New York (CNN) 鈥� Martin Gruenberg, the chair of the Federal Deposit Insurance Corporation, is facing a barrage of calls from lawmakers to resign after a released Tuesday detailed pervasive sexual harassment, discrimination and bullying at the agency.
If he heeds the calls, there could be significant ramifications for banks across the country.
The report, undertaken by the law firm Cleary Gottlieb Steen & Hamilton and commissioned by the FDIC, confirmed the findings of a revealing a long-standing problematic culture. It did not find that Gruenberg alone was responsible for the issues described in depth in the report based on interviews with over 500 employees.
鈥淲e do recognize that, as a number of FDIC employees put it in talking about Chairman Gruenberg, culture 鈥榮tarts at the top,鈥欌€� the report said.
It also documented several instances where he lashed out at subordinates 鈥減articularly when being delivered bad news or conveyed views with which he disagrees.鈥� That鈥檚 caused staffers to delay delivering news they fear would upset him. Gruenberg鈥檚 temperament 鈥渕ay hinder his ability to establish trust and confidence in leading meaningful culture change,鈥� the report added.
Gruenberg did not respond to a request for a comment. An FDIC spokesperson told CNN Gruenberg 鈥渋s already implementing the recommendations in the report鈥� and that 鈥渁t his direction鈥� the agency is 鈥渨orking to identify and appoint a transformation monitor as well as an independent third-party expert to support these efforts.鈥�
The majority of lawmakers calling on Gruenberg, a Democrat who was appointed by President Joe Biden, are Republicans. Aside from Democratic Rep. Bill Foster, Democrats have stopped short of calling on Gruenberg to resign.
That鈥檚 likely because if Gruenberg were to resign, Vice Chair Travis Hill, a Republican appointee, would automatically become chair until a replacement is appointed by the president and confirmed by the Senate. In the interim, that would leave the agency deadlocked with one other Republican and two Democratic members on the FDIC鈥檚 board of directors.
Rulemaking would come to a 鈥渟creeching halt,鈥� Dennis Kelleher, president and CEO of Better Markets, a group that advocates for oversight of the financial sector, told CNN. With Hill at the FDIC鈥檚 helm, there would also likely be little appetite to work with the Federal Reserve and Office of the Comptroller of the Currency to pass any kind of regulations that beefs up bank capital requirements, he said.
Last year, the three agencies a preliminary step to finalizing the rules known as Basel III Endgame 鈥� which would require the nation鈥檚 largest banks to set aside more capital, limiting the amount of funds they have to lend to customers. The agencies are in the process of evaluating the initial proposal, which Hill voted against, and may propose new rules based on the comments they received.
That鈥檚 why Jaret Seiberg, a policy analyst at TD Cowen, said in a Tuesday note, 鈥淕ruenberg鈥檚 departure would be a positive for the bigger banks.鈥�
Seiberg doesn鈥檛 think it鈥檚 likely Gruenberg will resign, however, especially since progressive Democrats like Sen. Elizabeth Warren aren鈥檛 calling for his resignation. Similarly, White House press secretary Karine Jean-Pierre didn鈥檛 convey that Biden has any reservations about Gruenberg鈥檚 abilities to lead the FDIC.
Kelleher also expressed concerns that Hill would not react fast enough if there was a banking crisis like last year鈥檚, which the FDIC played a key role in mitigating. Even though Hill did not lead the agency at the time, he was second-in-command, and there鈥檚 no evidence he would prolong or exacerbate a banking failure.
Hill, through an adviser, declined to comment.
The-CNN-Wire
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