FDIC Chair Gruenberg To Resign Upon Successor Announcement

U.S. Federal Deposit Insurance Corp Chair Martin Gruenberg announced his intention to step down on Monday, succumbing to mounting pressure amid a scandal involving sexual harassment and other misconduct within the top bank regulator. Gruenberg, a Democrat whose term extends until 2028, stated he would resign once a successor is confirmed. The White House is poised to nominate a replacement soon, according to deputy press secretary Sam Michel.

Gruenberg's impending departure comes at a critical juncture for the agency, following last year's failure of three major banks and ongoing challenges faced by numerous lenders amidst heightened Federal Reserve interest rates. The FDIC is actively collaborating with other bank regulators on various initiatives aimed at tightening regulations, including a contentious proposal to increase capital requirements for large banks.

With Gruenberg remaining in his role until a replacement is designated, Democrats can assert a moral victory while allowing the agency to maintain continuity in its regulatory agenda, noted Todd Baker, a senior fellow at Columbia University's law and business schools. Baker added, "It's a stalemate and it achieves most of the goals of the administration - that is, to retain control over the FDIC's agenda."

Despite the outcry over misconduct at the FDIC since November, as revealed by a Wall Street Journal report and confirmed by an external review, Gruenberg had resisted calls for his resignation until now. However, Democratic Senator Sherrod Brown, chair of the Senate Banking Committee, emphasised the need for "fundamental changes" at the agency and called for Gruenberg's replacement, adding to the pressure on the FDIC chair.

While it remains uncertain how long it will take to confirm a new nominee amidst the Senate's narrow divide, Republican Senator Tim Scott and others have urged Gruenberg's immediate departure. Ian Katz, managing director of policy research firm Capital Alpha Partners, expressed skepticism about Gruenberg's ability to retain his position, likening the situation to "trying to contain a raging fire."

In the event of Gruenberg's departure without a confirmed successor, leadership of the FDIC would fall to Travis Hill, the agency's vice chair and a Republican, resulting in a deadlock with a 2-2 split. Gruenberg, 71, has been with the FDIC since 2005 and holds the record as the agency's longest-serving board member. He served as chair twice, under Presidents Barack Obama and Joe Biden. Despite pledging to address cultural issues and personal conduct highlighted in the review, doubts persist about Gruenberg's ability to enact meaningful changes at the agency.