Biden taps new FDIC chief after sexual harassment scandal

President Biden announced Thursday he would nominate Christy Goldsmith Romero, a member of the Commodity Futures Trading Commission (CFTC), to helm the Federal Deposit Insurance Corporation (FDIC), tapping her to replace current FDIC Chair Martin Gruenberg amid a toxic workplace controversy.

Romero has been a member of the board of the CFTC, which oversees U.S. commodity and derivatives markets, since 2022. Before working at the CFTC, she spent more than a decade at the Treasury Department and was an inspector general for the Troubled Asset Relief Program, (TARP), the hundreds of billions in bailouts given to big banks amid the financial crisis and recession of 2007-08.

As the special inspector general for TARP, Romero oversaw 406 criminal charges brought against people in the financial industry, according to a 2017 report to Congress, including 55 bankers, one trader, 68 bank borrowers and 83 “homeowner scammers.”

Biden also announced his intention to nominate CFTC Commissioner Kristin N. Johnson to be assistant Treasury secretary for financial institutions and Hawaii Insurance Commissioner Gordon I. Ito to join the Financial Stability Oversight Council. The president will also renominate SEC Commissioner Caroline Crenshaw (D).

Romero’s nomination comes less than a month after Gruenberg announced his intention to resign as FDIC chair, a remarkably fast turnaround given the typical pace of nominations. The Senate will need to confirm her nomination.

Gruenberg’s announcement followed the release of a report in April that found that sexual harassment and discrimination were common at the FDIC and that employees were frequently afraid of being retaliated against by their bosses for complaining about the culture there.

The report from law firm Cleary Gottlieb Steen & Hamilton described a “patriarchal, insular, and risk-averse culture” that allowed for misconduct to persist and go underreported for years.

That report followed a bombshell investigation by The Wall Street Journal last year that exposed much of the same misconduct in disturbing detail, providing instances of a “sexualized, boys’ club environment.”

Major international banking regulations hang in the balance as the Federal Reserve works to implement what is known as the Basel III endgame, a series of reforms responding to the 2007-08 bank and insurance failures that will require banks to keep more capital on hand.

Republicans do not want the reforms to take place, and Fed regulators have considered scrapping and reproposing the regulations from the ground up.

Republicans started calling for Gruenberg’s resignation last year, with Senate Banking Committee ranking member Tim Scott (S.C.) and others telling him to step down.

In 2022, prior to the Journal’s investigation, Scott and then-Sen. Pat Toomey (R-Pa.) wrote to Gruenberg about “troubling allegations of racial discrimination and fears of retaliation at the FDIC under his previous leadership of the agency.”

Democrats also blasted the agency in the wake of the scandal, but some came to Gruenberg’s defense, arguing that the problems ran deeper than any one chairperson.

Top House Financial Services Committee Democrat Maxine Waters (Calif.) effectively accused the Cleary Gottlieb report of partisanship, arguing that it singled out Gruenberg and didn’t pay enough attention to other agency leaders.

“Unfortunately, the Cleary report diverts attention from the longstanding institutional challenges confronting the FDIC,” she said in a statement in May.

Problems with sexual harassment at the agency go back before Gruenberg’s tenure, suggesting that tolerance for bad behavior may be deeply set within the agency.

In 2020, while under the leadership of Trump-appointed FDIC Chair Jelena McWilliams, the FDIC’s inspector general issued a report warning that the regulator didn’t even have a clear definition of sexual harassment, let alone workable procedures for dealing with cases of it.

Rep. Bill Foster (Ill.) was among the first Democrats to call for Gruenberg’s resignation, saying in May that “sweeping changes must be made” to the agency to fix its toxic work environment.