>> senate banking, housing, and urban affairs committee will come to order. we hear testimony from three key regulators who see responsible for protecting your banking system and make sure it

serves all americans. the hearing comes one week after release the depended view on sexual harassment in workplace misconduct at the fdic. it may clear the fdic has serious long-running problems. for far too long if leaders leaders failed to take action to protect its most valuable resource, that is it's workers. the review details episodes of harassment, discrimination, and other misconduct that no one should ever have to endure, especially in the workplace and it could never be tolerated. period. this committee and the american people, clear answers and decisive action. that includes your plan for restoring fdic culture and regaining the trust of your employees. the steps you will take to put misconduct, and discrimination and ensure victims are not silenced. and how you'll ensure perpetrators are finally held accountable. the fdic can't fulfill its mission of maintaining

stability and public confidence in the nation's financial system until the issues raised in the independent review are fixed. failure is not an option. chair martin gruenberg, i hope you recognize this moment for what it is, a crisis. every employee in america deserves a workplace free of harassment and discrimination. the public should have confidence in the people of this agency so they can focus on the jobs. when workers face a toxic culture, it hurts the agency, mission, workers don't speak up when they spot problems if they are afraid of retaliation. is not a small, internal problem, it affects the public. most americans don't think much about the fdic. they shouldn't have to. that is the whole point. for people to have confidence the money is safe in the bank without having to give it any thought. that is why the job of this agency is so crucial. the fdic prevented the great

recession from becoming a great depression after the 2008 financial crisis. the fdic's action was crucial after the collapse of silicon valley bank and signature bank threatened to create a domino effect of bank failures. we need effective strong leader at this agency to ensure it's workers can continue to protect americans in their hard-earned money. chair gruenberg, it's up to you to prove to the public and to your employees that you are that leader and are able to restore confidence at fdic. the challenges at fdic only make it that much harder for the agency to focus on the crucial work it's doing along with the federal reserve and the occ. in the last year since the collapse of signature bank your agencies have helped make our system safer and more resilient. the fed, fdic and occ issued the capital proposal to protect americans from another financial crisis. we must ensure the largest banks have enough capital to prevent another text under wall street it bail up. and make sure things can

continue to lend to committees in good times and bad. the proposal recognizes systemic importance of large banks like silicon valley bank, not his big as wall street megabanks but can still do real damage to the economy when they fail. of course the industry and its allies on capitol hill have trotted out the same tired and well-funded arguments. the reality is the largest banks are telling shareholders and wall street analysts they can handle rules without a problem. they brag about how they have remained wildly profitable all the while comfortably meeting projected capital little -- levels proposed. if this sounds familiar, this committee hosted the seals from the biggest banks last fall. we have done it three years in a row. at a single ceo, not a single seal of the country's largest banks told us they would be unable to meet the capitals required under the proposal. that's whites imperative your agency finalize a strong rule

that protects americans and doesn't reward wall street's whining. also working to rein in the risky compensation structures that have time and time again brought our banking system to the brink of collapse. all street firms set up a system that rewards traders for exactly the kind of risky behavior that serves to benefit -- that serves no benefit to the economy and puts other people's money at risk. we saw in 2008. this model essentially tank the economy and ruined lives. we saw again with the failure of svb last year. this can't go forward without the federal reserve joining the process. the fed must know what's at stake. it's only report on silicon valley noted how compensation encouraged risk-taking which led to the bank's failure. michael barr, i look forward to seeing the fed join this effort as soon as possible. it is also why the senate must

past our recoup act, which this committee passed last year, ranking member and our staffs routed together to ensure reckless executives who wrecked their banks face accountability. finally we need action to address alarming trends in the banking industry. over the last decades we have lost thousands of banks of the largest ones have grown to control hundreds of billions or even out trillions in assets. a strong merger review process prevents banks from growing dangerously through acquisitions or mergers. americans can't afford mergers the pave the way for banks to take out competitors, close branches, lay off employees. we've seen that in louisiana and north carolina and south carolina and south dakota and ohio. and nevada. wall street bankers, the fdic

have begun to review the merger process, expect them to take steps to fix this. wall street bankers crash the economy in 2008. americans are paying for it more than a decade and a half later. is why the women and men who work at your agency remain so important. doing their jobs during the public free from harassment, workplace misconduct. you as leaders are responsible for what happened that the agencies which you lead. i expect to hear from chair gruenberg specifically and what you plan to do to make fundamental changes to the fdic and its culture. senator scott? >> thank you mr. chairman, pick you to the witnesses. there is no greater responsibility that we have as public servants to make sure we represented the interests of the american people and that we do it well and with character and integrity. no greater responsibility. responsibility starts here and now in addressing what your employees, chair gruenberg, described as a hostile, abusive and unprofessional workplace. chairman brown, i think we

actually need a singular hearing solely focused on the concerns of the employees of the fdic has with the leadership , and 22. because the men and women of the fdic, working to safeguard our financial security deserve a healthy workplace. they deserve to be heard. to be seen. they deserve a safe and equitable workplace. but most of all, they deserve to be treated with respect. we have all seen the 200 plus pages of the special report. we also yesterday mornings rolling across the capital. and you have heard me say this to you directly, you should resign. your employees do not have

confidence in you. and this is not a single incident. this spans over a decade plus of your leadership. at the fdic. so i don't need to go into your failures and the complete lack of management while you have been at the fdic. i want to talk about the people . your employees. and what they have had to go through. how can you justify allowing supervisors to refer to disabled veterans as captain mcnasty? we are talking about a veteran who lost part of his leg in service to our country. and to

work in a hostile work environment, where he is referred to as captain mcnasty is not just wrong, but disgusting. to think about the chilling reports that say employees, supervisors were permitted to mock the fact is employee used a wheelchair. what kind of environment and culture? and how long does it have to go on before it becomes commonplace to make fun of veterans who served this nation, at great

personal expense? or when an employee reported that for a period of three years, a senior examiner would sexualize her every time he could. and he believed similarly with other colleagues and bank employees including asking to see photos of their daughters and whether or not those daughters were single. but it's not just your management team. you yourself set the example when you were absolutely irate and attack your employee. or another fdc -- fdic employees saying they had a meeting with you and it was awful and felt very personal. that employees are made to cry, as if it's a badge of honor making your employees cry.

people, person after person, wanting to quit. others described your conduct as embarrassing and inappropriate. one person said, they will likely be demoted. and if this is what it takes, they are out. one thing i learned from running my own business is that if you don't take care of your employees, they can't take care of the customer. and the customers of the fdic, they are the american people. c-span2, -- chair gruenberg, you stated it doesn't matter if you believe if you can change the fdic culture, it matters if you believe the employees believe you can change the culture. they don't. whistleblower after whistleblower, employee after

employee. they have drawn the same conclusion, i would like to submit for the record a statement, mr. chairman, i like to submit a statement from a collection of fdic whistleblowers expressing their lack of conference in mr. gruenberg's ability to change the agency and doubt that he is the man for the job. leadership carries with it the responsibility of stewardship. your sheep are lost. in your fields riddled with weeds. in 2021 president biden worn his staff, if you're ever working with me and i hear you treat another with disrespect, i promise i will fire you on the spot. and he did. he fired the inspector general, martin dickman of the u.s. railroad retirement. for evidence he created a toxic work environment and engaged in

abusive treatment, including using crude and inappropriate language like slurs and belittling employees. i know i'm out of time. and the fdic and their special report describe you as harsh, aggressive, interacting with your staff in a demeaning and inappropriate manner, having a temper causing employees to fill disrespected, disparaged and verbally attacked. i can only conclude with one question. what makes you so different than the inspector general? is a politics? is at the fact that you are a necessary and easy vote for the biden administration's economic policy agenda? i think the answer is yes. >> thank you senator scott.

