The Wall Street Journal describes him as “perhaps Washington’s loneliest regulator.”
He’s spent two decades overseeing a federal agency that even its supporters admit devolved into an “Animal House”-style culture of inappropriate behavior. His notorious outbursts of temper are so bad that he’s put himself into anger management therapy.
But 71-old Martin J. Gruenberg, the on-again/off-again chairman of the of the U.S. Federal Deposit Insurance Corporation (FDIC), still has one friend loyal to the end.
Massachusetts Sen. Elizabeth Warren (D).
Warren has tried to cultivate a reputation as the moral conscience of Washington progressives. She frequently questions the character of corporate executives, blaming them for bad behavior by their employees. She was one of the first Democrats to demand the resignation of handsy former Sen. Al Franken (D-Minn.). And even Army Gen. Anthony Tata’s commendations for his military service couldn’t stop Warren from trying to keep him out of a Department of Defense job over politically incorrect commentary.
When it comes to Gruenberg, Warren is standing by her man. Why?
The question is particularly timely, critics say, in the wake of two grueling appearances before Congress last week. At issue is a damning new report showing the FDIC was plagued by years of bullying, sexual harassment, discrimination, and even alleged rapes, much of it on Gruenberg’s watch.
According to the 234-page investigative report from the New York-based law firm Cleary Gottlieb Steen & Hamilton, workers at the FDIC recounted “painful and emotional” experiences of misconduct, many on Gruenberg’s watch.
Examples include an FDIC examiner texting a female employee a picture of his sex organ, trips to brothels during work trips, and a female investigator being described by another employee as a “grizzly bear with t*ts.” Some 145 reported incidents of unwanted sexual conduct, and employees describe the FDIC’s leadership’s response as “foxes guarding the henhouse.”
And yet Warren, one of the loudest voices in the #MeToo movement, wants Gruenberg to keep his job, telling Punchbowl News he is “clearly committed to accepting the recommendations of the independent investigation and to make changes at the FDIC.”
Many of her Democratic colleagues are dubious at best.
During an appearance before the House Financial Services Committee, Rep. Ayanna Pressley (D-Mass.) delivered what may have been the cruelest cut.
“Personally, I do not have confidence that you can continue to lead in this role,” she told Gruenberg. “I am so tired of White men failing up.”
In his testimony, Gruenberg admitted that he only visits the six regional offices “once a year” and does not visit any of the hundreds of field offices nationwide.
“You’ve been at the FDIC for 19 years, you’ve been leading it for 10 of those 19 years, yet you never once took it on yourself to do anything,” U.S. Rep. Ann Wagner (R-Mo.) said. “You’ve got to be kidding me. How could you not know?”
Gruenberg’s appearance before the Senate Banking Committee the following day was even more brutal.
Sen. John Kennedy (R-La.) told Gruenberg that asking him to reform the FDIC was “like asking Alec Baldwin to conduct a course in gun safety.”
“Do I understand you, sir, that you believe you’re the person to clean up the FDIC?” Kennedy asked the FDIC chairman. When he said yes, Kennedy shot back, “Do you also believe in Bigfoot?”
Despite the well-publicized problems, however, when President Joe Biden nominated Gruenberg for another stint at the FDIC, Warren was one of his biggest cheerleaders.
“I applaud President Biden’s decision to nominate Martin Gruenberg to lead the FDIC. Gruenberg is an effective regulator with a proven track record of holding banks accountable,” Warren said at the time. “Under his leadership, I am confident that the FDIC will work to ensure that banks serve the needs of American families, not just bank executives.”
Why the ongoing support for what is, at best, a flawed nominee?
Rep. Bryan Steil (R-Wisc.) offered an explanation during the House committee hearing.
“I think it’s transparent what’s happening here – the administration cannot afford to lose you and particularly your vote on the board, which is key to getting the Basil III Endgame done and engaging an aggressive political agenda,” he said.
The Basel III Endgame is a proposal touted by the Biden administration that would significantly increase the capital ratio banks must maintain. Current regulations require banks to hold at least a 4.5 percent capital ratio. Opponents claim the proposal would wind up hurting average Americans applying for mortgages, car loans, credit, and small-business loans, forcing banks to become unrealistically risk-averse.
Warren is a top proponent of Basel III. She has claimed in previous testimony the policy would have prevented the collapse of three separate Silicon Valley-based banks in March 2023.
And keeping Gruenberg at the FDIC is key to enacting the new regulation.
But Republicans noted the collapse of Silicon Valley Bank and other institutions occurred on Gruenberg’s watch.
Rep. Blaine Luetkemeyer (R-Mo.) cited uninsured deposits accrued by the banks under Gruenberg’s watch, which he described as “weak management from the standpoint of regulation.”
“That’s what your job really is, as evidenced by the three banks that failed last year,” said Luetkemeyer, who has prior experience working in the banking industry. “As a bank examiner, there is no way in the world I would have allowed the bank model with those three banks, which had 80 to 95 percent uninsured deposits.
“Are you kidding me? No way. You knew about it for a year, did nothing, and by doing that you endangered not only the viability of those banks but the viability of our system.”
Gruenberg told committee members he’s seeking anger management therapy and is in the process of creating a new “Office of Professional Conduct, which will report directly to the FDIC Board of Directors” and will “engage an independent third-party expert to support our efforts.”
Gruenberg also repeatedly told committee members he was unaware of any cultural problems at the agency until “news reports” surfaced last fall.
John Milligan, political director for the Massachusetts Republican Party, told DCJournal that Gruenberg “epitomizes the Washington swamp” and called the report “despicable.”
“How can someone lead and reform the FDIC’s culture when they’ve been entrenched in it for so long, possibly contributing to its creation?” Milligan said, adding that Warren’s defense of the chairman “is a disservice to women in politics everywhere.”
“It’s evident that spending as much time in Washington as Warren has can overshadow any moral principles she may possess, as her political ambitions clearly take precedence.”
