Kennedy threatens 'no' vote for Hill over workplace scandal

• Key insight: Lawmakers across both parties continued to express concerns about the FDIC's persisting workplace culture scandal, pressing acting Chair Hill in a confirmation hearing for demonstrable progress reports, under threat of withholding their votes for his confirmation.
• Expert quote: "I heard you talk about transparency and accountability, those are pretty words," Kennedy said. "I want to know who's been fired. I want to know who's been prosecuted. If your name came up in front of me right now, I wouldn't vote for it." 
• Forward look: Hill's confirmation, which requires a simple majority vote in the Senate, could be held up if Republicans are not satisfied with the progress at the agency. 

At least one Republican lawmaker said they may not support Travis Hill's nomination to permanently lead the Federal Deposit Insurance Corp. over the agency's workplace culture scandal, potentially delaying or imperiling a critical piece of President Donald Trump's financial policy vision. 

Speaking at Hill's confirmation hearing before the Senate Banking Committee Thursday morning, Sen. John Kennedy, R-La., criticized acting FDIC Chair Hill over what he called a lack of progress on addressing the workplace misconduct scandal, saying he wouldn't vote to confirm Hill until he sees concrete accountability, including a report within 30 days on the agency's progress.

"I heard you talk about transparency and accountability, those are pretty words," Kennedy said. "I want to know who's been fired. I want to know who's been prosecuted. If your name came up in front of me right now, I wouldn't vote for it." 

Hill was expected to easily sail through Senate confirmation with uniform Republican support. Hill, who has served on the FDIC board since 2022, is well known and esteemed in the committee because of his tenure working for former FDIC Chairman Jelena McWilliams and from his time working on the committee under then-panel Chairman Mike Crapo, R-Idaho. He was previously confirmed to the FDIC board via a voice vote. 

But losing Kennedy's vote could be a problem in the tightly controlled Senate. Republicans only have a few votes to spare, and with tensions high between the parties in the midst of the government shutdown, Kennedy's lack of support might also pry off other Republican lawmakers. At the very least, Kennedy's objections could delay the final vote on Hill's confirmation. 

Other Republicans on the committee criticized the FDIC, and even questioned Hill's progress toward reforming culture at the agency. They stopped short, however, of withholding their support. 

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"I do know that a lot of what's motivating Senator Kennedy is we were so frustrated by all the violations that were occurring in plain sight," said Sen. Thom Tillis, R-N.C. "I view you as part of the solution, not a part of the problem." 

Kennedy's line of questioning resurfaced a scandal that had embroiled the agency when a Wall Street Journal investigation in late 2023 brought to light a persistent pattern of sexual and racial harassment and discrimination going back decades. These findings were further validated by an independent review conducted by law firm Cleary Gottlieb, which painted a picture of an agency with rampant instances of sexual harassment, discrimination and various other forms of misconduct spanning multiple administrations.

That scandal spurred many congressional Republicans and some Democrats to call for the resignation of then-Chair Martin Gruenberg, who has served in agency leadership since 2005. Gruenberg said he would resign upon the confirmation of a successor. Had he resigned immediately, leadership of the agency would have fallen to the FDIC vice chair, who at that time was Hill.  

Committee ranking member Elizabeth Warren, D-Mass., also criticized Hill for failing to make progress in tackling the agency's culture, arguing Hill has been less outspoken in calling for progress on the issue since assuming the acting chairmanship in the Trump administration.  

"Mr. Hill, at that time, called it a top priority of the board, but Mr. Hill has said little on this issue after becoming acting chair of the FDIC, and the FDIC has yet to respond to my requests for information," Warren said. "The public deserves to know what progress has been made to improve FDIC culture and whether your interest in doing so is genuine or only exists as part of an effort to stymie the agency's work when there's a Democrat as president."

Warren also questioned Hill on whether he bears culpability for the longstanding agency issues, given he has been at the agency across multiple administrations. Hill repeatedly called on then-Chair Martin Gruenberg to implement all recommendations from that review, Warren argued

"When former FDIC Chair Marty Gruenberg first appeared in front of this committee last year, I was clear that it was his responsibility to fix this and called on him to implement all of the independent reviews recommendations," Warren said. "Now that is the responsibility of Mr. Hill [and] I expect answers to these important questions before we vote on your nomination."

Hill also offered his views on a proposal to raise deposit insurance for certain business accounts. Sens. Bill Hagerty, R-Tenn., and Angela Alsobrooks, D-Md., have a bill that would raise deposit insurance for non-interest-bearing business accounts to $10 million, a dramatic increase that some large and small banks worry will be costly to the Deposit Insurance Fund and for the banks that have to pay into it. 

Hill appeared to be somewhat supportive of the idea of deposit insurance reform, but did not endorse any proposal in particular. 

"One of the big benefits of deposit insurance, from a public policy perspective, is it takes away the incentive for those depositors to run," Hill said. "So all else equal, an expansion of deposit insurance would create a more stable funding base where there would be a reduced incentive for depositors to run."

He also didn't say whether the increase in deposit insurance would cause small banks to have to pay larger assessment fees after a 10-year phase in period, nor did he address what happens with special assessment fees should a bank fail that has a large number of insured non-interest-bearing business deposits. 

"There's a lot of uncertainty around any predictions that we might make in terms of the impact that the legislation would have," Hill said. "There's uncertainty first because we don't have data on how many uninsured deposits are above or below certain thresholds, other than the $250,000. The other piece that we don't know is what kind of behavioral change there might be in terms of funds moving from certain types of deposits to other types of deposits."

Warren also questioned Hill over the agency's dismissal of scores of bank examiners since the beginning of the year, pointing to an FDIC Inspector General report from late last year that pointed to understaffing as a factor in the 2023 bank failures that roiled the industry. Warren also cited a 2023 report from the FDIC's chief risk officer that found that roughly 40% of big-bank examiner positions in the FDIC's New York field office were vacant or temporarily filled in the years before Signature Bank's failure in 2023. 

Following the Trump administration's broader workforce streamlining effort, known as the Workforce Optimization Initiative under the Department of Government Efficiency, the FDIC developed and executed a plan to eliminate 1,250 positions — or roughly 20% of all staff — across most departments through both voluntary separation incentives and later  formal reduction-in-force procedures. The agency also reportedly rescinded job offers to some 200 bank examiners this year.

"Since you became acting chairman in January," Warren asked at the hearing, "have you increased or decreased the number of bank examiners at the FDIC?"

Hill responded that regarding "the total number of examiners, we made small decreases on the safety-and-soundness side."

Warren pointed out that the agency has not shared with the committee a detailed breakdown of those workforce reductions. 

"You refused to provide this committee with a breakdown of the staff reductions when my office requested them last April," Warren said. "So you don't get to come in here now and say, 'Oh, I didn't cut any of the people you would care about.' If you weren't cutting any of the people I cared about, you should have told me that last April."