thank you for your remarks. i think we can agree that no public employee weather in the white house or the fdic should ever criticize or make fun of a disabled veteran. we will hear testimony today from the heads of three federal banking agencies. mr. barr , chair gruenberg, and michael hsu, acting comptroller of the currency, todd harper, originally intended to be here but is unable to join us due to extenuating circumstances. asked for his consent to enter his statement in the record without objection. >> my colleagues, thank you to the witnesses for your service and testimony, vice chair barr, please proceed. >> chairman brown, ranking member scott, and other members of the committee, thank you for the opportunity to testify about supervisory and regular

activities. accompany my testimony is the federal reserve's semiannual supervision and regulation report. today i will discuss current conditions in the banking sector, supervisory activities and some of our recent regulatory proposals. overall the banking system remains sound and resilient. banks continue to report capital and liquidity ratios above minimum regulatory levels. overall asset quality remains generally sound. capital ratios increased throughout 2023 leaving the system better positioned to weather potential losses. liquidity conditions overall stable. notably, the good assets on bank balance sheets remained above the 10 year average throughout 2023. additionally there has been a decrease in the share of uninsured deposits in the system. however, supervisors and banks must remain vigilant and ready for expected and unexpected stressors. is presently there are several risks we are monitoring.

for example, delinquency rates are rising among certain commercial real estate loans, such as those backed by offices, and some consumer loan sectors. cre delicacies are now 25 year high. credit card and auto loan delinquencies have been rising. in response to rising delinquencies, banks of increased loan loss provisions. on this basis, combined with our capital positions, the banking sector as a whole should be prepared to absorb loan losses that may materialize and continue fulfilling it's a vital role providing credit to households and businesses. the federal reserve continues to monitor these conditions carefully. it has been a little over a year since the failure of svb and ensuing stress in the banking system. events that highlighted the need to improve the speed,

force and agility of supervision to better align with the risk, size and complexity of supervised banks is appropriate. we have been making progress on these goals. first we are working to ensure supervision intensifies at the right pace as a bank grows in size and complexity. second, we are modifying supervisory processes so that once issues are identified, they are just quickly by both banks and supervisors. third, we are finding ways to better incorporate forward- looking risk analysis in supervision. lessons learned from svb are not only applicable to our supervisory framework, certain aspects of the failure show that enhancements to our regulatory framework would benefit the safety and soundness of our banking system. one of these enhancements was already in process several months before spv's failure. through advanced notice of rulemaking, expanding the application of that requirements to additional large banks. subsequently the board, the

fdic and occ followed up with a proposed rule that would increase the options available within the resolution process and enhance financial stability. we are going through comments now that we received on this proposal carefully. another important area is liquidity risk management. a striking feature of last year's bank stress was that svb, first republic signature struggled to cope with outflows. banks found it difficult to monetize their securities, repo transactions under severe stress and were not adequately prepared to utilize the federal reserve discount window. we are exploring targeted adjustments to our regulatory framework that would address each of these concerns. the federal reserve's lending to banks through the discount window plays an important role in supporting liquidity and stability of the banking system and the effective implementation of monetary policy. we are reaching out to a wide range of depository

institutions of all sizes to learn from their experiences with the discount window in order to improve our operations. turning to capital, a safe and sound banking system is crucial to a healthy economy. and capital is foundational to safety and soundness. a well-capitalized banking system reduces the probability that stressful conditions resulting financial crises. which inflict devastating economic cost and suffering for families and businesses all across the country. since my last testimony, we have received numerous and meaningful comments on our capital proposal. we also received additional data. we are closely analyzing this information and i expect we will have a set of changes to the proposal that allow us to have a broad consensus moving the proposal forward. the changes will enable us to have a safer financial system the better serves american households and businesses. thank you. >> thank you, mr. barr. mr. gruenberg, welcome.

>> thank you, mr. chairman. chairman brown, ranking member scott, and members of the committee, thank you for the opportunity today to appear before you today. i would like to focus my remarks on the fdic's ongoing efforts to transform its workplace culture. let me begin by saying that i am deeply committed to the fdic and its mission, as well as to the people on whom that mission depends. that is why when news reports of sexual harassment, discrimination and other misconduct surfaced last year, it was essential to gain a deeper understanding of the agency's workplace culture. at my direction, the fdic initiated an independent third- party review to determine the depth and extent of these issues. last week, the results of that

review, which was conducted by the law firm of gottlieb were released. the review found for an extended period of time, the fdic has failed to provide a workplace safe from sexual harassment, discrimination, and other personal misconduct. i accept the findings of the report, and as chairman, i take full responsibility. to anyone who has experienced sexual harassment, discrimination or other misconduct at the fdic, i again want to apologize and express how deeply sorry i am. i also acknowledge my own failures as chairman, both in failing to recognize how my temperament in meetings

impacted others. and, for not having identified deeper cultural issues at the fdic sooner. i am personally committed to addressing these issues. we accept all the recommendations of this report and are incorporating them into existing action plan for a safe, fair, and inclusive work environment. to restore credibility with our workforce, we must act swiftly on the report's recommendations and demonstrate the commitment to making fundamental change. for this reason, we have already begun implementing several key recommendations of the report. the report recommends that we identify and appoint a transformation monitor who will

monitor, audit and report on our implementation of the recommendations. we have already begun that process. and we will issue a request for proposals as early as this week. the report also recommends we engage an independent third- party expert to support our efforts. we have begun that process and will also issue a request for proposals as early as this week. the report recommends fundamental change to the agencies structure and procedures for receiving and investigating complaints and taking disciplinary action against misconduct in light of the failures of the existing offices that are delegated those duties. we will do this by proposing the establishment of an independent office of professional conduct which will report directly to the fdic board of directors. it will be charged with

fulfilling these responsibilities including through the use of outside third parties to conduct investigations. transformation monitor an independent third-party expert will advise us on this proposal. since december of last year the fdic has been focused on implementing its action plan to address all aspects of the issues raised in the news reports last year. the plan represents an agencywide effort. many of the recommendations outlined in the report recently received are already encompassed in the agencies action plan. the plan is focused around three core elements. providing more support and resources to victims. strengthening our process for reporting and investigating complaints. and improving accountability for anyone who is found to miss gage -- engage in misconduct.

the proposal to establish an independent office of professional conduct would advance all of these goals. it is my privilege to lead and work alongside everyone at the fdic. our people are extraordinarily dedicated to the agency and its mission. they deserve to have a workplace where all feel safe, valued and respected. there is no higher priority for me than delivering on that commitment. thank you. >> michael hsu, welcome. >> chairman brown, recommended -- scott, i am pleased to appear today to provide an update on the activities and priorities. the overall condition of the federal banking system is sound. occ supervised banks in aggregate continue to have strong regulatory capital insufficient liquidity buffers. risks from commercial real estate and exposure require

attention. one of my top priorities for the agency. the occ bank supervision operating plan for 2024 highlights asset liability management, credit risk and allowance for credit losses, cyber security, operational risk, consumer complaints risk is a key areas of focus. another priority has been promoting fairness in banking. this april marked the one year anniversary of occ guidance to assist banks in managing risks associated with overdraft protection programs. since the occ heightened attention began the overdraft fees charged by occ regulated banks in aggregate have fallen over 40%. adapting to digitalization has been a third priority. we recognized for instance the committee banks may face hurdles in risk managing their

third-party relationships including fintechs. earlier this month the occ, federal reserve and fdic published a third party risk management guide with examples of innovative approaches to conduct due diligence in assessing new fintech companies. the occ supports a diverse and dynamic banking system. continues its focus on updating our bank merger and analytical frameworks. we remain committed to working with art peers including the department of justice on this effort. to increase transparency, on january 29 we released for comment a proposed policy statement on bank mergers. we recently extended to june 15. my testimony provides greater testimony on these and other activities of the occ. is cochair of the fdic's special review committee, i would like to address briefly the recently released independent report on harassment and misconduct at the fdic. the top priority for us all must be protecting the staff of the fdic and putting people first.

