FDIC appears distracted, posing serious threat to Americans’ bank accounts
Do you remember the days when Government was boring? Not too long ago, stuffy Washington power struggles would sooner put you to sleep than have you glued to your phone or television. Sure, Netflix’s House of Cards played like a Shakespearean drama, but now it’s The West Wing that feels like utter fantasy. Today’s political brinksmanship is taking a toll on the entire government, and not just the parts you’d expect. Boring, yet critical, components of our government are now failing the American people because politics are being placed ahead of public service. Look at the tawdry drama that has overtaken the Federal Deposit Insurance Corporation (FDIC), now threatening the finances of all Americans.
The FDIC is supposed to be a “nonpolitical” and “independent” agency of the executive branch, with a mission more akin to a corporation than to a cabinet department. As you may know, the FDIC provides your bank account with deposit insurance, protecting you and millions of Americans from the losing it all if your bank goes bankrupt. By law, the FDIC is managed by a bipartisan board of directors, with staggered terms and a requirement that no more than 3 of the 5 members be of the same political party. Created after the Great Depression wiped out the savings of millions of Americans, the FDIC helped prevent a repeat of history. For 80 years the agency mostly operated with congeniality and genuine bipartisanship, keeping their eye on protecting our money. But that came crashing down with the inaugural zeal of the Biden-Harris Administration.
The sordid tale begins like this: Incumbent Chairwoman Jelena McWilliams, a Republican and an immigrant from Communist Yugoslavia, was ousted from her position by a revolt of the newly installed Biden-Harris appointees. In what can be best described as a coup d’etat, the Democrats on the Board of Directors: Vice Chair Martin Gruenberg, CFPB Director Rohit Chopra, and OCC Comptroller Michael Hsu hosted a dubiously legal board meeting while Chairwoman McWilliams was on a flight to an international meeting. The rump FDIC board approved their partisan agenda, then brazenly attempted to implement it without the Chair’s authorization. McWilliams appealed to Congressand to the public, but without recourse and little power to resist, resigned her position.
This episode was appalling. As a former Associate Director of Presidential Personnel, I couldn’t imagine muscling out an outstanding woman, who was confirmed by the Senate to serve out a full term. Character matters in life and especially so in public life. The damage done to the agency was profound and immediately manifested in what happened next. President Biden promoted the aforementioned Martin Gruenberg to replace McWilliams. Gruenberg is a well-known quantity in Washington. His gruff, demeaning attitude to his staff is infamous. Within a couple years, his mismanagement of the agency led to a Wall Street Journal investigation into FDIC’s toxic culture. This later turned into a full-fledged investigation into what kind of agency Gruenberg was running. According to the independent report, out of an agency of 6,000 employees, more than 500 staffers – one in 12 — have reported sexual harassment, racial or sexual discrimination, or other abuse from their managers. Gruenberg did not fire, demote or cut the pay of a single manager. It turns out, he was one of the abusers. One employee said Gruenberg threw their papers against the wall in a fit of rage, saying “in my entire career of 35 years, I’ve never had anybody treat me like that.” This was all reported in November of 2023, yet was he held accountable? At the beginning of his Administration, President Biden’s promised “(if) you treat another with disrespect… I will fire you on the spot”. Does this not apply to Gruenberg?
The answer to that question leads us back to what happened to McWilliams. Gruenberg’s Vice Chair is a Republican. This most partisan of administrations cannot seem to tolerate any speedbump in passing its political agenda.
But what about the agenda of the American people? This FDIC seems distracted—as the spectacular collapse of Silicon Valley Bank and others would suggest. The political games and partisan bickering helped create this toxic workplace, leaving bank examiners reeling and America’s banks vulnerable. My organization, the Financial Fairness Alliance (FFA) is investigating political influence and mismanagement at the FDIC. We will be looking at how the Gruenberg FDIC has mismanaged and redirected the agency away from its core mission. While it seems likely a new FDIC Chair will be replacing Gruenberg shortly, the FFA will be keeping tabs to make sure her promises of reform are not hollow. The American people deserve a restoration of integrity and purpose to the FDIC. Our financial markets, and your bank account, depend on it.
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