The Banks' Latest Hit Job

[Celerity]

https://prospect.org/blogs-and-newsletters/tap/2023-11-20-martin-gruenberg-fdic-harassment-republican-deregulation/

Last July 27, the several bank regulators, after long delays and several bank failures, issued new rules on higher capital standards for banks. This means that banks must hold more of their own equity capital as a cushion against losses. The banks resisted this at every step of the way, since it cuts into profits. They have spent massive sums to weaken or delay implementation of the rules. Two lead regulators pushing for this were Michael Barr, vice chair for supervision of the Federal Reserve, and Martin Gruenberg of the Federal Deposit Insurance Corporation (FDIC). Almost immediately, various people in Washington began getting calls from the right-wing press trying to get something, anything, on Gruenberg and Barr.

Last week, The Wall Street Journal broke a big story on the FDIC, and the big banks and their Republican allies in Congress are trying to use it to force Gruenberg’s resignation. A Journal investigative piece, several months in the making, documents that FDIC’s examinations division has been a toxic boys’ club of sexual harassment. The details are vulgar and appalling. Many women complained, the agency did not take most complaints seriously, and at least twenty women quit. According to my sources, many of the details in the Journal piece began with tips fed to the Journal reporter by Republican FDIC officials and holdover staff, who might have acted internally to address the problem rather than leak material to the press. Now Republicans are demanding Gruenberg’s resignation. And here the story gets more complicated.

If Gruenberg resigns, the Republican Vice Chair, Travis Hill, becomes acting chairman. In July, Hill voted against adopting the higher bank capital standards, as did the other Republican on the FDIC board, Jonathan McKernan. Both have parroted industry talking points. So if Gruenberg is forced out, the FDIC board would be deadlocked 2-2, with a Republican chair, and tougher capital standards would be effectively dead. That’s what this affair is really about. In addition, there are several pending regulatory rules that would be killed if Republicans get control of the FDIC, including resolution plans for banks with $100 billion or more in assets (a direct response to banking crash of March 2023) as well as rules on corporate governance and risk management.



Nobody has accused Gruenberg of sexual harassment himself. The accusation is that he failed to police the agency. It’s charming that Republicans are suddenly obsessed about keeping government safe from sexual harassment. I can’t find another case where congressional Republicans, the party of serial sexual predator Donald Trump, investigated abuses. But on the merits, is Gruenberg culpable for failing to monitor the conduct of the roughly 6,000 people who work for the FDIC or establishing procedures for complaints and remedies? We will soon learn more about that, but here’s what we know so far. In 2020, the FDIC’s Inspector General issued a report on sexual harassment at the agency, and proposed 15 procedural remedies to create a safer work climate and avenues of redress.

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