FDIC Hires Law Firm to Investigate ‘Toxic Atmosphere’ Allegations

Unlock Editor’s Digest for free

Roula Khalaf, editor of the FT, picks her favorite stories in this weekly newsletter.

The Federal Deposit Insurance Corporation on Monday hired law firm BakerHostetler to investigate allegations of widespread sexual harassment, inappropriate behavior and discrimination at the U.S. banking regulator.

In a video message sent to employees on Monday, FDIC Chairman Martin Grünberg called the reports “serious” and promised that the agency would “not turn a blind eye.” He reiterated an earlier call for employees with reports of inappropriate behavior to come forward.

Gruenberg said BakerHostetler will conduct an independent, “top-down” assessment of the FDIC workplace and alleged conduct.

“Harassment or discriminatory behavior at the FDIC is completely unacceptable,” Gruenberg said in the video, a transcript of which was reviewed by the Financial Times. “To the extent that the assessment identifies additional actions we can take to strengthen our agency, we will not hesitate to implement them.”

The independent review follows the publication of a Story in the Wall Street Journal, which detailed more than a decade of what he described as abusive incidents and a “toxic atmosphere” for women in the regulator’s workplace, including unwanted sexual advances. The WSJ said the FDIC’s female employees often left the agency because of systematic discrimination against women.

The incidents in the article date back to 2010. Gruenberg, who has led the agency since early 2022, was previously head of the FDIC from 2011 to 2018.

In 2020, the FDIC’s inspector general found that the agency’s sexual harassment policies were insufficient to prevent abuse. The FDIC promised at the time to improve its practices.

“Harassment in any form violates the FDIC’s values ​​and our deep commitment to promoting a diverse and inclusive workplace,” the FDIC said in a statement to the FT. The agency said it has implemented various programs and procedures to address harassment in its workplace: “When we identify misconduct, we investigate it and take appropriate action.”

Gruenberg is likely to face questions about the report when he, along with other top U.S. banking regulators, testifies before the Senate Banking Committee on Tuesday in a pre-scheduled hearing on Wall Street regulation.

Even before the recent allegations of misconduct, the FDIC and other banking regulators were under intense scrutiny in the wake of three of the four largest bankruptcies of federally insured banks in U.S. history – Silicon Valley Bank, Signature Bank and First Republic – earlier this year.

Gruenberg and Michael Barr, the Federal Reserve’s vice chairman for supervision, are expected to be asked about sweeping changes that government agencies have proposed to strengthen capital rules for large lenders.