#FDICTOO

November 13, 2023 2:28 PM

A toxic work environment at the FDIC, one of the nation’s top banking regulators, has for years caused employees to flee from an agency they say enabled and failed to punish bad behavior, according to a Wall Street Journal investigation based on interviews with FDIC employees as well as legal filings, union grievances, Equal Employment Opportunity complaints, emails, text messages and other internal documents. from Strip Clubs, Lewd Photos and a Boozy Hotel: The Toxic Atmosphere at Bank Regulator FDIC [WSJ; ungated]
posted by chavenet (23 comments total)

Mebbe I’m a prude, but if your coworkers want to go to a strip club they are bad coworkers.
posted by Going To Maine at 2:35 PM on November 13, 2023 [12 favorites]

When regulatory capture turns into complete work culture capture.
posted by tclark at 2:47 PM on November 13, 2023 [4 favorites]

For fuck's sake. It sounds like their current organizational model is a barrel full of rotten apples.
posted by hydropsyche at 2:47 PM on November 13, 2023 [3 favorites]

Well since banks refuse to be regulated there’s not much for the FDIC to do.

Idle hands are the Devil’s playground.
posted by chronkite at 3:25 PM on November 13, 2023 [1 favorite]

Indeed, tclark. I think that without examining the role of regulatory capture in the creation and support of the toxic environment, we're missing too many parts of the problem to do anything about it. When an industry's corruption of their oversight devolves down to the equivalent of single-issue voting -- which is to say that all they care about is filling regulatory agencies with people who are going to regulate favourably, if at all -- It's only going to create a swamp full of untouchable monsters. Driving out talented, honest, hard-working people is the intent, not an accident.
posted by krisjohn at 3:33 PM on November 13, 2023 [10 favorites]

Mebbe I’m a prude, but if your coworkers want to go to a strip club they are bad coworkers.

Several years ago my company sent me to a management training seminar where the speaker opened with the line "If you take nothing else from this seminar I am asking that you please, please remember that I have told you not to do cocaine with your subordinates."

You'd think he wouldn't need to say it but apparently there are a lot of people in management who haven't thought it through.
posted by Parasite Unseen at 3:48 PM on November 13, 2023 [21 favorites]

"If you take nothing else from this seminar I am asking that you please, please remember that I have told you not to do cocaine with your subordinates."

And this is how we knew it was not the 1980s anymore.
posted by Dip Flash at 4:04 PM on November 13, 2023 [11 favorites]

opened with the line

I see what he did there
posted by chavenet at 4:09 PM on November 13, 2023 [25 favorites]

I'm absolutely appalled and depressed by this story. But also begging commenters, at least the ones in the U.S. who already ought to know this, to grasp the distinction between political appointees and civil service employees. The article actually does make it clear that this behavior is largely amongst the examiners and their immediate supervisors--line employees. When you talk about not having regulating to do or being selected for their complacency vis-a-vis the industry, you're talking about an irrelevant dynamic. These are literally the people who are hired through ordinary USAJobs postings and go sit in a chair at a bank and test individual transactions for regulatory compliance, and their mostly immediate supervisors.

In other words, this is not so much a story about regulators as about team work travel. And what a stinker it is.
posted by praemunire at 4:13 PM on November 13, 2023 [9 favorites]

well, ok. I do think the culture of regulatory bodies matters, though. Norms greatly influence the interpretation of the mission. There's a real twist going on at the US EPA in Dallas lately, as the EPA is leading the charge for environmental justice and hiring more Black employees in leadership. it is not without dissent from the old timers in Dallas.

This being the WSJ, the point is that "government bad" though. So there is no point in investigating or writing in your story aobut how funding the department with industry revenue works, or "works."

When you look at the oil-regulating agencies, for example, there's a lot to dislike.

Having studied at a University with heavy oil industry recruitment, I cannot tell you how creepy it was to have alumni creeping on the co-eds, women who would then go on to work as their regulators. when this story dropped it was a non surprise. It's a level of harassment on, another level, really

The oil regulators can really take that expression "in bed with the industry" a bit too literally
posted by eustatic at 4:53 PM on November 13, 2023 [5 favorites]

praemunire: That is is a distinction I'm not having any difficulty grasping. The rest of the world is reasonably aware of how the US does things like systemic, legal bribery of elected officials and political appointments that don't appear to require any test of prior experience or basic competency. I think, though, you're drawing a line within the organizational culture that doesn't exist. There's no limit as to what industries will do to control the government departments that are supposed to control them -- they're just as happy to throw money at politicians as they are to make friends with all the new recruits.

