Reports of agency’s toxic workplace and widespread harassment lead to bipartisan calls for investigations

The federal government’s bank regulator and its leadership are under fire for fostering an abusive culture rife with harassment and discrimination, with key Republicans and Democrats both starting or seeking probes into the alleged wrongdoing. 

The backlash began as The Wall Street Journal last week reported incidents of Federal Deposit Insurance Corporation supervisors taking employees to strip clubs, sending lewd photos, engaging in and discussing sexual acts and taking other actions dating back more than a decade that created a toxic work environment.

Many women quit their jobs over the behavior, according to the report, which found FDIC Chair Martin Gruenberg had bullied employees and helped personally cultivate a culture that allowed harassment and discrimination to fester. Employees also said they often feared retaliation if they reported wrongdoing.  

Some Republican lawmakers are now calling on Gruenberg to resign, while members of both parties are seeking further information on his leadership and the environment at the agency. Rep. Patrick McHenry, R-N.C., who chairs the House Financial Services Committee, has launched his own probe into the matter, while Democrats on the Senate Banking Committee, led by Chairman Sherrod Brown, D-Ohio, are asking the agency’s inspector general to investigate it. The agency said it has itself hired a law firm to review the allegations. 

“Unlike your review, the committee’s investigation will focus not only on the alleged widespread and entrenched misconduct and toxic work environment, but whether this environment impacted the safety and soundness of the banking system,” McHenry wrote in a letter to Gruenberg. “In addition to workplace culture and misconduct, the Committee will further investigate your personal conduct and whether it conformed to the standards expected of our banking regulators.”

McHenry added he had concerns over FDIC's capacity to carry out its mission given the workplace issues within the agency and cautioned his committee will use its “full arsenal of oversight and investigative tools, including compulsory mechanisms," to conduct its investigation. 

“The FDIC is committed to being fully transparent and responsive to the requests of the committee,” an agency spokesperson said, though they declined to comment on the accusations. 

Gruenberg—who has served on the FDIC board since 2005 and is now on his second stint as chairman—told lawmakers last week he was unaware of the issues within his agency, but conceded a problem clearly existed and such behavior should not have been tolerated. A 2020 inspector general report found FDIC did not have policies and procedures in place for preventing or reporting sexual harassment.

In a letter to the FDIC IG asking for an independent investigation, Brown and his fellow committee Democrats asked for the probe to examine whether alleged harassers ever faced discipline, the 2020 IG report led to any change and other matters. 

“The FDIC’s employees play a critical role in ensuring our financial system operates in a safe and sound manner,” the senators said. “It is imperative that the FDIC recruit and retain talented public servants and create a safe and professional work environment. Allowing employees that have engaged in misconduct to stay on the job, while losing talented employees because of the failure to meaningfully address these systemic issues, compromises public trust in the FDIC.”

Sen. Tim Scott, R-S.C., also said he hoped to see an independent review of the matter. 

“If the FDIC fails to protect its own employees, how can we trust its mission of ensuring the safety and soundness of our financial system is being successfully carried out?” Scott said. 

Caitlin Savino, a spokesperson for the IG, said only that the office received the letter and is "currently reviewing the request."

On Monday, Republicans on a panel of House Oversight and Reform Committee launched their own investigation into the alleged behavior. 

“On the heels of several bank failures which shook confidence in the banking system and led the Biden Administration to take unprecedented steps to contain further panic, the allegations of a culture of tolerating harassment at the FDIC weakens the credibility of your agency,” Reps. Lisa McClain, R-Mich., and Andy Biggs, R-Ariz., wrote in a letter to Gruenberg.

They asked for all records relating to complaints and investigations into inappropriate behavior by FDIC employees, information from a law firm investigating the claims, related communications from FDIC human resources, documents from Gruenberg's office and a list of employees reassigned due to sexual harassment allegations.