[House Hearing, 118 Congress]
[From the U.S. Government Publishing Office]
OVERSIGHT OF THE FDIC'S
FAILED LEADERSHIP AND
TOXIC WORKPLACE CULTURE
=======================================================================
HEARING
BEFORE THE
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED EIGHTEENTH CONGRESS
SECOND SESSION
__________
JUNE 12, 2024
__________
Printed for the use of the Committee on Financial Services
Serial No. 118-95
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
______
U.S. GOVERNMENT PUBLISHING OFFICE
56-522 PDF WASHINGTON : 2024
HOUSE COMMITTEE ON FINANCIAL SERVICES
PATRICK McHENRY, North Carolina, Chairman
FRANK D. LUCAS, Oklahoma MAXINE WATERS, California, Ranking
PETE SESSIONS, Texas Member
BILL POSEY, Florida NYDIA M. VELAZQUEZ, New York
BLAINE LUETKEMEYER, Missouri BRAD SHERMAN, California
BILL HUIZENGA, Michigan GREGORY W. MEEKS, New York
ANN WAGNER, Missouri DAVID SCOTT, Georgia
ANDY BARR, Kentucky STEPHEN F. LYNCH, Massachusetts
ROGER WILLIAMS, Texas AL GREEN, Texas
FRENCH HILL, Arkansas, Vice EMANUEL CLEAVER, Missouri
Chairman JIM A. HIMES, Connecticut
TOM EMMER, Minnesota BILL FOSTER, Illinois
BARRY LOUDERMILK, Georgia JOYCE BEATTY, Ohio
ALEXANDER X. MOONEY, West Virginia JUAN VARGAS, California
WARREN DAVIDSON, Ohio JOSH GOTTHEIMER, New Jersey
JOHN ROSE, Tennessee VICENTE GONZALEZ, Texas
BRYAN STEIL, Wisconsin SEAN CASTEN, Illinois
WILLIAM TIMMONS, South Carolina AYANNA PRESSLEY, Massachusetts
RALPH NORMAN, South Carolina STEVEN HORSFORD, Nevada
DAN MEUSER, Pennsylvania RASHIDA TLAIB, Michigan
SCOTT FITZGERALD, Wisconsin RITCHIE TORRES, New York
ANDREW GARBARINO, New York SYLVIA GARCIA, Texas
YOUNG KIM, California NIKEMA WILLIAMS, Georgia
BYRON DONALDS, Florida WILEY NICKEL, North Carolina
MIKE FLOOD, Nebraska BRITTANY PETTERSEN, Colorado
MIKE LAWLER, New York
ZACH NUNN, Iowa
MONICA DE LA CRUZ, Texas
ERIN HOUCHIN, Indiana
ANDY OGLES, Tennessee
Matt Hoffmann, Staff Director
C O N T E N T S
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Page
Hearing held on:
June 12, 2024................................................ 1
Appendix:
June 12, 2024................................................ 59
WITNESSES
Wednesday, June 12, 2024
Hsu, Michael J., FDIC Board Member, and Co-Chair, Special Review
Committee of the Federal Deposit Insurance Corporation (FDIC).. 5
Kim, Joon H., Partner, Cleary Gottlieb Steen & Hamilton.......... 6
Mainoo, Abena, Partner, Cleary Gottlieb Steen & Hamilton......... 7
McKernan, Hon. Jonathan, Board Member, FDIC, and Co-Chair,
Special Review Committee of the Federal Deposit Insurance
Corporation (FDIC)............................................. 8
APPENDIX
Prepared statements:
Hsu, Michael J............................................... 60
Kim, Joon H.................................................. 65
Mainoo, Abena................................................ 65
McKernan, Hon. Jonathan...................................... 68
Additional Material Submitted for the Record
Garcia, Hon. Sylvia:
Bloomberg, ``Biden Is Poised to Pick Goldsmith Romero to Lead
Overhaul at FDIC,'' dated June 11, 2024.................... 76
Hsu, Michael J.:
Written responses to questions for the record from
Representative Hill........................................ 78
Written responses to questions for the record from
Representative Kim......................................... 80
Written responses to questions for the record from
Representative Meeks....................................... 81
Written responses to questions for the record from
Representative Mooney...................................... 78
Kim, Joon H.:
Written responses to questions for the record from
Representative Hill........................................ 82
Mainoo, Abena:
Written responses to questions for the record from
Representative Hill........................................ 82
McKernan, Hon. Jonathan:
Written responses to questions for the record from
Representative Kim......................................... 85
Written responses to questions for the record from
Representative Meeks....................................... 91
Written responses to questions for the record from
Representative Mooney...................................... 87
OVERSIGHT OF THE FDIC'S
FAILED LEADERSHIP AND
TOXIC WORKPLACE CULTURE
----------
Wednesday, June 12, 2024
U.S. House of Representatives,
Committee on Financial Services,
Washington, D.C.
The committee met, pursuant to notice, at 10:08 a.m., in
room 2128, Rayburn House Office Building, Hon. Patrick McHenry
[chairman of the committee] presiding.
Members present: Representatives McHenry, Lucas, Sessions,
Posey, Luetkemeyer, Huizenga, Barr, Williams of Texas, Hill,
Loudermilk, Mooney, Davidson, Rose, Steil, Timmons, Meuser,
Fitzgerald, Garbarino, Kim, Donalds, Flood, Lawler, Nunn,
Houchin; Waters, Velazquez, Sherman, Lynch, Green, Foster,
Beatty, Vargas, Gonzalez, Pressley, Horsford, Tlaib, Garcia,
and Williams of Georgia.
Chairman McHenry. The Financial Services Committee will
come to order.
Without objection, the Chair is authorized to declare a
recess of the committee at any time.
Today's hearing is entitled, ``Oversight of the FDIC's
Failed Leadership and Toxic Workplace Culture.''
I will note at the outset here for scheduling purposes for
the committee and our panelists that we have a vote series that
will be called at 10:30 this morning. That is why I was
interested in getting the committee started on time. We are a
little late. We will go as long as we can, then we will recess
for votes and return once the series is concluded. I urge
Members to return as soon as possible. We will start
questioning as soon as we have a sufficient number of Members
to do that.
I will now recognize myself for 4 minutes for an opening
statement.
At our May hearing to conduct oversight of the prudential
regulators, Members on both sides of the aisle expressed
interest in holding a separate hearing on misconduct at the
FDIC and the Cleary Gottlieb report. To my colleagues, I heard
you. Today's hearing is focused exclusively on the FDIC's toxic
workplace culture and Chair Gruenberg's abusive behavior. To
our witnesses, we thank you for being here today. Your
commitment to transparency has not gone unnoticed.
Just days after our last hearing, Chair Gruenberg announced
his intent to resign at some undetermined future date. His
resignation should have been welcome news to the FDIC
employees, who have been subjected to an appalling culture of
misconduct and abuse, but it was all a farce. Resigning after
the confirmation of a new Chair is just more of the status quo.
Chair Gruenberg knows this, which is why he told employees at
the FDIC to continue as if he would be there until the end of
the year. That is outrageous. This, though, is part and parcel
of Mr. Gruenberg's failure to accept responsibility for his own
actions. His approach to a long-overdue cultural overhaul of
the FDIC seems to be deny, deflect, and delay.
Case in point, 3 weeks after the White House pledged to
move quickly to replace him, we have yet to see a successor
even nominated. Deep institutional changes at the FDIC are
needed now, not later, which is why I called on President Biden
to fire Chair Gruenberg for cause. There is a clear succession
plan in place. The agency's operations would continue unabated
if he rightfully stepped down today, so what is the delay?
The Inspector General, The Wall Street Journal, and Cleary
Gottlieb all outlined important misconduct at every level of
the agency in painstaking detail, but based on Chair
Gruenberg's claims, we are supposed to believe he somehow
missed this appalling behavior while leading the agency for 10
of the last 13 years. It is clear that any cultural change will
happen in spite of his presence, not because of it.
The consequences of Chair Gruenberg's failed leadership go
further than the four walls of the FDIC. The events that have
unfolded over the last 15 months in our financial system, which
include three major bank failures last March, including
Signature Bank, which was directly under his supervision,
involved him directly, or the FDIC under his watch. In April,
Chair Gruenberg's Chief Risk Officer reviewed the FDIC's
actions leading up to Signature Bank's failure and concluded
that staffing, whether it be shortages or communication issues,
was a major issue.
In November, revelations came to light about the FDIC's
toxic culture and Chair Gruenberg's own abusive behavior
towards staff tasked with bringing him, ``bad news.'' It is
fair to conclude that Chair Gruenberg's behavior directly
impacted the FDIC's response to last year's banking turmoil. He
moved slowly, couldn't make decisions, and undoubtedly lashed
out at his own employees for presenting him information.
So, I ask the White House and my Democratic colleagues,
does your own agenda really outweigh the need for a competent
leader at the helm of the FDIC? For the well-being of the
agency and its 6,000 employees, as well as our financial
system, it is time for Democrats to join Republicans in calling
for an immediate change in leadership at the FDIC. With that, I
yield back.
The Chair now recognizes the ranking member of the
committee, the gentlewoman from California, Ms. Waters, for 4
minutes for an opening statement.
Ms. Waters. Good morning. Thank you to our witnesses for
being here today, including Acting Comptroller Hsu, who
testified just a few weeks ago.
As Committee Democrats have made very, very clear, all FDIC
employees deserve a safe work environment. Unfortunately, as
the Cleary report details, this has not been the case under the
leadership of both Republican and Democratic Chairs. In fact,
according to the report, the FDIC has had a troubling workplace
culture since 1980. I am pleased that the FDIC has begun
implementing the reforms necessary, and I am pleased that the
White House is reportedly nominating a proven leader, Commodity
Futures Trading Commission (CFTC) Commissioner Christy
Goldsmith Romero, to lead this effort as FDIC Chair.
However, I am concerned that the report we are discussing
may not tell the full story. For example, while the report
focuses on the current Chair, I want to know why the report
doesn't examine how and why former FDIC Chair, Jelena
McWilliams, and her senior staff, including the current FDIC
Vice Chair, Travis Hill, did not do more to ensure FDIC workers
had a safe workplace during their tenure, both before and after
the Inspector General identified a number of concerns relating
to sexual harassment way back in 2020.
Additionally, the Chair does not include critical data
needed to understand the location and rate of misconduct over
time and which types of misconduct are currently the most
prevalent. My staff asked Cleary to provide this information,
but they did not. This information could significantly impact
what types of reforms the FDIC leadership should prioritize and
where they should be implemented.
Now, while this committee should be focused on the
employees and exploring ways to strengthen worker protections,
Republicans are attacking the Democratic Chair, who has already
announced he will step down. But you won't hear them call for
Republican Vice Chair Travis Hill to step down, despite him
being a senior official under former Chair McWilliams when
allegations of misconduct persisted.
I also wonder whether my colleagues will call for anyone
who has been found liable for sexual abuse to stand down from
holding other positions of power in government. For example,
the former President and top Republican is not only an
adjudicated sexual abuser, but also the first and only former
President to be criminally convicted of not 1, not 2, but 34
felonies relating to violating election laws, and twice
impeached. He also faces three more criminal indictments for
his efforts to overturn the election and steal highly-sensitive
and classified national security documents and stash them at
his Mar-a-Lago resort.
Thankfully, President Biden is quickly taking steps to
protect workers at the FDIC by reportedly nominating CFTC
Commissioner Christy Goldsmith Romero to serve as FDIC Chair.
Commissioner Goldsmith Romero has a long track record of
working to protect our nation's investors, consumers, and
taxpayers. When she served as Special Inspector General for the
Troubled Asset Relief Program (TARP), she successfully held
accountable bank executives who engaged in financial crimes and
fraud. She has been unanimously confirmed by the Senate twice.
If Republicans are committed to changing the work culture at
the FDIC, I expect that they will join with Democrats to
support her swift Senate confirmation. I yield back.
Chairman McHenry. We will now recognize the gentleman from
Michigan, Mr. Huizenga, who is also the Chair of our Oversight
and Investigations Subcommittee, for one minute.
Mr. Huizenga. Thank you, Mr. Chairman. We will continue to
hear Democrat colleagues today attempt to deflect blame, and we
will continue to hear a litany of reasons why Chairman
Gruenberg is the right man, at the right time, with the right
ideas, to reform the FDIC. However, one simple fact remains:
Chairman Gruenberg is a failed leader who has put politics and
a radical progressive agenda over doing what is right. He has
put himself and his own ego before the FDIC employees and the
well-being of the agency that he reportedly loves.
Mr. Chairman, the independent report, which has been
accepted by everyone here today, was clear on one thing:
Culture starts at the top. For nearly 2 decades, Mr. Gruenberg
has failed to recognize how his own misconduct negatively
affected his own employees.
Mr. Chairman, it is time for new leadership. It is time to
let the agency heal. The safety and soundness of our banking
system is at risk under his leadership, and Chairman Gruenberg
should resign immediately or be removed by the President. I
yield back.
Chairman McHenry. The gentleman yields back. The ranking
member of our Subcommittee on Oversight and Investigations, Mr.
Green, is recognized for 1 minute.
Mr. Green. Thank you, Mr. Chairman. I thank the ranking
member as well, and I associate myself with the comments of the
ranking member.
Mr. Chairman, Chair Gruenberg has stated that he will step
down from his position once a successor is confirmed. I would
like to thank President Biden for putting forth a capable,
competent, and qualified nominee, and I encourage the Senate to
confirm this nominee as quickly as possible, confirm this
nominee who will rectify the toxic causality that resulted in
opprobrious conduct at the FDIC.
I do concur with the ranking member that the employees, the
persons who work there in all facets of work deserve a safe and
secure work environment. I trust that the successor, the new
Chair who will succeed Mr. Gruenberg, will work prudently to
strengthen banking regulations and capital requirements, as
well as rein in incentive-based executive compensation that
encourages excess risk-taking, and again, produce a safe work
environment. I thank you, and I yield back.
Chairman McHenry. The gentleman yields back. I will note
for the record that while my Democratic colleagues may be
front-running the White House, we have yet to see the full
nomination presented as the press reports indicated, and now,
our Democrat colleagues are saying it.
We will now receive the testimony of this hearing's panel:
Mr. Michael Hsu, Co-Chair of the Special Review Committee of
the Federal Deposit Insurance Corporation; Mr. Joon Kim, a
partner at the law firm, Cleary Gottlieb Steen & Hamilton LLP;
Ms. Abena Mainoo, also a partner with the law firm of Cleary
Gottlieb Steen & Hamilton; and the Honorable Jonathan McKernan,
Co-Chair of the Special Review Committee of the Federal Deposit
Insurance Corporation.
I would note Chair Gruenberg's absence. Originally, the
committee noticed and announced he would participate in today's
hearing. Unfortunately, he did have a personal conflict, and we
look forward to his appearance before the committee in the
future.
I would like to thank each of our witnesses for being here.
You will each be recognized for 5 minutes to give an oral
presentation of your testimony. And without objection, your
written statements will be made a part of the record. Mr. Hsu,
we will begin with you.
STATEMENT OF MICHAEL J. HSU, FDIC BOARD MEMBER, AND CO-CHAIR,
SPECIAL REVIEW COMMITTEE OF THE FEDERAL DEPOSIT INSURANCE
CORPORATION (FDIC)
Mr. Hsu. Thank you, Chairman McHenry, Ranking Member
Waters, and members of the committee. I am testifying today in
my capacity as a Director on the Board of the FDIC, and as Co-
Chair of the Special Review Committee, which was established to
oversee the independent third-party review of the agency's
workplace and culture. In these roles, my objective has been to
protect the people of the FDIC. That has been my top priority
and North Star throughout the entire process. The employees of
the FDIC need and deserve a safe and inclusive workplace and
they need it now.
My joint written statement with Director and Special Review
Committee Co-Chair, Jonathan McKernan, describes the processes
by which the independent third-party reviewer was selected and
how the review and report were overseen. At each and every
stage of the process, we sought to ensure that the review and
report were independent, credible, and fair. I believe we
achieved that and strongly support the report's findings or
recommendations. Most importantly, the report provides a clear
roadmap to address and remedy the pervasive problems at the
FDIC. The agency must implement its recommendations
immediately.
I want to reemphasize today the urgent need for actions,
not words. I am especially focused on actions in three areas:
first, addressing the fear of retaliation; second, implementing
the right action plan for cultural and structural
transformation; and third, ensuring that the Board and senior
management can and will be held accountable for doing what is
necessary to make the FDIC a safe and inclusive workplace.
Currently, the agency is taking action on all three fronts,
following through on recommendations in the report. More
specifically, the FDIC is in the process of: first, replacing
the broken internal process for fielding and responding to
reports of harassment with a new structure that will bypass
management hierarchies and utilize third-party investigators,
hold wrongdoers accountable, and report directly to the Board
in order to credibly mitigate the risk of retaliation; second,
hiring a third-party expert to bring an independent outside
perspective on what is needed to ensure cultural and structural
transformation, including augmenting the agency's action plan
as necessary; and third, hiring an independent transformation
monitor to hold the agency accountable for following through on
its commitments and taking the necessary actions in a timely
manner.
Protecting the people of the FDIC and earning back their
trust must be our highest priority. I am fully committed to
that. The three actions I highlighted--restructuring how the
agency does intake, investigations, and accountability; hiring
a third-party expert; and hiring an independent transformation
monitor are foundational to many of the recommendations of the
report. Taking these steps cannot wait and they must be done
right. This is my focus as a Director. Thank you. I am happy to
answer any questions.
[The prepared statement of Mr. Hsu can be found on page 60
of the appendix.]
Chairman McHenry. We will now recognize Mr. Joon Kim, a
partner at the law firm of Cleary Gottlieb Steen & Hamilton.
STATEMENT OF JOON H. KIM, PARTNER, CLEARY GOTTLIEB STEEN &
HAMILTON
Mr. Kim. Thank you. Chairman McHenry, Ranking Member
Waters, and members of the committee, my name is Joon Kim, and
I am a partner at the law firm of Cleary Gottlieb Steen &
Hamilton. And along with Jennifer Kennedy Park and Abena
Mainoo--who is here with me today--the three of us led the
recent review we conducted on behalf of the Special Review
Committee of the FDIC's Board of Directors.
The Special Review Committee appointed our firm to conduct
an independent review of allegations of sexual harassment and
interpersonal misconduct at the FDIC, including hostile,
abusive, unprofessional, or inappropriate conduct, as well as
management's response to these allegations, and the FDIC's
workplace culture, including any practices that might
discourage or deter the reporting of this type of misconduct.
