FDIC

Moral Bankruptcy: The FDIC’s Internal Crisis of Misconduct and Discrimination

EDITOR'S NOTES

A new 200-page report reveals a troubling culture of sexual harassment and discrimination at the Federal Deposit Insurance Corporation (FDIC), highlighting not just financial corruption but deep-seated moral corruption within the institution. Authored by the law firm Cleary Gottlieb Steen & Hamilton and initiated after alarming media reports, the investigation details how over 500 employees have faced a “sexualized boys’ club environment,” with rampant abuses ranging from unsolicited lewd images to outright mockery of disabilities. This widespread misconduct, bolstered by a vindictive system that punishes whistleblowers, exposes the FDIC as a deeply flawed institution desperately requiring radical ethical reform.

The Federal Deposit Insurance (FDIC) failed to provide its employees a safe workplace free from “sexual harassment, discrimination, and other interpersonal misconduct,” a new report released on Tuesday concluded.

Martin Gruenberg, chairman of the Federal Deposit Insurance Corporation (FDIC), testifies before the House Financial Services Committee in Washington on Nov. 15, 2023. (Madalina Vasiliu/The Epoch Times)

The more than 200-page report, produced by law firm Cleary Gottlieb Steen & Hamilton, was ordered by the bank regulator. The independent review was overseen by the Special Committee of the FDIC Board of Directors after The Wall Street Journal published scathing reports identifying an objectionable work climate and misogynistic culture described as a “sexualized boys’ club environment.”

More than 500 individuals recounted their experiences of discrimination, sexual harassment, and “other interpersonal misconduct” they endured at the FDIC.

Heads of field and regional offices managed their offices like “fiefdoms” while commissioned bank examiners “controlled the destinies of junior examiners,” the report explained.

“Those who reported expressed fear, sadness, and anger at what they had to endure,” the report stated.

“Many had never reported their experiences to anyone before, while others who had reported internally were left disappointed by the FDIC’s response.”

In one example, a female examiner received a photo of a senior FDIC examiner’s private parts and was recommended by others to “stay away from him because he had a ’reputation.’”

One employee feared for her safety after a co-worker stalked her and repeatedly shared “unwelcome sexualized text messages that feature partially naked women engaging in sexual acts.”

Women in a field office explained that their supervisor regularly talked about their breasts, legs, and sex life.

Others noted that colleagues and supervisors would mock personnel with disabilities, calling one “Pirate McNasty,” and demoralize workers from underrepresented groups by telling them they were “token” employees hired to fill quotas.

“These incidents, and many others like them, did not occur in a vacuum,” the report stated. “They arose within a workplace culture that is ’misogynistic,‘ ’patriarchal,‘ ’insular,‘ and ’outdated‘—a ’good ol’ boys’ club where favoritism is common, wagons are circled around managers, and senior executives with well-known reputations for pursuing romantic relations with subordinates enjoy long careers without any apparent consequence.”

The investigation also uncovered prevalent retaliation against workers who complained about the misconduct, which helped foster a toxic work environment.

“Employees are not encouraged to provide feedback and suggestions up the line, in particular if it is bad news,” one witness said.

“In fact, employees, such as myself, have been retaliated against for providing suggestions for improvement after having been requested for such feedback.”

Others, according to the report, were unsure or did not know how to report complaints.

‘Very Sorry’

Mr. Gruenberg told agency staff that the report presented “a sobering look inside our workplace” and expressed that he was “very sorry” for overseeing a hostile environment.

“I want to also thank everyone who shared their experiences throughout this process. I know that doing so was difficult,” the FDIC chief said. “To anyone who experienced sexual harassment or other misconduct at the FDIC, I again want to express how very sorry I am. I also want to apologize for any shortcomings on my part.”

“As Chairman, I am ultimately responsible for everything that happens at our agency, including our workplace culture,” he added.

Implementing “meaningful and sustained change” will not be easy, Mr. Gruenberg said to employees.

