that came out of that review," he said. "I just wanted to respond clearly for the record, and we'd be glad to provide you any additional information related to that."
Rep. Bill Huizenga, R-Mich., asked him for further explanation, and the FDIC official agreed he would be willing to share more information from their legal department and office of Inspector General. Huizenga said he intends to speak to the staff member who made the allegation.
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Gruenberg has expressed serious concern with sexual harassment at the agency and hired an independent law firm to investigate it almost immediately after the allegations surfaced.
"I have no higher priority than to ensure that all FDIC employees work in a safe environment where they feel valued and respected," he said in Tuesday's Senate hearing.
Rep. Maxine Waters, D-Calif., asked Gruenberg, acting Comptroller of the Currency Michael Hsu and Federal Reserve Vice Chair for Supervision Michael Barr for written plans reviewing their agency's sexual harassment and workplace safety policies, and the regulators agreed to provide written responses within fifteen days.
While workplace culture was a frequent theme, lawmakers also leveled a variety of concerns with the agencies' proposed
McHenry, who led a letter yesterday expressing discontent with what he called the "growing influence of global governance bodies on U.S. bank regulation," reiterated his concerns Wednesday that the capital reforms — as outlined by the Basel Committee on Banking Supervision — will harm the economy.
"You've ceded your authority over U.S. financial regulation to opaque, unelected and unaccountable global governance bodies and NGOs, allowing European counterparts to set the agenda and put our financial system at a competitive disadvantage," he said.
The GOP was not the only party expressing concern with the coming rule's impact. Rep. Bobby Scott, D-Va., said he was worried about the impact of Basel reforms on derivatives, which farmers use to manage the risks from market price fluctuations.
"[I'm concerned] not only with the impact it will have on our smaller farmers and their ability to access capital, but also on the increases to the cost of derivatives transactions, meaning higher prices for everyday consumers," said Scott.
Barr responded that while regulators are primarily tasked with ensuring the safety and soundness of banks that provide products like derivatives, he said he is open to hearing such concerns and making changes to the rule to mitigate such effects.
"It's important for those who rely on derivatives that banks can be healthy and strong in providing those services," he said. "We're open to improving the rule in all ways."
Rep. Gregory Meeks, D-N.Y., said he had concerns with the rule's effects on first-time homebuyers, something other tri-state lawmakers
Rep. Brad Sherman, D-Calif., noted part of the proposal that forces banks to recognize unrealized losses on held for sale securities is a long overdue reform. He actually wants to see regulators go further, and asked if they were considering compelling banks to recognize all unrealized losses on all mark-to-market securities.
"That's flabbergasting to think that [previously] you would take an asset that the bank paid a million dollars for that the market tells us is worth only $600,000 and counted it as a million," he said.
Sherman, while a proponent of certain Basel reforms, was also worried another recent proposal affecting bank regulation — new long-term debt requirements for big banks — might stifle small-business lending.
"Every time a bank is incentivized to buy that long-term debt on a securities market, that's money they can't lend to a local pizzeria," he said.
Another topic that was raised briefly was bank mergers, which — in general — progressives have opposed and conservatives have urged the Biden administration to approve more quickly. Arkansas Republican French Hill briefly asked FDIC Chairman Martin Gruenberg for a comprehensive list of pending mergers applications.
"Also just note on [the list] how long since their application was accepted," he said. "I want to know the length of time."
Rep. Nydia Velazquez, D-N.Y., asked Gruenberg when regulators plan to finalize a rule prohibiting morally hazardous executive compensation arrangements — a directive Congress issued in section 956 of Dodd Frank. Congress initially required the agencies to finalize the rule by May 2011, but while a rule was
Gruenberg said the agencies probably won't get it out by the end of the year, but rather are eyeing re-proposing the rule — thereby restarting the rulemaking and comment process — early next year.
"I think we are in general alignment," he said. "I think we're going to move toward a re-proposed rule that may not come until the early part of next year."