In conducting this review, we recognized its importance to
the FDIC, an institution that performs a critically important
public function of maintaining stability and public confidence
in our nation's financial system. We appreciated the grave
responsibility of conducting this type of a review, both to the
FDIC and its employees, as well as to the public that it
serves. We understood that independence, credibility, and
fairness were of paramount importance, and that is how we
approached the conduct of our review and the drafting of our
report.
To gather the facts necessary for the review, we set up a
hotline through which individuals could make reports. We
obtained and reviewed thousands of documents from the FDIC and
conducted additional interviews of current and former FDIC
employees from across multiple offices, divisions, and
seniority. The reports made to our hotline were particularly
revealing, both in volume and in substance. Over 500
individuals courageously reported to our hotline, often
painfully and emotionally recounting experiences of sexual
harassment, discrimination, and other interpersonal misconduct
that they had suffered at the FDIC.
Although we cannot describe all of the incidents reported
to us, we do feel compelled to convey the powerful emotions
that we heard. Those who reported incidents to us expressed
fear, sadness, and anger at what they had to endure. Many had
never reported their experiences to anyone before, while others
who had reported internally had been left disappointed by the
FDIC's response. Virtually all of them expressed hope that
reporting what they had gone through to us might help change
and make better the agency that they cared about deeply. In
conducting our review, we were guided by their example and by
the goal of doing right by them.
We hope that our review and our report did justice to their
experiences and honored the public service of the thousands of
FDIC employees. My colleague, Ms. Mainoo, will discuss in her
remarks the factual findings, analyses, and recommendations set
forth in our report.
Thank you for the opportunity to present on this important
issue to this committee, and we welcome questions.
[The prepared statement of Mr. Kim can be found on page 65
of the appendix.]
Chairman McHenry. We will now recognize Ms. Mainoo for 5
minutes.
STATEMENT OF ABENA MAINOO, PARTNER, CLEARY GOTTLIEB STEEN &
HAMILTON
Ms. Mainoo. Good morning, Chairman McHenry, Ranking Member
Waters, and members of the committee. We set forth in our
report the factual findings from our review and analysis of the
root causes of the issues we identified and recommendations we
believe would help address the issues that we identified. Our
report is being submitted to the committee with our written
testimony.
As we set forth in our report, we 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
found that a patriarchal, hierarchic, and insular culture
helped create the conditions that allowed for such misconduct
to occur and persist.
In addition, we found that a deep-seated fear of
retaliation as well as a lack of clarity and credibility around
internal reporting channels led to an underreporting of
workplace misconduct over the years. Other root causes we
identified included a lack of accountability, insufficient
prioritization of workplace culture, risk aversion, abuse of
certain power dynamics, and insufficient recordkeeping.
To address these issues, many of which we found were
longstanding and deeply ingrained, we made a number of
recommendations in our report. In developing the
recommendations, we took into account the view expressed by
many who reported to us that truly lasting and meaningful
change will not be a matter merely of revisions to policies and
increased training, although those are necessary and important,
but must include real cultural and structural change. That is
why, among other changes, we recommended the appointment of a
culture and structure transformation monitor as well as an
independent third-party expert such that the FDIC will have
expert guidance in implementing the recommendations, as well as
a monitor that will monitor and audit such implementation.
First among our recommendations is to protect the victims,
including protecting the physical and psychological safety of
those who have experienced sexual harassment, discrimination,
bullying, or other interpersonal misconduct at the FDIC. That
was our first recommendation because they were our foremost
concern. They are public servants, who, like so many within the
FDIC, care deeply about and take great pride in the mission and
worth of the FDIC. They demand and deserve a workplace with a
positive culture that is safe from sexual harassment,
discrimination, and other interpersonal misconduct. We hope our
review and our report will help achieve that for them and for
all other FDIC employees.
Thank you for the opportunity to present to the committee
on this important matter, and we look forward to answering any
questions you may have for us.
[The prepared statement of Ms. Mainoo can be found on page
65 of the appendix.]
Chairman McHenry. We will now recognize Director McKernan
for 5 minutes.
STATEMENT OF THE HONORABLE JONATHAN MCKERNAN, FDIC BOARD
MEMBER, AND CO-CHAIR, SPECIAL REVIEW COMMITTEE OF THE FEDERAL
DEPOSIT INSURANCE CORPORATION (FDIC)
Mr. McKernan. Chairman McHenry, Ranking Member Waters, and
members of the committee, I am here in my capacity as a Co-
Chair of the Special Review Committee that oversaw Cleary
Gottlieb's review of the FDIC's workplace.
I will first address myself to the FDIC employees. Cleary's
report establishes that you have been heard. The report makes
clear that what happened to you was real, and what happened to
you was wrong and totally unacceptable. I hope the report puts
us on a path to change and I hope real accountability is not
too far off. I would like to also convey my respect and
appreciation to Director Hsu for the exceedingly constructive
and nonpartisan way in which he approached this review. I think
we set an example for how the FDIC Board can and should work.
In my year and a half at the FDIC, I have developed a
strong attachment to the FDIC staff and our shared mission.
Overseeing the review, I saw a different side of the FDIC. That
was a jarring experience, and I think that is similar to the
experience many have reading the report. Cleary's report is a
painful read. The report documents sexual harassment and
misconduct on a scale and nature that shocks the conscience.
The report describes a good old boys club that is,
``patriarchal and misogynistic.''
The report makes clear there has been a widespread and
credible fear of retaliation that deters victims from reporting
wrongdoing. The report also makes clear that there has been a
failure to hold wrongdoers accountable when actually reported.
The report describes how these dynamics compound upon each
other, driving a cycle of deepening fear and distrust among
employees, especially women and other underrepresented groups.
It is also the case that almost all of the FDIC employees are
good people, solid public servants, deeply committed to a
mission that is central to the success of our country.
Reconciling that with the Cleary report comes down to a
question of leadership. An organization can prioritize
protecting employees, it can strive to root out wrongdoers and
make an example of them, or an organization can prioritize
protecting itself. It can strive to brush wrongdoers under the
rug, move them around, even promote them, all with an aim to
avoid the litigation, the bad press, and the time and expense
of disciplining bad actors. The FDIC too often chooses the
second path. That choice isn't driven by policies, procedures,
or training. That choice is driven by values, and our values
are set by our leaders. Thank you, and I look forward to your
questions.
[The prepared statement of Mr. McKernan can be found on
page 68 of the appendix.]
Chairman McHenry. Thank you all. I now recognize myself for
5 minutes for questions.
Director McKernan, the Chairman of the Board of the FDIC is
responsible for overseeing the staff of the agency. Is that
correct?
Mr. McKernan. Correct.
Chairman McHenry. Do you think it is important that the
Chairman be able to have an open dialogue with FDIC employees
about what they do?
Mr. McKernan. Absolutely.
Chairman McHenry. Is that what all Board members try to do?
Mr. McKernan. I think so.
Chairman McHenry. Would you agree that the findings of the
Cleary report demonstrate that the FDIC employees do not feel
comfortable interacting with Chairman Gruenberg?
Mr. McKernan. The report certainly establishes that his
reputation and conduct has chilled communication.
Chairman McHenry. How so?
Mr. McKernan. I think there is a general reluctance among
some employees to deliver bad news. At least, that is the
finding of the report.
Chairman McHenry. What does that mean for the agency?
Mr. McKernan. I think it can certainly impede our ability
to achieve our mission. If we are going to achieve our mission,
leadership needs to make informed decisions, and to make
informed decisions, you have to have all the facts, both good
and bad.
Chairman McHenry. Great. Does that affect safety and
soundness?
Mr. McKernan. Absolutely. Safety and soundness is essential
to our mission.
Chairman McHenry. So, rewinding to March of last year when
you had bad news about three banks going down and the lead-up
to that, and you had a Chair who has had such a serious
chilling effect on his staff that they don't even want to
present him bad information, did they fear for their career or
just the nasty abuse that he would give them for presenting
information?
Mr. McKernan. I am not sure if I understand the question,
Mr. Chairman.
Chairman McHenry. Did that have any effect in March?
Mr. McKernan. It certainly could have, but I don't know of
any specific incidents.
Chairman McHenry. Okay. So, the safety and soundness
question here really falls on the Chair of the FDIC Board.
Ms. Mainoo, I think you might be the appropriate person to
ask this. Can you give us some details you learned during the
course of your investigation about the chilling effect Chairman
Gruenberg's behavior has on FDIC employees delivering bad news?
Ms. Mainoo. Chairman McHenry, we described in our report,
around page 90 of our report, incidents involving Chairman
Gruenberg. We had looked into allegations of interpersonal
misconduct concerning Chairman Gruenberg as those were part of
the publicly-reported allegations that led to the need for our
independent review, and specifically, we described incidents as
recently as March 2023 in which an individual reported an
outburst involving Chairman Gruenberg.
Chairman McHenry. And what did you take from this? Was that
a widespread thing or just a one-off occasion?
Ms. Mainoo. We obtained reports of several incidents over
time, including when Mr. Gruenberg was Vice Chairman of the
FDIC, and continuing until at least 2023 during his current
tenure as Chairman, where employees reported experiences with
Chair Gruenberg, including the Chair losing his temper. And
what we took from that and what we heard from employees who
reported to us was that this could have a chilling impact on
communications with Chair Gruenberg, although I will also note
that we did not identify specific incidents that affected the
FDIC's ability to meet its mission.
Chairman McHenry. Okay. So, you have stories about the
chilling effect. Does that establish the reputation he had
among employees at the FDIC?
Ms. Mainoo. Yes, in the sense that the incidents contribute
to the reputation that Chair Gruenberg has for losing his
temper.
Chairman McHenry. Okay. And when I ask this question about
being presented tough information, bad news, there was nothing
but bad news in the lead-up to the bank failures in March of
last year. This reputation he had for screaming, yelling,
berating--and the report describes one incident where it is a
period of something like 30 minutes that he was yelling at one
employee--would have had an impact on their ability to actually
tell him the bad news that was occurring in the financial
system, which then could lead to a question of safety and
soundness decision-making for the agency. Clearly, from the
outside, we saw the inability of the FDIC to make a decision.
Now, this reputation he has looks clearly connected with that
inability.
Director McKernan, knowing what we know now, do you think
Chairman Gruenberg should immediately step aside?
Mr. McKernan. Mr. Chairman, my view is the FDIC urgently
needs a fresh start, and the sooner the better.
Chairman McHenry. I now yield back, and recognize the
ranking member, Ms. Waters, for 5 minutes.
Ms. Waters. Mr. Kim, the Cleary report addresses some
serious issues that confront the FDIC, yet the report does not
provide any key information that is important to understanding
the workplace culture at the FDIC and how to best correct the
problems the report identified. For example, the report does
not indicate how many of the 510 allegations are unique, or
even when these events occurred other than that they occurred
sometime between 1980 and this year. In fact, when discussing
the allegations received through the hotline, the report states
that, ``because various individuals reported different types of
misconduct that were sometimes overlapping or difficult to
characterize, the numbers are estimates,'' nor does the report
indicate how many of the allegations were firsthand or
secondhand.
Given this lack of specificity, it is difficult to
understand what types of misconduct may be increasing or
declining over time and what types of misconduct are most
prevalent today. Can you respond to that?
Mr. Kim. Yes. Thank you. Our report reflects that 510
individuals reported into our hotline, and we provide, on page
115 of our report, a breakdown of the different categories of
reports that came in by subject matter. Many of those reports
came in anonymously or confidentially where the person
reporting specifically requested that their information be kept
confidential.
Ms. Waters. How many of those reports were anonymous?
Mr. Kim. Pardon me?
Ms. Waters. How many----
Mr. Kim. How many were confidential?
Ms. Waters. ----came in anonymously?
Mr. Kim. In the----
Ms. Mainoo. I----
Mr. Kim. Sorry. Go ahead.
Ms. Mainoo. ----can take that. We received 200 reports
through the website that allowed for anonymous reporting. That
said, even some of those reports contained contact information
for the individuals, so 200 would be the high estimate.
Mr. Kim. We did include in the appendix to the report--it
is approximately 50 pages--46 representative examples of
reports that came in to our hotline. That provides quite a bit
of detail, both dates----
Ms. Waters. Okay. Let me be clear. What is the total number
of reports? How many reports? What was the number of reports?
Mr. Kim. There were 510 reports made through the hotline.
Ms. Waters. So, 510 reports? And how many of those were
anonymous?
Mr. Kim. Approximately 200.
Ms. Waters. About 200 of those? Okay.
Mr. Kim. And just to complete the thought, we did provide
in the report representative examples of the types of
allegations we received with details and dates. And to the
extent we did not include specificity, that was for the reason
of protecting the confidentiality----
Ms. Waters. How many do you consider you were able to
validate?
Mr. Kim. The ones that are identified in the appendix, are
corroborated or validated, is set forth in the description in
the appendix. It includes some reports that were consistent
with other reports that others had made. We do note in the
report that many of the 510 reports are mere allegations. They
are allegations that came into the report. We know that
limitation in our report. But we also find in the report that
the sheer volume and the nature of 510 reports coming in within
a relatively short time of a hotline being opened with these
types of allegations is itself a finding----
Ms. Waters. How many of these occurred at the headquarters,
the regional offices, or the field offices? Is that information
identified in the report? I didn't remember seeing how many
were actually at headquarters, or in field offices or regional
offices.
Ms. Mainoo. We said in the report on page 115, which is the
page that Mr. Kim had pointed to, that many allegations came
from regional or field offices. We received reports from all
six regional offices. We received reports from over 30 of the
field offices, and we also received reports from the FDIC's
headquarters. One limitation in the information that was
available to us goes to the recordkeeping challenges that we
had identified through our review. So, one of our
recommendations is that the FDIC ensure more systematic
recordkeeping.
Ms. Waters. Thank you.
Chairman McHenry. We will now recognize the Vice Chair of
the committee, Mr. Hill of Arkansas, for 5 minutes.
Mr. Hill. I thank the Chair, and I thank the panel for
being with us today to continue our investigation of the
poisonous culture at the FDIC.
Ms. Mainoo, the Cleary Gottlieb report outlines that
employees don't have trust in the reporting process, even
though the FDIC has over five offices for employees to take
their reports. This leads to employees feeling like the process
is broken, confusing, ineffective, and, to some degree, there
is no real incentive to report when people are being
browbeaten, and that word passes down through the culture. Can
you describe some of the difficulties with that reporting
channel, to follow up on the line of questioning, in your
review?
Ms. Mainoo. Yes, Congressman. We described in our report
what we found in our review regarding concerns about the
reporting processes and investigation processes. One question
that FDIC employees have when they experience interpersonal
misconduct is whether that conduct even violates any of the
FDIC's policies, and this is in part due to some confusion
about the policies and insufficient training on the policies.
Mr. Hill. Let me stop you there, because the FDIC and the
Comptroller of the Currency and the bank regulators have
imposed a strict standard as a part of their examination of
human resources practices at the institutions they have
regulated since the 1990s. What is not clear about sexual
harassment in the FDIC policy that makes it so challenging to
figure out?
Ms. Mainoo. One question that comes up is whether conduct
that does not necessarily violate the law but otherwise would
count as harassment within the FDIC's policies does violate any
policy. There is a misperception that in order for any conduct
to violate the policies, it needs to rise to the level of
unlawful conduct.
Mr. Hill. Is this a place where you would want to work?
Based on your spending weeks on this project, would you want to
work in this environment?
Ms. Mainoo. I think that is a difficult question to answer.
As we have all said in our statements, it is very clear, and we
heard from the FDIC employees who reported to us how proud they
are to work at the FDIC----
Mr. Hill. Excellent. It is an amazing mission since 1933, I
agree, an important mission. I don't believe that the current
Chair should be in charge of cleaning up this situation, and I
am glad, according to the ranking member, that President Biden
is going to appoint a new leader, but in the interim, with how
long the confirmation process will take, it is my judgment that
we should have the transition today, and the current Chairman
should be out of his office in order to move this atmosphere
forward.
Mr. McKernan, let me turn and talk about the implications
of this. We have a softening economy. We have a rising set of
challenges in commercial real estate lending. We have the
sharpest increase in interest rates since 1980, which has
created some real pressure in our depository institutions. And
I am concerned that we don't have the right leadership to get
the basic job done at the FDIC. What is your assessment of
that? This committee heard testimony during the Silicon Valley
Bank failure. It was not impressive what we heard from the
FDIC, and, in fact, you sent us a memo pointing out the
significant managerial weaknesses.
Mr. McKernan. Congressman, what I would say to that is the
state of affairs at the FDIC is challenging. Morale is bad. We
just fell, I think, second to last in our group in Federal
employment surveys. We were near the top for quite some time. I
think it is fair to say that a lot of staff have lost
confidence in the leadership, and even the Board. I think it is
fair to say that staff have seen no real accountability, so it
is hard to see much commitment to change, absent that
accountability. I think it is fair to say that there is a lot
of skepticism, even cynicism about prospects at the FDIC.
But I think it is also important to really emphasize that
almost all of the FDIC employees are good people. Like I said
at the beginning, they are solid public servants, deeply
committed to the mission despite everything that we have going
on, and they are going to keep pushing to do the mission. I
think it is the job of the leadership to make sure that they
can do their job. Frankly, you cannot----
Mr. Hill. I agree. Let me reclaim my time in closing and
simply say that you are right. We have to have the best morale,
the best esprit de corps, the best talent in the FDIC to handle
their jobs, but I don't believe that is being done. I believe
change needs to happen immediately. I yield back.
Chairman McHenry. This will be the final questioner before
we go to Floor votes, and we will recess after Ms. Velazquez.
Ms. Velazquez of New York is recognized for 5 minutes.
Ms. Velazquez. Thank you, Mr. Chairman. Mr. Kim, Ms.
Mainoo, can you tell us how far back these issues date and why
employees didn't feel comfortable reporting them earlier?
Ms. Mainoo. As we explain in our report, these issues are
longstanding. As Mr. Kim noted earlier, we included in our
report about 50 representative examples of the types of
allegations that we learned about, and we provide detailed
descriptions. And even among those representative examples, you
have some allegations going as far back as the late 1980s.
Ms. Velazquez. Okay. Thanks. And do these reports become
greater over time or less towards today?
Ms. Mainoo. It is difficult to speak to any patterns in
terms of interpersonal misconduct identified at the FDIC. As we
laid out in our report, the human resources group that receives
and currently investigates allegations of interpersonal
misconduct did not have a systematic way of keeping records of
those types of allegations until last year.
Ms. Velazquez. Thank you. Acting Comptroller Hsu, while
these incidents certainly did occur on Chair Gruenberg's watch,
they also occurred under the chairmanship of Jelena McWilliams.
Is that correct?
Mr. Hsu. That is my understanding, yes.
Ms. Velazquez. Mr. Kim, and Ms. Mainoo, your report states
that over 500 people who reported allegations of misconduct are
disproportionately women and people from underrepresented
groups. Can you both speak to the type of incidents FDIC
employees from this group face, and how the, ``good old boys,''
culture enabled these events to occur without repercussions?
