FDIC cancels planned board meeting after WSJ reports of toxic workplace

The Federal Deposit Insurance Corp. canceled a public meeting of its board scheduled for Thursday, hours after reports on allegations that Chairman Martin Gruenberg had turned a blind eye to misconduct at the banking regulator.

The five-member FDIC board called off a scheduled meeting to complete a plan to reimburse a federal deposit insurance fund for billions in losses tied to the collapse of two large banks in March. An agency spokesman said the FDIC board would finalize the plan without a public vote. 

"The Board has decided to act notationally on the one agenda item requiring action and, therefore, will not hold an open meeting today," the spokesman said.

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Gruenberg’s leadership came under fire this week after a Wall Street Journal investigation revealed that a toxic workplace environment across the FDIC had driven many female bank examiners to quit the agency over the years. In congressional testimony this week, Gruenberg, who has been at the agency since 2005 and is in his second stint as FDIC chairman, said he was "deeply troubled" by the accounts.

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On Thursday, the Republican chairman of the House Financial Services Committee said the panel would conduct a "rigorous investigation" into the allegations, including hearings and transcribed interviews. 

"It’s clear Mr. Gruenberg never should have been reappointed or confirmed in the first place," Rep. Patrick McHenry (R., N.C.) said in a statement. "Under his leadership, the FDIC is at best preoccupied with this sideshow and at worst compromised. Chair Gruenberg clearly bears responsibility as these allegations occurred during his tenure as either a board member or chairman."

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Gruenberg said in his congressional testimony that he was previously unaware of the allegations of workplace problems. Gruenberg and his top deputies, however, were involved in multiple decisions over high-level situations involving allegations of sexism, harassment and racial discrimination in which the agency didn’t take a hard line with individuals accused of misconduct, the Journal reported Wednesday.

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The FDIC chairman said this week that the agency had hired a law firm to conduct a comprehensive review of the workplace culture. 

The two Republicans on the FDIC board on Wednesday called for the board to oversee the investigation. Gruenberg said he welcomed board involvement. Had Thursday’s public meeting proceeded as planned, the FDIC’s GOP members were expected to raise questions about board oversight of the review and why the board was proceeding to new business without addressing that issue, a person familiar with the matter said.

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On Thursday morning, Rep. Bill Foster (D., Ill.), a member of the House Financial Services Committee that oversees the FDIC, became the latest lawmaker to call for an investigation into the allegations of harassment and discrimination. "I am disturbed by reports of widespread sexual harassment and gender discrimination at the FDIC," Foster said. "These are serious allegations that must be investigated and those responsible should be held accountable." 

He and McHenry called for a briefing by the FDIC’s inspector general. 

Thursday’s FDIC deposit-insurance move is intended to recover the government’s cost of backstopping the uninsured depositors of Silicon Valley Bank and Signature Bank, two large banks that failed in March. In May, the FDIC floated a proposed "special assessment" on the industry to help replenish a government insurance fund that lost an estimated $18.5 billion. A second vote is required to finalize the plan.