FDIC forms new panel to conduct 'independent review' of agency

Al Drago/Bloomberg

WASHINGTON — The Federal Deposit Insurance Corp. says it will establish a special board committee — co-chaired by directors Jonathan McKernan and Michael Hsu, who is also acting comptroller of the currency — to oversee an investigation into the agency's workplace culture. 

"The board supports taking all actions necessary to identify and address the root cause of the problem and to promote accountability," the agency said in a news release Tuesday. "The co-chairs may appoint up to three additional nonvoting members, likely from outside the FDIC, to join the special committee to advise and promote a diversity of views."

The release described the review as "fully independent" from the board and said that third-party investigators will report only to the special committee. 

Since The Wall Street Journal published a story Nov. 13 about allegations of harassment at the agency, there has been debate over who would oversee the investigation of the FDIC's allegedly abusive workplace culture. 

FDIC Chairman Martin Gruenberg said a week ago that the FDIC had hired a law firm to conduct an independent review. Subsequently, Republican board members McKernan and Vice Chairman Travis Hill urged Gruenberg and the FDIC general counsel to step back from the investigation. They advocated for recusal to enable the entire bipartisan board to oversee the process.

However, financial reform advocates like Better Markets CEO Dennis Kelleher voiced concerns that Hill should also abstain because of a potential conflict of interest.

"The Republican members of the FDIC board must not be involved in any such investigation [as] they have a direct conflict of interest because the vice chair becomes chair in the absence of a chair," Kelleher wrote in a release last week. "Given some are already calling for the removal of the chair, this is a possible result of the investigation."

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Hill said in a statement Tuesday that he supported the board's decision to create the special committee and its provision excluding FDIC management from directly overseeing the investigation to preserve the credibility of the review.

"The board resolution approved last night includes several provisions that restrict the ability of FDIC management and FDIC board members not on the special committee to engage with or influence the review," he said. "I agreed to support the resolution in part due to the inclusion of these provisions."

Gruenberg said in a separate statement that he supports the move. He will not directly oversee the review.

"I support and welcome the action by the FDIC board today establishing a special review committee consisting of FDIC board members McKernan and Hsu to direct and oversee an independent, third-party review of the FDIC's workplace and culture, and delegating to the special committee the full authority to do so," Gruenberg said.

Democratic voices — even those ideologically aligned with the Chairman — have raised concerns about the allegations. Senator Sherrod Brown, as the Senate Banking Committee's chairman, called for the FDIC's Office of the Inspector General to conduct an investigation into the workplace culture. The Whitehouse has echoed Democrats' concerns and urged the Senate to swiftly confirm their FDIC Inspector General nominee so the agency can properly conduct oversight. 

Days after the allegations surfaced, House Republicans, led by Committee Chairman Patrick McHenry, launched an investigation into Gruenberg himself citing concerns about the viability of his leadership. They argued that his lack of a timely response to workplace misconduct at the FDIC contributed to bank industry turmoil in March.