harassment and misconduct detailed in the report are totally unacceptable. the number and scope of allegations, the patterns of misconduct, and the long- standing culture revealed by the review are highly disturbing and need to be fixed immediately. the root causes and recommendations cited in the report provide a clear roadmap for what needs to be done and why. that is where our attention must be focused to ensure the fdic is a safe workplace for all of its employees. is a member of the fdic board, i am committed to the transformation called for in the report. am especially supportive of the report recommendation to engage in external expert and establish an independent monitor to ensure the agency's efforts are tracked and that accountability is enforced. i also believe that chair gruenberg has accepted responsibility for his and the fdic's past failings and is fully committed to leave the

agency in taking the actions necessary to make it a safe place for everyone to work. thank you. i will be happy to answer any questions. >> thank you. chair gruenberg, you offered an action plan last year to fix agency the last week's report made clear more is needed. one concerning item is the third-party report some employees don't believe last year's action plan will bring real results. they said, they reported expensing or observing interpersonal misconduct by number of the managers currently participating in the action plan. pretty egregious statement. yes or no, can you commit to us today that you will review any accusations of misconduct against the managers, the managers charged with developing the action plan and take strong and appropriate action to hold them accountable. >> yes, mr. chair. >> what you say to employees who understandably, considering the years of history, what you

say to employees who don't trust the steps you're taking to reform the agency? >> mr. chairman, we are committed to implementing the recommendations of the report. and to making fundamental, structural change in the way misconduct is addressed at the fdic. most fundamentally, and i think this gets to the core of the issues raised, we have to cut the good old boys network that is serving as an impediment to employees coming forward and reporting experiences of abusive treatment. and we can do that by establishing a new, independent office at the fdic outside of the existing organizational structure, accountable directly to the board that would assume all the responsibilities for

dealing with misconduct at the fdic. that would include receiving complaints from employees. providing employees the support and protection and assurance against any concerns about retaliation that is necessary for employees to come forward. it would assure independent investigations of complaints by outside third parties. and, it was -- would impose a strengthened disciplinary process that would be swift and transparent and have only one focus. justice for the victim. and if we can do, when we do, those three things, that will make a dramatic impact on how

these matters are handled at the fdic. we have, as the report notes, existing offices with those responsibilities. those offices have failed. and we need to move to a new office outside of the existing structure that will provide the kind of independence and assurance that our employees need to hold individuals accountable for misconduct may occur. >> understanding your credibility starts by ensuring integers accused of wrongdoing are not allowed to police their own behavior. it starts with that. as you know, making the fundamental changes necessary to repair fdic reputation,

equally important the culture, is going to take input and action from everyone at the agency. how do you plan to engage regularly with the entire workforce, particularly employees who have reported discrimination and harassment and other misconduct to make sure you bring about lasting change and this little boy network you mentioned, the toxic culture? >> from the outset of our efforts last december, to address these issues, we have made this an agencywide effort. we have invited employees across the agency with expressions of interest to volunteer, to participate in our efforts to address this issue. we have had significant response from employees, both in washington, and in our regional offices. and we are committed, i think it is critical for employees across the agency to participate and have a sense of ownership in terms of our efforts to address these issues. i think that is critical and we have worked closely with all of

our employee resource groups. they have had direct input and participation in developing our action plan and in our response to the recommendations of the new report. this has been and will continue to be an agencywide effort. >> and that means you will commit to bringing all the major policy changes necessary to implement the recommendations of this report including steps you've outlined today to the board for input and approval? >> yes. the board will be the oversight and oversee the governance of this effort. expect i will be watching, this committee will be watching. senator scott will be watching. i was told some years ago, he said watch what i'm doing and make sure you know you are watching what i am doing loud and clear. thank you. >> thank you, mr. chairman. let me turn my attention to vice chair barr for a minute. i think the importance of basel three being re-proposed, i

think slicing it and dicing it and trying to figure out how to make some changes and put it back on the market, i think that is probably the wrong strategy and approach. it would be much better to have a full proposal allowing people to have another window of opportunity to actually have input in the process of the changes. frankly, basel three, fed, you, chairman powell, have made a prudent decision to take another look at the proposal. that is a prudent decision. i think a better approach is to actually put it on the market for comments so that more people have a better engagement in this process. anything other than that i think is nibbling around the edges and will not produce the type of product that is in america's best interest. thoughts? >> like you very much, senator scott. we are really focused right now on substance. we had a lot of deep and

thoughtful comments on the proposal. we're trying to work our way through that substance now, reach agreement across the agencies and with my board on the substance. after we are done with that process and understanding where we want to go, on the substance, we will then determine what process we think is appropriate if the re-proposal and zipping appropriate we will do that. we are not yet at the stage where we are thinking about precisely what process we will use. >> certainly, obviously you understand this, but for the americans watching c-span for reasons that go beyond my ability to comprehend, i think it's important for us to note that the capital standards of basel three impart so much capital on the sidelines that those americans perhaps watching c-span looking for the first mortgage have less capital to actually become part of the american dream, to actually earn equity in this nation by having those small

businesses that change my financial life and the life of my family specifically my mom by starting a business and being successful, that capital that allows folks like me coming from positivity to expense american dream, because you have the ability to get a loan, or capital on the sidelines, really is a way of disenfranchising more americans and not necessarily making the system more fair. thank you for your comments in the call and having a conversation about this important underlying issue that will have an impact on our economy. to chair gruenberg, the offices haven't failed. you have. it is that simple. an environment that is so corrosive, so talk to, that employees, i want to read this from the report, the level of intimidation that is embedded in the culture after a decade of your leadership, you can't

just unravel it. you can't unscramble that egg. going to classes and looking for ways to have anger management and solve that problem, if it takes a decade to recognize that, perhaps you need a whole few years away from the fdic to figure that out on your own. why punish the fdic and the american people? and frankly, the employees. here's a quote from one employee. "nobody trusts those in charge. and even though it is not getting into the hands of senior executives, i am using vpn and someone else's cell phone to write this. i still fear that talking to come back to haunt me. " those are chilling words. i have so many complaints and concerns through the report, but it's hard to read them all.

a field office supervisor had romantic feelings for her, and would send her flowers. he would demand to know who she was talking to and what she was talking about. he called and texted her at work and at home. during mandatory telework he would insist that she stay on teams, team videos for hours on end directing her to leave the video on and she left to use the restroom. she became so fearful, she went to the police and considered seeking a restraining order. she hesitated to file a complaint with the fdic because she believed the agency would believe him over her if she reported it. eventually, when she did work up the courage to file, she said managers dismissed her concerns, the report concludes, she continues to live in fear.

you have 5000 employees. plus, the strategy is to give them more pay, more promotion, and to transfer four folks may be in leadership. if after a decade of toxicity and corrosion, 5000 employees, the best we can do is find a scapegoat, shift the blame, you should resign. >> thank you, senator scott. >> thank you mr. chairman. thank you for being here. i'm going to focus my questions today with chair gruenberg. i appreciate you coming in to visit with me. let me start here, and you're hearing this constantly, this is an opportunity to do right

by the employees at the fdic. there most 6000 employees at the fdic, and there is no doubt that an environment, a workplace that has long-standing misconduct, harassment, discrimination and lack of full accountability at the fdic is absolutely unacceptable. now here is the concern i have. this is been long-standing. this is been long-standing, and words are not enough now. you can come here and testify and talk about what you want to do, but we have heard it before. i have heard it under previous administrations, previous chairs and previous leadership. in fact we have a previous report the came out that absolutely, from the office of inspector general, july 2020, identify these issues, recommendations were made, and i will say, even at that time

the leadership, it wasn't you, the leadership at the fdic questioned some of those recommendations. fast-forward, we still have an issue. it is not just about structural change, it's about a workplace culture we need to address. i do believe that if you're paying attention to what is happening here and you have read the analysis and report and the recommendations, there is a clear imprint for what to do. our goal here, and mine, is to hold you accountable. the entire board and leadership. because now is the time to focus on the employees. and their workplace. let me just say this, the root cause analysis, lack of accountability, failure to hold employees accountable for misconduct that was addressed in the previous report and hasn't been addressed, employees who alleged to have engaged in misconduct failed to

face consequence, fear of retaliation -- that is just the structural changes we need to make. now we have workplace issues. let me just say, the workplace culture has to be addressed. and you are going to have to come forward and tell us how you're going to do that. let me just note this, though, in the report it notes that the fdic and its leadership have not sufficiently focused on and prioritized workplace culture. historical efforts to address it have not been sustained in any way to make lasting changes. is not the case, as some have expressed, the problems related to the workplace culture, including with respect to sexual harassment, only came apparent through the recent media reports. there have been prior culture change and improvement initiatives that the fdic has instituted in part because of some of the issues identified in the report going back to

