Heads must roll for the FDIC's sexual harassment culture. But whose?

Bloomberg News

Sen. Elizabeth Warren, D-Mass., said it best: "I shouldn't have to say this in 2023: Sexual harassment is never all right — never. It's important that the FDIC gets to the bottom of this and holds harassers accountable." 

Those words were said this morning at a Senate Banking Committee hearing a day after a massive and damning investigation by The Wall Street Journal depicted a pervasive culture of sexual harassment, exclusion and belittlement of female bank examiners, unhinged partying and just pure toxicity at the Federal Deposit Insurance Corp., all of which goes back at least a decade and probably far longer. 

If you're reading this then there's a good chance you've already read the Journal story, and if you haven't, just imagine the most toxic workplace you've ever heard of and triple the toxicity — that might get you in the ballpark. 

And today in the hearing, FDIC Chair Martin Gruenberg — who has served as an FDIC board member since 2005 and a couple of tours as chair since being confirmed again as chair not quite a year ago — got what was coming to him. Sen. Cynthia Lummis, R-Wyo., called the behavior outlined in the article "skanky," and Sen. John Kennedy, R-La., not to be outdone, told Gruenberg that "you and your colleagues ought to have your heads in a bag. The FDIC is no country for creepy old men."

I spent a lot of time the last day or so thinking about whether Gruenberg should resign. If the allegations outlined in the Journal report happened at any organization — be it a regulator, a bank or a gas station — the head of that organization shouldn't lead it anymore. If you knew this was happening and you did nothing, you are indifferent to suffering and therefore not suited to lead a federal agency that has power. If you had absolutely no idea any of this was happening, you are an ineffective and out-of-touch leader and therefore should not be trusted with the power that your office confers.

But let's not pretend that these senators are purely motivated by a deep desire to protect and empower women or anyone else. If Gruenberg resigns, Vice Chair Travis Hill — a Republican, and an outspoken critic of the administration's regulatory agenda — will become acting chair until a replacement is confirmed. That would presumably stall the Biden administration's regulatory agenda, but it's far less obvious that it would necessarily make the agency a less toxic place to work. The incidents detailed in the report happened when Gruenberg was chair and also when other people — women and men, Democrats and Republicans — ran the show.

AB - Policy & Regulation

Lawmakers zero in on 'disturbing' cultural problems at the FDIC

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If I were Gruenberg, I would take a long look in the mirror and decide whether I am capable of achieving that goal. Not Basel III, not Community Reinvestment Act reform, not replenishing the Deposit Insurance Fund. If I, as Gruenberg, decide that I am not going to resign, then for the remainder of my term I must decide that I have one and only one priority: turning this agency around. That means weeding out and firing all the skeezy weirdos in my organization — one strike and you're out. And if there's some technical reason why you can't do that, demand whatever power you don't have to do it. If that means moving into the FDIC hotel and serving as hall monitor to make sure no one is puking in the elevator or peeing off the roof as reported in the Journal, then that's what I should be willing to do. And if I'm not, I need to make way for someone who will, political implications be damned.

Gruenberg, as I mentioned, has been at the FDIC a long time — the agency is his legacy, and now that agency is known to the world to be profoundly flawed. This is not — should not — be a bad news cycle that can be weathered and later forgotten, because it can shape the future of the agency for generations. As we speak there are hundreds of precocious and civic-minded college students who last week might have thought about being FDIC examiners after they graduate, but have now decided to build their careers elsewhere. 

If Gruenberg cares about the FDIC and its future, then he must know that the independent investigation and report that have been promised aren't going to change much, even if that may be the minimum effort necessary to get out of this news cycle. He needs to harness his institutional knowledge, passion and gravitas to turn over every rock and send wrongdoers packing. And if he can't — or won't — then the administration needs to find someone who will.