FDIC Chairman Martin Gruenberg will resign after a damning investigation that exposed a toxic workplace

Martin Gruenberg, head of the Federal Deposit Insurance Corporation (FDC), will resign following a damning independent investigation that revealed widespread sexual harassment, discrimination and bullying at the agency responsible for regulating the banking sector.

“In light of recent events, I am prepared to step down from my duties once a successor is confirmed,” Gruenberg said in a statement Monday. “Until then, I will continue to perform my responsibilities as Chairman of the FDIC, including transforming the FDIC’s workplace culture.”

Gruenberg’s resignation announcement came just hours after Senator Sherrod Brown, a leading Democrat and chairman of the Senate Banking Committee, called for “new leadership” at the FDIC. Gruenberg joined the FDIC board nearly two decades ago, and has served as the agency’s chairman for nearly 10 of the last 13 years.

President Joe Biden will announce a new nominee to lead the FDIC “soon,” White House deputy press secretary Sam Michel said in a statement Monday after the news was announced. “We expect the Senate to quickly confirm the nominee,” he added. But there is no guarantee that will happen, as confirmation processes are known to drag on for months or longer, and Biden may no longer be in office by then.

Because Gruenberg will remain in office until a successor is named, Republican-appointed Vice Chairman Travis Hill will not automatically become chairman, leaving the agency in a stalemate since the FDIC board has only one other Republican and two Democrats.

This would likely have led to a halt in important and controversial regulations in the banking sector, such as increasing capital requirements., from taking effect.

Michel said the administration was grateful for “his willingness to remain at the FDIC until his successor is confirmed to continue to protect our nation’s financial stability during this transition period.”

Senator Tim Scott, the ranking Republican on the Senate Banking Committee, criticized Gruenberg’s decision not to resign immediately, as did Democrats for not putting more pressure on him.

“This strategy of protracted dispute makes clear that this administration is prioritizing its political agenda over worker protections,” Scott said in a statement.

The FDIC hired the law firm Cleary Gottlieb Steen & Hamilton to produce a report that ultimately triggered Gruenberg’s resignation. The report confirmed the findings of a November Wall Street Journal investigation that uncovered a longstanding problematic corporate culture. But it did not conclude that Gruenberg was solely responsible for the problems detailed in the report, which was based on interviews with more than 500 employees.

However, several cases were documented in which Gruenberg attacked his subordinates, “particularly when they were told bad news or views with which he disagreed.” This led employees to delay communicating messages they feared would upset him. Gruenberg’s temperament “could have compromised his ability to build trust and confidence to create meaningful culture change,” the report added.

Testifying before lawmakers last week in a previously scheduled hearing with other top financial regulators, Gruenberg said he takes “full responsibility” for the report’s findings. “I also acknowledge my own mistakes as chairman, both in failing to recognize how my temperament in meetings affected others and in failing to recognize deeper cultural problems at the FDIC sooner,” he said.

The FDIC declined to comment further beyond Gruenberg’s statement Monday.

A delicate political maneuver

While most Democrats did not go so far as to call for Gruenberg’s resignation or replacement, many expressed outrage at the House and Senate hearings in mid-May in which Gruenberg testified.

“I’m angry … If I were in my office, I’d probably get kicked out,” said Rep. Gregory Meeks, a Democrat from New York, during the hearing. “It just makes me very sad,” he added, referring to the findings of the independent report.

However, Democratic Senator Elizabeth Warren described the calls for Gruenberg to resign as a “purely political action.”

“Your resignation would do nothing to improve the culture of the FDIC, but it would give Republicans veto power over banking policy,” she said at the Senate hearing where Gruenberg testified. In her view, it would be enough if he implemented all of the report’s recommendations, which he has promised to do.

This story has been updated with additional context and developments.

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