President Biden announced on Wednesday that he will nominate Commodity Futures Trading Commission (CFTC) Commissioner Christy Goldsmith Romero to lead the Federal Deposit Insurance Corporation (FDIC), replacing current FDIC Chairman Martin Gruenberg, amid an ongoing controversy over workplace misconduct.
Romero has served as director of the CFTC, which oversees U.S. commodities and derivatives markets, since 2022. Prior to working at the CFTC, he spent more than a decade at the Treasury Department, where he served as inspector general for the Troubled Asset Relief Program (TARP), the hundreds of billions of dollars of bailout money given to large banks during the 2007-08 financial crisis and recession.
As special inspector general for TARP, Romero oversaw 406 criminal indictments against financial industry figures. 2017 Congressional ReportThese included 55 bank employees, one trader, 68 bank borrowers and 83 “homeowner fraudsters”.
Biden also announced his intention to nominate CFTC Chair Christine N. Johnson to be Assistant Secretary of the Treasury for Financial Institutions and Insurance Commissioner Gordon I. Ito of Hawaii to the Financial Stability Oversight Council. The president also plans to re-nominate SEC Chair Caroline Crenshaw (Democrat).
Romero’s nomination comes less than a month after Grunberg announced his intention to step down as FDIC chairman — a remarkable swift move given the usual pace of nominations. The Senate must now approve Romero’s nomination.
Gruenberg’s announcement follows the release of a report in April that found sexual harassment and discrimination were commonplace at the FDIC, and that employees frequently feared they would be retaliated against by their superiors if they complained about the company culture.
The report by law firm Cleary, Gottlieb, Steen & Hamilton described a “patriarchal, insular and risk-averse culture” where misconduct could continue for years and go unreported.
The report follows a shocking investigation by The Wall Street Journal last year, which exposed much of the same misconduct in disturbing detail and cited examples of a “sexualized boys’ club environment.”
Key international banking regulations are in jeopardy as the Federal Reserve works to implement rules known as the final phase of Basel III, a set of reforms that require banks to hold more capital following the collapse of banks and insurance companies in 2007-2008.
Republicans don’t want to implement the reforms, and Fed regulators are considering repealing the rules and re-proposing them from the ground up.
Republicans began calling for Grunberg’s resignation last year, with Sen. Tim Scott of South Carolina, the chairman of the Senate Banking Committee, among others urging him to step down.
In 2022, ahead of the Journal investigation, Scott and then-Sen. Pat Toomey (R-Pa.) wrote Grunberg a letter about “allegations of racism and fears of retaliation that occurred during his previous leadership of the FDIC.”
Democrats also slammed the agency in the wake of the scandal, but some came to Grunberg’s defence, arguing the problems run deeper than one chairman.
Rep. Maxine Waters of California, the top Democrat on the House Financial Services Committee, effectively denounced Cleary Gottlieb’s report as partisan, arguing that it focused only on Grunberg and did not pay enough attention to leaders of other government agencies.
“Unfortunately, the Cleary report is a distraction from the long-standing systemic challenges facing the FDIC,” she said in a May statement.
Sexual harassment issues at the agency predate Gruenberg’s tenure, suggesting tolerance for bad behavior may be deeply rooted within the agency.
In 2020, the FDIC’s inspector general, under the direction of FDIC Chair Jelena McWilliams, a Trump appointee, released a report warning that the regulator didn’t even have a clear definition of sexual harassment, much less any actionable procedures for dealing with cases of sexual harassment.
Rep. Bill Foster (R-Ill.) was one of the first Democrats to call for Gruenberg’s resignation, saying in May that “substantial reforms are needed” to fix the agency’s toxic work environment.