Here's a bit of a primer on the scope of regulatory capture, if you can cope with the repetition in the posts.
posted by krisjohn at 4:54 PM on November 13, 2023 [3 favorites]

The rest of the world is reasonably aware of how the US does things like systemic, legal bribery of elected officials and political appointments that don't appear to require any test of prior experience or basic competency.

Ah, you think this is a US-specific problem. Okay.

I think, though, you're drawing a line within the organizational culture that doesn't exist. There's no limit as to what industries will do to control the government departments that are supposed to control them

These are not policymakers. These are not appointees. These are people hired out of college to do several years training to become examiners for a bank supervisor, which means traveling around the country and, e.g., checking to make sure that when you transfer a balance from one account to another the two reconcile. And their immediate superiors. So when you talk about how they were getting in trouble because they made policy choices not to regulate and so have too much free time, or how they were chosen for their friendliness to the industry, you're just not making sense. These guys never made a policy in their career. No one asked them about their policy preferences or how they feel about the industry in their interviews. They're line people and immediate supervisors, and, in U.S. federal agencies, they're not political people. The political people come and go. The complete bullshit nonsense these teams engaged in comes from being jerks working away from home.

Here's a bit of a primer on the scope of regulatory capture, if you can cope with the repetition in the posts.

I'm a public interest lawyer, thank you, I'm reasonably familiar.
posted by praemunire at 6:50 PM on November 13, 2023 [7 favorites]

well, ok. I do think the culture of regulatory bodies matters, though. Norms greatly influence the interpretation of the mission.

That said, I don't disagree with this, certainly in the sense that the head of the agency, especially a relatively small agency, has great power in setting the tone. If Gruenberg thought it was important to set an example, he certainly could have pushed for more vigorous disciplinary action against the offenders who did get identified. Or make a point of noting which federal employees thought it was great to be drunk on federal property. He should be getting an earful tonight as a result of this article.
posted by praemunire at 6:54 PM on November 13, 2023 [5 favorites]

Can the non-US commenters take a breather for a moment? Because maybe, just maybe, you don't know what you're talking about?

Above and beyond what this article discusses, I'm very alarmed at the implications of what these party boy bank examiners are probably doing when they're examining banks.

If you've not worked in a bank, you probably don't know just how big of a deal examinations and examiners are. Where they walk, bank employees crouch in fear.

Which worries me.

If there's this kind of sexual harassment internally, then why wouldn't these same people be abusing their authority with bank employees in the same ways, but with an even greater power imbalance?

And, no, none of this has much to do with high finance or banking regulations involving high finance. This isn't Wall Street, this is Main Street.

I have an old friend who's a major Wall Street analyst and his world and the world of your local bank have little to do with each other, even when they're the same bank. In fact, his bank is my bank, and is my local bank, because thirty or so years ago Bank of America bought the regional bank my grandfather helped build.

Banks are examined individually, regularly, and there are a whole bunch of banks in the US. If this was about anyone remotely at the level where worries about mortgage-backed securities exist(ed), they sure as hell wouldn't be spending more than a third of the year on the road in places like Brass Tit, Wyoming*.

What this is about is a male-dominated profession where people travel frequently, work on teams that change composition, lonely nights at boring hotels, a huge amount of institutional and personal authority, and the resulting culture that evolved away from the eyes of upper-management. I expect this kind of thing is common in similar contexts elsewhere, institutions where there's much less public scrutiny.

Building what came to be a party hotel for your new employees to stay in on an extended basis, while they are training, probably didn't help. And then releasing them into the land of two-lane highways and breakfast at Denny's for months at a time.

My mom worked in banking — small banks — for almost thirty years before she switched careers and became an RN. I remember as a kid how the atmosphere at the bank would be charged before an examination. Charged and weirdly quiet. And my mom's father, the CEO of a large bank (large in regional, not national terms), also expressed considerable fear of, and respect for, bank examiners.

So many bank employees are women — the majority (again, we're not talking about Wall Street) — it's difficult for me to feel sure that there's not a bunch of sexual harassment by examiners of bank employees happening, if it's happening within the examiner's own workplaces.

