Senate Banking Chair Brown calls on Biden to replace embattled FDIC head

Senate Banking Chair Sherrod Brown on Monday called on President Joe Biden to replace FDIC Chair Martin Gruenberg, after damning reports of a toxic workplace culture at the bank regulator where Gruenberg has served for nearly two decades.

Brown said in a statement that there must be “fundamental change” at the FDIC, which insures more than $10 trillion in bank deposits and oversees thousands of financial institutions, in a move that is likely to turn the tide against the agency head with other Democrats as well.

“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,” he said. “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’s statement is a break with Sen. Elizabeth Warren (D-Mass.) who has said she has confidence in Gruenberg’s ability to effect change. Gruenberg testified at hearings before House and Senate lawmakers last week, where Democrats stopped just shy of calling for the agency head’s ouster.

“I expect that the entire Banking and Housing Committee and Senate leaders, in both parties, will put politics aside and join this effort to bring new leadership to the agency to ensure a safe workplace for the women and men who protect our financial system,” Brown said in his statement.

Notably, the senator did not call on Gruenberg to resign. The FDIC chair directs staff work and sets priorities for regulation, and if Gruenberg were to depart, the agency would be led on an acting basis by its Republican vice chair, Travis Hill. The course of action laid out by the senator, however, would allow control of the agency to pass to another Democrat, who would be tasked with fixing the internal culture at the regulator.

An independent report released this month by law firm Cleary Gottlieb Steen & Hamilton said the FDIC needs “cultural and structural change” to combat sexual harassment, abuse and retaliation that stretched back years. It also questioned whether Gruenberg was the right person to lead those reforms, citing incidents of him “losing his temper and interacting with staff in a demeaning and inappropriate manner.”

The report comes at a pivotal point as the FDIC and other Biden-era regulators are seeking to finalize a series of tougher regulations against banks.

One of Gruenberg’s Republican predecessors, Sheila Bair, made a similar call to Brown. Bair, who was appointed as FDIC chair by President George W. Bush and led the agency through the 2008 financial crisis, has been an advocate for stringent oversight of banks.

“I have known and worked with Chairman Gruenberg for years,” Bair said in a post on X, formerly known as Twitter. “But there is a desperate need for change at the FDIC. This controversy is hurting him and his agency. For his own sake and everyone at the FDIC, he should announce his intention to resign effective with the appointment and confirmation of a new Chair.”

The FDIC declined to comment. The White House did not immediately respond to a request for comment.

Gruenberg has said he accepts the findings of the Cleary Gottlieb report but signaled his intention to stay. He also proposed the creation of a new independent office to address reports of workplace harassment and discrimination internally.

“To anyone who has experienced sexual harassment or other misconduct at the FDIC, I again want to apologize and express how deeply sorry I am,” Gruenberg told lawmakers last week.

“I also acknowledge my own failures as Chairman, both in failing to recognize how my temperament in meetings impacted others and for not having identified deeper cultural issues at the FDIC sooner,” he said.

Gruenberg has been head of the agency for 10 of the last 13 years.

This is, depending on how it’s counted, Gruenberg’s fourth stint atop the FDIC. He was first confirmed to the job under President Barack Obama and served twice as its acting head. His current term was secured unconventionally: sticking around at the agency after his board term had expired and after his successor, Jelena McWilliams, had already been named by President Donald Trump.

McWilliams ultimately resigned early from her four-year term after Gruenberg and his fellow Democratic board members circumvented her and voted to take public feedback on potential changes to the agency’s bank merger approval process without her approval. His role in McWilliams’ departure fanned dislike for Gruenberg among Hill Republicans, many of whom have been calling for him to step down after the report findings.

Until this week, Rep. Bill Foster (D-Ill.) had been the only Democrat to call for the FDIC chair to be replaced.

The bad news continues to pile up for Gruenberg, including that the regulator ranks near last among midsize agencies in employee happiness, and further details of problems within the agency continue to trickle out.