WASHINGTON — A much-anticipated hearing in the House Financial Services Committee on workplace misconduct at the Federal Deposit Insurance Corp. yielded little movement among Democrats toward demanding FDIC Chair Martin Gruenberg's immediate resignation.
Republicans — like Chairman Rep. Patrick McHenry, R-N.C. — continued to decry Gruenberg's continued presence atop the agency, where he has served on the board of directors for nearly 20 years and as chair for nearly 10, both in acting and Senate-confirmed capacities.
"Resigning after the confirmation of a new chair is just more of the status quo," McHenry said. "Chair Gruenberg knows this, which is why he told employees at the FDIC to continue as if he would be there until the end of the year. That is outrageous."
Many Democrats also argued their colleagues across the aisle lacked moral authority to demand new leadership. Representative Maxine Waters, D-Calif. — the ranking member on the committee — said the misconduct detailed in the report occurred across many administrations and was unresolved.
"Republicans are attacking the Democratic chair, who has already announced he will step down," she noted. "But you won't hear them call for Republican [FDIC] vice chair, Travis Hill, to step down despite him being a senior official under former Chair McWilliams when allegations of misconduct persisted."
The FDIC workplace scandal
While Gruenberg was not accused of sexual misconduct or harassment, the report detailed instances where Gruenberg yelled at and berated subordinates but did not explicitly call for his ouster. Despite the report's findings, Gruenberg retained his position and participated in
The hearing featured testimony from McKernan and Hsu, as well as representatives of Cleary Gottlieb who undertook the investigation. While
Democrats pushed back on the accusations that they are stalling Gruenberg's replacement, pointing to the fact that the White House has been moving relatively fast in an election year to choose a replacement. Reports over the weekend prior reported the administration is on the precipice of nominating
Waters also argued that the GOP lacked moral authority given that presumptive Republican nominee for president Donald Trump has been found liable for sexual assault and weathered persistent accusations of sexual harassment over the course of his career.
"We hear much complaining about it here with respect to a democratic appointee, Mr. Gruenberg, who's admitted that he's leaving, but yet all my Republican colleagues are supporting former President Trump, who has got an atrocious and long record of poor treatment [of women]," said Rep. Stephen F. Lynch, D-Mass. "The relevance here is that the next president will appoint the FDIC chair that we're questioning the conduct of today."
The FDIC board members on the panel also fielded a number of questions about how the fallout from the report had been affecting staff morale. McKernan expressed hope that accountability will soon come for those found to have engaged in misconduct.
When asked what he meant by real accountability, McKernan indicated he wanted to see a change in leadership.
"We need a fresh start sooner rather than later, that's important to establish credibility," he said. "It's important to bring in someone that has the moral authority to really push change and … deal with our legacy issues."
Rep. Blaine Luetkemeyer, R-Mo., asked McKernan about his outlook for accountability. McKernan answered skeptically, and suggested that the board take a more "active role" in FDIC governance until Gruenberg leaves office.
"I'm not particularly optimistic we'll see accountability soon," he said. "I think there's a real question here that we at the board need to consider during this interim, when we're waiting for a new chair, we're waiting for the current chair to resign and have the acting chair, I think the board needs to take a more active role here."
Luetkemeyer pressed McKernan, a Republican, to do more or risk being seen as complacent.
"As leaders, you need to step up and stop the nonsense, otherwise you're an enabler," he said. "You continue to allow this to go on, you're no better than Gruenberg in my mind … this has got to be stopped."
Rep. Andy Barr, R-Ky., asked McKernan about how agency staff are faring in light of the scandal. McKernan said that the turmoil has presented a significant headwind to the agency, that workers are generally exhausted and distracted.
"The morale at the FDIC is bad [and] that's not good for our ability to execute on the mission," he said. "The state of affairs at the FDIC — if not fixed — are going to be a real problem for retention and recruitment of new staff, and that will be fatal to our ability to achieve our mission."
Lawmakers voiced bipartisan agreement on the need to move any prospective nominee out of the White House. Democrat Bill Foster, D-Ill. — the lone Democrat who had called for Gruenberg's resignation upon publication of the Cleary Gottlieb report — said the Senate should confirm a replacement without delay, but made clear a very real roadblock to replacing Gruenberg will be Senate Republicans'
"I encourage the Biden administration to quickly nominate a new chair — which I understand is underway," he said. "And I look forward to my Republican colleagues encouraging their Senate colleagues to rapidly confirm the replacement for Mr. Gruenberg."
Waters struck a similar tone, saying that if Republicans are serious about their outrage over Gruenberg's presence at the FDIC, they will confirm his replacement quickly.
"If Republicans are committed to change in the work culture at the FDIC," she said. "I expect that they will join with Democrats to support her swift Senate confirmation."
Whether that confirmation will be swift is open to debate. Todd Baker — managing principal at Broadmoor Consulting and a senior fellow at Columbia University — said he continues to believe that a preelection confirmation is unlikely.
"The nomination of a woman to replace Gruenberg takes the Democrats off the hook and I can't see the Senate Republicans viewing confirmation as a priority, as they presumably think they will take the White House in November and appoint their own candidate," wrote Baker in an email. "If they don't win the Presidency, they still may take the Senate, in which case they will be in a much better position to influence any Democratic nominee."
Isaac Boltansky, a research analyst at BTIG, said he doesn't see major changes after today's hearing, continuing to believe while remotely possible, a swift confirmation is highly improbable. Gruenberg's replacement, he says, will be slow-walked until it is eclipsed in political importance by the election.
"My sense is that the nomination will be slow-walked in the hopes that this issue fades into the background of an election year summer," said Boltansky. "That would allow Gruenberg to stay in place and continue moving forward Democratic policy priorities for the next few months."