* Not a real place. Probably.
posted by Ivan Fyodorovich at 4:06 AM on November 14, 2023 [8 favorites]

"Brass Tit, Wyoming" was the working title of a Yellowstone prequel.
posted by Iris Gambol at 10:24 AM on November 14, 2023 [2 favorites]

These are not policymakers. These are not appointees. These are people hired out of college...

Maybe I'm asking a stupid question, but hired by whom?
posted by Dysk at 12:52 AM on November 15, 2023 [3 favorites]

By the Federal Deposit Insurance Corporation.

"Apply here"

Wikipedia:

The FDIC is not supported by public funds; member banks' insurance dues are its primary source of funding. The FDIC charges premiums based upon the risk that the insured bank poses.

and

The Board of Directors is the governing body of the FDIC. The board is composed of five members, three appointed by the president of the United States with the consent of the United States Senate and two ex officio members. The three appointed members each serve six-year terms. No more than three members of the board may be of the same political affiliation.

Politics comes in at the highest levels such as policy about reserve requirements and such. But this is far above the level of the examiners or their supervisors or the supervisor's supervisors.

I don't recall an example from the 2008 crisis that involved failures of examiners to identify risk, but perhaps there is something of that sort. But the 2008 regulatory failures were first and foremost policy failures that were a function of politics when passing banking regulation that were far too neoliberal.
posted by Ivan Fyodorovich at 3:16 AM on November 15, 2023

Various parties failed to identify risk in 2008, but that was because the risk was intentionally obfuscated by the investment banks cum retail banks, that were allowed by regulators — directed by legislation — complex practices that were risky and obfuscatory. The biggest policy failure was not having a firewall between the securities side and the retail banking side at the very least.
posted by Ivan Fyodorovich at 3:30 AM on November 15, 2023

Yes, but within the FDIC, specific individuals would be in charge of hiring, training, hr compliance, and determining how to respond to any sexual harassment complaints that arise. I imagine, like any bureaucracy, there are many layers for the hiring decisions (peons hired by low level managers, low level managers hired by middle managers, middle managers hired by upper level managers who serve at the will of the political appointee level overseers). Decisions about how to deal with sexual harassment complaints tend to be made at higher levels / hr compliance isn’t so much in the hands of low level managers, and whether or not mid level managers have much influence can vary a lot between bureaucracies. The hr response to sexual harassment complaints has more influence on organizational culture in that respect than initial hiring, unless hr has no power or teeth within the organizational structure.
posted by eviemath at 3:31 AM on November 15, 2023 [1 favorite]

From what I’ve observed from folks I know who work for other branches of the US federal government, the political appointee level oversight does have a significant impact on working conditions and departmental policies such as hr policies that would help set workplace culture around sexual harassment. Often they don’t make huge changes to most such details, but Trump appointees and the upper level managers they brought in or elevated to such roles made some pretty significant and wide-ranging impacts on departmental workplace conditions in the couple situations I’ve heard of.
posted by eviemath at 3:38 AM on November 15, 2023

(That is, often political appointees with a new administration don’t make huge changes to stuff like sexual harassment policies. With Trump appointees being an exception, since they were specifically out to radically change the whole workplace culture. But that past convention does mean that a series of political heads who don’t care and treat a regulatory department as annoying red tape or as facilitators for business instead of as regulatory oversight could very much bear responsibility for enabling a culture of sexual harassment in the workplace (which Trump appointees certainly wouldn’t have seen any problem with, either).)
posted by eviemath at 3:43 AM on November 15, 2023

Yeah, but I was addressing the "regulatory capture" claim that links the sexual harassment to the banking industry and government oversight. That's a big stretch, when there's sexual harassment throughout industry and government and there's nothing in particular about this scandal that's much connected with FDIC's mission.

This is exactly the sort of thing that happens in this kind of working environment, especially when there's a failure in leadership to ensure that it doesn't. It's not [much] about banking, but it is about that failure of leadership.
posted by Ivan Fyodorovich at 6:54 AM on November 15, 2023 [1 favorite]

Follow-up report on Gruenberg's leadership style. Not pleasant reading.
posted by praemunire at 12:06 AM on November 17, 2023 [1 favorite]