2008. this is a systemic failure over the years. over the years. and it is time to take action. ice -- my first question to you is based on the recommendations from this report, do you anticipate, and i hope you say yes to everyone, that you're going to implement every single recommendation in this report. one of the recommendations to address the cultural transformation is to hire an independent individual to monitor and audit any recommendations the fdic adopts. to agree to that? okay. secondly, there is also a recommendation that the fdic should retain an independent third-party was substantial and credible experience in the topics uncovered by this report

to advise in the implementation of the recommendations. that is a separate independent third-party. do you agree to that? >> yes, we have begun the process of implementing both of those recommendations. >> so how do you anticipate cash let me ask both of you, mr. hsu, you are on the board. how you anticipate, not just the cultural changes , excuse me, the structural changes you were talking about, how do you anticipate changing the culture? this is not about words anymore. this is about showing action to the federal employees there that you are doing something about it. what are you specifically going to do? but if i may start, and then maybe mike could add. those are the hardest, because you have to change people's attitudes and behaviors, which is the hardest part of this work. i believe the structural changes are critical, both in independence and giving employees a sense of confidence and protection to utilize them.

we have a key additional structural issue which is the decentralized nature of her organizational structure with 3000 banks we supervise, 70 field offices around the country. but let me ask you this, have you held any person accountable so far? >> four employees have been separated this year and we have made management changes and as a result of this, establishing a new office, there will be additional management changes. we have started a program of training, in person training for all 6000 employees at the fdic. we began with the managers of those 70 field offices, which is, in some sense, the locus of the issue. we have had all of our senior executives, including myself, go through that training. we are now working through the rest of our workforce. by november of this year we will complete the in person training. for every employee. so at a minimum will have a

baseline of understanding for every employee, what is sexual harassment, to recognize it, -- >> i appreciate that but it's more than just training. >> i understand. >> it is more than just training. that is the start of it. you've got to do more. and going over my time. this is such an important issue. mr. hsu, you are on the board, what are your thoughts on this, it has to be change in the culture. it's more than just training. >> it is imperative that every single recommendation be carried out in full in a timely manner immediate. and those have to be actions that are credible to the staff of the fdic. in particular the fear of retaliation creates a cycle. because if there is a fear retaliation there is no reporting. if there's no reporting, there is no action. this is a very clear report. i agree with you, it's all dependent on actions and

outcomes. that is where focus has to be. >> i am done. i'm just going to say this, the should be the last report we deal with on this particular issue and we are going to hold you accountable. the entire board and management at fdic, you need to make changes. this is something that clearly has happened over years and decades, unfortunately, but it's time to make the change and we need to hold you accountable, for my perspective i'm not going to let go. this has to change. has to change. >> thank you. >> thank you, mr. chairman. mr. gruenberg, yesterday my house colleagues, antedate my senate colleagues have all been taking you to task on how under your 19 year tenure you failed to protect employees and create a cultural -- culture of professionalism at the fdic. instead of that, your agency is known as a place that fosters a

culture that is, in their words, misogynistic, patriarchal, and outdated. a place where favoritism is common in senior executives with well-known reputations of inappropriate workplace behavior enjoy long careers with no consequences. you, in fact, are one of the senior executives who have subjected employees to bullying and your explosive temper, which are detailed in multiple pages of this report. 9192, 93, 94 are all included. and yet you have faced no consequences. culture starts at the top. those aren't my words, mr. chair, those are the words of the employees at the fdic. and

you can read that on page 6 of the report. your employees clearly have no faith that you can meaningfully lead changes at the fdic. and quite frankly, neither do i. i think that you should resign for the good of the institution. mr. barr, in agreement with the chairman powell, you have stated on page 5 of your written testimony the you expect a series of broad material changes to the basel iii and gain proposal. i think, myself and many members of this committee, would welcome that. do you agree that each section of the proposal covering all three risk strikes, the market risk, operational risk, credit risk, that they need broad

material revisions based on the comments you had received? >> yes, i think if you look across all three areas, i do expect some significant changes in the proposal. >> and by definition, material in this particular case does mean significant change. would you say the commenters that have made, and there has been a lot of comments made, you think they would be able to anticipate all the changes you are considering? >> we are going through the substantive work now. if we find an area where the administrative procedures act would suggest we haven't met that standard, that would be one of the factors we think about about process going forward. but right now we are really just focused on the substance, making sure we get the substance right and then we turn to the question of, what is the right next step in the process ask >> it's fair to say, and i believe probably 87% of all the comments that you received were not favorable to the proposal that you are making. the vast

majority wanted you to eliminated or wanted substantive significant changes within those proposed regulations. would that be fair to say? >> i haven't done that calculation. i have heard that number reported before but i haven't myself look at that. >> the reason i'm asking the question, and i think you are on it, you may very well have to withdraw and we propose that proposed regulation if these are significant changes so that there could be other comments made in the future. would you agree with that? >> as i said, we haven't reached the question yet of what the right process is. really focused on the substance. we are working our way through that. after we reach a conclusion about the substance we will turn to the question about what the appropriate process is from that point on. >> but you do expect, i think

is both you and the chairman have indicated, that you would probably have significant changes to the proposal. >> chair powell and i have both said we expect broad material changes. >> i noticed you indicated that would require or trigger additional administrative or actions under administrative procedures at this time. >> what i said, senator, is that we haven't made a decision about the process. we will follow the administering of procedures act and take care whatever the appropriate process is but we haven't reached a judgment about the process at this time. >> and curious, i think yesterday with the house financial services committee, you indicated that policy changes to the proposal, as you've indicated here today, they haven't been finalized yet. but as you go through and are trying to identify this, has there been a framework or a term sheet or some sort of of a layout laying out the different contours and changes that other

agencies you're working with have been able to see and work over? are and put it out for the public to comment, then we welcome as we have in this instance, comments from senators and members of the house. those comments that we get are part of a review when we evaluate our proposal. >> this may be for changes and it would be appropriate for the oversight committee to at least have access to the questions or at least if there is a

worksheet of some sort, it seems that it would be fair game to share with us, as well. >> the normal process is to conduct it the way that we are. i expect that we will continue to conduct it according to the normal process. >> thank you. >> senator from virginia is recognized for its >> thank you, chairman. i will not echo all of the comments that my colleagues have said, but behavior has got to change and it needs to be a meaningful plan. i think some of us with full comments or calls the way some of my colleagues have, the plan has to be incredible and we have not seen that so far. i also want to on barr , i have written you separately on the record and i think the reason there has been such pushback is

that early on, there was no evidence based documentation on what would be the cumulative effect of these rule changes. in terms of credit availability. i hope that before the final rules come out, you will make those estimate -- estimates public. again, we need that from an oversight standpoint and i do hope that there will be an evidenced based indication of the risk and benefits of these proposals. i know you are going through a reworking process and it has caused lots of consternation. we have talked to you and others about this. wherever you come in, we need that evidence-based approach. i don't think it was there in the initial proposal. this will be mostly directed, miss -- i mostly have gruenberg

