Federal Deposit Insurance Corp. board members Jonathan McKernan and Michael Hsu will co-chair a committee the agency established to oversee an independent third-party review of the FDIC’s workplace culture, the regulator announced Tuesday.
FDIC Chair Martin Gruenberg emphasized in a separate statement Tuesday he “will play no role in overseeing the review.”
McKernan and FDIC Vice Chair Travis Hill requested Thursday that Gruenberg and the agency’s general counsel, Harrel Pettway, recuse themselves from any review because of allegations, reported in The Wall Street Journal last week, that they enabled a toxic culture at the FDIC that turned a blind eye to sexual misconduct and other inappropriate behavior.
Hill, in a statement Tuesday, said he agreed with the resolution launching the review in part because it included “several provisions that restrict the ability of FDIC management and FDIC Board members not on the Special Committee to engage with or influence” it.
“I have had a number of conversations with current and former employees over the past week that have reinforced the need for the review to be truly independent — to encourage those who have been subject to inappropriate conduct to participate, and for the results to be viewed credibly,” Hill said Tuesday.
McKernan and Hsu, the acting chief of the Office of the Comptroller of the Currency, can appoint up to three people, likely from outside the FDIC, to join the special committee as advisers, the agency said. That means Hill and the FDIC’s fifth board member, CFPB Director Rohit Chopra, also won’t participate in the review’s oversight.
Though the co-chairs balance each other out politically — McKernan is a Republican, Hsu a Democrat — that structure is not independent enough for some observers who pushed for McKernan, too, to not take part.
"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 [Hill, a Republican] becomes chair in the absence of a chair," Dennis Kelleher, CEO of advocacy group Better Markets, wrote in a release Thursday. "Given some are already calling for the removal of the chair, this is a possible result of the investigation."
It remains unclear whether the committee will engage another law firm to assist with the review. Gruenberg last week said attorneys from BakerHostetler would conduct an independent “top-to-bottom” evaluation of the FDIC’s workplace culture within the next 90 days.
The FDIC’s review is at least the fourth investigation into the damning allegations that have engulfed the agency over the past nine days.
The House Financial Services Committee will open a probe of the FDIC’s workplace culture, three Republicans on the panel told Gruenberg in a letter Friday.
The 12 Democrats on the Senate Banking Committee also pushed for an investigation — though rather than open their own, they urged the FDIC inspector general’s office to conduct it.
And the House Oversight Committee on Monday launched an investigation, for which it’s asking the FDIC to hand over any records of complaints, investigations, reports or allegations of hostile, inappropriate or retaliatory workplace actions since Jan. 1, 2021. The panel also wants senior FDIC officials to brief them by Nov. 27 on the sexual misconduct and cultural toxicity allegations.
Hill, for his part Tuesday, took the opportunity to express his pride in the agency, but added “that is not something we should take for granted.”
“Pride and trust always and continually need to be earned, nobody is entitled to them, and I hope the FDIC comes out of this a better agency on the other side,” Hill said in his statement.
