The Journal. - Lewd Photos, Booze and Bullying: Inside the FDIC’s Toxic Culture

Episode Date: November 29, 2023

A Journal investigation reveals a years-long culture of sexual harassment and intimidation at the Federal Deposit Insurance Corporation, a government agency that regulates banks. WSJ's Rebecca Ballhaus on the allegations and how some of the problems went all the way to the top. Further Reading: - Strip Clubs, Lewd Photos and a Boozy Hotel: The Toxic Atmosphere at Bank Regulator FDIC  - FDIC Chair, Known for Temper, Ignored Bad Behavior in Workplace  Further Listening: - Can the Government Contain a Banking Crisis?  Learn more about your ad choices. Visit megaphone.fm/adchoices

Lauren Lemmer graduated from college in 2010. She was looking for a job and wanted to work in the banking industry. So economy wasn't great, but I was lucky enough that I had a few different job opportunities. I ultimately thought, you know, I'll probably learn a lot quickly at the FDIC, given the type of exposure I'll have to a myriad of banks. Banks were still failing. So that was the thing that I thought was most interesting was that sort of breadth of experience that the FDIC offered. The FDIC is the Federal Deposit Insurance Corporation.

It's a government agency that monitors banks. Lauren was excited when she landed a job as a bank examiner in training at a field office in California. The job meant Lauren would be traveling a lot. She soon learned that those work trips could often involve hard partying. And sometimes, Lauren says, the vibe from some male colleagues was off. It was very easy to extrapolate it to excuse things that were just frankly unprofessional as nothing more than, you know, maybe somebody hitting on you and you rejected them. hitting on you and you rejected them. And you didn't want to say anything because you would be labeled as sensitive

or, hey, you got to toughen up. So it was very much like you either fit in or you don't. And so much of that was around like the thickness of your skin. Lauren would get comments about her looks, speculation about her sex life. Once, she was invited to a strip club by other bank examiners. Another time, she got an unsolicited naked photo from a colleague. And on one work trip to Dallas, after drinks at a bar, a male co-worker followed her.

You know, once we got into the hotel, he got off on the same floor as me and then just kept following me as if there was some unsaid thing. You just think like, oh, my God, was I just too nice? Was I too friendly? Oh, my gosh. Oh, he's just drunk. And, you know, I didn't say anything to anybody I didn't let anything happen beyond him trying to go into my room and that was that but even as I like say that out loud it's like I'm already saying like oh it wasn't that bad because like nothing actually happened. Well, the intent was there. Like, this is not normal.

Not normal. But according to a journal investigation, part of a larger problem at the FDIC, a broad culture across multiple offices of sexism, harassment, and bullying that has festered at the government agency for years. When you think back on it now, it's like, it's horrific. And it makes me sad that it didn't end when I left the FDIC. It continued for other women. So it was very eye-opening and validating in a way, and also sad that I wasn't actually alone. They were not alone. We all just felt alone together. Welcome to The Journal,

our show about money, business, and power. I'm Jessica Mendoza. It's Wednesday, November 29th. Coming up on the show, inside the toxic culture of the FDIC. Need a great reason to get up in the morning? Well, what about two? Right now, get a small, organic Fairtrade coffee and a tasty bacon and egg or breakfast sandwich for only $5 at A&W's in Ontario. What is the FDIC? Good question. I think when times are good, you're not thinking about the FDIC and what its job is.

Our colleague Rebecca Ballhaus is part of the investigations team. The FDIC stands for the Federal Deposit Insurance Corporation. What they do is they insure deposits at banks, but they also examine banks for risk and for compliance with regulations and to determine their financial stability. The agency basically makes sure banks are healthy, that they're not in danger of failing. It was founded in 1933 in response to the bank runs of the Great Depression. Today, there are 80 offices all over the country, and bank examiners regularly travel long distances to assess banks. It's a really tough job, I think, especially in some of these regions where you are responsible for an enormous swath of land. It could mean that you're driving, you know, hours and hours to get to a bank.

Some people spend up to 100 nights of the year on the road, and that just takes its toll. And is it typically just one person? I'm picturing sort of FBI agents go in pairs, you know? Is it just one bank examiner going off and doing this thing? No, it tends to be much larger than that, and it depends on the size of the bank and the kind of examination. But for some exams, it'll be fewer than 10 people. For some, it'll be as many as dozens. And overall, what do you think is the impression that most folks have of the FDIC? Not a place that you tend to associate with personnel drama. I think it has a pretty staid reputation, and I don't think people tend to think of a bank examiner job as a particularly spicy line of work.

Over the last six months, though, Rebecca learned about a surprising culture at the FDIC. I started hearing from a number of other people at the agency or who had left the agency about other aspects of the place they thought I should be looking into. And one thing that really piqued my interest was this idea of life on the road as a bank examiner for the FDIC being sort of like the Wild West. And I had a couple of sources early on described to me, you know, female examiners getting naked photos from their bosses or from other examiners. And I had people describe, you know, heavy drinking happening in some of the offices. And so because that was so at odds with what my notion of the FDIC was,

it just seemed like a natural place to keep looking. To report the story, Rebecca interviewed more than 100 current and former employees, including more than 20 women who quit the FDIC. She also reviewed legal filings, union grievances, emails, text messages, and other internal documents. I talked to a woman who remembered how she had been sitting in a conference room of the bank around a table. And her male colleagues were talking about how women need to use sex to get ahead at the FDIC, and they were making eye contact with her. Another woman remembered one encounter that left her speechless. One day during lunch with an examiner she'd become friendly with,