Mr. Kim. I can start. Yes, we do make the finding that
those who reported were predominantly women and from
underrepresented groups, and we also noted that we also spoke
to many people who had positive experiences at the FDIC. And in
fact, some of the people who did report incidents generally had
positive experiences themselves, but it was important for us to
note that, predominantly, those reporting these issues were
those who appear to be women or underrepresented minorities.
Ms. Velazquez. Can you talk about the, ``good old boy,''
network?
Ms. Mainoo. Yes. We received reports about favoritism. For
example, one of the examples that we included in the appendix
with the representative examples talked about, and it was
reported by two individuals where they observed a manager
acting inappropriately toward an employee in the presence of an
executive. And in that situation, the executive asked the
employee who had been yelled at and had been the subject of the
abuse to apologize, and did not say anything to the manager.
And one of the people who reported to us observed that this was
based on the personal relationship that the executive had with
that manager, and to that individual, this was an example of
the, ``good old boys,'' network.
Ms. Velazquez. So, how do we break up this culture?
Ms. Mainoo. Cultural and structural transformation are
important because, as we have explained, these issues are
longstanding. There have been previous efforts to bring about
cultural change at the FDIC. We believe that in part because
these issues have continued to persist, those efforts have been
ineffective. And so our recommendations, including the
appointment of a monitor to oversee the FDIC's work going
forward, are intended to bring about change.
Ms. Velazquez. Thank you. The FDIC created an action plan.
Can you speak to the viability of the plan and whether you
think the plan alone is sufficient to address the structure and
cultural changes?
Mr. Kim. As we noted in the report, the action plan does
contain proposed actions that overlap with our recommendations.
So obviously, both were seeking to address a similar or the
same issue. However, we had some additional recommendations
that we believed were important, as Ms. Mainoo mentioned. Very
important to us was the appointment of a transformation monitor
who could monitor and audit the steps that were being taken,
and that this person be or the monitor be independent and have
the necessary resources. Also, we recommended the retention of
an external expert who is expert in these areas. And then,
importantly, we had a recommendation that the review process be
conducted by a group that is independent.
Ms. Velazquez. Thank you, Mr. Chairman. I yield back.
Chairman McHenry. The gentlelady's time has expired. We
will now recess for Floor votes, and we will restart with Mr.
Lucas when we return.
The committee stands in recess.
[recess]
Chairman McHenry. The committee will come to order. We are
going to return to our questioning order. Thank you to the
panelists for remaining.
I will now recognize the gentleman from Oklahoma, Mr.
Lucas, who is also the Chair of the House Science Committee,
for 5 minutes.
Mr. Lucas. Thank you, Mr. Chairman, and I appreciate you
yielding to me for questions. In my tenure in Congress, on a
variety of committees, we have dealt with a number of sticky
sort of questions, things that had to be addressed, things that
could not be allowed to go unchallenged, and I occasionally
take a little different perspective in the questions I ask.
Mr. Kim, on December 11, 2023, the FDIC Special Review
Committee chose your firm to conduct an independent review of
the FDIC's culture into allegations of sexual harassment,
misconduct, and just a toxic culture at the FDIC. You and your
colleagues, Ms. Mainoo and Ms. Park, led the team for this
investigation. Has your team conducted investigations into
workplace misconduct before?
Mr. Kim. Yes, we have.
Mr. Lucas. Mr. Kim, when the Special Review Committee chose
your firm, what was your understanding of the scope of the
investigation with respect to the conduct of the Chairman?
Mr. Kim. The scope of our review was set forth to us in the
resolution from the Board, and that was for us to conduct an
independent review of allegations of sexual harassment and
interpersonal misconduct at the FDIC, including hostile,
abusive, unprofessional, or inappropriate conduct, as well as
management's response to these allegations, and the FDIC's
workplace culture, including any practices that might
discourage or deter the reporting of this type of misconduct.
That was the scope that was provided to us.
Mr. Lucas. So that we may better understand your
investigation, could you elaborate on the steps your firm took
to ensure independence of the investigation, to safeguard the
report against any bias?
Mr. Kim. Yes. Obviously, as lawyers, we have ethical
obligations to our client. In this case, our client was the
Special Review Committee of the FDIC Board. That was the
exclusive ethical duty that we owed. The investigative team
understood that and we also, as a precautionary measure,
created walls internally at the firm to separate out any
lawyers who do banking work. And we conducted our review in a
way which ensured that independence, but also independence
within the firm, and also from within the FDIC because there
was a need for independence in that regard as well.
Mr. Lucas. There are some who have been distressed about
the focus on the current Chairman rather than his predecessors.
Mr. Kim, during the course of your investigation, if
significant issues were uncovered regarding previous Chairs
that contributed to the toxic workplace at the FDIC, how would
that have been included in the report?
Mr. Kim. Yes. We did not intend to focus on particular
Chairs. As we make clear in the report, the workplace culture
issues were longstanding, and have spanned many years, across
different Chairs. We addressed the conduct of the current
Chairman because public reporting relating to his conduct and
his reputation was already publicly reported by the time we
were appointed, and were what led to the need for an
independent review as opposed to a review led by management,
which is what was contemplated before. And for that reason, as
well as the reason that he is the current Chairman, and,
obviously, as many people reported to us, culture starts at the
top, and also because it is relevant to the implementation of
the recommendations, we deemed it appropriate and necessary to
cover his conduct as well in the way we did in the report.
Mr. Lucas. Continuing my line of thought, Mr. Kim, of
course, as you are gathering all the information and
determining what is relevant to the investigation, not every
piece of data would be included in the final report. From your
interviews with current and past employees, was there evidence
of substantial misconduct, misbehavior like Mr. Gruenberg's
from the previous Chairman that was left out of the report?
Mr. Kim. As you have noted, not everything that we learned
is set forth in the report. That includes with respect to
anyone, including the current Chairman. What we included was
what is relevant and necessary to understand our factual
findings and to support our recommendation. That is what we
included in the report.
Mr. Lucas. One last question, Mr. Kim. Would you expand on
how Chairman Gruenberg's leadership may be a challenge to the
FDIC's cultural transformation that we all want?
Mr. Kim. We did not in the report, nor do we today take a
position on whether the current Chairman should or should not
stay as the Chair of the FDIC. We believe that to be beyond the
mandate of our review. We wanted to review and investigate the
facts set forth, the facts that were necessary to understand
our findings, and the facts that were necessary to support our
recommendation.
Mr. Huizenga. [presiding]. The gentleman's time has
expired.
Mr. Lucas. Thank you, Mr. Kim. I yield back, Mr. Chairman.
Mr. Huizenga. The gentleman's time has expired. With that,
the gentleman from Massachusetts, Mr. Lynch, is recognized for
5 minutes.
Mr. Lynch. Thank you, Mr. Chairman. I want to begin by just
saying there is a certain element of disingenuousness in terms
of the Republican position on abuse of women in the workplace.
We hear many complaints about it here with respect to a
Democratic appointee, Mr. Gruenberg, who has admitted that he
is leaving the office, but I just want to point out that all of
my Republican colleagues are supporting former President Trump,
who has an atrocious and long record of poor treatment, not
only poor treatment----
Mr. Sessions. Mr. Chairman.
Mr. Lynch. I am speaking. I am speaking. This is my time.
And remember, the relevance here is the next President will
appoint the FDIC Chair that we are questioning the conduct of
today. So, this is about the fitness and the true and genuine
concerns that my colleagues have with respect to what has
happened here. Let's put aside for a minute the fact that he is
a convicted felon on a deal with a porn star, that the----
Mr. Sessions. Mr. Chairman, that is not a correct----
Ms. Waters. The time belongs to the gentleman from
Massachusetts.
Mr. Lynch. This is my time.
Mr. Huizenga. Hold on.
Mr. Lynch. A civil conviction by a jury----
Mr. Huizenga. I will suspend for just a moment. We will
suspend the clock. The gentleman cannot interrupt that way, and
I would remind the gentleman from Massachusetts to direct his
remarks to the Chair.
Mr. Lynch. Yes.
Mr. Huizenga. And you will have your time. With that, the
clock may resume.
Mr. Lynch. Thank you, Mr. Chairman. I respect that, and I
appreciate that. And we are talking about someone who has been
convicted by a jury in a civil court for sexual abuse. And
then, I could have brought in a tape here of the Access
Hollywood thing where he talked about how he grabs women's
genitals and kisses them right off the bat. So, I just want to
rebalance this about what we are doing here today. And if we
are truly concerned about the way women are treated in the
workplace, there is real reason to question the genuineness of
the criticism on my colleagues' part.
I am a former union president, so let's get to the
workplace here. And I was a union steward before I was a union
president. In the workplace, if some of this stuff, which was
totally unacceptable--and I totally agree with the factual
basis of the record and the investigation. Mr. Kim, or Ms.
Mainoo, why was the union not involved here? As a union
steward, I would have been the first person in the workplace to
know about that activity, and there would have been a duty of
fair representation on my part as a union steward to go to bat
for those women, for those employees who were being treated
like that. What happened here? You did the investigation. This
is a union workplace. The National Treasury Employees Union
(NTEU) is the collective bargaining representative for these
employees, I believe. What happened there? What was the
breakdown there?
Ms. Mainoo. Thank you, Congressman. You are correct that
the National Treasury Employees Union is the relevant union
here. And as we explained in our report, we spoke to the union
representatives as part of our effort to understand the scope
of issues relating to interpersonal misconduct at the FDIC. And
in terms of the union's role, the union did have a role in
providing support, both to employees----
Mr. Lynch. How many grievances were filed? If I was the
union steward, I would file a grievance every single time
something like that happened. How many grievances were filed?
Ms. Mainoo. We know that grievances were filed along with
complaints under the anti-harassment program and under the
FDIC's equal employment opportunity policy.
Mr. Lynch. Okay. And where did those grievances go? Was
there a procedure where they could be addressed?
Ms. Mainoo. There was a four-step process, and the first
step was for any grievances to go to a supervisor, all the way
up to the Chair or the Chair's designee.
Mr. Lynch. How many were sustained? How many grievances
were sustained, and what action happened as a result of that?
Ms. Mainoo. What we say in our report is that insufficient
disciplinary actions were taken in response to allegations of
interpersonal misconduct. And one of the statistics we cite is
from the FDIC's reports that it made to Congress, that out of
92 complaints that were made between 2015 and 2023 under the
FDIC's anti-harassment policy, the most serious disciplinary
action that was taken was suspensions, and that was in two
instances.
Mr. Huizenga. The gentleman's time has expired.
Mr. Lynch. Thank you for your indulgence, Mr. Chairman. I
appreciate it. Thank you. I yield back.
Mr. Huizenga. The Chair would also like to remind the
Members up here about what the hearing is supposed to be about,
but also about Rule 17. Rules of decorum do require us to not
impugn other Members, and the President, and we would include
nominees in that.
Ms. Waters. Will the gentleman yield?
Mr. Huizenga. I will not. I will also note that the Members
may use their 5 minutes as they wish.
Ms. Waters. Parliamentary inquiry.
Mr. Huizenga. What is the gentlewoman's parliamentary
inquiry?
Ms. Waters. I want to be sure about what you are advising
us. Are you advising us that we are not to make any statements
about the President?
Mr. Huizenga. No.
Ms. Waters. Would you please clarify?
Mr. Huizenga. I would like us to adhere to Rule 17, which
says that we should not mischaracterize members or current
members of government or past members of government.
Ms. Waters. Despite facts.
Mr. Huizenga. The gentleman from Texas is recognized for 5
minutes.
Mr. Sessions. Mr. Chairman, thank you very much. I would
like to delve into and take a little bit further approach. Mr.
Hsu, and Ms. Mainoo, thank you for your comments today. Both of
you used the word several times, ``retaliation.'' Are you both
lawyers?
Ms. Mainoo. Yes.
Mr. Sessions. What is the Federal law related to
retaliation, at least in your opinion, that this whole agency,
all the management and others had been advised about, because I
have heard you twice say there is a concern about retaliation.
Ms. Mainoo. An example would be the antidiscrimination
laws, which, in addition to making discrimination based on
protected classes unlawful, would also cover any retaliation
against individuals who make complaints about discrimination.
Mr. Sessions. Would that be the same as a whistleblower, or
is a whistleblower a different type of status? In other words,
if a person is allowed to give feedback, their name, the
information, specific information, you know who they are, is
that treated differently under the law than a whistleblower? I
think the answer is, yes.
Ms. Mainoo. Could you just rephrase your question?
Mr. Sessions. Yes, ma'am.
Ms. Mainoo. Just to make sure I understand it.
Mr. Sessions. Yes, ma'am, and thank you. There is feedback
that was provided within the agency. I don't know what that
venue was, but we have heard about some 500--there were some
300 perhaps where they provided their name and direct
information for you to get back to them. You have already said,
yes, there would be Federal law related to the protection of
those people, at least as it relates to someone retaliating
against them.
Ms. Mainoo. Correct.
Mr. Sessions. Is that the same or a different law than
generally would apply to whistleblowers, and did you have
whistleblowers?
Ms. Mainoo. There are also specific whistleblower laws that
protect individuals who report violations of law, so that is
another example.
Mr. Sessions. Okay. Now, I have heard both of you mention
retaliation, probably at least in your mind as a source of
probably what is still there. What has taken place in
relationship to that, and who would be responsible for that
observation, and dealing with retaliation in this FDIC?
Ms. Mainoo. To elaborate on the concern about retaliation,
one concern that we heard was, in addition to confusion about
whether any conduct violated FDIC policies and whom to report
to, there was also a concern about whether FDIC employees could
trust the reporting channel.
Mr. Sessions. Yes, ma'am. I want to go to who is
responsible for directly taking that issue on with the
knowledge that we have heard that the current leadership is
incapable of effectively managing the organization. Who is
taking that issue on within the agency, notwithstanding that
they should not be waiting for a new person to be approved, and
who is taking this issue of retaliation on right now and has
been in the past year? Who? Name that title.
Mr. Hsu. Congressman, I believe the full Board needs to be
engaged.
Mr. Sessions. The full Board is great. Okay, the Board.
Who? You represent the Board?
Mr. Hsu. I am on the Board, yes.
Mr. Sessions. What are you doing to make sure that
retaliation is not alive and well and will not be tolerated?
What are you doing then, sir?
Mr. Hsu. The fear of retaliation requires both cultural and
structural transformation. There is currently a process that is
broken.
Mr. Sessions. When will that be fixed, sir, since you are
the responsible party?
Mr. Hsu. The Board is currently taking action to create a
new structure----
Mr. Sessions. When will that be fixed, and does that
require a new head of the agency to approve that?
Mr. Hsu. It is being fixed as we speak. The Board is
currently----
Mr. Sessions. It is being fixed.
Mr. Hsu. It is being fixed currently.
Mr. Sessions. Would you please provide this committee, both
Republicans and Democrats, with notice when that has been
fixed?
Mr. Hsu. Yes.
Mr. Sessions. Notwithstanding who the Director is, it is
the Board. I sure appreciate your help, and thank both of you
very much.
I just think that some of the things going back to
conversation about what needs to be fixed today within the
division of labor, there are certain things the new Chairman
would need to be responsible for, and there are also things
that are current issues. I appreciate your help. Thank you very
much, Mr. Chairman. I yield back.
Mr. Huizenga. Yes. The gentleman's time has expired. With
that, the gentleman from California, Mr. Sherman, is recognized
for 5 minutes.
Mr. Sherman. Thank you. We have had a problem since the
1980s. I won't repeat the reports because they have been stated
so often, but they show a horrendous picture. And now we are
close to, well, I can't say solving, but to making this agency
as good as it can be as far as its workplace culture. I want to
commend the law firm for its report. I want to commend The Wall
Street Journal for really forcing that report to be
commissioned, and now we are so close. Mr. Gruenberg is
resigning. President Biden is going to appoint a successor, and
I want to call upon the Administration to appoint a successor
as soon as possible.
But I want the Republican members of this committee to take
the opportunity to demand that the Senate not engage in
dilatory tactics to prevent that successor from being
confirmed--a prompt hearing, and then an up-or-down vote
without any of the Senate tricks--because I was one of those
who asked for this hearing, but that was before Mr. Gruenberg
announced his retirement. The title of this hearing is about
the toxic workplace culture at the FDIC. If the Senate unduly
delays the confirmation, we will need another hearing, Mr.
Chairman, on the Senate's toxic culture of delay, which would
be preventing us from dealing with the toxic culture at the
FDIC.
Now, some have argued that somehow the failures of
Signature Bank and First Republic Bank are a result of Mr.
Gruenberg's temperament. Mr. Hsu, you were there. Did these
banks fail because they had bad management and they failed to
account for interest rate risk, or did they fail because of Mr.
Gruenberg's personality?
Mr. Hsu. Thank you for the question, Congressman. The OCC
does not regulate Silicon Valley Bank.
Mr. Sherman. Yes. I am asking you in your role as a member
of the FDIC.
Mr. Hsu. Yes. The factors that led to the failures are well
laid out in the reports that the FDIC has gotten.
Mr. Sherman. Do any of those reports say it is Mr.
Gruenberg's personality? That is not mentioned? You are on the
FDIC Board. Has anyone at the FDIC identified for you, I was
going to bring this First Republic issue up or Signature Bank
up, but I failed to bring it up because I was worried about the
Chairman's personality? Has anybody stepped forward and said
his personality stopped them from taking action?
Mr. Hsu. No.
Mr. Sherman. The National Treasury Employees Union (NTEU)
represents the FDIC employees. I wonder whether Mr. Hsu and Mr.
McKernan can commit to working with the NTEU as the FDIC moves
forward to improve its workforce culture?
Mr. Hsu. Yes.
Mr. McKernan. Yes.
Mr. Sherman. I would point out that there are 6,600
employees who deserve a good workplace culture, but there are
330 million Americans who deserve good bank regulation, and if
Mr. Gruenberg resigns before a successor is confirmed, the FDIC
could be split 2-to-2.
Mr. Hsu, if the FDIC was split 2-to-2 and we had another
big crisis, Silicon Valley Bank 2, is it possible the FDIC
would split 2-to-2 as to what action to take if we only had 4
Commissioners?
Mr. Hsu. It is hard to speculate about that.
Mr. Sherman. But there is a reason why you have an odd
number of Commissioners, correct? It is so that you are less
likely to split 2-to-2.
Mr. Hsu. I don't want to speculate about that.
Mr. Sherman. Okay. I won't ask you to speculate. But last I
checked, 2 plus 2 was 4. If you have only 4 members, then you
can divide 2-to-2.
