An independent report says the FDIC has a toxic work and leadership culture

• The Federal Deposit Insurance Corporation, or FDIC, has a “paternalistic” culture, according to an independent report.
• The bank’s regulatory body did not take any action regarding dozens of harassment complaints and transferred the violators.
• Investigators raised doubts about the FDIC chief’s ability to lead a cultural shift.

A major US bank regulator has a “paternalistic” and “isolated” culture and is headed by a chairman with a reputation for a strong temper, according to an analyst. Independent report Released on Tuesday.

The 234-page summary of the months-long investigation, led by outside law firm Cleary Gottlieb Steen & Hamilton, highlighted issues both old and new at the Federal Deposit Insurance Corporation, or FDIC. The FDIC has dismissed countless harassment complaints and that violators are transferred internally or promoted, the report said.

The law firm’s report is based on A Damn November story From The Wall Street Journal on the FDIC’s toxic work culture and comes as the FDIC faces a House investigation.

Investigators said they set up a hotline in mid-January and received more than 500 complaints — most from current employees — about sexual harassment, discrimination and other issues. The FDIC has about 6,000 employees.

Tuesday’s report described the FDIC’s culture as “misogynistic,” “patriarchal,” “isolated” and “outdated” — a “good ol’ boys’ club” where nepotism is common, revolving around powerful directors and senior executives. People who are known to have romantic relationships with their subordinates have long careers without any apparent consequences.”

While the FDIC operates an anti-harassment program, the report said it is ineffective. Of the 92 complaints the FDIC received from 2015 to 2023, none resulted in discipline more serious than suspension — and only two merited suspension, while 78 complaints resulted in indiscipline. Investigators said many employees did not report problems because they feared retaliation.

Investigators spoke with one employee who said she was “extremely fearful for her physical safety” after a colleague, who had been stalking her, continued to send her sexually explicit text messages, even after she filed a complaint against him. Employees from underrepresented groups said they were told they were “token” employees meant to fill quotas.

Tuesday’s investigation builds on a 2020 report by the FDIC’s inspector general that found the regulator did not create an “adequate” sexual harassment reporting and prevention program. The previous report also indicated widespread fear of retaliation.

Independent investigators spent nine pages discussing the conduct of FDIC Chairman Martin Gruenberg. Investigators wrote that they had heard “credible reports” of Grunberg’s mood, including in meetings as recently as May 2023.

“As the FDIC faces a workplace culture crisis, Chairman Gruenberg’s reputation raises questions about the credibility of leadership’s response to the crisis and the ‘moral authority’ to lead a cultural transformation,” the report said.

In a statement Tuesday to employees, which was released to the public, Gruenberg said he takes responsibility for the agency, including its culture. The 71-year-old Democrat has spent nearly a decade in the position under multiple presidential administrations.

He added: “I also want to apologize for any negligence on my part.”

After the report was published, some lawmakers from both parties called for Gruenberg’s exit. His departure would put Vice President Travis Hill, a Republican, in the interim seat.

White House press secretary Karine Jean-Pierre would not say Tuesday whether the president still had confidence in Gruenberg.

She said Gruenberg “apologized and adhered to the recommendations” issued by the law firm.

The FDIC did not immediately respond to a request for comment from Business Insider They are sent outside standard business hours. The agency did not issue a statement beyond Gruenberg’s Tuesday letter to employees.