The Wild, Wild FDIC

The FDIC directly supervises and examines more than 5,000 banks and savings associations for operational safety and soundness. And if you were wondering why the FDIC might have missed a few banks going south here and there it is because the FDIC runs a Wild, Wild West operation.

If you are in the mood for a trashy novel, spend no money and look no further.  Just read the  “Report for the Special Review Committee of the Board of Directors of the Federal Deposit Insurance Corporation.

When examiners were traveling, they frequented strip clubs.  There were over 500 complaints by employees about sexual harassment, discrimination, and interpersonal conduct that prompted too many employee exits.

Worse, the enforcement strategy used for those who engaged in misconduct was “pay, promote, or move them.”  Despite 92 harassment complaints, between 2015 and 2023, no one was removed and no one had their pay reduced. The most serious punishment was a suspension.

Even worse was the fear of reporting because of retaliation.  The investigating law firm c set up its own hotline for employees to report misconduct. Over 900 employees spoke up to the firm.  However, one employee noted, “[t]he threat of retribution and payback is real, supervisors rule by fear in the FDIC. Nobody trusts those in charge, and even though this is not getting into the hands of senior execs[,] I’m using a VPN and someone else’s cell phone to write this.”  p. 4 of the report

The report found serious culture issues fueled by the leadership. The report recommends pages of changes.  The one change missing was a recommendation for getting rid of the Chairman of the FDIC, Martin Greenberg. His bad behavior was well documented.  Mr. Gruenberg was found to have temper problems.  He was also reported to be aggressive, harsh, and prone to dressing down staff publicly. Mr. Gruenberg testified in Congress  that he was never the subject of a third-party investigation.

Ah, but the law firm found that he actually was investigated in  2008 for his conduct. He had to amend his testimony. Nonetheless, the law firm heaped praise on Mr. Gruenberg, and concluded that he was not a root cause of the problems at the FDIC.  The report’s outing of the “tone at the top” aside, he’s not going anywhere.

That conclusion about the FDIC chairman and the FDIC itself are going nowhere.  The muddy quagmire will continue.  Don’t count on crackerjack bank supervision from this crowd.  They are too busy on the road and in their own building with other activities to really check FDIC deposits.

About mmjdiary

Professor Marianne Jennings is an emeritus professor of legal and ethical studies from the W.P. Carey School of Business at Arizona State University, retiring in 2011 after 35 years of teaching undergraduate and graduate courses in ethics and the legal environment of business. During her tenure at ASU, she served as director of the Joan and David Lincoln Center for Applied Ethics from 1995-1999. In 2006, she was appointed faculty director for the W.P. Carey Executive MBA Program. She has done consulting work for businesses and professional groups including AICPA, Boeing, Dial Corporation, Edward Jones, Mattel, Motorola, CFA Institute, Southern California Edison, the Institute of Internal Auditors, AIMR, DuPont, AES, Blue Cross Blue Shield, Motorola, Hy-Vee Foods, IBM, Bell Helicopter, Amgen, Raytheon, and VIAD. The sixth edition of her textbook, Case Studies in Business Ethics, was published in February 2011. The ninth edition of her textbook, Business: lts Legal, Ethical and Global Environment was published in January 2011. The 23rd edition of her book, Business Law: Principles and Cases, will be published in January 2013. The tenth edition of her book, Real Estate Law, will also be published in January 2013. Her book, A Business Tale: A Story of Ethics, Choices, Success, and a Very Large Rabbit, a fable about business ethics, was chosen by Library Journal in 2004 as its business book of the year. A Business Tale was also a finalist for two other literary awards for 2004. In 2000 her book on corporate governance was published by the New York Times MBA Pocket Series. Her book on long-term success, Building a Business Through Good Times and Bad: Lessons from Fifteen Companies, Each With a Century of Dividends, was published in October 2002 and has been used by Booz, Allen, Hamilton for its work on business longevity. Her latest book, The Seven Signs of Ethical Collapse was published by St. Martin’s Press in July 2006 and has been a finalist for two book awards. Her weekly columns are syndicated around the country, and her work has appeared in the Wall Street Journal, the Chicago Tribune, the New York Times, Washington Post, and the Reader's Digest. A collection of her essays, Nobody Fixes Real Carrot Sticks Anymore, first published in 1994 is still being published. She has been a commentator on business issues on All Things Considered for National Public Radio. She has served on four boards of directors, including Arizona Public Service (1987-2000), Zealous Capital Corporation, and the Center for Children with Chronic Illness and Disability at the University of Minnesota. She was appointed to the board of advisors for the Institute of Nuclear Power Operators in 2004 and served on the board of trustees for Think Arizona, a public policy think tank. She has appeared on CNBC, CBS This Morning, the Today Show, and CBS Evening News. In 2010 she was named one of the Top 100 Thought Leaders in Business Ethics by Trust Across America. Her books have been translated into four different languages. She received the British Emerald award for authoring one of their top 50 articles in management publications, chosen from over 15,000 articles. Personal: Married since 1976 to Terry H. Jennings, Maricopa County Attorney’s Office Deputy County Attorney; five children: Sarah, Sam, and John, and the late Claire and Hannah Jennings.
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