Independent investigation called as FDIC faces claims of toxic culture of sexism

Current and former employees tell WSJ probe about deep-seated ‘sexualized boys club’ driving women to quit.

Just hours after The Wall Street Journal reported an investigation that found a long-running, toxic atmosphere prompted women to quit working at the US Federal Deposit Insurance Corporation (FDIC), the banking regulator hired an independent firm to conduct a “top-to-bottom assessment” of alleged harassment and discrimination there.

In a three-minute video to staff reviewed by the WSJ, FDIC Chairman Martin Gruenberg said Monday that the article “raises some serious allegations about the FDIC workplace” and said the firm would contact employees to solicit their confidential input. He didn’t specify which firm the agency had hired.

“I encourage you to participate in this process,” he said. “To the extent the assessment identifies further actions we can take to strengthen our agency, we won’t hesitate to implement them.” He said harassment and discrimination are “completely unacceptable” and said the agency doesn’t tolerate or “turn a blind eye” to it. 

Independent inquiry, congressional reaction

When provided with the Journal’s findings last month, weeks before the article’s publication date, the FDIC said harassment was “contrary to the FDIC’s values,” but it did not mention the decision to hire an independent consultant, the WSJ said.

The FDIC told the news outlet that it had hired the law firm BakerHostetler to conduct the independent probe.

Gruenberg faced questioning on the matter during a hearing that was focused more generally on the oversight of financial regulators on Tuesday, telling the US Senate Banking Committee he was “deeply troubled” by the WSJ reporting and that a “safe environment” for staff was a top priority. He is also due to appear Wednesday before the House Financial Services Committee, along with other top regulators.

Gruenberg testified before the Senate Banking Committee on Tuesday, alongside officials from other federal bank regulators, and that hearing is being referred to as “Oversight of Financial Regulators: Protecting Main Street Not Wall Street.” 

Another former examiner said she was explicit with senior managers about what she viewed as a culture of harassment and misogyny. One manager admitted they had heard similar concerns from other women and knew it was a problem.

Republicans on the House Financial Services Committee said in a published statement – issued two days before Gruenberg is set to testify – that they would “get to the bottom” of the allegations.

The committee notes that in a July 2020 report focused on sexual harassment, the FDIC’s Office of Inspector General (OIG) said: “FDIC had not established an adequate sexual harassment prevention program.” The report, along with recent reporting, seems to confirm the longstanding pattern of FDIC employees creating an unsafe work environment for their colleagues and a failure of the FDIC to take appropriate corrective action, the committee says in its statement.

“This alleged conduct is unbecoming of any employee of @FDICgov,” the GOP wing of the committee posted on X, formerly known as Twitter. “Chair Gruenberg has been on the Board for almost 20 years and has failed to address these entrenched problems.”

Harassment, toxic work culture allegations

The WSJ‘s investigation, based on interviews with more than 100 current and former FDIC employees, found that many employees didn’t file complaints about their harassment, fearing retaliation or believing nothing would come of it. But when people did complain, the FDIC in multiple instances investigated and substantiated complaints but moved the perpetrators to other offices instead of firing them.

Female employees described a sexualized, boys’ club environment that they say led them to leave the agency over the years, feeling they were consistently given fewer opportunities than their male counterparts.

Women recounted instances of being sent naked photos from senior bank examiners, hearing that their male supervisors were visiting strip clubs with male colleagues and being subjected to discussions of how women needed to use sex to get ahead at the FDIC. One woman told of a male colleague following her back to her hotel room during a training trip, being invited to a strip club by other bank examiners, and being sent an unsolicited naked photo by a colleague.

“Chair Gruenberg has been on the Board for almost 20 years and has failed to address these entrenched problems.”

US House Financial Services Committee, in a post on X

Another woman said a colleague complained to her that he wasn’t having enough sex, adding: “Obviously, if I walked into this office and you were naked, I’d f*** you right here.”

Reports of the agency’s problems stretch back more than a decade and have persisted through changes in leadership, administrations and internal investigations, the WSJ‘s investigation revealed. “It was just an accepted part of the culture,” said a former examiner-in-training. 

Another former examiner, in describing her exit interview upon leaving the agency, said she was explicit with senior managers in the office about what she viewed as a culture of harassment and misogyny. One manager admitted they had heard similar concerns from other women and knew it was a problem, she said. 

FDIC in the spotlight

The FDIC’s performance has come under harsh scrutiny following a costly series of large bank failures earlier this year, two of which were supervised by the FDIC. At the time, the agency cited its struggles to retain examiners as part of the reason it didn’t detect problems with some of the failed banks earlier, in addition to its failure to take more timely supervisory action regarding the banks’ interest rate risk or liquidity risk management processes.

In the July 2020 report, the OIG found that the FDIC had not established an adequate sexual harassment prevention program and should improve policies, procedures, and training to facilitate the reporting of sexual harassment allegations and address allegations in a prompt and effective manner.

Specifically, OIG said the FDIC had not developed a sexual harassment prevention program that fully aligned with the core principles endorsed by the Equal Employment Opportunity Commission calling for prompt investigations and resolutions of harassment complaints and in being comprehensive, easy to understand, and regularly communicated to all employees.

The FDIC’s deputy to the chairman and chief operating officer at the time, Arleas Upton Kea, said in a written response to the OIG’s July 2020 report that the percentage of employees who had experienced sexual harassment was “well below the government average.” She added that the IG’s report “ignores the possibility” that employees might want to address their complaints in a more informal way.