I would finally point out that Silicon Valley Bank also
failed because interest rate risk was not built in sufficiently
in our bank examination process, and we need to mark-to-market
all long-term instruments that banks hold, whether it is
available for sale or held to maturity. And until we do that,
we will see banks put too much of their in Wall Street----
Mr. Huizenga. The gentleman's time has expired.
Mr. Sherman. I yield back.
Mr. Huizenga. The gentleman's time has expired. The
gentleman from Missouri, Mr. Luetkemeyer, who is also the Chair
of our Subcommittee on National Security, Illicit Finance, and
International Financial Institutions, is now recognized.
Mr. Luetkemeyer. That is a very long name, Mr. Chairman.
Mr. Huizenga. Yes. I was truncating it in my own head.
Sorry about that.
Mr. Luetkemeyer. Thank you. Thank you, Mr. Chairman. And I
thank all of you for being here today. This is a very serious
matter that deserves a lot of insightfulness and a lot of, I
think, insightful comments and questioning.
My first question is to Mr. Hsu this morning. Do you take
this report seriously, Mr. Hsu?
Mr. Hsu. Very seriously, yes.
Mr. Luetkemeyer. Okay. You say in your written testimony
that you are, ``committed to holding any employee engaging in
misconduct accountable,'' and your main objective is to protect
the employees. You believe this?
Mr. Hsu. Yes.
Mr. Luetkemeyer. Why have you not taken action to fire Mr.
Gruenberg at this point?
Mr. Hsu. The actions we are focused on are actions that I
can influence, which relate to hiring the third-party expert--
--
Mr. Luetkemeyer. You can't influence this, him continuing
to be at the head of this agency?
Mr. Hsu. That decision is for the White House and for the
Senate.
Mr. Luetkemeyer. Can't the FDIC Board do something about
this?
Mr. Hsu. I'm sorry?
Mr. Luetkemeyer. Can't the FDIC Board do something about
this?
Mr. Hsu. The FDIC Board doesn't have the authority.
Mr. Luetkemeyer. What happens if Mr. Gruenberg commits a
felony or winds up in jail tomorrow? Who takes over?
Mr. Hsu. I think, under the rules, the Vice Chair would
take over.
Mr. Luetkemeyer. We have a Vice Chair. Okay. Mr. McKernan,
do you take this report seriously?
Mr. McKernan. Absolutely.
Mr. Luetkemeyer. In your testimony, you say that you hope
accountability is not far off. Do you believe this?
Mr. McKernan. Do I believe it is far off?
Mr. Luetkemeyer. Yes.
Mr. McKernan. I am not particularly optimistic that we will
see accountability soon.
Mr. Luetkemeyer. Okay. Yes, I am concerned about that part.
You also say the reconciling report comes down to a question of
leadership. An organization can prioritize protecting the
employees, it can root out wrongdoers, and make an example of
them, but we need leaders. Why are you not taking action? Why
are you not pressing for Mr. Gruenberg to resign?
Mr. McKernan. I am pressing for the Board to take a more
active role, to your earlier question. I think there is a real
question here that we at the Board need to consider during this
interim when we are waiting for a new Chair or waiting for the
current Chair to resign and have the Acting Chair. I think the
Board needs to take a more active role here, and I have been
pushing for that.
Mr. Luetkemeyer. appreciate that, because I think you were
talking a minute ago about having leaders and solving these
problems, and you guys are in a position, Mr. McKernan and Mr.
Hsu, of being leaders in this situation. As leaders, you need
to step up and stop the nonsense. Otherwise, you are an
enabler, if you continue to allow this to go on. You are no
better than Mr. Gruenberg, in my mind, if you allow it to go
on. It has to be stopped.
Mr. Kim, and Ms. Mainoo, is rape a crime? You both are
attorneys. You tell me.
Mr. Kim. Yes, rape is a crime.
Mr. Luetkemeyer. In your report, you indicate that at this
hotel that a lot of the FDIC folks go to when they are in
training, there was a rape that occurred besides a bunch of, I
think 24 more instances of harassment of some kind. Was anybody
prosecuted as a result of that?
Mr. Kim. I believe there was a rape that was alleged and
presented to the local police department. I don't believe that
there was----
Mr. Luetkemeyer. There was no follow-through on that?
Mr. Kim. Not that we are aware of.
Mr. Luetkemeyer. So, we have an alleged crime here that
nobody took care of. Was it swept underneath the rug? This is a
very serious crime. I don't understand how they can get away
with this, what you are telling me, that they swept it
underneath the rug?
Mr. Kim. We are not aware that it was swept under the rug.
What we are aware of is the information that we were able to
obtain from the local police department and that there was
action taken.
Mr. Luetkemeyer. But it is a crime.
Mr. Kim. Rape itself is a crime, of course.
Mr. Luetkemeyer. Okay. So, we are allowing criminal
activities to go on within the agency, if that is the case.
Ms. Mainoo. Just to add to what Mr. Kim said, there were
two reports of sexual assault at the Seidman Center. For one of
those two sexual assaults reported, we understand from the
FDIC's Office of Inspector General that no charges were filed
because the claims could not be substantiated by law
enforcement. And as to the second incident, we understand from
the Office of Inspector General that the investigation into
that incident is ongoing, so we were not able to get more
information about it.
Mr. Luetkemeyer. Does intimidation by the Chairman have
anything to do with that not being taken up?
Ms. Mainoo. There is no indication that the Chair is
related to this.
Mr. Luetkemeyer. Okay. Very good.
Mr. Hsu, you took part in the coup that occurred with Ms.
Williams over a major disagreement of opinion over a merger
issue, yet you have let this crime go unchallenged, sexual
harassment and racial discrimination, which is documented,
continue to go unchallenged. I am curious as to why we don't
take further action.
It just boggles my mind, but it is about politics, pure and
simple, in my mind. We have a Republican who is the Vice Chair,
and if Mr. Gruenberg steps down, you will have a Republican as
the Chair, and it is all about that. It is not about what is
good for the people of the FDIC. It is not about what is good
for the banking industry. It is about politics, and that is to
say because both of you sit in position to stop the nonsense.
Please do that on your----
Mr. Huizenga. The gentleman's time has expired. The Chair
recognizes the gentleman from Texas, Mr. Green, for 5 minutes.
Mr. Green. Thank you, Mr. Chairman. I thank the witnesses
for appearing today. Permit me to ask a question about the
composition of the Board. Do you agree that the Board has some
5 members, Mr. Kim?
Mr. Kim. The Board of the FDIC?
Mr. Green. Yes.
Mr. Kim. Yes.
Mr. Green. How many women are there among the 5 members?
Mr. Kim. There are no women among the 5 members.
Mr. Green. Five men?
Mr. Kim. Correct.
Mr. Green. I believe we live in a world where it is not
enough for things to be right, they must also look right. By
the way, no disrespect to any of my friends who are on the
Board, I think highly of you, but it just seems to me that it
may be time for us to look to have the leadership of a female.
Permit me to ask you about the comment that you made. I believe
it was you, Mr. McKernan, you made the comment of this being
misogynistic. Explain, please?
Mr. McKernan. Explain what I mean by that?
Mr. Green. Yes, sir.
Mr. McKernan. This is a characterization of the report, and
when they describe the workplace culture, clearly, they may
have other examples. But what I understand that to mean is that
we have biases here slanted in favor of a male workforce.
Mr. Green. You have heard the term, ``good old boys.''
Mr. McKernan. Absolutely.
Mr. Green. Is that what we are talking about?
Mr. McKernan. That is right.
Mr. Green. Someone used the term, ``patriarchal.'' Would
you speak up, ma'am? I believe you did.
Ms. Mainoo. I did use that term, and that referred to
conduct, including allegations that there are outdated notions
of appropriate and inappropriate workplace behavior as well as
favoritism and exclusion of women as well as members of
underrepresented groups.
Mr. Green. Now, ma'am, can you point to in your report
where you indicate that a member of the Board should be made
Chair of the Board? Can you? If you cannot, you may say, no.
Ms. Mainoo. Could you rephrase the question? I want to make
sure I understand it.
Mr. Green. Can you point to some language in your report
where there is an indication that a member of the Board should
become Chair of the Board?
Ms. Mainoo. We do not take a position in our report about
who should be in leadership.
Mr. Green. Your report doesn't address that because that is
beyond your mandate?
Ms. Mainoo. It is beyond our mandate.
Mr. Green. Absolutely, beyond your mandate, which means
that you are not recommending that the Vice Chair become Chair
of the Board, are you?
Ms. Mainoo. We are not taking any position on who should be
the Chair of the Board.
Mr. Green. So when you say this should be done
expeditiously, you are not indicating that it must be done
expeditiously so that the Vice Chair can become Chair, are you?
Ms. Mainoo. We are suggesting that our recommendations
should be implemented expeditiously to improve the workplace
culture at the FDIC.
Mr. Green. Exactly, but not such that a specific person can
become Chair.
Ms. Mainoo. We are not taking any position on whom should
be Chair.
Mr. Green. No position on the Chair?
Ms. Mainoo. Correct.
Mr. Green. In this toxic environment, with 5 men at the
helm, can you find a reason why a woman should not become the
next Chair in your report?
Ms. Mainoo. Absolutely not.
Mr. Green. It just seems to me that the President is trying
as best as he can to do what someone said about a fresh start.
Who made that statement? Raise your hand if you said, ``fresh
start.''
Mr. McKernan. Congressman, I believe that was me.
Mr. Green. Yes, a fresh start. A fresh start, in my
opinion, should include placing a woman at the helm as Chair.
Now, this can be difficult for my colleagues across the aisle
to embrace because we quite regularly have all men on our
panels, and quite regularly I remind them that the reason we
have females is because the Democrats will decide that we need
to have some balance, but it is just not unusual to have all
White men. This is not getting a feel of where we are. It is
the mentality, and this mentality is pervasive not only on the
Board of this FDIC, but this is something that we have to deal
with across many, many lines. So, I want to go on record as
supporting a female as the next Chair of the Board. I think it
is time to do that. I yield back.
Mr. Huizenga. The gentleman's time has expired. The Chair
will now recognize himself for 5 minutes.
Ms. Mainoo, I have a question for you. I have just been
kind of hearing between the lines from a lot of my colleagues
on the other side and it seems like they think your report was
somehow incomplete. Was it incomplete?
Ms. Mainoo. No, our report----
Mr. Huizenga. Was it biased?
Ms. Mainoo. It was not biased.
Mr. Huizenga. Was it sensationalized?
Ms. Mainoo. It was not sensationalized.
Mr. Huizenga. So, you believe it is an accurate reflection
of the leadership and the culture of what was happening at the
FDIC?
Ms. Mainoo. We do.
Mr. Huizenga. Okay. I will note, by the way, that we had a
woman Chair of the FDIC, the last Chair of the FDIC, and Mr.
Hsu helped remove her, so when it comes to equity, we had that.
I do want to say as well about the report, Ms. Mainoo or
Mr. Kim, a number of the allegations seem to be sort of saying,
well, there was a focus on one particular Chair, the current
Chair. My reading of the report is that former Chairs, two
women, by the way, were only mentioned in the report for the
work that they did in attempting to improve the agency culture.
Is that accurate?
Mr. Kim. We make very clear in the report that the
workplace culture and conduct issues were longstanding and
probative.
Mr. Huizenga. They were longstanding, and who was
attempting to fix it?
Mr. Kim. All Chairs have taken steps to seek to address
them.
Mr. Huizenga. I understand your delicate position, Mr. Kim,
but the simple fact is that you had an open-ended report. There
were no problems with the other two female Chairs. There was a
problem with this Chair.
I am going to move on. A few weeks ago, the FDIC reported
that the Board of Directors terminated the Special Review
Committee, leaving the agency to handle matters of the
independent review internally. The Board of Directors of the
FDIC is supposed to set policy, oversee management, and protect
the interests of employees.
Director McKernan, what is the role of the Board in the
day-to-day operations of the FDIC? You were starting to say you
were advocating for that.
Mr. McKernan. Yes. When we terminated the Special Review
Committee, I was of the view that we really needed to have the
Board step up and take a more active role during the interim.
One way to do that would be to establish a Board committee,
only independent Directors, not representative management
Directors, to oversee implementation of the action plan.
Mr. Huizenga. Sorry. If Chairman Gruenberg didn't see the
cultural problems at the agency for 10 of his 13 years as
Chairman, shouldn't the Board be playing a bigger role in
overseeing that cultural change?
Mr. McKernan. That is my view.
Mr. Huizenga. Okay. What specifically can the Board do?
Mr. McKernan. One option would be to establish a Board
committee.
Mr. Huizenga. Okay. But that appears to be rejected by Mr.
Hsu. Mr. Hsu, is that correct?
Mr. Hsu. I believe the full Board needs to be fully engaged
in order to back the actions so that the actions that are taken
to fulfill the recommendations are long-lasting, they are taken
now, and they are conducted in full.
Mr. Huizenga. Okay. So, based on the whistleblower reports
both before and after the report, Chairman Gruenberg has not
been protecting FDIC employees. They don't have confidence in
him. In fact, I think there was a Wall Street Journal article
that literally the title of it was, ``He Survived a Beatdown
From Congress. Can He Survive One From His Own Staff?''
Director Hsu, do you still believe, as you testified in
May, Chairman Gruenberg can restore trust at the FDIC and lead
changes in the culture during the remainder of his time, and,
as I said in my opening, is he the right man at the right time
with the right ideas?
Mr. Hsu. My focus is on the employees of the FDIC and
delivering on the action.
Mr. Huizenga. Is he the right person to lead this?
Mr. Hsu. As long as the Chairman is delivering on
commitments and taking actions, I am supportive. It is
conditional on taking those actions.
Mr. Huizenga. I am taking that as a, yes.
Ms. Hsu. It is conditional on taking those actions.
Mr. Huizenga. Okay. So, that is a conditional, yes. I am
just not sure why you are so afraid of him, quite honestly, and
why you can't admit an obvious truth. That is disappointing
because I know, and I believe that the FDIC employees would
disagree with you, that he is not the right person to be
leading this.
Director Hsu, I think it is finally time to become a more
active Director. I think that your time and certainly your
efforts in removing the last female Chair of the FDIC for what
many of us believe was certainly far less than anything that is
being accused or is being alleged right now, it is hard to view
that as not for being for political purposes. And I would say
it is time for you to step up and for you to be able to change
that. Let's do what is good for the employees.
Mr. Hsu. I have been completely focused on trying to
establish three actions that are critical to reestablishing
trust with the employees of the FDIC.
Mr. Huizenga. My time is expiring, but you also need to
remove the Chairman, and with that, I yield back.
And the gentlelady from Ohio, Mrs. Beatty, who is also the
ranking member of our National Security Subcommittee, is now
recognized for 5 minutes.
Mrs. Beatty. Thank you, Mr. Chairman. And thank you,
Ranking Member Waters. Let me just start by reminding my
Republican colleagues that the hearing on Director Gruenberg
was our last hearing where Democrats were very critical of him
as well as Jelena McWilliams for failing to address the long-
span culture of abuse. Republicans continued to place blame on
Mr. Gruenberg. Well, he has resigned, and I applaud President
Biden for putting a critical eye on identifying a person with
the experience and background, and a person who has been tested
and supported by Democrat and Republicans to be confirmed. And
the next potential FDIC Chair that I think we are expecting to
be nominated, Christy Goldsmith Romero, meets all of those
standards, as we have heard before from our ranking member and
others. Again, she meets all of those standards. If Republicans
care about the organization, the people, and moving forward,
then they would follow Democrats and put people over politics.
I think that there is a lot of hypocrisy, in my opinion,
Mr. Chairman, here of Republicans being outraged by sexual
harassment, misconduct in this context, but not in other
contexts. My senior Republican colleague from Missouri asked
the question about rape and if rape was a crime, and it was
answered by our expert witness as, yes. But I don't see, Mr.
Chairman, Republicans calling for the resignation or removal of
your last Party leader for the exact same conduct that Mr.
Trump had, which is hypocrisy.
Now, I think it is very interesting that you asked the
witness or you stated that he was afraid of the Director. So
let me say to my Republican colleagues, why are you so afraid
of Mr. Trump? If it is in alignment to say that he is afraid of
someone that he had to work for, and Mr. Trump has done many of
these same things--and I am within Rule 17, which I just took
the last 20 minutes to read, Mr. Chairman--as much as anybody
else over there has said and talked about President Biden. So,
I think it is interesting. I did not hear you answer the
question about if you are afraid or ever felt afraid, so I am
going to extend it. Have you ever felt threatened or afraid of
the Chair?
Mr. Hsu. No.
Mrs. Beatty. And to your Republican colleague, have you
ever felt threatened or afraid of the Chair?
Mr. McKernan. No, Congresswoman.
Mrs. Beatty. Okay. Thank you. Now, let me go to another
question. I want to thank my colleague, Mr. Green, who talked
about having a female Chair, and I am sure he was speaking in
the spirit of diversity and inclusion. To the Acting
Comptroller, I would like to start with you to understand the
diversity and inclusion efforts at the FDIC. Staff diversity at
this prudential regulatory agency, I believe, continues to lag.
It is clear that it is not just diversity, but it is also
inclusion, and it must be improved, I believe, for not only
women, but for people of color. I think it is important when
you talk about the culture that people come from, whether it is
rural America, whether it is suburban, so it is not just race
and gender. It is far more than that. What steps could you tell
us that the FDIC is taking to do that, especially at the GS-15
level? And we only have about 30 seconds. I am going to give
you each 10 seconds, and if you don't know, say you don't know.
Mr. Hsu. I believe the action steps that are laid out in
the agency's action plan, as well as the recommendations that
are there in the report, will go a long way to creating the
environment that will enable----
Mrs. Beatty. So, you think there is enough in the report
that will address it?
Mr. Hsu. It is a starting point.
Mrs. Beatty. Okay. Mr. McKernan?
Mr. McKernan. Congresswoman, I agree. I certainly support
your point here around the need to really foster more diversity
and inclusion at the agency. I think we have a good program in
place currently to both recruit and retain--retain is a really
key point.
Mrs. Beatty. Okay. I only have 2 seconds, so you can give
me a written answer. Are there two top recommendations that you
would give? My time is up, so you can submit it in writing.
Mr. Huizenga. The gentlelady will take that in writing, as
she had indicated.
The gentleman from Kentucky, Mr. Barr, is recognized for 5
minutes.
Mr. Barr. Thank you, Mr. Chairman. As you all know, on May
20th, Chairman Gruenberg announced that he would resign after
the Biden Administration nominates and the Senate confirms his
new successor. Given the culture and the toxic workplace
environment, that is a very swamp-like thing to do. This is why
the American people hate Washington, D.C., because it is not a
resignation; a resignation should have come months ago. And in
fact, according to a Wall Street Journal article, Mr. Gruenberg
himself suggested he is staying because if he leaves, the
agency will have 2 Democrats and 2 Republicans. This is
supposed to be an independent regulatory agency, not a partisan
agency, but Mr. Gruenberg is saying the reason he is not
resigning is because, oh my gosh, it is no longer going to be a
partisan majority. That means he is more concerned about
threats to the Biden Administration's partisan regulatory
agenda than he is about cleaning up the mess he created.
