FDIC news this morning:
FDIC chair in the hot seat
By Emily Peck
A harsh grilling awaits FDIC chair Martin Gruenberg on Capitol Hill next week when lawmakers are expected to question him over a bombshell investigation that found a longstanding toxic culture at the agency.
Why it matters: Gruenberg's fate hangs in the balance — along with the prospects for the Biden administration's financial regulatory agenda.
Catch up fast: Out this week, the report details an agency that's been rife with sexual harassment for years, and where employees fear retaliation for speaking up.
The report notes that issues predate Gruenberg, who became chair in 2022 and served in the role from 2012 -2018. However, it devotes about nine pages to Gruenberg's reputation for losing his temper in the workplace.
The situation raises uncomfortable questions for the White House and Democrats, typically folks who want leaders held responsible for workplace cultures that allow for sexual harassment and discrimination.
The big picture: If Gruenberg steps down, it would leave the FDIC board deadlocked — two Democrats and two Republicans. That would make it difficult for the agency to move forward on any controversial rulemaking.
"A 2-2 vote would stall and probably doom politically sensitive banking policy," per a note from Renaissance Macro Research.
Zoom in: Atop the doom list is the administration's proposal to beef up capital requirements for banks, already facing pushback from the industry and even some Democrats (it's expected to be revised), and a recent interagency proposal to curb bank executives' pay.
If Gruenberg leaves, the White House won't choose an acting chair. The role would automatically go to Travis Hill, the vice chairman of the FDIC board and a Republican.
His departure would change the balance of power between the three banking regulators — the FDIC, the OCC and the Fed — and imperil interagency rulemaking.
The White House would scramble to find a new leader who could be confirmed by the Senate before the election.
Between the lines: The report doesn't explicitly call for his ouster but the implicit message is there.
Where he stands: Republicans are calling for Gruenberg's head and a broader leadership change.
Top Democrats on finance committees, including Sen. Sherrod Brown (Ohio), Sen. Elizabeth Warren (Mass.) and Rep. Maxine Waters (California) are all backing Gruenberg, Punchbowl News reported on Wednesday.
Others including Rep. Bill Foster (D-Ill.), who sits on the House Financial Services Committee, are backing away.
Meanwhile: Advocates for financial reform question the independence of the investigation itself, asking why the FDIC's former chair, Republican Jelena McWilliams, who served from 2018 to 2021, didn't come up for more criticism.
They point to a 2020 investigation from the FDIC's Office of the Inspector General that highlighted sexual harassment issues and appears to have been largely ignored inside the agency.
The bottom line: Ultimately, Gruenberg's fate is in President Biden's hands.
A lot is riding on how Gruenberg does on Capitol Hill next week when banking regulators go before House and Senate committees for regularly scheduled oversight hearings.
"A disastrous performance next week could make it harder for Democrats to defend his staying in the role," the RenMac note says.
