Investigation finds toxic culture at FDIC, targets its leader

A report on workplace culture at the Federal Deposit Insurance Corporation, released Tuesday, revealed a broad pattern of sexual harassment, discrimination and abuse of women and minority members by senior officials. The findings are likely to prompt another round of potentially painful questions for the agency’s head, Martin Gruenberg, who is scheduled to testify in Congress later this month.

The report said the misconduct at the Federal Deposit Insurance Corporation, which has the authority to monitor the health and stability of all U.S. banks but closely oversees smaller institutions, affected “a very large number of employees” and lasted “for a very long period.”

The report, prepared by law firm Cleary Gottlieb, said the agency’s problems were caused by a “patriarchal, insular, risk-averse culture” and a “lack of clarity and credibility around internal reporting channels.” She described “fiefdoms” in regional offices, where senior managers protected other long-term employees from potential consequences resulting from junior employees’ allegations of mistreatment.

Examples of this behaviour, including senior examiners texting young women pictures of their genitals or taking them to brothels, were the first of their kind. mentioned By the Wall Street Journal in November. Tuesday’s report was the result of an independent investigation by Cleary Gottlieb, who was appointed by a special committee created by the agency’s board of directors after the newspaper report.

The report asked whether Dr. Grunberg, who has worked at the agency for nearly two decades and has led it for 10 of the past 13 years, could effectively continue in his role.

“The incidents — and the resulting reputation for losing his temper and expressing anger toward employees — may hinder his ability to build confidence in leading meaningful cultural change,” she said. The report also referred to Dr. “Groenberg’s apparent inability or unwillingness to recognize how others are having some difficult interactions with him.”

In a memo to FDIC staff on Tuesday shared with The New York Times, Mr. Gruenberg apologized for his behavior.

“To anyone who has experienced sexual harassment or other misconduct at the FDIC, I would once again like to say how deeply sorry I am. I also want to apologize for any shortcomings on my part,” he wrote. “As Chairman, I am ultimately responsible for all “What’s happening at our agency, including our workplace culture.”

The report did not recommend that Dr. Gruenberg steps down or is removed. It provides for new systems to protect victims of abuse, a new role for monitoring culture, more training to improve workplace behaviour, and better reporting systems for employees who suffer abuse.

But that may fuel new calls for Trump. Gruenberg to leave. Republicans in Congress have been calling for him to resign since last fall, while Democrats criticized his behavior, as reported by The Journal, and called for an independent investigation.

more than mr. Gruenberg’s career is on the line. Bank executives and lobbyists, who generally oppose a new plan proposed by federal regulators to increase capital requirements on the largest institutions, believe that if Mr. Trump were to do so, it would be difficult for him to do so. When Gruenberg leaves the FDIC, there will not be enough support for the plan among other regulatory agencies and it will have to be canceled.

Mr. Gruenberg is scheduled to testify before the House Financial Services Committee on May 15 and the Senate Banking Committee on May 16 in semiannual hearings on financial regulation.