Mr. Hsu, do you believe that you have a responsibility as
an FDIC Board member to protect the independence and
credibility of the FDIC as an institution, and not the partisan
makeup of the FDIC?
Mr. Hsu. The independence of the FDIC is critical, just as
critical as taking actions to protect the employees of the
FDIC.
Mr. Barr. Resigning now is how you protect the employees of
the agency, not after the Biden Administration can protect its
partisan majority. Let me ask you this, Director McKernan. Have
you heard from employees at the FDIC following Chairman
Gruenberg's announcement that he would retire later instead of
now?
Mr. McKernan. Have I heard from them? Yes.
Mr. Barr. And tell me, what have they told you? Are they
able to carry out their work without distraction?
Mr. McKernan. I would say the universal view. There are a
lot of views about the report, but universally, they are
exhausted and distracted.
Mr. Barr. Are employees able to effectively do their jobs?
Mr. McKernan. I think it is a significant headwind.
Mr. Barr. In your opinion, how does the failure of Mr.
Gruenberg to resign today prevent the FDIC from meeting its
responsibilities as an independent Federal regulator?
Mr. McKernan. Congressman, as I have said, we need a fresh
start sooner rather than later. That is important to establish
credibility. It is important to bring in someone who has the
moral authority to really push change, and it is important so
we have clean hands to sort of deal with our legacy issues.
Mr. Barr. I will stick with you, Director McKernan. Last
month, the FDIC announced that there are 63 banks at the brink
of insolvency in the United States. The commercial real estate
office situation is a problem. I don't think it is systemic,
but I think the FDIC is going to have a lot of important work
to do with distressed banks that are overexposed to commercial
real estate in a high-interest-rate environment over the next
several years. Resolution of those institutions is going to be
important for the stability of our financial system. In your
judgment, is the safety and soundness of our system threatened
by this distraction of Chairman Gruenberg hanging on to power,
and can he manage these risks that are coming at us like a
freight train?
Mr. McKernan. The distraction certainly does not help. That
is why I say we need a fresh start.
Mr. Barr. I think that is really important. That is the
important point here. It is important to change the culture and
clean up the toxic culture there and get morale and retention
of examiners and recruiting of new examiners to do that. But
the job at the FDIC over the next couple of years, when we have
a wave of defaults in commercial real estate and some of these
banks that are overexposed, the FDIC has a big job ahead of it.
And every day that goes on that Mr. Gruenberg is there
jeopardizes the safety and soundness of our financial system.
The FDIC needs to be on the ball right now.
And I will finish with Comptroller Hsu. On May 15th, when
you last appeared before us with Mr. Gruenberg, Mr. Meeks asked
you whether you thought that the Chairman could restore trust
and credibility at the FDIC. You testified that you thought he
could, and then you answered Mr. Huizenga, ``based on certain
conditions.'' I asked you, given his history of hostile
behavior, you passed it off as passion, just passion, but you
finally admitted the issues are severe. Recall the independent
report that you oversaw with Director McKernan. Is it still
your testimony that you believe Chairman Gruenberg can restore
trust and credibility at the FDIC?
Mr. Hsu. I believe we need to take action right now with
regards to changing the structure of the agency, getting a
third-party expert, and hiring an independent monitor.
Mr. Barr. So, do you agree or disagree with the findings of
the report that you oversaw?
Mr. Hsu. I agree with all the findings of the report.
Mr. Barr. Okay. Why shouldn't Mr. Gruenberg step down
immediately?
Mr. Hsu. My focus is on the action.
Mr. Barr. Well, your focus should be on the leadership that
has caused the problem, and he needs to resign now. I yield
back.
Mr. Huizenga. The gentleman's time has expired. With that,
the gentleman from Illinois, Mr. Foster, will be recognized,
but I do want to remind my colleagues, and I will do this
periodically, that under Rule 17, Members, the President, and
the presumptive nominee of both parties, the Presidents are
protected. Members will refrain from engaging in personalities.
In other words, if it is about policy and legislation, it is
fine.
With that, Mr. Foster, you are recognized for 5 minutes.
Mr. Foster. Thank you, Mr. Chairman, and I have to say that
I concur, and I look forward to my Republican colleagues
encouraging their Senate colleagues to rapidly confirm the
replacement for Mr. Gruenberg.
I think I speak for many members of this committee when I
say that I was appalled by the findings of the Cleary report.
It painted a picture of an agency plagued by a toxic culture
that has allowed inappropriate workplace conduct to persist for
far too long without accountability. And it is appropriate to
bring in new leadership to the FDIC that has a demonstrated
commitment to addressing these issues and the credibility to
instill positive change at an agency that has long struggled
with these issues that we are discussing today. I encourage the
Biden Administration to quickly nominate a new FDIC Chair,
which I understand is underway, and for the Senate to confirm
them without delay.
From my experience as a business owner and as an
organization leader, I know that culture starts at the top.
Many current and former FDIC employees bravely shared their
stories for this report, and it is important that swift action
be taken to show them that their voices have been heard. The
action plan that was put forward last December, and the
recommendations in the Cleary report, are important steps, and
I encourage future FDIC leaders to dutifully implement those
recommendations and the other changes that may prove to be
necessary.
But I would be interested in what timescale we can expect
for these changes, and I will start with this. Acting
Comptroller Hsu, and Mr. McKernan, as Directors of the FDIC,
you have experienced the fact that data on misconduct
throughout the organization has not been collected regularly or
uniformly. So my question is, has this been fixed? It has not
been regularly provided, apparently, even to Directors and
senior management. This issue was highlighted in both the
Inspector General's 2020 evaluation and the Cleary report.
First, do you believe this was an impediment to your
understanding of the full scope of what has been going on, and
second, is that part at least fixed today? If there is a
complaint that comes in today, is it being logged in a
systematic manner? I will start with Acting Comptroller Hsu.
Mr. Hsu. Thank you very much for the question. I think, as
has been highlighted previously, recordkeeping challenges at
the agency have been an impediment to having the proper culture
and the structure to be able to deal with these issues. That is
one of the recommendations that has to be pursued. There are
some predicates before we can get to that, though. There needs
to be a third-party expert, there needs to be an independent
monitor, and there needs to be a safe reporting channel for all
employees so that recordkeeping can be addressed in due time,
and so that all of these recommendations can be implemented in
full. We are going to do that as quickly as possible.
Mr. Foster. Yes, but in the interim, are there any
improvements that have been made in the recordkeeping and
reporting? Has at least a memo gone out to everyone, hey, do
something better than you have been doing so that whomever
comes in to finish cleaning up the situation will say, here is
a comprehensive list of everything, every complaint that has
been received for the last 6 months or whatever?
Mr. Hsu. Yes. I believe that in the agency's action plan,
there are sub-action plans within that. Those have been
assigned. There are sponsors. There are deadlines. I believe
that recordkeeping has been part of that. I don't know if
Director McKernan has others.
Mr. Foster. Yes.
Mr. McKernan. No, I think I concur with that. The only
thing I might add here is that even if we have the most-ideal
reporting mechanism and recordkeeping mechanism in place, it is
not going to work if people are afraid of retaliation. That is
not policies, procedures training. That is a change in values,
and that is going to be something that is going to have to be
like a cycle that builds. We are going to have to show that
through discipline and by empowering people to do it well.
Mr. Foster. And reporters, people who are thinking of
reporting something will look at whether other people who
report them actually get their complaints addressed or whether
they are swept under the rug. So, it is going to be the work of
years to let everyone understand that it is an organization
that takes these complaints seriously. Can you give me some
idea of the timescale? When should we really expect measurable
changes in the organization, assuming that all of these are
implemented?
Mr. Hsu. Sir, your point about trust is really critical.
There is a reason that FDIC employees have been skeptical of
these efforts in the past, and that trust is going to be
established through consistent actions over time that show that
it protects them. In this process that we established for the
hotline that Cleary ran, there was skepticism about using the
hotline for some time. It took time for brave employees to come
forward and use it and realize, okay, this is different, I can
trust this. They could tell their colleagues, and those hotline
calls, the hotline usage improved over time because people
trusted it. We need to do the same as an agency. That is why it
is so critical that we stand up these new structures
immediately with urgency, that they are credible, and that
people don't have that fear of retaliation.
Mr. Foster. Yes. And we have to monitor that as the
hotline----
Mr. Huizenga. The gentleman's time has expired.
Mr. Foster. Thank you, and I yield back.
Mr. Huizenga. And with that, the gentleman from Texas, Mr.
Williams--the skipper of the Republican baseball team, and we
have a big game tonight--is recognized for 5 minutes.
Mr. Williams of Texas. You are going to do well tonight.
Thank you for that introduction.
Director McKernan, last November, after The Wall Street
Journal published the first article about the FDIC's culture,
Chairman Gruenberg announced that he made the decision to hire
BakerHostetler to conduct a top-to-bottom assessment of
workplace culture issues at the FDIC that same day. When the
second Wall Street Journal article came out detailing Chairman
Gruenberg's misconduct, the FDIC Board of Directors instead
created a Special Review Committee and appointed you and
Director Hsu as its co-Chairs. So, Director McKernan, did
Chairman Gruenberg participate in any decisions made by the
Special Review Committee?
Mr. McKernan. No.
Mr. Williams of Texas. Why didn't he participate?
Mr. McKernan. I think it is important for the independence
of the process that this be a process overseen entirely by
independent Directors.
Mr. Williams of Texas. Okay. Chairman Gruenberg was
excluded from the Special Review Committee and was removed from
the creation of the action plan because he is part of the
problem at the FDIC. Now, through our committee's
investigation, and the Cleary report, we have seen multiple
instances of bullying and misconduct from the Chairman himself.
If he wasn't fit to be part of these initial process or culture
changes, wouldn't you agree that there is a concern that he is
not properly leading the implementation of the action plan and
Cleary Gottlieb's recommendations?
Mr. McKernan. Congressman, I think it is an important
point. Like I have said, I have been advocating for the Board
to take a more active role for these and related
considerations. I think there is a question here about what is
the right governance of our action plan going forward.
Mr. Williams of Texas. It is appalling to me that he would
even consider attempting to be part of the solution when he is
part of the problem.
Mr. Kim, one of Cleary's recommendations is for the FDIC to
hold leadership accountable. Can you talk about why this
recommendation is necessary at all levels for a true cultural
change at the agency?
Mr. Kim. We have set forth in the report our finding that
these workplace conduct and culture issues have been
longstanding and persistent. And as a result, we believe that
the recommendation needed to include transformation of culture
and structure beyond just improved trainings or policies, and
as a result, that was our recommendation. Our recommendation is
that the organization, including its leaders and managers, need
to recognize the need for this transformation, cultural and
structural. We did not take and do not take a view as to
whether any particular leader or Chair should or should not
remain at this FDIC. That was not in our mandate, nor do we
believe we have the authority to make such a decision or
recommendation.
Mr. Williams of Texas. On May 20th, Chairman Gruenberg said
that he would resign from his role as Chairman after President
Biden and the Senate have nominated and confirmed his
successor. We have been talking about that today. This is
unacceptable and a clear political decision by the Biden
Administration. Cleary's report has shown that the employees at
the FDIC have zero faith--zero, I repeat--in their current
Chairman, and Chairman Gruenberg's decision is insulting to
those whom his actions have directly affected.
Director McKernan, how does this hinder the FDIC from
fulfilling its duties, and what particular challenges does this
create for the FDIC in effectively overseeing and managing
financial institutions?
Mr. McKernan. Congressman, the morale at the FDIC is bad.
That is not good for our ability to execute on the mission. We
have great staff. They are going to keep pushing forward, but
we shouldn't create headwinds through that. I think also going,
forward, longer term, if the state of affairs at the FDIC is
not fixed, it is going to be a real problem for the retention
and recruitment of new staff, and that will be fatal to our
ability to achieve our mission if we can't fix that.
Mr. Williams of Texas. I am a small business owner, and I
know if your employees don't have faith in leadership and
trust, it is not ever going to work, and you have a real issue
here.
With that, I have a minute to go. Mr. Chairman, and I would
yield my time back to you if you would like it.
Mr. Huizenga. I would appreciate that. Mr. McKernan, we
were starting to explore some of those changes. I will ask you
the same question I asked Mr. Hsu, which is, do you believe
that Mr. Gruenberg is the right man, at the right time, with
the right ideas, to be able to lead the FDIC into a new place?
Mr. McKernan. As I said, I think we really need a fresh
start, and sooner rather than later.
Mr. Huizenga. It feels like a little like saying I am
resigning, but I am actually not resigning. It is a little like
a Member of Congress saying, well, I am not going to serve in
Congress if the people who elect me don't elect me. Of course,
there is a simple thing that this President could do, which is
remove Mr. Gruenberg, and we could start on that fresh start,
could we not?
Mr. McKernan. I take your point. I do think it is really
ultimately a question for our elected leaders, but if I am
asked, my focus is on what is in the best interest of the
agency, and I think that is clear.
Mr. Huizenga. Okay. My time has expired. The gentleman from
California, Mr. Vargas, is recognized for 5 minutes.
Mr. Vargas. Thank you very much, Mr. Chairman. First of
all, I want to thank the Chair. We did ask for a hearing, and
he provided one, so I want to thank the Chair and the ranking
member, so we could ask these questions. I appreciate it very
much.
At the beginning, Mr. Speaker, actually you said culture
starts at the top. I agree with that. Culture starts at the
top. And Mr. McKernan, you said values are set by our leaders.
I think that is correct. I take a look here at Rule 17, under
Decorum and Debate, and it says, ``Members shall be confined to
question under debate, avoiding personality.'' It doesn't say
that you can't talk about convictions, that you can't talk
about court cases. In fact, you can. I don't see why you
cannot. I think that allows for it, Mr. Speaker.
Mr. Huizenga. Well, I appreciate the upgrade, but it is Mr.
Chairman----
Mr. Vargas. Mr. Chairman.
Mr. Huizenga. ----not Mr. Speaker, and I am happy to
address that, that there was no discussion. I am saying----
Mr. Vargas. Right. No, the reason I say that is because
another Member said that is one of the reasons that people hate
Congress is because of the, ``swampy move,'' by Mr. Gruenberg.
Now, by the way, my dad, a great guy who unfortunately passed
away a few weeks before I joined Congress, taught me one thing.
He said, ``Never defend, son, the indefensible.'' So, I am not
going to defend Chairman Gruenberg because I think it is
indefensible, personally. I am not going to defend him.
But I will defend, obviously, the decisions that we are
making here. And how do you defend others when you are talking
about how culture starts at the top, and then you say that
people hate Washington because we are, ``swamping,'' because we
are hypocrites? When you say that culture starts at the top,
and you take a look at who is at the very top, and you take a
look at convictions, you will take a look at court cases, and
then you say, that is fine, we are going to look away, that is
fine.
But this Chairman, we are going to hold accountable and
hold both accountable. By the way, I personally don't think
Chairman Gruenberg should be there either, but the hypocrisy
that I hear on the other side really is stunning, just stunning
on this issue because of the court cases. And it is not my
decision, but the decisions of jurors and judges who made those
decisions.
All of that being said, I do think that there is a problem
here, and I thank you for the work that you have done as
attorneys, and I thank you for the work that you have done as
Board members. I think you have worked hard. Now, obviously,
recommendations were made in 2020, and they weren't fulfilled,
because, again, we talk about people being afraid of
retaliation. Why do we think it is going to work this time?
Mr. Kim, I think I will go to you because you are the one
who headed up the investigation. Go ahead, sir.
Mr. Kim. Yes. We did find that a number of the findings in
the 2020 OIG report remained issues, and that is partly what
led us to the finding that these are issues that have been
longstanding or deep-seated, which is why, based on the
findings, we wanted to put in the report sufficient information
so that the reader can get a flavor of what it is that we
heard. And we did hear, on a regular basis, the fear of
retaliation.
Mr. Vargas. And it was your testimony, I believe, that a
lot of the people who came forward were women and
underrepresented minorities. Was that your testimony?
Mr. Kim. That is correct.
Mr. Vargas. Okay. And why do you think that is the case?
Mr. Kim. Because I think women and underrepresented
minorities have been, at the FDIC and elsewhere, more
susceptible to misconduct as well as victims of a culture that
is patriarchal or insular.
Mr. Vargas. Sort of the, ``good old boys network,'' that
was spoken about at the beginning?
Mr. Kim. That is what we heard in our review.
Mr. Vargas. And most of it was in the offices away from
Washington?
Mr. Kim. It was both. As we set forth in the report, we
received reports from all of the divisions, and all of the
districts, but as we noted in the report, some of the issues
with respect to fiefdoms and the like were more prevalent in
the field offices than in headquarters.
Mr. Vargas. Okay. Again, I have 30 seconds left. I want to
thank you for your work. I do think we should move forward. I
don't think that it is defensible to defend Chairman Gruenberg,
I don't, and I think that the things that were said at the
beginning were absolutely true. Culture starts at the top, so
does character, and I think we need to change there. And I wish
that my colleagues on the other side would listen to their own
words. Thank you very much. I yield back.
Mr. Huizenga. The gentleman yields back. The gentleman from
Ohio, Mr. Davidson, who is also the Chair of our Housing and
Insurance Subcommittee, is recognized for 5 minutes.
Mr. Davidson. Thank you, Mr. Chairman. And thank you to our
witnesses. Mr. McKernan, I thank you for the work to highlight
some of these issues. In your opinion, can an effective top-to-
bottom cultural change be made at the FDIC while Martin
Gruenberg is Chairman?
Mr. McKernan. I don't think we can have real culture change
until we have that fresh start.
Mr. Davidson. That has been my experience, whether it was
in the military, or in business, or frankly, here. You can
update the human resources manual, you can write new standard
operating procedures, you can train them all you want.
Sometimes you just have to change the people, and it seems
clear that we need to do that. What is the delay? Director Hsu,
why the delay? Why should we tolerate Mr. Gruenberg sticking
around through the rest of the afternoon?
Mr. Hsu. At the Board, we are not delaying. We have taken
steps already to hire an independent third-party expert, an
independent monitor, and to restructure the reporting lines for
incidents. Those are all actions that are required to reduce
the fear of retaliation, to ensure that we have the right
outside expertise so we can make the changes that are
necessary.
Mr. Davidson. So, you are outsourcing the leadership
challenge to some third party and then you are going to put a
Director in to implement what the third party came up with?
