Patrick McHenry Grills Witnesses On ‘Chilling Impact’ Of FDIC Chair Gruenberg Blowing Up At On Staff

3 months ago

During a House Financial Services Committee hearing on Wednesday, Rep. Patrick McHenry (R-NC) questioned witnesses about the toxic workplace culture at the FDIC caused by Chairperson Martin Gruenberg.

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Transcript

00:00Thank you. I now recognize myself for five minutes. Director McKernan, the chairman of the board of

00:06the FDIC is responsible for overseeing the staff of the agency, is that correct? Correct.

00:12Do you think it's important that the chairman be able to have an open dialogue with FDIC

00:17employees about what they do? Absolutely, chairman. Is that what all board members try to do?

00:22I think so. Would you agree that the findings of the CLEAR report demonstrate the FDIC employees

00:28do not feel comfortable interacting with Chairman Grunberg? The report certainly establishes that

00:34his reputation and conduct has chilled communication. How so? I think there's a

00:39general reluctance among some to deliver bad news. At least that's the findings of the report.

00:44And how does delivering bad news, what does that mean for the agency? Well, I think it can

00:50certainly impede our ability to achieve our mission. If we're going to achieve our mission,

00:57leadership needs to make informed decisions. To make informed decisions,

01:00you have to have all the facts, both good and bad. Great. Does that affect safety and soundness?

01:04Absolutely. Safety and soundness is central to our mission. So, rewinding to March of last year,

01:10when you had bad news about three banks going down, and the lead up to that, and you have a

01:17chair that has had such a serious chilling effect on his staff, they don't even want to present him

01:21bad information. Do they fear for their career, or just the nasty abuse that he will give them

01:28for presenting information? I'm not sure if I understand the question, Chairman.

01:35So, did that have any effect in March? It certainly could have. I don't know

01:41of any specific incidents. Okay. So, the safety and soundness question here really falls on the

01:47chair of the FDIC board. Ms. Manu, I think you might be the appropriate person to ask this. Can

01:54you give us some details you learned during the course of your investigation about the chilling

01:58effect Chairman Gruenberg's behavior has on FDIC employees delivering bad news?

02:07Chairman McHenry, we described in our report, around page 90 of our report,

02:12incidents involving Chairman Gruenberg. We had looked into allegations of interpersonal

02:18misconduct concerning Chairman Gruenberg, as those were part of the publicly reported

02:22allegations that led to the need for our independent review. And specifically, we described

02:28incidents as recently as March 2023, in which an individual reported an outburst involving

02:37Chairman Gruenberg. And so, what did you take from this? Was that a widespread thing, or was

02:45this a one-off occasion? We obtained reports of several incidents over time, including when

02:56Mr. Gruenberg was vice chairman of the FDIC, continuing until at least 2023, during his

03:05current tenure as chairman, where employees reported experiences with Chair Gruenberg,

03:11including the chair losing his temper. And what we took from that, and what we heard from

03:16employees who reported to us, was that this could have a chilling impact on communications with

03:22Chair Gruenberg, although I will also note that we did not identify specific incidents that affected

03:28the FDIC's ability to meet its mission. Okay. So, get into that question. So, the chilling effect,

03:39you have stories, does that establish the reputation he had among employees of the FDIC?

03:47Yes, in the sense that the incidents contribute to the reputation that Chair Gruenberg has for

03:54losing his temper. Okay. And so, when I asked this question about being presented

04:01tough information, bad news, there was nothing but bad news in the lead-up to the bank failures

04:07in March of last year. And the specifics of that, this reputation he had for screaming, yelling,

04:16berating, and the report describes one incident where it's a period of something like 30 minutes

04:22that he was yelling at one employee. And that would have an impact on their ability to actually

04:31tell him the bad news that was occurring in the financial system, which then could lead to a

04:36question of safety and soundness decision-making for the agencies. Clearly, from the outside,

04:41we saw the inability for them to make a decision, the FDIC to make a decision. Now, this reputation

04:48he has looks clearly connected with that inability. Director McCurry, knowing what we know

04:55now, do you think Chairman Gruenberg should immediately step aside? Chairman, my view is

05:01the FDIC urgently needs a fresh start, and the sooner the better.

Patrick McHenry Grills Witnesses On ‘Chilling Impact’ Of FDIC Chair Gruenberg Blowing Up At On Staff

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