FDIC’s Toxic Culture Enabled Widespread Harassment and Abuse, Report Finds

By Claire Meyer

8 May 2024

The Federal Deposit Insurance Corporation (FDIC) is responsible for insuring Americans’ bank deposits, but recent reports show that the government agency has long been irresponsible when it comes to ensuring its employees are safe from harassment, abuse, and mistreatment.

After a bombshell report from The Wall Street Journal last year documented strip club visits, lewd messages, heavy drinking, and bullying at the agency, a special review committee from the FDIC board of directors appointed an outside law firm, Cleary Gottlieb Steen & Hamilton, to review the allegations of harassment and misconduct, as well as management’s response to the allegations. The review also assessed the FDIC’s workplace culture, “including any practices that might discourage or deter the reporting of this type of misconduct.”

The 174-page report (not counting the 45-page appendix outlining examples of allegations of interpersonal misconduct) found that “for far too many employees and for far too long, the FDIC has failed to provide a workplace safe from sexual harassment, discrimination, and other interpersonal misconduct. We also find that a patriarchal, insular, and risk-averse culture has contributed to the conditions that allowed for this workplace misconduct to occur and persist, and that a widespread fear of retaliation, as well as a lack of clarity and credibility around internal reporting channels, has led to an under-reporting of workplace misconduct over the years.”

More than 500 FDIC employees contacted the law firm in charge of the review to report misconduct at the agency, both in field offices and headquarters.

One employee described how she feared deeply for her physical safety after a colleague who had been stalking her continued to text her even after she submitted a complaint against him for sending unwelcome sexualized text messages. Women in one field office shared how it became routine to hear their supervisor talk about their breasts and legs and his sex life. A woman examiner reported that an FDIC examiner sent her an image of his private parts. Some senior executives were well-known for pursuing romantic relations with subordinates.

Individuals reported that an employee with a disability was being made fun of by a supervisor, including being called cruel nicknames. Other employees cited multiple instances of homophobia, discriminatory statements, and demoralizing conduct aimed at minorities.

Reporting harassment or misconduct at the FDIC was a challenge for victims, who feared for retaliation and payback. Even in anonymous reporting to an independent law firm, some FDIC employees reported using VPNs and other people’s cell phones to write in to hide their tracks from supervisors, the report explained.

The “boys’ club” culture was regularly cited as a source of favoritism, unfairness, and exclusion at the FDIC. According to the report, “For women and individuals from underrepresented groups, this includes gender and race-based name calling, difficulty being promoted after having children, a lack of respect for women, pressure to participate in offensive jokes to avoid ‘being considered a prude,’ experiencing different accountability standards, and their opinions not being heard.”

Employees with experience at other federal agencies described how the FDIC has a “sense of exceptionalism,” manifesting in a belief that the FDIC is a special, separate agency that can make up its own rules because of a lack of day-to-day oversight. Others wrote off bad behavior because the FDIC’s culture was not as bad as environments in factories, warehouses, or construction sites.

“Many reported that in this culture, wrongdoers are not held to account for their misconduct,” the report said. "Instead, they are just moved around to other offices and roles. As one executive at the FDIC put it, the FDIC’s response to interpersonal misconduct is ‘pay, promote, or move them.’”

According to the FDIC’s public reporting, of the 92 harassment complaints made through its anti-harassment program between 2015 and 2023, not one resulted in removal, reductions in pay, or any discipline more serious than a suspension, the report found. Of these complaints, there were two suspensions, two letters of reprimand, and 12 orders for counseling, warnings, or training.

“This lack of accountability stems in part from a risk averse culture that focuses excessively on the risks associated with taking disciplinary action, while not sufficiently taking into account the institutional damage that can be caused by years of not holding people sufficiently accountable,” the report said.

The law firm’s analysis identified 10 key root causes or contributing factors for the workplace misconduct and culture issues at the FDIC:

Lack of accountability
Fear of retaliation
Insufficient prioritization of workplace culture
Patriarchal, hierarchic, and insular culture
Risk aversion
Lack of clear guidance
Abuse of power dynamics
Confusing and ineffective reporting channels
Investigative processes lack credibility
Insufficient record keeping

The report called on the FDIC to establish an anonymous hotline to report misconduct and abuse, develop a more timely, transparent process for handling complaints, and take steps to protect victims.

“Today’s report establishes the urgent imperative of a culture transformation at the FDIC led by those with the leadership capacity to effectuate that change,” said Special Committee co-chair Jonathan McKernan, in an FDIC press release on 7 May. “The report marks an important first step towards healing, repair, and sustainable change at the FDIC. Fostering an environment that promotes a safe, respectful, and inclusive workplace is fundamental to achieving the agency’s mission.”

After the review was released, lawmakers called on FDIC chairman Martin Gruenberg to resign, despite his pledge to implement the outside review’s recommendations—including agencywide cultural transformation, efforts to protect victims, and pushing to hold leadership accountable—and his apology to those who were mistreated, NPR reported. Gruenberg has been a senior leader at the agency for nearly 20 years.

For his part, Gruenberg said the report presented a “sobering look” inside the FDIC, and he apologized for any “shortcomings” on his part.

But as employees interviewed by the law firm said, culture starts at the top, and some of them detailed Gruenberg losing his temper and acting “harsh” and “aggressive,” which had a chilling effect on open communications in the agency. However, some other employees reported positive interactions with him, writing off his seemingly harsh tone as a “prosecutorial” speaking style, Reuters reported. Although the report found that Gruenberg’s personal conduct was not a root cause of the more severe issues, it was skeptical that of his capability to oversee a major overhaul of the agency.

“As the FDIC faces a crisis relating to its workplace culture, Chairman Gruenberg’s reputation raises questions about the credibility of the leadership’s response to the crisis and the ‘moral authority’ to lead a cultural transformation,” the report said.

To learn more about toxic workplaces—including how to get out of one—check out the Security Management article collection here.

When faced with a toxic work culture, your best option is often to leave. But how can you manage the situation in the short term while you look for your next opportunity? https://t.co/zXQ5jVRgXx
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