and barr. i think one of the things as we deal with thinking about a structure for our banks and particularly around liquidity problems and the way we solve, really have taught us that the notion of stability deposits and notion of runs that we are way behind where technology has taken us, obviously we need to make sure that we have the ability to prevent temporary liquidity issues from turning into crisis is -- crises. i have shared this with my colleagues and committee. the beginning, the discount window was set up exactly for this circumstance. what we have seen recently is very rarely played that role. i say this to my colleagues on

both sides, i have been talking to some of my republican colleagues and welcome the democratic colleagues, as well, to reform the stigma that goes about utilization. i think this really ought to be back into the beginnings of the fed, more often used tool. now, the bill will implement a mandatory test borrowing with different tiers and exemption for those institutions under the dollars and assets and other safeguards on small depositories. it would also require that institutions demonstrate that they can use the window. the svp didn't even have procedures set up. give regulators -- allow them to give proper credit in liquidity evaluations for institutions that do that. i think we need to look at how

we keep the liquidity window open at a longer basis and wide- open on how we can do other things to try and remove the stigma issue. try to promote a more harmonized process across the federal reserve banks and better coordination between the fed and home loan bank to make sure that we can get this right. i got your colleagues comments on this. we have had a private conversation on this, but i would like you to share whether you think this kind of approach in terms of making the liquidity window d stigmatizing it and making sure that institutions know how to use it and modernizing it. that would be a step in the right direction. >> absolutely. i think it helps for a step back and remember the problem we are trying to solve, which is that bank runs are faster. because those are faster, that ability to be able to use the

discount window when a bank has appropriate amounts of collateral to be able to do so in a safe and sound manner, it is critical. we are happy to continue engaging with you as to how to frame that. it is tricky. it is a tricky problem to solve, but we are committed to working with you. we do need to solve this. we will address the speed of bank runs. >> i have invited my colleagues to join me on this. before we start adding new moves, we have to make sure that some of the tools set up in the first place are more fully used. thank you. >> senator from louisiana is recognized. >> i hope senator al franken is watching today. if it weren't for double standards around this place, there wouldn't be any standards at all.

mr. gruenberg, have you ever heard the expression , a fish rots from the head down? >> yes, senator. >> listen carefully to your testimony. understand to assert that you believe you are the person to clean up the fdic? >> i do, senator. >> do you also believe that elvis is alive? >> not to my knowledge, senator. >> do you believe in bigfoot? >> no, sir. >> have you read this report? >> yes, sir. >> you have been the fdic chairman in the left 13 years. >> yes, i have.

>> you have been there for 20 years? >> yes, sir. >> this has been going on for decades. has it not? >> i think the report makes that finding, senator. >> did you leave the part of the report where one of your supervisors describes one of your young female employees as being quote, like a grizzly bear with tips? >> i have read the report. >> did you read the part where one of your supervisors ask a young female employee quote, does your husband eat you? did you read that? >> i have read the report. >> did you read the part where one young employee was

supervisor sent a text saying, get naked. did you read that? >> yes, sir. >> did you read the part where one of your supervisors turned to one of your hispanic employees and asked him to recite the pledge of allegiance to prove that he is an american? did you read that? >> i read it, sir. >> you are not going to be able to clean up the fdic. you will be too busy defending herself in court. i'm going to introduce a bill to extend the statute of limitations to allow every employee at the fdic to file suit over the sexual abuse and sexual discrimination and racism . you will be spending more

time in court. now, the report doesn't think you are the person to clean up the fdic, does it? >> i don't know that it reaches that conclusion, but it has critical comments in regard to me. >> ed says that even your senior leaders feel quote, disrespected, disparaged and treated unfairly by you. did i quote that correctly? >> i have read the report, senator. >> it goes on to say that your long tenure and reputation for losing your temper and bullying people quote, presents unique challenges for you to change

the agency. did you read that? >> i have. >> it also says, questions whether you have the moral authority to do so. is that correct? >> i have read the report. >> you fixing this agency, gruenberg , is like asking baldwin to conduct a course in gun safety. you ought to be ashamed of yourself. mr. hsu, you better -- ought to be ashamed of yourself trying to defend this gentleman. have you ever read a worse report, gruenberg , in all of

your years? >> it's a bad report. >> it's bad. i could go through the report and i'm embarrassed to read some of these allegations. these folks on the first row behind you, are they fdic employees? >> some of them are, yes. >> would you like to turn around and apologize to the female employee sitting behind you at the fdic. >> i have, senator. >> would you like to do that now? >> i think you should. >> i apologize. >> now, i think you should resign. i'm done.

>> thank you, mr. chair. it is ironic to me that my republican colleague thinks that chair gruenberg can't do his job because he will be in court when the candidate --'s candidate for president is currently facing multiple indictments and is actually in court. chair gruenberg, as i said to you as we last spoke, i think it can be your legacy to repair the damage that has been done to employees at the fdic and knowing the agency as you do, you have the potential to make changes that need to be made in this agency for the good of everybody there and the agency that i do believe that you care deeply about and we all hold you accountable to that. i want to direct a question to you and everyone on the panel. this is to do with what is

happening with insurance -- home insurance rates surging across the country. have seen the rates surge in recent years. rates surge in why is this happening? it is happening because of more bigger and disruptive and frequent severe weather events. this is the cost of climate change and it is hitting homeowners hard. recent study found that 97% of catastrophic losses to homeowners in 2022 were caused by hail, wind and weather related events. you are probably thinking that it is a big problem for states like florida or louisiana or south carolina. of course, it is. it is a huge economic problem. you may not know that it is a huge issue in the midwest from 2016 to 2022, my home state of minnesota incurred the highest lost cost of any state for severe weather events. what does this mean? insurance companies are not keeping up and the cost down to

homeowners in the form of massive rate hikes and improvements of properties. worst case, they lose their property insurance. my question is is, obviously property costs are an issue for homeowners, but it also seems like it could be a big issue for financial institutions will need to manage risks. would you agree with that? had you see this issue pending out as a systemic risk? >> it's an excellent question. we look carefully at the way that the largest banks are managing these risks. we recently went through an exercise with six of the largest banks to understand their risk management. one of the things that the banks learned through that process, many of them is that they do not have complete information about how their properties were covered or not covered by property and casualty insurance. that affects losses to the

banking sectors. it is quite a critical issue. >> the prospect of trillions of dollars of properties becoming uninsurable because of the risk seems to me to be something of significant concern and i think it's very important that you look at this issue and think clearly about what it might mean in terms of systemic risk. i also want to ask about the community reinvestment act. recently, the finalized updates were important and long overdue , so i am dismayed, of course, that the rulemaking has been struck down by this activist judge in a case where plaintiffs were clearly shopping for a friendly judge. i'm not asking you to comment on that and i understand that with petting -- pending

litigation come you can't comment could i wonder if you can clarify on the rulemaking itself. it is true that this was the first update to regulations in 29 years. is that right? >> that's correct. >> there has been many significant changes. the big shift to mobile and online banking is one example. >> yes, senator. >> these new roles take into account how remote lending works. is that correct? >> yes. >> is a true that these new rules are not overly inclusive? they don't pull in community banks, but largely operate locally. >> the particular provision with respect to outlined lending areas refers to banks that don't have large branches, so they are doing remote lending. >> thank you. i think it's important that we understand that the tailored

approach has been taken with the roles that reflects the realities of the banking today and i hope that they will be allowed to go into effect. thank you, chair. >> thank you, senator smith. senator of tennessee is recognized. i will give you five extra seconds. >> vice chairman barr, i understand that last week you spoke to graduates of american university and i would like to call up part of your marks for the group today. quote, when things go wrong, it is your responsibility. it's not someone on your team's fault and having the ability to not point the finger at other people and point it at yourself and understand that you are accountable and responsible is an important part of being a leader. does that advice extend beyond college graduates to leaders of federal agencies? >> yes, senator.