Mr. Hsu. The purpose of engaging with the outside parties
is to make sure that we have the best expertise from outside.
We have to do this differently.
Mr. Davidson. Why not just hire a good leader?
Mr. Hsu. We have to do this differently than in the past.
We want to make sure that we have the right plan and that we
are implementing those steps immediately.
Mr. Davidson. It sounds to me like the plan is that we are
going to come up with a committee that is designed to delay
action while Mr. Gruenberg rides out the rest of the Biden
Administration and continues his time there.
Mr. McKernan, how long has Director Gruenberg been at the
FDIC?
Mr. McKernan. Twenty years, as I understand it.
Mr. Davidson. Twenty years. How long has he been leading
it?
Mr. McKernan. Ten of the last 13 years.
Mr. Davidson. Ten of the last 13 years, he has been leading
it. Do you think he has had anything to do with poisoning this
culture?
Mr. McKernan. I think the Chairman is ultimately
accountable for the culture.
Mr. Davidson. Generally, that is the answer. Everything
that happens or fails to happen in an organization is
ultimately the top leader's responsibility. That doesn't mean
he is the one who did everything, but, ultimately, that is the
duty of leadership, and anyone can find an excuse. It seems
like Mr. Gruenberg is full of them. Leaders find a way.
Director Hsu, do you think Mr. Gruenberg is going to find a
way?
Mr. Hsu. Again, I am focused on what I can control----
Mr. Davidson. If you give him a good, outside, third-party,
outsourced solution, do you think he could follow it with any
credibility?
Mr. Hsu. The purpose of having the outside expertise is to
make sure that the agency is doing the best it can for the
employees of the agency.
Mr. Davidson. What is the due date for that, around January
21, 2025?
Mr. Hsu. No, it is right now. We have to do these things
right now.
Mr. Davidson. I know we do, but you are outsourcing it to
some third party. They are supposed to get back to you around
January 21st?
Mr. Hsu. No, the hiring of the third party, both the expert
and the monitor, is currently in process right now, and we are
also going to restructure the broken internal process that has
led to retaliation.
Mr. Davidson. It might take until January 21st to get rid
of Mr. Gruenberg, but I am pretty sure it will be done right
around that time frame, if not before.
Mr. McKernan, is there anything that we could do between
now and January 21st to facilitate Mr. Gruenberg's departure at
the FDIC?
Mr. McKernan. I don't know that I can speak to that, but I
think it is important that Congress continue to exercise its
oversight role to hold us accountable, including the Board, for
making real, actionable steps to get culture change moving.
Mr. Davidson. Obviously, the President of the United States
could fire him. That would be great. No leadership coming from
there, but Congress has the power of the purse. We are only
funded until September 30th. In theory, we could eliminate
funding for Mr. Gruenberg's position beginning on October 1st
of this year. We have an opportunity coming up in the
appropriations process. We have a Holman rule that would
facilitate just such an action directed at Mr. Gruenberg. Does
anyone believe that would be appropriate to provide
congressional accountability for Mr. Gruenberg? Do you think we
should keep him in place, or do you think we should continue to
pay him? We are the ones who provide the funding for his
paycheck. Should we keep him on the United States payroll?
I was really encouraged to hear Mr. Vargas talk about not
defending the indefensible, but if we fund his paycheck into
the next fiscal year, we are defending the indefensible. We
shouldn't provide a dime to Mr. Gruenberg. So, I hope my
colleagues will defend his payroll, and I hope it is a moot
point because Joe Biden could fire him this afternoon, and that
would be the appropriate action. Anywhere else, anyone doing
these kinds of things would be walked out with a cardboard box
that afternoon. And I hope that becomes the norm within the
FDIC to not tolerate these kinds of things, whether it is of
the employees or the subordinate leaders who make up the chain
of command. We need to fix this culture, and Congress can do
that by holding Gruenberg accountable with appropriations. I
yield back.
Mr. Huizenga. The gentleman's time has expired. The
gentlewoman from Texas, Ms. Garcia, is recognized for 5
minutes.
Ms. Garcia. Thank you so much, and thank you to the
witnesses for being here. First I want to start with Ms.
Mainoo. You said something that caught my ear at the beginning.
You said that this has gone on for far too long. I think that
is your quote, and then you went further and said that this was
longstanding and deeply ingrained. So if it goes back to the
1980s, have you been able to age any of the 500 complaints,
like how many were in the 1980s and the 1990s and the 2000s,
2010s, and 2020s, so that we can get a better idea of how
ingrained it is?
Ms. Mainoo. To give a better idea of our findings, we
included in our report what we thought was necessary to
understand our findings and support our recommendations.
Ms. Garcia. The question is, did you age the findings?
Okay. Let me ask you this, were there more prior to 2000, or
were there more in the 1980s?
Ms. Mainoo. In the representative examples, the nearly 50
representative examples we included in the report, where we had
dates----
Ms. Garcia. What dates are you referring to, because I know
that a lot of the samples, a lot of pages are like this, they
are redacted, okay? There are redactions in probably 5, 6, 10
pages. So, it says examples on page A4, but I have, like, 2
pages of redactions.
Ms. Mainoo. Right. What I was saying was that----
Ms. Garcia. I am just trying to get an idea, ma'am. It is a
simple question. Did you age the allegations? It really is a
yes-or-no answer.
Ms. Mainoo. We aged allegations and most of the examples in
the appendix that you are just referring to, where there are
dates, most of those are from within the past 5 years.
Ms. Garcia. Five years, okay. That is good to know because
it struck me that the OIG report did make a recommendation
regarding this back in 2020, suggested that the FDIC develop a
more-formalized strategy to promote a harassment-free
workplace. In response, the agency wrote, and again, this was
in 2020, ``The FDIC disagrees that development of a new
strategy is required because the FDIC currently has a robust,
multifaceted strategy in place designed to promote a culture of
diversity and inclusivity in an environment in which harassment
is not tolerated.'' So, they thought everything was hunky-dory
apparently in 2020. Do you recall who the Chair was then?
Ms. Mainoo. The Chair in 2020 was Chair McWilliams.
Ms. Garcia. Okay. So, it was not Mr. Gruenberg?
Ms. Mainoo. Correct. It was not Mr. Gruenberg who was the
Chair, then.
Ms. Garcia. So when he came in following Chair McWilliams,
he saw the OIG report that said, we disagree, we are doing
fine, we don't need a new strategy. That sort of kind of caught
my attention because there seems to be so much focus and, well,
it should be on the current Chair, when, in fact, there have
been other previous Chairs, both Democrat and Republican,
appointed by both Democrat and Republican Presidents. So, it is
a problem for the agency and it is something that needs to be
worked on, but it seems like the agency has resisted some of
this.
Mr. McKernan, you have been on now for how many years?
Mr. McKernan. About a year and a half.
Ms. Garcia. Okay. I know you have said even today that the
Board bears responsibility and that the Board should be more
involved. So, in your 1\1/2\ years, what have you done or what
have you initiated to take care of some of these issues that
you yourself say we need to take steps to address? What steps
have you taken, sir?
Mr. McKernan. When the reports came out in the press in
November, I had been there about, I guess, 10 months, and what
I did was champion an independent review. We initially had a
review that was going to be overseen by the Chairman and staff.
That review was, candidly, very narrow in scope, with a very
limited budget. It was not a real review. It was not a top-to-
bottom review. I found that very objectionable, and worked very
hard on the Board to get us to do a real review, an independent
review. Director Hsu was very constructive to that end, and now
we are here today talking about that review.
Ms. Garcia. Is there anything else you have done that you
can share with us?
Mr. McKernan. Currently, we are having a relatively
contentious debate on the Board about exactly what the Board's
role is going forward. I am one vote among five. I think we
need to really reconsider how the Board approaches the
oversight of the action plan.
Ms. Garcia. Thank you. Mr. Chairman, I ask unanimous
consent to enter into the record an article from Bloomberg
entitled, ``Biden Is Poised to Pick Goldsmith Romero to Lead
Overhaul at FDIC.''
Mr. Flood. [presiding]. Without objection, it is so
ordered.
Ms. Garcia. Thank you.
Mr. Flood. The gentleman from West Virginia, Mr. Mooney, is
now recognized for 5 minutes.
Mr. Mooney. In West Virginia, we have a lot of small banks.
I met with some of them last year after the Silicon Valley Bank
was given the systemic risk exception. Most of them were of the
view that no banks in West Virginia would have been given that
exception. It is my first chance to speak to folks from the
FDIC since then. So, my questions are really directed at Mr.
McKernan and Mr. Hsu about the Silicon Valley Bank.
The Silicon Valley Bank was a comparatively smaller
financial institution, and many policymakers and politicians
were skeptical about invoking the systemic risk exception for
Silicon Valley Bank, while others, particularly those with
large ties to interests in the Silicon Valley, supported making
the bank's accountholders completely whole. Isn't it true that
the Silicon Valley Bank was not an obvious candidate for the
invocation of the systemic risk exception, Mr. Hsu?
Mr. Hsu. The FDIC Board decided unanimously to invoke the
systemic risk exception at that time based on a lot of analysis
and discussion.
Mr. Mooney. Mr. McKernan?
Mr. McKernan. I would certainly agree, Congressman, that it
was not an obvious candidate, and that was probably one of the
harder decisions I have had to make in my life. And candidly, I
wouldn't begrudge anyone who wants to criticize me for it,
because depending on what side of the bed I wake up on, I
sometimes wonder if I made the right decision.
Mr. Mooney. I appreciate that. I know we make the laws
here, and you do your best to implement them, and there are a
lot of gray areas in that, but let me ask a follow-up question.
Isn't it also true that as a part of the analysis regarding the
invocation of the systemic risk exception for Silicon Valley
Bank, that an important concern relayed to the FDIC was a
special decision was made that it would be important to prevent
money from going to Chinese interests? What did the FDIC do to
analyze whether the FDIC would be funding Chinese interests and
how did the FDIC go about preventing it? Mr. McKernan?
Mr. McKernan. Congressman, I can't speak to that. I am
happy to take that question back, but that was certainly not
something I was looking at, at the Board. What was central to
my decision-making is we had also Signature Bank that same
weekend, and although it was not obvious to others at the time,
First Republic Bank was right there as well. I put the three
together, which was really what got me to, ``yes.''
Mr. Mooney. Okay. Mr. Hsu, any thoughts on that?
Mr. Hsu. I would have to get back to you to as to your
question.
Mr. Mooney. Okay. I have also been alerted to the fact that
the FDIC chose to insure certain foreign euro-dollar sweep
accounts for a failed bank, which would be in violation of 12
CFR Section 360.8, which expressly states that the insurability
of funds associated with sweep accounts maintained by foreign
branches is to be determined as of the end-of-business status
of the funds. Instead, the FDIC chose to interrupt the cycle
and pay out the accounts as if the money was stationary in the
United States. Why did the FDIC bend the rules on that?
Mr. McKernan. Congressman, that is another question I will
have to take back.
Mr. Mooney. Okay. I have time for one more question. Going
back to the earlier discussion, if Mr. Gruenberg were to step
down and the current Vice Chairman becomes the Acting Chairman,
would the FDIC continue to function and carry out its mission?
Yes or no?
Mr. McKernan. Absolutely. The FDIC has functioned without a
full Board for quite some time.
Mr. Hsu. Yes.
Mr. Mooney. Anybody else want to opine on that one?
[No response.]
Mr. Mooney. Let's just say the bylaws clearly state that
there is a solution in place if Mr. Gruenberg were to step down
and resign today. He has already told the staff they need to
prepare for him to stay through the end of the year. The staff
went from hoping for a fresh start to now being stressed about
the future of the agency, defeated and unable to adequately do
their jobs, so that would be a good option, I would say. Mr.
Chairman, that is really it for my questions. I yield back the
balance of my time.
Mr. Flood. The gentleman yields back. The gentlewoman from
Massachusetts, Ms. Pressley, is now recognized for 5 minutes.
Ms. Pressley. Thank you, Mr. Chairman, and thank you all
for being here.
First, I want to say I am encouraged to see a more-
representative table today. I am glad that there is a woman at
this table and that there is diverse representation at this
table, given the experiences both of racial discrimination,
microaggression, hostilities, and also sexual harassment. I
remain deeply concerned about accountability and recourse
following the inaction to address essential workers' rights at
the FDIC. I did not parse words when Mr. Gruenberg was before
this committee, and I certainly won't today. I appreciate that
he has taken the appropriate step of tendering his resignation
effective immediately following Senate confirmation of his
successor.
Let me be clear. Those on the other side of the aisle do
not come to this conversation in good faith. They see an
opportunity to gut critical Federal regulatory work, and they
are going after it. That aside, let me be clear. The FDIC must
prioritize recourse for workers and accountability for
wrongdoers.
Mr. Kim, based on this report, it is just not clear to me
who at the FDIC directly contributed to the recommendation
section.
Mr. Kim. Sorry. Who directly contributed to the
recommendation section?
Ms. Pressley. Yes.
Mr. Kim. The report was entirely the work of the Cleary
Gottlieb team, and we both reached our factual findings and the
analyses and developed the recommendations.
Ms. Pressley. Okay. Let me just unpack that. I will be a
little bit more precise. What role did employees, current or
former, who were actually impacted by these adverse experiences
at the FDIC play in contributing to the recommendations?
Mr. Kim. Thank you for that clarification. Of course, the
entirety of our report is based on facts that we learned from
speaking with people at the FDIC, current and former, as well
as the documents. We came in with no personal knowledge of what
was going on at the FDIC, which is why we started our remarks
today by emphasizing the emotion that we heard from people who
were reporting. The entirety of the findings and the
recommendations are based on what we learned from the FDIC.
In terms of the recommendations, there were many people
within the FDIC, particularly those who are part of employee
resource groups, who had very good ideas about what to do, and
we understood that they had contributed in part to the
development of the action plan. In our interviews with them, we
also asked those who had experienced these issues, those who
were part of the process, how do you think this could be
improved, and a lot of that was reflected in our
recommendations as well.
Ms. Pressley. Okay. I have some other questions I need to
get to, but that is so critically important. It is essential to
healing for those who were adversely impacted. And I am just a
firm believer that those closest to the pain should be closest
to the power driving and informing the policymaking, and that
is certainly true for survivors' justice. So, I hope that they
will continue to be actively engaged and their input solicited.
It is so important that you are partnering with them because
they are experts in addressing sexual harassment and protecting
workers' rights.
Mr. Kim, in the report, it states that the FDIC did not
concur with two of OIG's recommendations on proportionate and
consistent disciplinary action for substantiated harassment.
What were the two recommendations, and why did the FDIC oppose
them?
Mr. Kim. We understand that after the Office of the
Inspector General (OIG) report in 2020, the FDIC took issue
with----
Ms. Pressley. I'm sorry. I am running out of time, so could
you just tell me what were the two recommendations?
Mr. Kim. We don't know exactly on what basis the FDIC
resisted those.
Ms. Presley. Okay. Well, no one, and I repeat, no one,
should ever be subjected to sexual harassment in the workplace.
This is an issue that affects people of all walks of life in
workplaces throughout America, and that is why we will be
introducing the BE HEARD in the Workplace Act. This is anti-
harassment, survivor-focused legislation that will codify
critical changes to prevent workplace harassment and
discrimination and enable workers to seek accountability and
justice. It was drafted in close partnership with survivors,
civil rights lawyers, and workers' rights advocates.
This bill prohibits mandatory arbitration and nondisclosure
agreements from covering up harassment. It expands the
jurisdiction of the Equal Employment Opportunity Commission
(EEOC), and it outlines a clear legal pathway for survivors to
seek legal redress through the court system. The BE HEARD in
the Workplace Act is essential to protecting workers and
ensuring accountability for discrimination, harassment, and
abuse. I want every worker to know, we don't just care about
your labor, we give a damn about your lives, and every worker
should be able to do their job with safety, dignity, and
respect. Thank you.
Mr. Flood. The gentlewoman yields back. The gentleman from
Tennessee, Mr. Rose, is now recognized for 5 minutes.
Mr. Rose. I want to thank Chairman McHenry and Ranking
Member Waters for holding this hearing, and thank our witnesses
for being with us today.
Director Hsu, as the founder and operator of a business, I
know just how important values are as a guiding beacon to
employees. At the Federal Deposit Insurance Corporation, you
have the stated values of integrity, competence, teamwork,
effectiveness, accountability, and fairness. I am sure your nod
indicates you are aware of that.
Director Hsu, the FDIC describes the value of integrity as
adhering to the highest ethical and professional standards.
Based on the FDIC definition of, ``integrity,'' does Chair
Gruenberg yelling at his staff meet the standard of integrity?
Yes or no?
Mr. Hsu. Any misconduct does not meet that standard.
Mr. Rose. I think you are right, and, Director Hsu, the
FDIC describes the value of teamwork as communicating and
collaborating effectively with one another. Based on the FDIC
definition of, ``teamwork,'' does Chair Gruenberg's staff being
afraid to give him bad news sound like he meets the value of
teamwork? Yes or no?
Mr. Hsu. Fear is not a part of teamwork.
Mr. Rose. And, Director Hsu, the FDIC describes the value
of fairness as respecting individual viewpoints and treating
others with dignity and trust. Based on the FDIC definition of,
``fairness,'' does your staff not having trust in the Chair to
write to him with concerns like they did with Chair Bair or
Chair McWilliams indicate that he meets the value? Yes or no?
Mr. Hsu. Trust is critical. We need to work extremely hard
to rebuild trust with the staff at the FDIC.
Mr. Rose. Let's be honest, Director Hsu. Chair Gruenberg
does not embody the values of the FDIC. Employees are working
in fear at the agency as we speak. I grew up on a farm, and
early in my life I learned from my grandmother that when the
fox is in the hen house, you have to get it out. You don't
leave it there for months and months and expect not to suffer
continual damage. And so while I can appreciate Chair
Gruenberg's decision to resign, frankly, it needs to happen
now, and having it happen months from now puts the country and
certainly the institution of the FDIC at risk.
Director McKernan, as you consider the values of integrity,
competence, teamwork, effectiveness, accountability, and
fairness that are supposed to guide the Federal Deposit
Insurance Corporation, did your review of the Cleary Gottlieb
report and personal experience at the FDIC find a culture
reflective of those values?
Mr. McKernan. No. You can't read the report and think that
our culture is consistent with the values.
Mr. Rose. And Mr. Kim, the report outlines that employees
do not have trust in the reporting process, even though the
FDIC has over five offices for employees to make or to take
their reports. What were you hearing from employees that drew
Cleary to that conclusion?
Mr. Kim. We were hearing both that there was confusion in
the reporting processes, that there were a number of different
places that they could report, but there was not a uniform
understanding of which reporting channel was for what, and
then, there was concern expressed to us that some of the
reviews following reports were conducted by groups that had
management's interests more in mind than the complainants, and
raised credibility questions about those reviews.