The Federal Deposit Insurance Corporation (FDIC) seal is shown outside its headquarters in Washington on March 14, 2023. (Manuel Balce Ceneta/AP Photo)

The recommendations outlined in the report will be incorporated into the FDIC’s ongoing 13-page action plan. Additionally, the FDIC is still actively finding a transformation monitor and independent third-party expert to help adopt the Special Review Committee’s recommendations.

Special committee co-chair Jonathan McKernan called the report “an important first step” toward ushering in change at the FDIC.

“Today’s report establishes the urgent imperative of a cultural transformation at the FDIC led by those with the leadership capacity to effectuate that change,” Mr. McKernan said in a statement. “Fostering an environment that promotes a safe, respectful, and inclusive workplace is fundamental to achieving the agency’s mission.”

An apology is not enough for Patrick McHenry, Chairman of the House Financial Services Committee, who demanded Mr. Gruenberg’s resignation.

“It’s time for Chair Gruenberg to step aside. The independent report released today details his inexcusable behavior and makes clear new leadership is needed at the FDIC,” Mr. McHenry said in a statement.

He added that committee Republicans will ensure the FDIC head and other senior leaders are “held accountable” for their actions.

Rep. Patrick McHenry (R-N.C.) speaks to the press after meeting President Joe Biden to discuss the debt limit at the White House in Washington on May 22, 2023. (Madalina Vasiliu/The Epoch Times)

Cleary Gottlieb Steen & Hamilton was not asked, nor did it determine, if Mr. Gruenberg and other individuals at the federal agency should be removed or disciplined.

‘Toxic Atmosphere’ at FDIC

Late last year, The Wall Street Journal published two in-depth reports. The first was“Strip Clubs, Lewd Photos and a Boozy Hotel: The Toxic Atmosphere at Bank Regulator FDIC,” and the second was “FDIC Chair, Known for Temper, Ignored Bad Behavior in Workplace.”

The article listed claims by employees, past and present, that bullying, discrimination, and sexual misconduct were pervasive at the FDIC.

Many cases of inappropriate conduct listed in the article were met with little or no disciplinary action.

Following the newspaper’s published investigation, Mr. Gruenberg said he had been unaware of the allegations and rejected calls from Republicans to step down.

Later, the Wall Street Journal reported that the FDIC chief maintained “a reputation for bullying and for having an explosive temper.” At least one probe was initiated against Mr. Gruenberg after berating a female employee while serving as the vice chairman.

Mr. Gruenberg told lawmakers at a Senate Banking Committee hearing that he was “personally disturbed and deeply troubled” by the article’s findings, adding that the agency launched a “comprehensive review” of the situation.

Following the report, several Republican senators demanded his resignation over workplace misconduct allegations.

Sen. John Kennedy (R-La.) urged Mr. Gruenberg to step down so that “a new chair can restore the professional culture at the FDIC that the American people expect from its institutions.”

In a Dec. 7 letter, Sens. Tim Scott (R-S.C.), Thom Tillis (R-N.C.), Cynthia Lummis (R-Wyo.), Kevin Cramer (R-N.D.), and Steve Daines (R-Mont.) called the accusations “deeply disturbing and unacceptable at any workplace.”

“According to these reports, both you and your top deputies ‘have been involved in decisions over high-level examples of alleged sexism, harassment, and racial discrimination in which the agency didn’t take a hard line with individuals accused of misconduct,’ allowing the culture of harassment and discrimination to persist and flourish,” the letter added.

The bombshell Wall Street Journal reports came three years after the FDIC’s inspector general discovered multiple sexual harassment complaints and issued more than a dozen recommendations to change the workplace culture.

Mr. Gruenberg joined the FDIC Board of Directors in August 2005. In 2011, then-President Barack Obama nominated him to a full five-year term as chairman. In 2022, President Joe Biden nominated Mr. Gruenberg to another term.

Should Mr. Gruenberg step down or be removed from his position, FDIC Vice Chair Travis Hill would take over, and the board would be split between Republicans and Democrats.

This article originally appeared on Zero Hedge

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