>> i agree. when the team or agency, serious decisions have to be taken. they are decisions that will provide a stark test of what leadership is. i would like to turn to gruenberg to talk about accountability and leadership. during the independent investigation of your agency, roughly one in 10 fdic employees reported quote, experiences of sexual harassment, discrimination and other interpersonal misconduct. that is just the sheer volume of complaints that generate serious managerial issues. this is shaped by years of senior management. the report says, culture starts at the top. you have been at the fdic for nearly 10 years and 10 of the past 13, you have let the agencies.

if the fdic's culture is the problem and you have established the culture for nearly two decades, how could you possibly be the most capable person to fix this? >> senator, i have indicated and take full responsibility. i have also indicated that one of my failures was not recognizing the cultural challenge that the agency has previously. since last december --. >> you have been there for 20 years. i don't know how you can't recognize it. >> when the reports came forward, we have devoted all of the resources in an agencywide effort to address them and i have indicated in the third- party report last week as a result of my direction to have an independent third-party review look at the agency in

hope of washington to try to develop and an in-depth understanding of the nature that the challenges the agency has. >> just yesterday, concerned about this report that emerged and contains a statement from the fdic employees that says -- these are employees across the political spectrum and don't believe the current leadership can affect the changes. they even left it unsigned, because they are a phrase -- effort of reprisal. that is one of the issues we are trying to address. leadership is necessary to do it and they don't believe you can provide it. this is extraordinarily hard for all of us to understand and i want to ask a different question. if you were to resign your role, who would take your place? >> under the statute, the vice chairman would become acting chairman. >> is he a republican? >> i believe so. >> we are getting to the core

of what's happening. this is what's going on. just yesterday in a house hearing, presented the presley for massachusetts sent the quiet part out loud. she said that if you were to resign, it would quote, jeopardize critical regulations pending finalization at this agency. let that sink in. the need for immediate leadership change is so obvious . the independent report is beyond disturbing. it describes abuse, discrimination based on race and , uncontrolled anger and retaliation. it reports instance of sexual harassment and that occurred at the so-called fdic hotel across the river in virginia. it is truly remarkable that anybody on this committee will be willing to ignore this report in what it so obviously requires all for a few regulations in the federal reserve. does the me to move it have

exception? is saving your job more important than protecting staff and integrity of the agency that you lead? >> senator, i hope -- have no higher priority than protecting the issues. >> they don't believe you can do it. i don't believe you can. >> i believe we can. we have been working on it and it has been an agency wide effort. >> this is the most damning report i have ever seen. i can't believe they are willing to brush this under the table to get a regulatory agenda passed. >> senator butler of california is recognized. >> thank you, chairman, for holding today's hearing. thank you to all of our witnesses. first, i want to know and appreciate gruenberg and number of conversations that you and i have been able to have and i want to state again

that the findings of this report are deeply disturbing and unacceptable. as has been noted from everyone today, these are cultural challenges and experiences that have been happening for decades across multiple administrations, republican and democrat. the examples that have been provided to the godly report are truly jaw-dropping. women, people of color, lgbtq employees among others have been harassed, abused all during their employment. you have heard from my colleagues that we are expecting more from you. we expect that you will be doing the work and taking the

steps to write and restore the credibility of the agency. i also expect that my colleagues from both sides of the aisle will be consistent in their commitment to investigating and holding perpetrators of sexual harassment to account and abuse, whether they serve at the fdic or seek to occupy the oval off this. it has been interesting and perplexing to listen to my colleagues mentioned the notion of double standards, but also experience how they have not and will not call out the behavior of the former president who not only is in court today, but finds himself having already been found liable for sexual assault. it simply cannot be that this behavior is disgusting and

unacceptable for a manager at the fdic , but willfully ignored and therefore excused for a person who hopes to actually be the next president of the united states. what incredible hypocrisy. i do have a question for you, gruenberg, on the report. as i noted, one of the tragic element of the situation is unfair it sets us back. what are your specific effort -- efforts as part of the action plan that speak to those women and people of color and members of the lgbtq+ community that the fdic is a safe place for them to work? >> thank you, senator. that is an important question from my standpoint.

as part of our action plan as you may know, we have a task force of female leaders at the fdic developing a strategy for strengthening our recruitment efforts specifically for women and employees of color. they have been working diligently and it's a supplement to our existing efforts that we have had extensive recruitment efforts with a priority of mine since i have been at the fdic to expand diversity and inclusion at the fdic and it is a core objective of our action plan. >> thank you for that. i have noted to you in our previous conversations that in my opinion and experience, plans are only valuable when they make their way off the shelf. an oversight that is required, i would expect that we would

hear from you, the monitor, and other independent oversight agents that you are employing as part of the report to be back to this community, whether formally at the table or in writing frequently as the implementation moves forward. mr. barr , would like to offer a question moving from my responsibility as a national representative here to truly focus in on people of california. wendy silicon valley bank failed in march 2023, millions of dollars in loans for community projects, including affordable housing projects across california were jeopardized. after persisting -- purchasing committed to expanding its community support in california, including the provision of community reinvestment grants for an affordable home subsidy program

. can you talk about how the fed has been working with the san francisco branch to ensure that the supervisory failures are actually moving forward in your way as an oversight to ensure that the commitments to those affordable housing projects are being followed through? >> thank you. we are taking several steps to improve supervision, including to make sure that our risk profile feeds into the way in which institutions are supervised, so that as they grow in size and complexity, they are supervised more intently. we are working on escalation framework to make sure that matters are escalated promptly and that banks and supervisors take action quickly when that happens. these are the kinds of measures that we are undertaking to make sure that supervision is improved in the future. >> thank you, senator butler.

>> thank you, chair, for hosting the hearing and things to the three witnesses for being here. i know that most of my colleagues have focused their intention on the report as a pretty troubling personnel management over at the fdic from sexual harassment on down. i share the concerns. what i want to focus on is whether some of the problems identified to fdic actually make it harder for the fdic to do it's very important job in our financial system. something i focus on and as you know in our private and public conversations, we have a massive problem and a divergence in public information and reporting on the failure and how it was sold to j.p. morgan.

unfortunately, we also have a troubling forthrightness about underlying justifications for why j.p. morgan was able to allow to purchase first republic or instead of another option, more specifically liquidation. i want to drill in on some. in public in some of our conversations, you have said that the difference between the loss -- if first republic went to j.p. morgan, the lost spread was $20 million. is that correct? >> that was one estimate. >> other estimates that have been out there have the loss ratio or loss spread at $1 billion or substantially smaller one of the things i did and one

of the rare acts of bipartisanship on the banking committee is that we sent your office a letter trying to better understand what estimates and data points went into the least cost analysis that you use our gift to ensure that j.p. morgan was allowed to buy first republic bank. now, what was the trend -- fdic's steps? dear member that? >> not apparent, but we would be glad to follow-up. >> fdic staff turned over information that suggested your estimate for the single-family residential portfolio first republic . the loss was $30.3 billion. obviously, a massive amount of money. now, based on information that my staff has uncovered sometimes with cooperation and sometimes, gruenberg, absence

and cooperation of the fdic, we believe that there is a good amount of evidence that the actual loss in first republic single-family residential unit was actually closer to 11 or $12 billion. in fact, the number of banks who made inquiries thought it was closer to 11 or 12 billion dollars. if you think that the loss in that one portfolio was $30 billion and the actual answer was more like $11 billion or $12 billion, would that lead to significant difference in how you evaluate the least cost test? >> i don't know the offhand basis for the two estimates. we have to evaluate that. >> one thing i want to drill down on is your estimate for the liquidation was $16.2 billion and j.p. morgan acquisition was $13.6 billion. that is a difference of less than $3 billion. if you assume that the loss in