Mr. Rose. I can't help but hear what I have heard from each
of you today and not reflect back to January 20, 2021, when
President Biden said that everyone is entitled to be treated
with decency and dignity, and I agree with the President. That
is true. He went on to say that if you treat another colleague
with disrespect, talk down to someone, I promise I will fire
you on the spot. On the spot, no ifs, ands, or buts. It sounds
to me like that admonition is not being taken to heart with
respect to Chair Gruenberg. And I would suggest that Chair
Gruenberg should reflect on that, and I hope the Administration
will reflect on that very clear admonition. And I trust that my
colleagues on the other side understand the clarity, at least
in the words of President Biden, and I think it is time for
that clarity to be implemented. With that, Mr. Chairman, I
yield back.
Mr. Flood. The gentleman from Tennessee yields back. The
gentlewoman from Michigan, Ms. Tlaib, is now recognized for 5
minutes.
Ms. Tlaib. Thank you, Mr. Chairman. The question is, how
can you address a problem that you can't see? One longstanding
issue, and I feel like maybe some of my colleagues have brought
it up as documented in both the 2020 Inspector General's report
and the Cleary report, was the lack of a centralized database
tracking and documenting harassment claims, and the
investigations at the FDIC. And before, I think 2020, the
internal records were maintained in a hard-copy file system
held by specific individuals there and stored electronically in
FDIC's, what they call the Corporate Human Resources
Information System (CHRIS). And from 2008 to 2021, the CHRIS
system documented only 2 cases of sexual harassment, and just 7
cases of harassment.
Mr. Kim, and Ms. Mainoo, given that the 2009 Office of the
Inspector General survey found that 8 percent of FDIC
respondents had experienced sexual harassment from 2015 to
2019, is there any reason to believe that CHRIS database
records from 2008 to 2021 were complete or accurate?
Ms. Mainoo. There is no reason to believe that the CHRIS
database was complete.
Ms. Tlaib. Okay. In terms of tracking workplace misconduct,
how would you characterize the FDIC's data collection and
management practices, for both of you?
Ms. Mainoo. Currently?
Ms. Tlaib. Yes.
Ms. Mainoo. We understand that the group within the Human
Resources Division at the FDIC, within the Division of
Administration, has taken steps recently to improve centralized
and systematic recordkeeping. In the past year, we understand--
--
Ms. Tlaib. Is this based on their action plan?
Ms. Mainoo. No, this actually predates the action plan.
Ms. Tlaib. Okay.
Ms. Mainoo. We understand that in the past year, that group
specifically has introduced a system that now tracks different
types of interpersonal misconduct so that it allows the FDIC to
identify sexual harassment, for example, compared to hostile
work environment, and also identifies whether misconduct falls
under the FDIC's anti-harassment program, which the records
before did not do.
Ms. Tlaib. And I am not rolling my eyes at you. It is just
really bizarre that they would do so. So, in the FDIC's
December 2023 action plan, one of the stated goals was to,
``enhance the centralized tracking system for monitoring sexual
harassment claims.'' The projected completion of this was
February 29th of this year.
So, either Mr. McKernan or Mr. Hsu, has this action item
been successfully completed? If so, what specific steps were
taken to improve the FDIC's ability to track misconduct?
Mr. McKernan. I am not aware of whether it is actually
completed, and even if we are saying it is completed, I won't
believe it until I see some independent validation that it is
completed.
Mr. Hsu. I agree with Director McKernan. The completion of
the action plan for that particular database is only going to
work if people feel safe.
Ms. Tlaib. I see. There is no trust.
Mr. Hsu. That is the fundamental thing that needs to be
addressed.
Ms. Tlaib. It makes sense. Yes, I actually talked to him
about that. People have lost a lot of trust. Staying on the
topic of collecting and tracking information, the 2021 Office
of the Inspector General report found that the FDIC does not
have a systematic process for collecting or analyzing employee
retention data, for instance. According to the Cleary report,
the FDIC revised its retention tracking process in 2023. So,
either Mr. Hsu or Mr. McKernan, what is the FDIC's current
process for tracking employee retention records? Do either of
you know?
Mr. Hsu. My understanding is that there are projects to
improve these. Again, I think as Board members, our focus is we
really need to change both structure and culture.
Ms. Tlaib. No, Mr. Hsu, because I know when people start
leaving, something is wrong. So, I am trying to figure out what
percentage of employees who leave the FDIC complete exit
surveys, what are we doing there, because that can always help
with indicating whether or not there is a pattern of sexual
harassment, there is something wrong, getting to the root cause
of turnover, whatever you want to call it. Again, we are
talking about retention and the importance of exit interviews..
Mr. Hsu. Yes. I believe that has been identified in the
report as something that needs to be improved as part of the
action plan, in concert with these other steps. They all have
to move together.
Ms. Tlaib. But are they doing exit interviews right now?
Mr. Hsu. I will have to get back to you on that.
Ms. Tlaib. You don't do exit interviews right now?
Mr. Hsu. I don't want to misspeak.
Ms. Tlaib. Okay.
Mr. Hsu. I want to make sure we get back to you on this
point.
Ms. Tlaib. That is really important, especially in such a
large organization right now.
Thank you, Mr. Chairman. I yield back.
Mr. Flood. The gentlewoman yields back. I now recognize
myself for 5 minutes. Thank you to all of our witnesses for
being here today.
The independent report from Cleary Gottlieb on the FDIC's
workplace culture and the conduct of Chairman Martin Gruenberg
is disturbing. The report makes a number of recommendations for
the future of the FDIC. Let's review some of those.
Number one calls for access to the Chair. This
recommendation would ensure that the mental health resources
developed as a result of the recommendations would have an
audience with the Chair and other executives in order to make
those cultural changes. Chairman Gruenberg is not just a
symptom of the culture; he has become so ingrained in the
culture that it is indistinguishable from his personal
leadership. You can't shake up the order of things when you are
the ultimate symbol of the old regime.
The number two recommendation calls for a 360-degree review
of all leadership to ensure accountability. Let's take a look
at Chairman Gruenberg's history to get a sense of how he might
receive the constructive feedback resulting from this review.
In the report, one executive stated that Mr. Gruenberg's
actions have the effect of chilling open conversations. Another
said that there was, ``a great reluctance to deliver bad news
to Marty Gruenberg.''
In November 2020, when overseeing a bank acquisition, the
officers of the acquiring bank did not wear masks to a meeting
because the State where the meeting took place did not have a
mask mandate at the time. Chairman Gruenberg, ``lost it,'' when
he heard the bankers did not wear masks and he took his rage
out on his own staff. It got so bad that one employee who was
the target of this behavior said, ``I might cry. I want to
quit.''
Finally, when confronted with the fallout from The Wall
Street Journal story about Mr. Gruenberg's unacceptable
conduct, the Chairman refused to believe the story's
descriptions of his own behavior, prompting one executive to
leave the room in outrage. Given this pattern of behavior, can
we really expect Chairman Gruenberg to faithfully implement
these cultural changes, particularly ones that would require
his personal buy-in as Chairman?
Some of my colleagues have already brought up an issue I
would like to focus more on: the prospects of a quick Senate
confirmation process. We all know the Senate does not like to
move quickly, and I would expect nothing different in this
case. Chairman Gruenberg has vowed to remain at his post and
has told employees to prepare for him to stay through the end
of the year. We are talking about someone who has served as an
Acting Chairman 3 times over the course of his career. A large
chunk of his career has been spent with interim titles.
Chairman Gruenberg is still the FDIC because of his refusal to
leave at the end of his last chairmanship.
Director Hsu, do you feel that Chairman Gruenberg is the
correct person to implement the changes recommended in this
report in the long term?
Mr. Hsu. Thank you for the question. I am focused on what I
can control. What I can control are the actions of the Board
that works to protect the employees of the FDIC.
Mr. Flood. But I am asking you for your opinion. Do you
think that he is the correct person to do this?
Mr. Hsu. Again, I am focused on what I can control. So, I
am really focused on trying to get in place the cultural and
structural transformation.
Mr. Flood. Director Hsu, you are not responding to my
question. Let's go to my next question. Are you comfortable
with Chairman Gruenberg staying in his post on an interim
basis?
Mr. Hsu. Again, I am focused on these actions. These
actions have to get done.
Mr. Flood. Are you comfortable?
Mr. Hsu. As long as he is focused on delivering and he
delivers on the commitments to take actions. That is what is
really, really critical. I will work with whomever the Chair
is, but that is really important, to focus on those actions.
Mr. Flood. Director Hsu, as we both know, the Senate
confirmation process could take a long time. All the while,
FDIC employees are being asked to wait for leadership required
to make this cultural transformation. How long do you think
they should have to wait?
Mr. Hsu. They are not going to wait. We are going to take
action immediately. We are taking action on the critical parts.
Mr. Flood. So, you are confident that Mr. Gruenberg can do
this? You said, they don't have to wait, but he is still there.
Mr. Hsu. We are taking action.
Mr. Flood. Okay.
Mr. Hsu. We are taking action to----
Mr. Flood. Does that mean you are comfortable with him
doing this job?
Mr. Hsu. I can control what I can control. We are taking
action on the expert, on the monitor, on standing up a new
structure so that people don't have fear of retaliation. Those
are the things on which I am focused.
Mr. Flood. There are thousands of employees at the FDIC who
are banking on this changing, and we have the same person at
the top, who has not demonstrated a willingness to tackle this
problem. In fact, people are afraid to go to him and even talk
about it. So, I express the lack of confidence that I have as a
member of this committee in seeing things change. With that,
thank you. I yield back.
The gentleman from Wisconsin, Mr. Steil, who is also the
Chair of the House Administration Committee, is now recognized
for 5 minutes.
Mr. Steil. Thank you very much, Mr. Chairman. Mr. Hsu,
after The Wall Street Journal published its report in November,
Chairman Gruenberg announced he had already hired
BakerHostetler to conduct a third-party review. Then, a week
later, the FDIC Board of Directors established a Special Review
Committee to oversee a third-party review. Why did the Board
believe it was necessary to create a special committee and hire
an outside law firm to conduct the review?
Mr. Hsu. The Board unanimously voted to create the Special
Review Committee to ensure that there is independence and
credibility with regard to that review.
Mr. Steil. And would there be a concern that there would be
a lack of credibility or independence if that committee would
have been selected by Mr. Gruenberg?
Mr. Hsu. I think that is implied within that resolution,
yes.
Mr. Steil. Okay. Let me jump to you, Mr. McKernan, if I
can. From my understanding, BakerHostetler was already
investigating the FDIC when Cleary Gottlieb was chosen, as just
discussed. Whose decision was it to scrap BakerHostetler's
investigation?
Mr. McKernan. The Special Review Committee made the
decision to go with Cleary instead of BakerHostetler.
Mr. Steil. So, is the Special Review Committee not the full
FDIC Board?
Mr. McKernan. That is right, just me and Director Hsu.
Mr. Steil. And could you also comment again, and see if you
agree here with Mr. Hsu, as to why Cleary Gottlieb was chosen
instead of BakerHostetler?
Mr. McKernan. The way I looked at it is, we had to have an
independent review, not a Chairman-driven or staff-driven
review. You can't investigate yourself. You have to have
someone from the outside. The best we have are independent
Directors. Also, when you looked at the terms of the
BakerHostetler engagement, it raised real questions around the
independence. It was very narrow in scope. It was very limited
in budget. That was part of the reason we made a strong case
for a separate committee of the Board to lead the
investigation.
Mr. Steil. Thank you very much. Back to you, Mr. Hsu, if I
can. There is a long history of incidents involving Chairman
Gruenberg's temper at the FDIC predating, obviously, The Wall
Street Journal reporting. Were you aware of the internal FDIC
investigation in 2008 into Mr. Gruenberg's behavior before The
Wall Street Journal articles appeared?
Mr. Hsu. No.
Mr. Steil. You were not formally aware? You had no
knowledge that any review had been conducted?
Mr. Hsu. No, was not aware of it either formally or
informally----
Mr. Steil. So, there wasn't any casual conversation at the
workplace around the water cooler that this review might be
ongoing?
Mr. Hsu. I was not aware, no.
Mr. Steil. You were not aware. Director McKernan, if I can
come back to you, were you aware?
Mr. McKernan. Just to make sure I understand the question,
was I aware of the 2008 investigation?
Mr. Steil. Prior to The Wall Street Journal article.
Mr. McKernan. Yes, I had heard rumors about it.
Mr. Steil. So, you had heard rumors, and you have full
evidence. Walk me through what that looked like to you?
Mr. McKernan. How did I know, and what did I know then?
Mr. Steil. It was just a casual conversation amongst
employees of the FDIC that this review by a supposed, well, we
can have the discussion as to the independence of the law firm,
but a law firm review of the behavior of the Chairman. Was that
just water cooler talk around the FDIC?
Mr. McKernan. There are a lot of open secrets, as you know,
in D.C., and this was one of those, that there had been an
issue in 2008 and also an investigation.
Mr. Steil. And you would say it was widely known at the
FDIC?
Mr. McKernan. At the FDIC, I can't speak to that. I don't
know.
Mr. Steil. Where was it widely known, or where would you
have thought that this would have been a casual conversation
two individuals might have had?
Mr. McKernan. I was a Senate staffer at the time, and I
think folks knew then.
Mr. Steil. So, Senate staffers who were involved in the
broader--probably, the Senate Banking Committee then would have
had general knowledge that----
Mr. McKernan. I was speaking to the fact of the
investigation----
Mr. Steil. ----an investigation was ongoing?
Mr. McKernan. Oh, no, no. I'm sorry. That there had been an
investigation.
Mr. Steil. That there had been an investigation.
Mr. McKernan. Yes.
Mr. Steil. But not that BakerHostetler was conducting a
review?
Mr. McKernan. Oh, I'm sorry. No, the BakerHostetler thing
came out of The Wall Street Journal reporting.
Mr. Steil. Great. It is good that we are diving into this.
So, you did not have knowledge that the BakerHostetler review
was ongoing until you read about it in The Wall Street Journal?
Mr. McKernan. That is right. I don't remember where I
learned about the BakerHostetler--I think it was actually at
the hearings immediately after The Wall Street Journal
reporting.
Mr. Steil. But after The Wall Street Journal reporting. It
was not part of a casual conversation you had with people?
Mr. McKernan. Right.
Mr. Steil. You had heard the casual conversations that
there were problems at the FDIC. That was, I think, reasonably
well-known, and it has now been fully exposed to the level that
it was.
Mr. McKernan. That is right.
Mr. Steil. But the BakerHostetler review you were unaware
of?
Mr. McKernan. It was not brought to the Board's attention--
--
Mr. Steil. Say it again?
Mr. McKernan. ----which is a problem because the Board is
supposed to act on major matters. Instead, the Chairman
retained a firm to do an investigation, which would have
attracted a lot of publicity without alerting the Board.
Mr. Steil. Thank you. In my limited time, I just think it
is so important here that Chairman Gruenberg should resign. He
should have never been involved in the initial review with a
third party for the exact reasons that you identified for us
here today. And as noted by Mr. Rose, re-quoting President
Biden, he is saying he has no ifs, ands, or buts about whether
or not someone engaged in this action should be terminated. He
should be terminated. He engaged in the action. And to me, it
is pretty clear as to what is going on. The Administration is
concerned about the policies, and they are willing to put their
agenda ahead of protecting people.
Mr. Chairman, I yield back.
Mr. Flood. The gentleman from Wisconsin yields back. The
gentleman from Pennsylvania, Mr. Meuser, is now recognized for
5 minutes.
Mr. Meuser. Thank you, Mr. Chairman. Mr. Hsu, who has been
fired or put on leave at the FDIC or separated from employees
that they allegedly have been abusing and harassing?
Mr. Hsu. My understanding is that there have been four
individuals who have been separated from the agency.
Mr. Meuser. Okay. And you support that?
Mr. Hsu. I have some indirect knowledge of that. I was not
directly involved with those things.
Mr. Meuser. And what they did apparently was more serious
than any accountability of Mr. Gruenberg, in your view?
Mr. Hsu. I don't think I am at liberty to talk about the
specifics around that, but my understanding is that there have
been four separations based on----
Mr. Meuser. Why not? You are under testimony. Why not?
Mr. Hsu. I think there are protections around privacy and
personal----
Mr. Meuser. You are doing a lot of protecting, Mr. Hsu, a
lot of protecting.
Mr. Hsu. My point is not----
Mr. Meuser. It is not loyalty. It is destructive to the
FDIC. You are missing the picture. In my view, sir, you are
missing the picture. You told Representative Meeks that you
feel Mr. Gruenberg can restore trust and credibility at the
FDIC. You said, yes, you do. So, you condone how he has handled
things at the FDIC and you think he is the right person, the
only person who can correct the situation that was created
under his leadership. Does that make any sense to you?
Mr. Hsu. I understand the question. I don't condone any
actions that are inappropriate. My focus is on the actions that
are going to restore trust with the employees of the FDIC. That
is where my focus is.
Mr. Meuser. Okay. You keep saying, ``action.'' What about
his inaction? What about the inaction of many of the
supervisors who were there? They should all be under scrutiny
and carefully reviewed. It sounds like a madhouse took place
here.
Mr. Hsu. Currently, there are three critical actions that
are being supported and considered by the Board: the hiring of
the expert; the hiring of the monitor; and standing up a new
structure so that there is no fear of retaliation. Those are
all being done by the full Board engagement.
Mr. Meuser. Oh, it sounds like one heck of a bureaucratic
committee reviewing this, which will apparently take months,
meanwhile leaving Mr. Gruenberg there and leaving employees in
a state of malfunction and dysfunction and disarray. When did
you first learn of this chaos taking place?
Mr. Hsu. I read it in The Wall Street Journal article----
Mr. Meuser. Was that the first time you heard of it?
Mr. Hsu. Yes. It was very disturbing.
Mr. Meuser. Were you surprised?
Mr. Hsu. I was very bothered by it, yes.
Mr. Meuser. Okay. Mr. McKernan, you said you heard rumors
years back?
Mr. McKernan. To be specific here, I heard, I think, maybe
in August or September, that the Journal was looking into
workplace culture issues.
Mr. Meuser. Were you surprised to hear it?
Mr. McKernan. About the workplace culture issues?
Mr. Meuser. Yes.
Mr. McKernan. I didn't hear much about in August or
September around what the Journal was going to report, so I was
deeply shocked when I actually saw the stories in November.
Mr. Meuser. Okay. So, everybody was shocked. Everybody was
surprised. Just heard about it, read about it in the paper. How
much involvement do you have on a monthly basis with the FDIC?
Mr. Hsu. I am a Director, so we have monthly Board
meetings, and then there are meetings in between to deal with
Board matters.
