Dive Brief:

• The Federal Deposit Insurance Corp. failed to timely report “several allegations of misconduct” involving senior officials to the agency’s inspector general, the FDIC’s IG, Jennifer Fain, wrote in a memo dated Thursday.
• The White House, meanwhile, could choose a nominee as early as this week to replace the FDIC’s outgoing chair, Martin Gruenberg, two people with knowledge of the matter told Reuters on Friday. Kristin Johnson, a Democratic commissioner at the Commodity Futures Trading Commission, is a front-runner for the job, Bloomberg reported.
• Rep. Patrick McHenry, R-NC, the chair of the House Financial Services Committee, has summoned Gruenberg to testify June 12 on Capitol Hill in a hearing focused specifically on the FDIC’s response to allegations of a toxic workplace culture.

Dive Insight:

McHenry announced two hearings set for June 12.

FDIC board member Jonathan McKernan and Acting Comptroller of the Currency Michael Hsu, who also received letters from McHenry on Thursday, are scheduled to testify at the first hearing, along with a representative of Cleary Gottlieb, the law firm that conducted a review of the FDIC’s workplace culture. McKernan and Hsu co-chaired the committee that oversaw the review, the results of which were published this month.

Gruenberg is set to testify at the day’s second hearing. The FDIC chair appeared before the Senate Banking and House Financial Services committees — for previously scheduled hearings — roughly a week after the Cleary Gottlieb report was published, and lawmakers “described having to choose” between discussing the findings of the report and the original purpose of the hearing, McHenry wrote.

“I would hope that we would have a separate hearing devoted exclusively to the horrendous revelations at the FDIC,” McHenry quoted Rep. Brad Sherman, D-CA, as saying.

Gruenberg agreed last week to resign once a successor is confirmed. In doing so, he bowed to increasing pressure from lawmakers to leave the agency, although many Republicans, including McHenry, have said they would prefer he leave immediately and allow the FDIC to operate temporarily under Republican Vice Chair Travis Hill. The FDIC board would then be deadlocked 2-2 between Democrats and Republicans, endangering regulatory work that’s in progress, including a contentious measure to boost capital requirements.

“The Republicans won’t give up until they force Gruenberg out and install the Republican vice chair,” Dennis Kelleher, CEO of the nonprofit Better Markets, told the Financial Times.

Five candidates?

Johnson, the CFTC commissioner, is among five women whose names have been mentioned as potential candidates to succeed Gruenberg. Others, according to Reuters, include Nellie Liang, an undersecretary at the Treasury Department; Adrienne Harris, the superintendent of New York’s Department of Financial Services; Sandra Thompson, director of the Federal Housing Finance Agency; and Christy Goldsmith Romero, who serves at the CFTC alongside Johnson.

The White House declined to comment on the possible nomination, as did Johnson — although a person familiar with the matter told Bloomberg that White House officials discussed the role with Johnson in recent days.

Johnson has served at the CFTC since 2022 and, before that, taught law at Emory and Tulane universities. She also spent the early part of the 2007-08 financial crisis as a vice president and associate general counsel at JPMorgan Chase, according to her LinkedIn profile.

Treasury Secretary Janet Yellen, for one, said she thinks Gruenberg's successor needs to be free of any links to the FDIC's workplace culture.

“It needs somebody who’s committed to cleaning up the problem,” she told Reuters on Friday. “It needs somebody who can come in from the outside, is credible in terms of their own past actions and stance with regard to issues of this type.”

IG’s reminders

The FDIC’s Office of the Inspector General, meanwhile, is reviewing misconduct allegations reported in an untimely manner “to determine how they should be incorporated into OIG work plans,” Fain wrote in her memo.

The OIG is also making follow-up requests within the FDIC to identify any additional unreported allegations.

“Reporting allegations to the OIG promptly … is especially important when they involve senior FDIC officials because these offices may have inherent conflicts in their ability to objectively investigate such allegations,” Fain wrote.

Fain recommended the FDIC chair and IG remind agency employees, in an agency-wide message, of their obligation to report allegations of misconduct, and to list the OIG Hotline as an option for employees wishing to report allegations.