Just days after the release of a scathing report detailing a culture of widespread sexual harassment and discrimination at the Federal Deposit Insurance Corporation, its chair, Martin Gruenberg, submitted congressional testimony on Tuesday that indicated he had no plans to step down.
In prepared remarks he plans to deliver to the House Financial Services Committee Wednesday, Mr. Gruenberg largely repeated his previous statements — that he was sorry for the harassment and abuse employees suffered, and that he and his staff were already working on making changes.
“I accept the findings of the report and, as chairman, I take full responsibility,” he said.
The hearings come as Mr. Gruenberg, a Democrat, faces calls from Republican lawmakers to resign. He has so far survived those demands with the backing of the White House and key Democratic lawmakers like Senator Sherrod Brown of Ohio, Senator Elizabeth Warren of Massachusetts and Representative Maxine Waters of California.
Should Mr. Gruenberg be pressured to depart the agency after the hearings, that could also put into jeopardy a rule that the agency is proposing, along with other federal bank regulators, to tighten and expand oversight of the nation’s largest lenders, but that big banks have fiercely opposed.
Mr. Gruenberg has faced intense criticism since the release of the May 7 report, which described a culture of rampant abuse from senior examiners and other officials at the agency, including instances in which supervisors sent their employees nude photos of themselves or took them to brothels during business trips. The report was commissioned by a special committee that the F.D.I.C.’s board formed in response to a series of a Wall Street Journal articles last year.
Conducted by the Cleary Gottlieb law firm, the analysis also questioned whether Mr. Gruenberg, who has led the agency for 10 of the last 13 years, could remain effective in his role, given “the incidents of — and resulting reputation for — losing his temper and expressing anger with staff.”
An F.D.I.C. spokesman said on Tuesday that Mr. Gruenberg had been meeting with both Democrats and Republicans to describe the steps the agency was taking to fix the problems.
The way the F.D.I.C. is structured could offer him some protection. The agency’s chair — nominated by the president and confirmed by the Senate — leads a five-person board of directors. No more than three board members can be members of the same political party, according to the agency’s rules.
Right now, with Mr. Gruenberg in charge, Democrats hold a majority of the five board votes, which means he’s not likely to face a revolt from the other two members of his party, making him relatively safe from internal pressure to resign.
Jonathan Macey, a professor of corporate law at Yale, said things would likely be much harder for Mr. Gruenberg in the private sector.
“I think it would be very difficult for the C.E.O. of a public company to survive this scandal, particularly because it appears to be pretty widespread and longstanding,” he said. “The board of directors would be worried that they themselves would be subject to shareholder litigation for not adequately supervising what was going on in the company.”
The White House is facing questions about how Mr. Gruenberg’s behavior, as described in the report, can be tolerated in light of President Biden’s zero-tolerance policy for workplace bullying, which previously led to the resignations of a White House staff member and a cabinet-level official.
A day after the release of the report, Republicans in Congress, including the chairman of the House Oversight Committee, Representative James R. Comer of Kentucky, wrote to Mr. Biden requesting that the White House turn over all communications and documents related to the allegations against Mr. Gruenberg.
“As you know, the president, of course, expects the administration to reflect the values of decency and integrity and to protect the rights and dignity of employees,” Karine Jean-Pierre, the White House press secretary, said at a news conference last week.
Removing Mr. Gruenberg would elevate the agency’s current vice chair, Travis Hill, a Republican. He has been a senior leader for six years, and was a senior member of the executive team of Jelena McWilliams, the chair from June 2018 to February 2022, who was appointed by President Donald J. Trump.
Ms. Waters, the highest-ranking Democrat on the House Financial Services Committee, where Mr. Gruenberg will testify on Wednesday, still supports him. In a statement on Thursday, she criticized the report for focusing on Mr. Gruenberg while excluding his predecessors.
“Tone at the top is important, and positive workplace culture needs to be modeled and reinforced from the top down,” she said, adding that the report “completely ignores the activities of the two previous Republican chairs.”
The fate of the proposed overhaul to capital requirements for the country’s largest banks could also be affected if Mr. Gruenberg departs. The banks have been furiously fighting it, claiming that it would harm their ability to lend.
Support for the capital rules proposal generally runs along partisan lines. The two Republicans on the F.D.I.C. board, including Mr. Hill, are likely to vote against it in its current form.
In his testimony on Wednesday, Mr. Gruenberg plans to list some key parts of the proposal that regulators are considering changing after feedback from the industry, including how the new capital rules would treat residential mortgages, some investments that come with tax credits and some fee-based trading and banking activities. Without Mr. Gruenberg, there would probably not be enough support for the proposal. The White House and Democrats in Congress generally want to see the capital rule succeed.
On Thursday, a day after the House Financial Services Committee hearing, Mr. Gruenberg is scheduled to testify before the Senate Banking Committee. The back-to-back hearings are part of a regular process by Congress to oversee banking regulators.
Source Agencies