the residential portfolio was $11 billion or $15 billion instead of $30 billion, then the test would lead you to the. chair gruenberg, why haven't you responded? why hasn't your staff responded to so many of the inquiries that we have made? some of the information that i read back to you is based on conversations with staff and some of it is based on conversation with thanks -- banks or other offices , because the fdic won't answer our questions. to make this point more specifically, i worry that the culture you created at fdic makes people terrified to answer honestly. if they are not answering honestly, it's impossible for us to do our job of overseeing the regulation that you do in the financial sector. why haven't you been more forthright in some questions? are you ignoring us or waiting

for more time? this is important. i would like to know what happened. your agency won't give me the answers. >> i appreciate the question and as you indicated, we have had exchanges. i believe that we try to respond in writing to the questions you have raised. if they have not been satisfactory, i'm sorry. we are prepared to engage with you and your staff further if that would be helpful. >> certainly and i would appreciate that, but just to recap and i know i'm over my time, so if you would, just give me a minute here. to recap, in march of 2023, you and treasury secretary worked with j.p. morgan to inject $30 billion into first republic. it was in complete failure. one month later, first republic failed anyway. you allowed the concentration in the financial sector to purchase first republic based

on a wildly office-based estimate of some of the loss that existed. when our office tried to get information to better understand, very often we have been steamrolled. if that doesn't suggest a problem in the culture of the fdic, i don't know what does. i certainly would love to work with your staff on this. i don't know if you would share that commitment. >> senator of maryland is recognized. warnock of georgia is record test. >> thank you so much. i appreciate the kindness. thank you, chair brown. chair gruenberg, when we spoke last week, i was clear with you that i find this report deeply disturbing regarding the workplace environment at the fdic and the kind of harassment that employees

experience there. among other concerning, the sexual harassment that happens there and culture that didn't seem to push back hard enough. racial discrimination reported by many fdic employees . when we last spoke, you told me that you were unaware of these allegations. that was until the wall street journal was published in november 2023. i am confused about the timeline and how that's possible. can you clarify this for me? what aspects of the toxic culture for you unaware of? what did the wall street journal shed light on? >> thank you, senator. i was certainly aware that the fdic has processes for

employees to make complaints, have them invest a gated and disciplinary action result ends -- if misconduct is taking place. i acknowledge that this was a failure on my part. what i did not recognize was that there was a deep-seated workplace culture at the fdic underlying this. prior to those in his report, i did not recognize that. those news reports brought that to light. when those reports came forward, we immediately took action. i requested the third-party review to get an understanding of the issue. that has just come forward and we have the detailed action plan we have been working on since last december, but the

cultural issues that are at the base of this have been discussed and i have not appreciated. >> it is clearly a culture issue and deep-seated. not only has this workplace sexual harassment and racial discrimination not been discouraged, one could argue that it has been encouraged when you consider the response. it is clearly concerning to me and anybody looking at this from 2015 to 2023 of the 92 harassment complaints made through the fdic anti- harassment program, not a single one resulted in removal. reductions in greater pay or any discipline more serious

than a suspension. of those 92, just two resulted in suspensions and blood as a reprimand. one could argue that this encourages harassment, which is a serious issue. the fdic clearly needs a cultural shift to be an effective regulator with the important work that we count on you to do. the reporting following lester's regional banking crisis detailed from the fdic and your agency admits that it is persistent staffing shortages that have harmed the ability to supervise banks but it's not a nice place to work for a lot of folks. you can succeed if your employee is expecting a toxic work environment. i will have more questions for you to answer in writing, the pastor of the fdic -- financial institution and consumer protections subcommittee, i want to ask

about accountability going forward. this report offered multiple recommendations and all of which you have accepted, but i need a commitment from you to provide me and my subcommittee a written progress report and breathing these recommendations within the next 90 days. >> thank you so much. is important that we remain vigilant. thank you. >> senator from alabama is recognized. >> thank you, chairman. let's get to it. as a woman, the findings of the fdic report are particularly disturbing . hundreds of instances of gender discrimination, unsolicited sexual advances, harassment, assault and faculty being promoted after having children.

let me repeat that individuals within the united states agency denied opportunities for women because they chose to have a family. one employee recounted being told by her supervisor, you are a mother now. you don't belong in the workplace. that is completely and totally unacceptable. in the 232 page report, i do want to point out a few things. in 2013, opm analysis said, the culture of the ftse permits this clinician and in group favoritism and relationship promotions and job assignment. mr. gruenberg, who was the chair of the fdic in 2013? >> i was, senator.

>> yes, sir. in 2013, a female employee was sent an explicit photo by her supervisor and she didn't report it after being warned quote, you don't report. you don't say anything, because he end up getting fired. mr. gruenberg, who was the chair of fdic in 2015? >> i was, senator. >> a subtle and not-so-subtle bias against women in the fdic and women whose god or dare to ask a question. this woman is going to dare to ask a question. mr. gruenberg, who was the chair of the fdic? >> i was, senator. >> i could go on, but you get the point. the fdic was created to promote confidence in the american financial sector. mr. hsu, do you believe that an agency described as misogynistic, abusive, toxic

and still -- instills trust and confidence in the american people? yes or no? if it is described as that and you have said that you like this was an unbiased and nonpolitical report and i have read your words, so my question to you is, do you believe in agency described as misogynistic, abusive or toxic instills trust and confidence in the american people? >> the issue suit highlighted. >> if that is the way thing is described, the answer is no. can you say no? can you do that? i heard you earlier. this is really disturbing. i didn't expect to have to go back and forth with you on this. it's an easy answer. if an agency is described as those things, the answer is it does not instill trust in the american people. it does not create a culture where women feel like they want

to work there, can work there or can succeed. there is a competency issue at the fdic. when you just heard senator warnock talk about the brain drain, it is because of the culture. what woman would want to work under these circumstances? the answer is zero. if we want to create a place where women can thrive and feel like they can balance having a family and contributing to the greater good, it is an honor to look at any of the places that you all work and the answer to the question is no. let's try this again, vice chair barr. do you believe that the agency described as misogynistic, abusive or toxic instills trust or confidence in the american public? >> problems in that report are deeply troubling. >> no. do you agree? >> i agree that the agency has deep problems that they need to resolve. >> this is really frustrating. chair gruenberg, you have been

either the chair, acting chair, vice chair for 15 of the last 18 years. i guess those three things, then three years you want one of those, then you were a member of the board. >> yes, senator. >> as fdic chairman, your responsibility to day-to-day management of this organization as the vice chair is to advise the chairman and the board is to ensure the day-to-day operations of a qualified management. it is clear that we need wholesale change. i hope people will stop putting your career love -- about the. people it is in order to restore confidence and it

starts at the top. we need to change. the american people deserve a change and the fdic was actually created to give them confidence in the financial system and we need a wholesale change starting at the top. >> massachusetts is recognized. >> thank you, chairman. everyone deserves a workplace free of discrimination and harassment. chairman gruenberg, republicans have called today for your resignation are engaged in purely political exercise. they want to replace you with vice chairman travis hill who was the right-hand man to your republican predecessor who allowed the culture problems at the agency the fester. your resignation would do nothing to improve the toxic culture at the fdic, but it would give republicans a veto over bank policy. culture starts at the top and it is your responsibility to fix this.

