Senate Banking Committee Chair calls for ‘new leadership’ at the FDIC following scathing report

By Elisabeth Buchwald, CNN

New York (CNN) — Sen. Sherrod Brown, a Democrat who heads the Senate Banking Committee, is calling for a leadership overhaul at the Federal Deposit Insurance Corporation following a scathing 234-page report released earlier this month that detailed pervasive sexual harassment, discrimination and bullying at the agency.

Brown stopped short of explicitly calling for FDIC Chair Martin Gruenberg, who was appointed by President Joe Biden, to resign. Rather, he said in a statement Monday morning, “there must be fundamental changes at the FDIC.”

“Those changes begin with new leadership, who must fix the agency’s toxic culture and put the women and men who work there — and their mission — first,” Brown said. “That’s why I’m calling on the President to immediately nominate a new Chair who can lead the FDIC at this challenging time and for the Senate to act on that nomination without delay.”

Brown’s comments come after he chaired a hearing in which Gruenberg testified last week and received “further outreach from FDIC employees.”

Succession planning

Most Democrats haven’t called on Gruenberg to be replaced. That’s likely because if Gruenberg were to vacate his position, Vice Chair Travis Hill, a Republican appointee, would automatically become chair until a replacement is appointed by the president and confirmed by the Senate. Ultimately, if President Joe Biden heeds Brown’s call, there’s no guarantee that his new pick would be confirmed by January, when a new president could be inaugurated.

The White House did not immediately respond to CNN’s request for a comment.

Additionally, if Gruenberg is ousted, the agency would be deadlocked with one other Republican and two Democratic members on the FDIC’s board of directors until a new chair is confirmed. That would likely stop significant and controversial banking regulations, such as ramped-up capital requirements, from taking effect.

The FDIC is responsible for ensuring the safety and soundness of banks across the country. It is financed by banks that contribute to its deposit insurance fund.

Jaret Seiberg, an analyst at TD Cowen, said it’s significant that Brown didn’t outright call for Gruenberg to resign. “This suggests to us that he would remain until a replacement is confirmed. That should ensure a Democratic majority that could adopt new rules,” he said in a note on Monday.

Brown himself is also in a sticky position as he faces one of the toughest reelection bids in his state of Ohio that could determine which party controls the Senate. That’s partly why Seiberg believes Brown is attempting to appear as though he does not support Gruenberg “but he is not disrupting efforts to finalize bank safety and soundness rules.”

Shortly after Brown released his statement, Sheila Bair, who served as chair of the FDIC from 2006 to 2011, called on Gruenberg to resign.

“I have known and worked with Chairman Gruenberg for years. But there is a desperate need for change at the FDIC,” Bair, a Republican appointee, said in a post on X. “For his own sake and everyone at the FDIC, he should announce his intention to resign effective with the appointment and confirmation of a new Chair.”

Gruenberg commits to improving his own temperament

Gruenberg was grilled by lawmakers last week in back-to-back hearings before the House and the Senate that were scheduled prior to the report’s release. During the hearings, where Gruenberg testified alongside other top financial regulators, he told lawmakers he takes “full responsibility” for the findings of the report.

“I also acknowledge my own failures as Chairman, both in failing to recognize how my temperament in meetings impacted others and for not having identified deeper cultural issues at the FDIC sooner,” he said. Gruenberg did not immediately respond a request for comment, while the FDIC declined to comment.

Gruenberg also agreed to take anger management courses given the report undertaken by the law firm Cleary Gottlieb Steen & Hamilton and commissioned by the FDIC documented several instances where he lashed out at subordinates “particularly when being delivered bad news or conveyed views with which he disagrees.” That has caused staffers to delay delivering news they fear would upset him. Gruenberg’s temperament “may hinder his ability to establish trust and confidence in leading meaningful culture change,” the report added.

The report, however, did not find that Gruenberg alone was responsible for the issues described in depth, based on interviews with over 500 employees. But the report said, “We do recognize that, as a number of FDIC employees put it in talking about Chairman Gruenberg, culture ‘starts at the top.’”

This story has been updated with additional details and context.

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