Mr. Meuser. Human resources is never in those meetings?
Mr. Hsu. Generally not.
Mr. Meuser. You don't pay any attention to it, with 6,000
employees? There's no reason for the Board to pay attention to
the issues of 6,000 employees?
Mr. Hsu. The Board is ultimately responsible for the
agency, and so we need to take care of the employees.
Mr. Meuser. Let me ask you this. You have four divisions
within your agency that you oversee. If this was occurring
within their division, how would you handle that with that
division Director?
Mr. Hsu. Misconduct----
Mr. Meuser. The same way? Would you leave him there? Would
you say, hey, you know what? I know there has been a mess for
years. Women have been harassed, men have been harassed, all
kinds of abuses taking place, lawsuits, right? You name it. It
is bad, but I am going to keep you there because I want you now
to fix the mess that you made.
Mr. Hsu. No.
Mr. Meuser. Well, that is what you are doing with Mr.
Gruenberg.
Mr. Hsu. Wrongdoers must be held accountable. They will be
held accountable----
Mr. Meuser. How is it any different than what is happening
with Mr. Gruenberg?
Mr. Hsu. Mr. Gruenberg was not cited as a root cause of the
problems at the FDIC in the report. He is not cited as a root
cause. There are recommendations which will lay out the actions
that need to be----
Mr. Meuser. Oh, so it needs to be a root cause. You are a
Division Director, so you would find out if he was part of the
root cause?
Mr. McKernan, do you agree with that? Do you think that is
a good management policy?
Mr. McKernan. No. As I said, I think we really need a fresh
start, and the sooner, the better.
Mr. Meuser. The sooner, the better. So, why not today? I
yield back, Mr. Chairman.
Mr. Flood. The gentleman from Pennsylvania yields back. The
gentleman from Wisconsin, Mr. Fitzgerald, is now recognized for
5 minutes.
Mr. Fitzgerald. Thank you, Mr. Chairman. I apologize. We
have a Judiciary Committee hearing going on at the same time.
We are all appalled at the findings of the report and the
toxic culture at the FDIC. Last year, Discover's CEO, Roger
Hochschild, quickly resigned after regulatory issues surfaced.
Similarly, in March, New York Community Bank's CEO stepped down
following the bank's near-collapse. In neither case did the CEO
wait around until a permanent successor was in place.
Mr. McKernan, do you agree that a responsible regulator
would not be doing its job if it let a bank CEO stick around
for similar conduct to what was reported in the Cleary Gottlieb
investigation?
Mr. McKernan. I guess hypotheticals are always dangerous,
but it is hard to imagine the bank regulator would let
management stick around.
Mr. Fitzgerald. Yes. Thank you.
Comptroller Hsu, the same question to you. Would a
responsible regulator allow a CEO to stick around until a
permanent replacement is found, despite the misconduct that has
happened under their watch, yes or no?
Mr. Hsu. A responsible regulator will take the steps
necessary to ensure the safety and soundness of the
institution.
Mr. Fitzgerald. Mr. Kim, and Ms. Mainoo, I would like to
discuss your recommendation of the 360-degree review of a Chair
or a Chair's direct reports. Can you briefly describe this 360-
degree review, Mr. Kim?
Mr. Kim. Yes. We believe that it would be important for the
leadership to have the 360-degree review, to be informed of the
views and perspective, both of people to whom they report but
also to those who report to them.
Mr. Fitzgerald. Ms. Mainoo, can you answer the same
question?
Ms. Mainoo. Yes, and just to add to what Mr. Kim said, we
also learned when we spoke with FDIC employees, as well as by
reviewing records of recommendations that employee resource
groups have made in the past, that there is interest by FDIC
employees in 360-degree reviews. And so, we included that as
one of our recommendations.
Mr. Fitzgerald. And your recommendation states that the
360-degree review should occur for at least the first 2 years
by an independent third party. Is that correct?
Ms. Mainoo. That is correct.
Mr. Fitzgerald. Do you think this should be the same third
party that will be working with the transformation monitor on
the culture change, or do you see this as being a completely
separate third party from the culture change role?
Ms. Mainoo. As we say in the report, the independent third
party may or may not be the same----
Mr. Fitzgerald. Okay. The Cleary report highlighted the
misconduct of Chairman Gruenberg in the report's section on
findings. Do you think that your team would have still offered
this recommendation if you had not found misconduct perpetuated
by the Chairman? Mr. Kim, can you answer that?
Mr. Kim. I believe we saw value in the 360-degree reviews
regardless of who is the Chairman, and would have recommended a
similar review.
Mr. Fitzgerald. And because the report highlighted the
misconduct of the current Chairman of the FDIC, do you think
the information obtained by the 360-degree review should be
submitted to Congress to assist on our oversight efforts of a
culture change?
Mr. Kim. Our view was that it should be conducted by an
independent party so that they are not worried about concerns
or fear that management would hear about it. I don't think we
recommended that it be made public or provided to Congress. I
do think there are some questions about how open someone will
be in their 360-degree reviews if they know it is going to be
provided publicly, so that is not part of our recommendation
that it be provided to Congress.
Mr. Fitzgerald. Thank you. Mr. Chairman, I yield back.
Mr. Flood. The gentleman yields back. The gentlewoman from
California, Mrs. Kim, is now recognized for 5 minutes.
Mrs. Kim. Thank you. Mr. Hsu, and witnesses, thank you for
being here with us.
Mr. Hsu, in a joint statement that is issued by you and
Director McKernan to announce the release of the Cleary
Gottlieb report, you say the report, ``put the people of the
FDIC first and focused on identifying root causes.'' You also
noted that it was a balanced, focused, and nonpartisan report.
Do you still stand by this statement and sentiment that the
Cleary report put the people of the FDIC first?
Mr. Hsu. Yes.
Mrs. Kim. You do. Mr. Hsu, then, do you agree with the
Cleary report's assessment that Chairman Gruenberg's attributes
hinder his ability to establish trust and confidence in leading
a meaningful culture change at the FDIC, because based on your
statement regarding that report, you must agree that it is time
for new leadership in order to put the people of the FDIC
first.
Mr. Hsu. I agree with the report's conclusions that his
actions present unique challenges to building trust with the
staff, and that is why I am very focused on actions that the
agency----
Mrs. Kim. Do you still support Chairman Gruenberg?
Mr. Hsu. I am focused on what I can control. What I can
control is influencing the Board to take the actions that are
necessary to reestablish trust with the staff. That is my
focus.
Mrs. Kim. Okay. One of the recommendations of the report
was for victims of abuse and harassment to have access to the
Chairman of the FDIC, but as it stands today, unfortunately, it
seems to be counterintuitive for those victims. Former Chairman
McWilliams, for example, spent a lot of time with the staff in
the cafeteria and rode the bus from Virginia Square to the
other offices, whereas Chairman Gruenberg spends his time with
only his small circle of trusted advisors.
So let me ask you a question, Mr. Kim. Based upon your
investigation, do FDIC staff believe that Chairman Gruenberg is
an accessible Chairman?
Mr. Kim. I don't think we put that question in that way,
whether he is accessible. What we learned, we put in the
report, which is that although many employees had positive
relationships with him, there were a certain number, including
certain direct reports, who had had difficult interactions with
him. And then, there was a general----
Mrs. Kim. I think the point of my question is, a Chairman
shouldn't just surround himself with the top executive senior
members only, but should be accessible to all employees
regardless of their status or rank. That is the accessibility
question that I am asking you.
Mr. Kim. Accessibility is obviously a good thing, and being
more accessible, obviously, helps improve workplace culture.
Mrs. Kim. Let me ask the question to Mr. McKernan. If
Chairman Gruenberg does open his door to victims of harassment,
do you think that the findings made about his behavior towards
staff would make employees hesitant to approach the Chairman
directly?
Mr. McKernan. Given his reputation as documented in the
Cleary report, I suspect that would be challenging for some.
Mrs. Kim. So, can you answer the same question? Why do you
think it is important that the Chairman is accessible to his
employees regardless of their status, rank, or position?
Mr. McKernan. One of the things I certainly learned
overseeing the investigation is you cannot, as a leader, rely
simply on the formal reporting channels. They break down. You
have to have a real, deep-seated interest in trying to root out
information, to get your sense of the pulse through other
informal mechanisms, and that requires an open rapport with the
staff.
Mrs. Kim. To be clear, this is a great recommendation. The
FDIC has a pervasive toxic culture, and because of that,
employees should have a direct line to the Chairman to report
those issues. However, with Chairman Gruenberg at the helm, I
am not sure if the employees would benefit from direct access
to him or would even want to have that available to them, for
that matter. In the report, Cleary recommended that the FDIC
hire an independent third party to advise and assist with the
implementation of the recommendations, but I am concerned that
the leader of the office may feel a sense of loyalty to
Chairman Gruenberg.
Director McKernan, would it have been valuable for the
Special Review Committee or other Board members to be involved
in the decision-making process for setting up the office?
Mr. McKernan. Yes. This is actually a topic of some debate
now. This monitor is a critical choice for us. I learned about
the process when the Chairman announced it at the hearing----
Mr. Flood. The gentlewoman's time has expired.
Mrs. Kim. Thank you.
Mr. Flood. The gentleman from New York, Mr. Lawler, is now
recognized for 5 minutes.
Mr. Lawler. Thank you, Mr. Chairman. Democrats say Chairman
Gruenberg was not aware of the deep-seated cultural issues at
the FDIC until it was revealed by public reporting. When
Chairman McWilliams took over at the FDIC, she immediately saw
the cultural issues that were prevalent at the agency. Chairman
McWilliams came to the FDIC with a goal to know the issues
faced by employees and took the time to ride the shuttle to the
Arlington and D.C. campuses, to eat lunch in the cafeteria, and
had an open-door policy to hear employees' concerns. Through
her outreach to employees, Chairman McWilliams noted that the
toxic culture at the FDIC was readily apparent, and she began
initiatives to improve the agency.
Within the first 3 months of her tenure, Chairman
McWilliams received a letter from anonymous African-American
employees outlining a series of discriminatory acts at the
FDIC. Chairman McWilliams worked with the employee resource
groups and her staff to form employee-driven initiatives to fix
the issues highlighted in the letter. So, when I look at this
situation, some of my colleagues seem to believe that the
report did a disservice to the FDIC because it focused only on
the bad stories about Chairman Gruenberg, and they believe the
report downplayed the same concerns under prior Chairs.
Mr. Kim, and Ms. Mainoo, as part of your investigation, did
you review workplace culture under prior Chairs of the FDIC
other than Chair Gruenberg?
Mr. Kim. As we set forth in our report, we received reports
from people who had suffered experiences that went back many
years, so it did include information and reports during times
that covered prior Chairs as well.
Mr. Lawler. And did you hear from any employees about any
differences between the leadership of prior Chairs and Chairman
Gruenberg's leadership?
Mr. Kim. Our focus was on the reports of incidents that
they experienced and their experiences with respect to the
workplace culture. As we note in the report, their experiences
with respect to workplace culture we found were longstanding
and deeply ingrained, I believe is the word that we used, so
that led us to a number of the recommendations as well as the
findings. But we found in terms of the workplace culture
issues, that it was something that was longstanding and not
attributed to a particular Chair.
Mr. Lawler. Okay. In your review, do you recall employees
reporting encounters with Chairman Bair or Chairman McWilliams,
where the employee described those Chairs as being
unprofessional, aggressive, or hostile?
Mr. Kim. As I said, we were not focused on----
Mr. Lawler. That is a yes-or-no question. Do you recall
anybody in your review?
Mr. Kim. We do not recall anyone using those words.
Mr. Lawler. Did anybody say they were disrespected,
disparaged, or treated unfairly by those Chairs? Yes or no?
Mr. Kim. Not in the context of hotline reports, but in the
context of discussing experiences with prior Chairs, there were
some who had noted that former Chair, Sheila Bair, could at
times be difficult as well.
Mr. Lawler. Okay. Director McKernan, yes or no, should
Chairman Gruenberg step down immediately?
Mr. McKernan. Congressman, I think that is a decision for
our elected leaders, but I would say we do need a fresh start,
and the sooner, the better.
Mr. Lawler. Oh, yes.
Mr. McKernan. We need a fresh start sooner, rather than
later.
Mr. Lawler. I will take that as a, yes. Shifting gears,
isn't it true that when Silicon Valley Bank failed, it was not
considered one of the large U.S. banks? In fact, it was not one
of the top 10 largest banks in the U.S. at the time. And
because of its comparatively small size, you understand that
many of us on Capitol Hill have called into question why the
systemic risk exception was invoked for Silicon Valley Bank.
Many businesses in the tech industry had their money on deposit
at Silicon Valley Bank, correct?
Mr. Hsu. Yes.
Mr. Lawler. And you understand that in most instances,
their deposit accounts held far in excess of $250,000, correct?
Mr. Hsu. That is my understanding.
Mr. Lawler. Those politically-connected companies would
have lost lots of money without the systemic risk exception----
Mr. Flood. The gentleman's time has expired.
Mr. Lawler. ----correct?
Mr. Flood. The gentleman's time has expired. The gentleman
from Iowa, Mr. Nunn, is now recognized for 5 minutes.
Mr. Nunn. Thank you, Mr. Chairman. Without objection, I
would like to yield to my colleague from New York the time
required to finish his question.
Mr. Lawler. Thank you.
Mr. Flood. The gentleman is recognized.
Mr. Lawler. You agree those politically-connected companies
would have lost a lot of money without the systemic risk
exception, correct?
Mr. Hsu. The Board of the FDIC voted unanimously for the
systemic risk exception. I think, as Director McKernan had
noted in prior testimony, there was a lot going on at that time
which supported that decision.
Mr. Lawler. Okay. When the systemic risk exception was
invoked, it was announced that everyone's money would be safe
and insured, correct?
Mr. Hsu. The Board decided unanimously to invoke the
systemic risk exception.
Mr. Lawler. Okay. And you are aware that the depositor base
for Silicon Valley Bank included people from outside America,
including significant Chinese interests, correct?
Mr. Hsu. The purpose of invoking the systemic risk
exception is to ensure that the financial stability of the
United States is protected, and the Board voted unanimously to
do that.
Mr. Lawler. Did companies with significant Chinese
interests benefit from this decision?
Mr. Hsu. Again, the decision to invoke the systemic risk
exception focuses on protecting the financial stability of the
United States.
Mr. Lawler. Lastly, are you aware of any policies or
directives within the FDIC regarding the treatment of Chinese
depositors at Silicon Valley Bank?
Mr. Hsu. I am not aware of that. I would have to get back
to you on that.
Mr. Lawler. Okay. Thank you.
Mr. Lawler. And thank you to my colleague, Mr. Nunn.
Mr. Flood. The gentleman from Iowa is recognized for 3
minutes and 27 seconds.
Mr. Nunn. Thank you, Mr. Chairman. As others have noted as
well, I am incredibly disappointed that Chairman Gruenberg
chose not to be with us today. Clearly, the Gottlieb report
about the FDIC's workplace culture is concerning. To quote the
200-page report, ``the FDIC remains a good old boys club rife
with sexual harassment, discrimination, and other inappropriate
misconduct.'' Other descriptions of the agency include a
particular insular hierarchy, a risk-averse culture, and a
widespread fear of retaliation amongst the workforce that
allowed misconduct to persist, including in the last 7 years
alone, 92 harassment complaints made. Zero resulted in any
removal, reduction in grade or pay, or any discipline action
more severe than a suspension, something endemic in Washington,
D.C.
Adding to this disturbing culture was Chairman Gruenberg's
claim that he had no idea what was happening at the agency,
even though he ran it for 10 of the last 13 years when these
claims were made. I think one of the most frustrating parts
here is, how could anyone trust him when it was The Wall Street
Journal who found this after just interviewing a few
individuals?
Director McKernan, I want to speak directly to you.
Director McKernan, resignation of examiners in training who are
highly critical to our nation's economy doubled from 2001 until
it hit a new high of 62 in the first 9 months of 2022. Only 48
percent of examiners hired in the agency remain since 2017. Do
you believe the inability of the FDIC to retain talent affects
your ability to help regulate my hometown banks in Iowa?
Mr. McKernan. It certainly poses some risk.
Mr. Nunn. I would agree. How does the ability to retain
quality staff impact our ability to police and support and help
regulate our banks if these people have all left the job
market?
Mr. McKernan. I think it is a very important, pressing
question. If we can't get our staff retention issues fixed, it
is going to continue to mount as a challenge for our mission.
Mr. Nunn. Do you know if the FDIC has fired any employees
in the wake of these reports?
Mr. McKernan. The Chairman has reported that there have
been four separations. It is my understanding that three of the
four were resignations or retirements.
Mr. Nunn. Do you believe, Director McKernan, that the
Chairman should have been the first person fired on this list?
Mr. McKernan. That is a question that is reserved for our
elected leaders, but if I were asked by them my view on what is
best for the agency, it is very clear to me that we need a
fresh start sooner rather than later.
Mr. Nunn. I think 92 harassment cases would say he should
have been gone. I think the entire country is looking for
dependable leadership--which has clearly failed--and they are
asking for his resignation. He should listen to the country.
With that, Comptroller Hsu, you have read The Wall Street
Journal article entitled, ``Strip Clubs, Lewd Photos, and a
Boozy Hotel: The Toxic Atmosphere at Bank Regulator FDIC,''
that was published a year ago. I am glad to hear that I have an
extra copy here if you have not read it. Was this just an
accepted part of the culture that you were part of?
Mr. Hsu. It is totally unacceptable.
Mr. Nunn. I would agree with that. It is not just normal as
has been highlighted, correct?
Mr. Hsu. Totally unacceptable.
Mr. Nunn. Finally, one staffer was advised, ``Just smile
and make your supervisor feel good,'' as was reported in this
article.
Mr. Hsu. All of the behaviors highlighted in that article
are totally unacceptable, and the root causes of that are there
is a culture and there is a structure at the FDIC which needs
to be transformed.
Mr. Nunn. I concur. Twenty women quit. We have understaffed
banking regulation. The Chairman needs to stand down to restart
that culture.
Mr. Flood. The gentleman's time has expired.
Mr. Nunn. Thank you, Mr. Chairman.
Mr. Flood. I would like to thank all of our witnesses for
their testimony today.
The Chair notes that some Members may have additional
questions for this panel, which they may wish to submit in
writing. Without objection, the hearing record will remain open
for 5 legislative days for Members to submit written questions
to these witnesses and to place their responses in the record.
Also, without objection, Members will have 5 legislative days
to submit extraneous materials to the Chair for inclusion in
the record.
I would ask our witnesses to please respond no later than
August 1, 2024.
This hearing is adjourned.
[Whereupon, at 1:47 p.m., the hearing was adjourned.]
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A P P E N D I X
June 12, 2024