do you commit to implementing all of the recommendations from the action plan and independent review? >> yes, senator. >> we will be watching you, so you can keep your word on this. let me return to the purpose of the hearing. 2023 was the biggest year for bank collapses in our nations history. in the span of two months, we saw the largest bank failures ever. each of you has unfinished business needed to strength in our financial rules and prevent another crisis. first, executive compensation. the ceos of the banks that failed walked away with millions of dollars after they ran their banks into the ground. the fdic under chair gruenberg leadership and the occ under acting controller hsu have finally revived a rule that would reform ceo pay packages, so they do not advise --

incentivize risk-taking. vice chair barr, will the fed follow the law and join the fdic and occ's proposed rulemaking on incentive-based compensation? >> we are committed to following the law to have an implementing role under section 956 that we have further work to do. >> let's get it done. your deadline passed 13 years ago. i hope you do not allow chair powell to stop you from following the law. let's take a look at mergers. your agencies have allowed the industry to create more too big to fail banks than ever. active controller hsu, the new proposal on mergers said nothing about how the occ will evaluate the impact on competition, which misses the point. will you strengthen your proposal, so that it actually

addresses competition the way the fdic's proposal does? >> we are working with the fdic and doj tour, and we are committed. >> i think it's really important that we get this done. vice chair barr, the fed has not put out an update on mergers. when can we expect them to follow through on the president's executive order to strengthen bank merger guidelines? >> we are working with the fdic and occ on the department of justice on the matter. i don't anticipate as putting out a separate proposal on this. we are working with the other agencies. >> we have to get this done. finally, bank capital. these giant banks threatened the entire economy when they collapse. strong capital requirements allow them to better absorb shocks without being a bill out from the taxpayers. they

released proposal to strengthen capital requirements on the 37 biggest banks, but the lobby has launched an unprecedented campaign to weaken it. vice chair barr, are you committed to finalizing a strong moral -- will this fall? >> i am committed to doing that. >> chair gruenberg, are you committed? >> yes, senator. >> are you committed, hsu? >> yes. >> good. i will hold you to be accountable for finishing your unfinished business. the american people need to get this done. >> senator recognize from montana. >> thank you. >> president biden said in that quote , if you are ever working with me and i hear you treat another colleague with disrespect, talk down to someone

, then i promise you that i will fire you on the spot. know if our butts. it's interesting given the findings of recent investigation in the workplace culture at the fdic that, chair gruenberg, i find you are still sitting here with a job before this committee. how do you reconcile what president biden said with what's been going on in the fdic and you still hold your job? >> as i have indicated, i accept the findings of the report, including in regard to my conduct and i have committed to addressing the issue personally, as well as having our workforce on a confidential basis regularly give me feedback

, as well as engaging an executive coach and any necessarily counseling. i'm prepared to take responsibility on my part for the findings. >> how do you resolve that your boss is saying, i promise that i will fire you on the spot. first of all, who has been fired so far in the fdic? >> i can tell you, senator, that there have been four employees separated from the agency for misconduct. we have had changes of senior management responsible in this area. >> what does separated mean? >> they have received termination notices from the agency or before the disciplinary action takes effect , they have resigned or retired, which they are allowed to do under the law. >> how many have been terminated?

>> i would want to get back to you, but several and not all. all of them received termination notices or other disciplinary action before the action took place, some of them voluntarily left. >> what i find revealing is that some of the same senate democrats who have sought to state their political identities on fighting against sexual-harassment dissemination are sitting here today and turning a blind eye to the same abuses that are happening under your leadership at the fdic. i think it's an example on full display for the american people of the biden administration and democrats talking out on both sides of their mouth . if president biden was serious about the pledge he made on day one, he would have already called for change in leadership at the fdic. it is clear that the president

and his party would rather ignore these damning findings of political expediency. without you, chair gruenberg, they lose a key figure in your rush to radically expand for little purpose other than to target politically disfavored entities. as i alluded in my opening marks an independent report investigating workplace culture, they found that the agency you have led longer than any other director in history has been plagued with sexual harassment, assault, bullying, discrimination, misconduct. additionally, according to interviews with fdic employees, you are described as someone incapable of controlling their

temper and regularly describe interactions with you and i quote, being extremely difficult . the findings made clear that serious and systemic reforms are desperately needed at the fdic. given your long tenure agency and clear inability or unwillingness to address these issues, how can you sit here and make the case that you have the moral authority to continue leading the agency if we were consistent with what he said about fine people on the spot, this issue would have been addressed a long time ago. how do you have the moral authority to continue the agency with the incredible list of behaviors and allegations? >> senator, we have been engaged since the stories came out last

year and and all agency efforts engaged in employees across the agency in addressing these deeply troubling issues. we have a comprehensive action plan and in the process of implementing where we have accepted all of the findings of the new report and are committed to implementing all of the recommendations that we have already started the process. we have engaged, as i indicated , participation in the agency and we are committed to following through. i think i can provide the leadership to do that. >> has the president asked you to resign? >> senator, you are recognized for five minutes. >> welcome, everybody. gruenberg, let me start with you. i associate myself with all of the deep concerns expressed in

the findings of the report, including those expressed by senator warnock. i have been listening to her testimony before i got here. i think each of us who ask you this question are repeating the question, because we want your personal commitment to following through right away in implementing all of the recommendations and i just want to say that we will be watching like a hawk to make sure this happens. do i have your personal commitment that you will immediately implement these reforms, so that we can change the culture at the fdic? i think you care loudly and clearly that that will be an absolute requirement going forward. vice chair barr, i want to pick up on a couple of

questions that some of my colleagues have asked. i want to start with the issue of implementation of section 956, which as you know was required under the bill passed over a decade ago and am glad to see signaled their intent to propose the rule and i know the fcc has indicated that they are moving forward. i have not seen any notice of proposed rule from the fed. can we get your commitment today that the fed will quickly begin the process of implementing this law by issuing a noticed or proposed rule in short order? >> in discussions with my colleagues, it became apparent that we believe we need to conduct some further analysis.

>> i know you haven't been here for the duration of this period but we are close to two decades. you do agree this is a requirement of the law, correct? >> i agree it is required by the law and we are committed to do that. >> is 20 years way too long to be making good on a legal requirement? >> in this case, the exact time period is shorter but it is a very very long time. >> as a matter of years here, i do want to be clear that this is a case where noncompliance with the requirement is a real problem and a lot of us have lost patience and i hope you will communicate that back to folks on the board and your colleagues. on the issue and i think

senator smith raise the issue of the cra and the fact that we saw a lawsuit filed and form shopping going on these days but could each of you take a moment to describe the due diligence you each went through in coming up with a rule? obviously, this role was outdated and a lot of changes have occurred in the banking system. it is also my understanding you looked at the comments before issuing the rules. if you can emphasize the process you went through and why you think this upgrade was necessary starting with you? >> the community reinvestment act has been an absolute critical thing for helping low and moderate income people across the united states and

the rule that we finalized really did take into account comments from communities all over the country, from bankers of all sizes and community organizations and civil rights groups and staff worked for several years overall on this process to get that input in advance and take it during the comment process. i think this is a win for everybody and it will really help bring communities along in ways that have been essential for the future of our country and i think the staff and agency did extraordinary work and to make sure it is a lawful and impactful rule. >> thank you. >> after 25 years, and all the changes in the banking industry over that period, it was absolutely essential to modernize and strengthen the community reinvestment act to make it relevant to the changing nature of the banking market today and failure to do

that makes it increasingly irrelevant to expand access to credit investment in basic financial services to low and moderate income communities and communities of color across the united states and the process and what went into developing that rule and we had an advanced rulemaking that was developed by the fed and took public comment and then the notice when we again took a broad comment and there was an extraordinary review done of every comment received with careful consideration in the final rulemaking and it is a sound and balanced and strong rule and it will really make a difference to low and moderate income communities across the country. >> the only thing i would add is the efforts of staff on this rulemaking which was

extraordinary and i have seen a lot of different effort and there was a lot of deliberation that went into that. >> thank you. >> thank you to the witnesses for joining us today and we look forward to working with you to strengthen our financial system and for the senators who wish to submit questions for the record, they are due a week from today on thursday, may 23 to the agencies and please submit responses to questions for the record within 45 days from the day you receive them and thank you again for your testimony. the committee is adjourned. abo.