Martin Gruenberg, the chair of the Federal Deposit Insurance Corporation, is facing an influx of calls to resign after a blistering, 234-page report released Tuesday revealed widespread sexual harassment and other misconduct plaguing the federal bank regulator.
The damning report, which was released by law firm Cleary Gottlieb Steen & Hamilton and was prompted by a Wall Street Journal investigation in November, did not find that Gruenberg alone was responsible for the FDIC’s toxic workplace.
However, “we do recognize that, as a number of FDIC employees put it in talking about Chairman Gruenberg, culture ‘starts at the top,’” the report said.
Cleary Gottlieb also documented several instances in which Gruenberg — who’s served as FDIC chair since 2023, but has been a leader at the agency since joining its board in 2005 — lashed out at subordinates, “particularly when being delivered bad news or conveyed views with which he disagrees.”
The incidents have created an atmosphere of fear at the firm, where staffers hold back on delivering potentially upsetting news to Gruenberg, CNN earlier reported.
Gruenberg’s temperament “may hinder his ability to establish trust and confidence in leading meaningful culture change,” the report added.
The calls for Gruenberg — a Democrat who was appointed by President Biden — to step down are being led by Republican lawmakers.
On the left, only Rep. Bill Foster (D-Ill.) has demanded that Gruenberg leave, according to CNN.
If Gruenberg caves in and does actually resign, there could be significant ramifications for banks across the country, CNN reported.
The move would kill the FDIC’s initiative to work with the Federal Reserve and Office of the Comptroller of the Currency to pass any kind of regulations that beef up bank capital requirements, according to Dennis Kelleher, president and CEO of Better Markets, a group that advocates for oversight of the financial sector.
Kelleher also told CNN that rule-making would come to a “screeching halt” without Gruenberg at the helm.
A spokesperson for the FDIC insisted to the outlet that Gruenberg “is already implementing the recommendations in the report” and that “at his direction,” the agency is “working to identify and appoint a transformation monitor as well as an independent third-party expert to support these efforts.”
The FDIC did not immediately respond to The Post’s request for comment.
Late last year, three agencies — the FDIC, the Fed and the Office of the Comptroller of the Currency — approved a preliminary step to finalize Basel III Endgame, a set of rules that would require America’s largest banks to set aside more capital, limiting the amount of funds they have to lend to customers.
The groups are in the process of evaluating the initial proposal after Republicans on the FDIC board voted against Basel III Endgame, and are poised to propose new rules based on the comments they received, according to CNN.
Jaret Seiberg, a policy analyst at TD Cowen, said in a Tuesday note obtained by CNN that this is why “Gruenberg’s departure would be a positive for the bigger banks.”
Seiberg, however, noted that he doesn’t think Gruenberg will resign as key Democrats like Sen. Elizabeth Warren aren’t calling for his resignation, and White House press secretary Karine Jean-Pierre didn’t say that Biden has any doubts on his ability to lead the FDIC.
This is likely because in the case of Gruenberg’s resignation, vice chair Travis Hill, a Republican appointee, would automatically become chair until a replacement is appointed by the president and confirmed by the Senate, CNN reported.
Hill voted against Basel III Endgame.