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Amanda Gerut

Prominent leader of financial services watchdog resigns after report found it was riddled with a 'misogynistic’ and ‘good ole boys club’ culture

Martin Gruenberg (Credit: Photo by Kevin Dietsch/Getty Images)

After a probe into the workplace culture at the Federal Deposit Insurance Corporation found rampant sexual harassment and male employees run amok who were rarely held to account, the regulator’s leader is stepping down. 

While FDIC chair Martin Gruenberg managed to hold onto his post for several weeks following the report’s release, he failed to drown out calls for change at the top of the organization. Gruenberg announced in a statement on Monday that he would leave once a successor had been appointed, the Wall Street Journal reported. Senate Banking Committee Chair Sen. Sherrod Brown (D-Ohio) earlier today called for Gruenberg’s ouster, a signal that his hold was on shaky ground.

“After chairing last week’s hearing, reviewing the independent report, and receiving further outreach from FDIC employees to the Banking and Housing Committee, I am left with one conclusion: there must be fundamental changes at the FDIC,” said Brown in a statement. “Those changes begin with new leadership, who must fix the agency’s toxic culture and put the women and men who work there – and their mission – first.”

Gruenberg was sworn in as FDIC chair in January 2023, served on the board since 2005, and held the vice chair from August 2005 to July 2011. “In light of recent events, I am prepared to step down from my responsibilities once a successor is confirmed,” said Gruenberg in a statement. "Until that time, I will continue to fulfill my responsibilities as Chairman of the FDIC, including the transformation of the FDIC’s workplace culture.” 

The appointment of a successor to Gruenberg, a Democrat, means the FDIC won’t be in the hands of Republican Vice-Chair Travis Hill. 

Despite the stunning revelations about the workplace culture at the FDIC, there had been few calls for Gruenberg to resign in the days after the independent review was published, and little backlash from lawmakers.

For instance, in a statement to Fortune two weeks ago, Sen. Elizabeth Warren did not call for him to leave. “Everyone deserves a workplace that’s free of discrimination and harassment,” she said. “I supported this independent investigation into misconduct during both Republican and Democratic Administrations at the FDIC. Chair Gruenberg has accepted responsibility, and I support his work to implement the action plan to improve the FDIC’s culture.”

However, he faced two brutal days of hearings on Capitol Hill and suffered a lambasting from both Democratic and Republican lawmakers.

Gruenberg’s departure may throw a wrench into at least one proposed rule that plenty of regulators would like to see: The day before the report was published, the FDIC re-issued an earlier rule harkening back to the Dodd-Frank era designed to rein in compensation on Wall Street in instances in which executives have taken excessive risks that later lead to significant investor losses. Previous iterations drew significant backlash in the past, with accusations that the government was attempting to take a board seat at the top of the largest financial services firms. 

It was initially proposed in April 2011 and drew more than 10,000 comments. In June 2016, regulators proposed a different version of the rule but haven’t acted again—until now. The potential changes on the table include mandatory clawbacks and asset forfeiture in certain cases, and it would be up to regulators and not corporate boards. The rule could also dictate specific performance measures executives would have to hit and could limit the powers of a board compensation committee in using discretion in adjusting payouts. The rule strikes at the heart of an issue that could be powerful on the campaign trail: Payouts on Wall Street versus slow-to-rise pay for hourly and salaried workers.

The report’s findings

The scathing FDIC report was the result of a special review committee of the agency’s board of directors, which was appointed to probe the workplace culture, allegations of sexual harassment, and executive misconduct at the agency as well as management’s past response. It came after the Wall Street Journal reported on the culture at the FDIC in 2023.

The agency's review was conducted by law firm Cleary Gottlieb Steen & Hamilton and included interviews with more than 500 people—mostly women and minorities—many of whom called into a hotline. The assessment stated that executives found it painful and emotional to recount their experiences with sexual harassment and other types of misconduct. Some had reported to the FDIC before and were let down by the process, while others just didn’t bother. “Virtually all of them expressed hope that reporting what they had gone through now might help change and make better the agency that they care about deeply,” the review states.

The committee found that “for far too many employees and for far too long, the FDIC has failed to provide a workplace safe from sexual harassment, discrimination, and other interpersonal misconduct,” the intro states. “We also find that a patriarchal, insular, and risk-averse culture has contributed to the conditions that allowed for this workplace misconduct to occur and persist, and that a widespread fear of retaliation, as well as a lack of clarity and credibility around internal reporting channels, has led to an underreporting of workplace misconduct over the years.”

The report included a litany of examples—some that occurred as recently as a few weeks prior—that painted the work environment at the FDIC as difficult and unsafe for female employees. One woman described being stalked by a colleague who also sent her unwelcome sexual text messages of partially naked women; another woman examiner said a senior FDIC examiner texted photos of his genitals out of nowhere; other employees reported that a senior examiner was fond of visiting brothels during work trips. Numerous examples included in the report included unwanted sexual touching, rubbing, propositioning and excessive drinking.

It wasn’t only women who were subject to lewd behavior. Employees endured a supervisor who referred to gay men as “little girls,” which made at least one employee believe that he had to hide his sexual orientation. Employees of color were demoralized to hear they were hired to fill quotas.

“These incidents, and many others like them, did not occur in a vacuum,” the report states. “They arose within a workplace culture that is ‘misogynistic,’ ‘patriarchal, ‘insular,’ and ‘outdated’—a ‘good ole 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 FDIC reported it had 92 harassment complaints between 2015 and 2023, and none resulted in a termination, reduction in pay or rank, or discipline more serious than a suspension, according to the report. The FDIC’s paralysis on holding harassers accountable appears to be rooted in the agency’s aversion to risk, and an “excessive” focus on the risks of taking disciplinary action. Yet, years of not holding people accountable for their behaviors had wrought significant institutional damage, the report said.  

Gruenberg did not come out unscathed and at times in the report comes across as unaware of the impact of his temper on others. Employees reported that Gruenberg’s aggression led them to fret about delivering bad news they feared might ignite his rage. Others, however, said he had a prosecutorial style and was otherwise “soft spoken.” The WSJ's story sparked a discussion among senior staff—including Gruenberg. An executive verified that the newspaper's reporting about Gruenberg’s temper was accurate, which led to a “tense and awkward discussion among the senior staff about their respective interactions with him.”

The report states that Gruenberg’s conduct isn’t at the root of the sexual harassment and discrimination issues at the FDIC, but the tone at the top is critical to turning around the agency’s culture. According to the review, Gruenberg presided over numerous male employees in field offices and headquarters who stalked, harassed, and inappropriately sent sexual photos and texts to female colleagues. When employees made reports about misconduct, perpetrators were rarely held accountable and instead were moved to other offices and into new roles, the report stated.

“As one executive at the FDIC put it, the FDIC’s response to interpersonal misconduct is ‘pay, promote, or move them.’”

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