FDIC Chair Gruenberg to be investigated by Republican-led House committee over conduct at the agency

By Elisabeth Buchwald, CNN

New York (CNN) — The House Financial Services Committee has launched an investigation into Federal Deposit Insurance Corporation Chair Martin Gruenberg’s conduct at the agency, members of the committee announced on Friday.

This comes after a Wall Street Journal investigation based on interviews with more than 100 current and former FDIC employees found that the agency rarely disciplined managers accused of sexual misconduct and other offenses.

During previously scheduled semi-annual testimony before the Senate Banking Committee on Tuesday that was unrelated to the allegations, Gruenberg testified that he was unaware of the allegations of widespread sexual harassment and discrimination at the agency. But he didn’t indicate he was unaware of the long-standing problematic culture the investigation described.

Gruenberg told senators he was “personally disturbed and deeply troubled” by the report, which alleged female workers received photos of their male superiors’ genitalia, were told they needed to use sex to get ahead and were passed over for opportunities.

Gruenberg, who said he read the report, told senators, “It’s quite clear that we’ve had employees at the FDIC subjected to horrendous experiences that simply are unacceptable and can’t be tolerated.”

In his Wednesday testimony before the House Financial Services Committee, also part of the previously scheduled hearing, Gruenberg denied having ever been investigated for “inappropriate conduct.”

But after the House committee returned from a recess Wednesday afternoon, Gruenberg revealed he was the subject of an investigation in 2008, when he was Vice Chair at the FDIC. This came after the Journal contacted the FDIC for comment, a report published by the publication on Wednesday said.

The internal investigation related to several allegations of temperament issues, according to the Journal’s reporting.

“I’m not aware of anything that came out of that review,” Gruenberg told House members when the hearing adjourned. “I would be glad to provide you [with] any additional information,” he added.

In a letter Friday advising Gruenberg of the investigation, Representative Patrick McHenry, Chair of the House Financial Services Committee, wrote “Your conflicting testimony in this week’s hearing before the Committee was alarming.” Two high-ranking Republicans on the committee also signed the letter.

“The viability of your leadership is in question,” they wrote.

Gruenberg and the FDIC did not respond to CNN’s requests for comment.

When asked by Republican Senator Mike Rounds from South Dakota if he was aware of the allegations in the Journal’s initial reporting before it was published on Monday, Gruenberg responded, “As a general matter, no, senator.”

Republican Senator Thom Tillis from North Carolina followed up on Gruenberg’s response, asking him if he should read anything into it.

“I did not know about the individual cases,” Gruenberg told him.

Shortly after the report was published, the FDIC announced it hired a law firm to conduct an independent investigation into the allegations.

Gruenberg said Tuesday he hopes the findings from the review will be made public in “90 days or less” and vowed to be completely transparent throughout the process.

In addition to investigating Gruenberg, the House committee said it would be undertaking its own independent investigation into alleged agency-wide workplace misconduct and whether that impeded the agency’s ability to regulate financial institutions.

Senators and House members also heard testimony from Michael Barr, Vice Chair for Supervision at the Federal Reserve; and Michael Hsu, Acting Comptroller at the Office of the Comptroller of the Currency, on a range of issues relating to banking regulation.

Gruenberg joined the FDIC board of directors in 2005 and was sworn in as chair at the start of this year. In 2020, when Jelena McWilliams was Chair of the FDIC, the agency’s inspector general released a report that found the FDIC did not have “an adequate sexual harassment prevention program” in place and needed to improve its policies and procedures.

The report also referenced a 2019 survey conducted by the inspector general that found 8% of the 2,376 respondents experienced sexual harassment between January 2015 to April 2019.

Gruenberg told senators it was the responsibility of prior FDIC chairs to do something about it, even though he was the Acting Chair beginning in February 2022, after the inspector general’s report had been made public.

Two FDIC board members — Vice Chair Travis Hill and Director Jonathan McKernan — released a joint statement on Thursday calling on Gruenberg to recuse himself from the independent investigation the FDIC is commissioning.

“Second, the FDIC board, not FDIC management, should determine the scope of the investigation, the appropriate structure for day-to-day direction of the review, and who conducts the inquiry,” they said.

In a prior statement this week, Hill and McKernan said they and their fellow board members “have an obligation to ensure that the FDIC holds all responsible employees and managers accountable for any inappropriate conduct.”

The 2020 inspector general report made 15 recommendations to prevent and address sexual harassment at the agency, which Gruenberg said in his testimony on Tuesday had been implemented but acknowledged “didn’t change the culture” at the FDIC.

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