Pressure mounts on FDIC chief to resign after sexual misconduct report

By Douglas Gillison

(Reuters) -A top U.S. banking regulator faced mounting pressure on Thursday over his handling of allegations of sexual misconduct among agency staff and accounts of his own past conduct, with Republican lawmakers calling for his resignation and vowing to conduct a thorough probe.

The calls followed a Wall Street Journal report earlier this week that said the U.S. Federal Deposit Insurance Corporation had failed to eradicate widespread harassment in its workforce.

In congressional testimony this week, FDIC Chair Martin Gruenberg said he found the reports personally troubling and vowed to take corrective action, adding that the agency had successfully acted on recommendations from an internal watchdog in 2020 but that more work remained to be done.

Gruenberg did not respond to requests for comment.

In a statement, Senator Sherrod Brown, the Democratic chair of the Senate Banking Committee, said reports of misconduct were “extremely concerning” and called on the FDIC’s inspector general to investigate.

He was echoed by influential Democratic Senator Elizabeth Warren, a financial reform advocate, who said later Thursday she also supported a full review of alleged workplace misconduct.

The inspector general’s office did not respond to a request for comment. Meanwhile, Tim Scott, the top Republican on the Banking Committee, said Gruenberg should “seriously consider” whether he was fit to lead the agency.

In statements and social media posts, Republican Senators John Kennedy and Thom Tillis, both committee members, as well as Joni Ernst, called on Gruenberg to resign.

Under FDIC bylaws, Vice Chair Travis Hill, a Republican, would replace Gruenberg should he vacate his position.

The resignation calls came after a turbulent day in which the FDIC abruptly canceled a board meeting, at which it had been due to consider adopting a special fee to replenish its deposit insurance fund, minutes after the meeting had been due to start.

Hours later, the FDIC’s Republican board members called on Gruenberg and FDIC General Counsel Harrel Pettway to recuse themselves from a pending internal investigation into the agency’s handling of staff misconduct allegations.

The Wall Street Journal on Monday reported allegations of sexual misconduct among staff between 2010 and 2022 at agency outposts nationwide, citing interviews with more than 20 women who had quit.

In follow-up reporting on Thursday, the newspaper said Gruenberg had himself earned a reputation for bullying and had played a role in high-level decisions in which people accused of sexism, harassment and racial discrimination faced scant consequences.

The FDIC did not respond to a request for comment on Thursday afternoon, but told the Journal it took the matter very seriously and that an outside law firm would conduct an internal review.

Earlier on Thursday, Patrick McHenry, the Republican chair of the House Financial Services Committee, announced his committee would conduct a “rigorous investigation, including hearings, oversight and transcribed interviews.”

McHenry also said Gruenberg had “initially misled” the committee during testimony on Wednesday, at first claiming he had not been the subject of an investigation to his workplace conduct before acknowledging that he had.

Late Thursday, the FDIC announced it had adopted the “special assessment” fee, with some minor modifications from an original May proposal. The fee, to be paid by banks over two years, is intended to recoup an estimated $16.3 billion loss from the March failures of Silicon Valley Bank and Signature Bank.

(Reporting by Douglas Gillison and Pete Schroeder; Editing by Chizu Nomiyama, Nick Zieminski and Lisa Shumaker)