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Gruenberg will not testify at House Cleary report hearing

Banking
Gruenberg will not testify at House Cleary report hearing


Federal Deposit Insurance Corp. Chair Martin Gruenberg declined to testify at a House Financial Services Committee hearing scheduled for Wednesday on workplace misconduct at the agency, citing scheduling conflicts.

Bloomberg News

WASHINGTON — Federal Deposit Insurance Corp. Chair Martin Gruenberg will not attend the scheduled House hearing on Wednesday addressing workplace misconduct allegations at the banking agency, which an FDIC spokesperson attributed to a scheduling conflict.

When reached for comment, an FDIC official said the agency has been in close communication with the committee since they gave notice of the hearing to identify another date when the Gruenberg would have been available to testify. Gruenberg spoke at length on the workplace misconduct allegations during his testimony in the House and Senate last month, which also featured acting Comptroller of the Currency Michael Hsu and Michael Barr, Federal Reserve vice chair for supervision.

An independent report by law firm Cleary Gottlieb released in early May corroborated allegations that had surfaced in a Wall Street Journal article last fall. The report also unearthed additional details, including harassment and discrimination as well as criticism of Gruenberg’s temper in workplace settings.

Despite Republican calls for his resignation at last month’s hearing, the veteran bank regulator managed to retain support from congressional Democrats, though Senate Banking Committee Chair Sherrod Brown, D-Ohio, called for new leadership at the agency, spurring Gruenberg to say he would resign upon the confirmation of a successor. Gruenberg also pledged reforms, including creating an Office of Professional Conduct and firing several employees involved in misconduct. He apologized and expressed commitment to changing the agency’s culture, while acknowledging the hurt caused by these issues.

House Financial Services Committee Chair Patrick McHenry, R-N.C., demanded Gruenberg face a second round of questioning on the independent report’s findings in the lower chamber.

Despite Gruenberg’s absence, two FDIC board members, Hsu and Jonathan McKernan — who co-chaired a special board committee tasked with overseeing the investigation into the agency’s culture — and representatives from Cleary Gottlieb will provide testimony.

Industry experts have offered varying predictions for how long Gruenberg will remain in office. If the FDIC chair were to be vacated without a successor confirmed, Republican Vice Chairman Travis Hill would take over, leaving the FDIC with a 2-2 deadlock partisan makeup and likely imperiling the Biden administration’s lengthy and still unfinished regulatory agenda.

Isaac Boltansky, an analyst with BTIG, interpreted Gruenberg’s conditioning of his resignation on the confirmation of a Democratic successor — and thus retaining a Democratic majority on the FDIC board — as a way to respond to resignation calls without sacrificing Biden bank regulations.

“The likeliest scenario in our view is that the process to name and confirm a new nominee is strategically slow-walked to ensure that Gruenberg is in the seat and able to cast a vote advancing Democratic bank policies,” he wrote in a research note. “It is difficult to envision either the White House moving quickly to submit a nominee or the Senate acting with haste on that nomination.”



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