FDIC Chair Martin Gruenberg said Monday that he is prepared to step down less than a week after he rebuffed bipartisan calls to resign, a shake-up that could have implications for an aggressive campaign to impose tougher regulations on US banks.
Gruenberg has been reeling from reports revealing a toxic workplace riddled with sexual harassment, bullying, and other misconduct, including a 234-page independent review commissioned following stories published by the Wall Street Journal.
As recently as last week, the FDIC boss made it clear he wanted to remain in charge so he could help the agency fix its problems.
That changed this week as his support on Capitol Hill eroded.
“In light of recent events, I am prepared to step down from my responsibilities once a successor is confirmed,” he said in a release. “Until that time, I will continue to fulfill my responsibilities as Chairman of the FDIC, including the transformation of the FDIC’s workplace culture.”
Perhaps the turning point came after Senate Banking Committee Chair Sherrod Brown (D-Ohio) on Monday called on President Biden to nominate a new chair of the agency to restore the FDIC’s workplace culture. Brown did not call for Gruenberg’s resignation during a committee hearing last week.
“There must be fundamental changes at the FDIC,” Brown said. “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.”
“That’s why I’m calling on the President to immediately nominate a new Chair who can lead the FDIC at this challenging time and for the Senate to act on that nomination without delay,” Brown said.
Gruenberg’s replacement has to be named by the president and confirmed by the Senate.
Biden’s deputy press secretary, Sam Michel, said that “while the FDIC is an independent agency, as we have said, the President, of course, expects the administration to reflect the values of decency and integrity and to protect the rights and dignity of all employees.”
Read more: What is the FDIC, and how does it work?
“The President will soon put forward a new nominee for FDIC Chair who is committed to those values and to protecting consumers and ensuring the stability of our financial system, and we expect the Senate to confirm the nominee quickly.”
The exit of Gruenberg could have implications for the financial world. It comes just as the FDIC, Federal Reserve, and the Office of the Comptroller of the Currency are pushing for a sweeping overhaul of how banks are regulated in the wake of last spring’s regional bank crisis.
Last July, US banking regulators proposed raising capital requirements for banks by an aggregate 16%, widening the scope of the new rules to include banks with as low as $100 billion in assets.
Officials argued the changes were needed to strengthen banks and better prepare them for shocks like this spring’s crisis when the failures of Silicon Valley Bank, Signature Bank, and First Republic triggered deposit withdrawals.
Banks, their lobbyists, and some Republican lawmakers argue the proposal would curb lending and hurt the economy.
Even Federal Reserve Chairman Jerome Powell has hinted at reservations about the capital proposal and its impact and said that he expects changes to be made.
Michael Barr, the Fed’s vice chairman for supervision, said Monday that he expects “broad, material changes” to the proposal.
Sen. Elizabeth Warren (D.-Mass.) said at the Senate Banking Committee hearing last week that Republicans wanted Gruenberg to resign so they could have more control over bank regulations.
“Your resignation would do nothing to improve the culture of the FDIC, but it would give Republicans a veto over bank policy,” Warren said at the hearing, which Gruenberg attended.
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