he complained to her about his marriage. He told her he wasn't having enough sex. And he said, you know, obviously if I walked into this office and you were naked, he'd have sex with her right here. And she was so stunned that she didn't say anything and she never filed a complaint. The FDIC says bad behavior isn't tolerated. It's hired an independent firm to investigate alleged harassment and discrimination. Rebecca says that many of these alleged incidents happened in regional offices and on the road. It's not everywhere,

but it's in a lot of places. And it's something that has caused a lot of female examiners to leave the agency over the years because of what they describe as a boys club culture, where they weren't getting the same opportunities to advance as their male colleagues, boys club culture, where they weren't getting the same opportunities to advance as their male colleagues, and because it was a sexualized culture, where some people felt harassed, some people just felt uncomfortable. But there was this persistent sort of undercurrent of sexual nature. Employees also regularly went to the FDIC headquarters in D.C., and Rebecca reported that problems came up on those trips, too. Sometimes it would happen at the FDIC's hotel in Virginia, where employees all stay together when

they're in town for training sessions. Wait, the FDIC owns its own hotel in the D.C. area? Yes. The FDIC has an 11-story hotel in Virginia. They built it in the 1980s. They spent more than $100 million on this training complex. And the hotel was intended to save the agency money for when its staff had to come to D.C. to take these training sessions so they didn't have to pay for a hotel separately. And could you describe what you heard would happen at this hotel? Could you describe what you heard would happen at this hotel? So one of the first things I heard was that there's actually a meme account on Instagram that has talked about what happens at the hotel. And so, you know, one comment that really caught my eye was,

if you haven't puked off the roof, were you ever really a FIZ, which stands for Financial Institution Specialist or a Bank Examiner in Training. But we also heard stories of, you know, people vomiting in the elevator or peeing off the roof. It really paints a picture. And it is, again, not what you think of when you think of bank examiners coming in to like, it's not the picture of a regulator that you have in your head necessarily. No, it's not. And, you know, there were two employees who got arrested at the hotel over the years, and that, I think, is even less what you imagine for your regulator. It wasn't what Lauren Lemmer imagined either.

She's the former trainee who says a co-worker followed her back to her hotel room in Dallas. Lauren decided to leave the FDIC in 2013. Before her last day, she met with a manager and rattled off a list of concerns. One was about her direct supervisor, a man who she says had been asking colleagues about her sex life. I didn't want to quit within three and a half years. And so I remember vividly pointing to my supervisor's office, sitting from my field office supervisor's office, saying, and he is a problem. And it just seemed like he was so disrespectful to me. And I'm not, I was not somebody that was generally disrespected, period.

Yet I felt it so much from him repeatedly. yet I felt it so much from him repeatedly and then I was told I was like sensitive for feeling that way. The former supervisor denied making any sexual comments. He also said

he worked to improve his communication style after a talk with an office manager in 2015. Lauren says she had brought up these issues with a union steward, but never filed a formal complaint. Here's Rebecca again. I would say very few of the women I talked to actually pursued formal complaints. A lot of them said something as they were leaving the agency, but a lot of them didn't file complaints either because they were urged not to or because they felt nothing would come of it.

Even when there were complaints, Rebecca's reporting showed that the agency failed to punish managers accused of misconduct. In some cases, managers were transferred to other regional offices after their behavior was substantiated. their behavior was substantiated. The same day the journal published Rebecca's findings about sexual harassment at the FDIC, the head of the agency spoke out. Martin Grunberg sent a pre-recorded video to employees. Let me say at the outset, harassment or discriminatory behavior at the FDIC is completely unacceptable. Period. We don't tolerate it. We don't turn a blind eye to it. But Rebecca also learned that sexual harassment was just part of the FDIC's problem.

Her reporting would also reveal a culture of intimidation and bullying that went all the way to the top, all the way to the chairman himself. That's next. Embrace the summer vibes with Summersby Hard Cider. Bursting with lovely aromas of apple, this light-bodied, fruity cider offers a crisp, clean finish. Perfect for sunny days and warm nights. Enjoy it well-chilled or over ice.

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Get almost, almost anything delivered with Uber Eats. Order now. Alcohol in select markets. Product availability may vary by Regency app for details. Mr. Gruenberg, what the hell's going on at the FDIC? It's a troubling question, Senator. I read the report as you did. As I indicated earlier, it is...

After Rebecca's story ran earlier this month, a Senate panel grilled the FDIC chairman, Martin Grunberg, about the allegations. It is deeply disturbing and troubling, and we're going to bring all the resources of the FDIC to bear to understand what is going on, what has occurred, and how we can most effectively address it. After that hearing, Grunberg sent another video to staff. In it, he took responsibility for what happened under his watch.

To everyone that's been affected, and particularly anyone who's experienced sexual harassment, I want to say how very sorry I am. He added that he would address concerns, including, quote, my own shortcomings. Let's talk about the chair of the FDIC. Who is he? The chair of the FDIC has been there for nearly two decades. His name is Marty Grunberg, and he joined the agency for the first time in 2005, and he never left. Grunberg has served under four presidents. Last year, President Joe Biden nominated him for another term. Grunberg is 70 years old.

He has wispy white hair, and he's often seen in boxy gray suits. Have you met Marty Grunberg? I haven't met him. We had asked to interview him for this story, and the FDIC declined our request. I think he is sort of exactly how you would imagine the chairman of the FDIC to look and sound. I think a lot of employees describe not finding him to be the most scintillating speaker. In the second quarter, uninsured deposits declined by 2.5%. That's a significant slowing from the 8% decline reported in the first quarter. But what kind of reputation did he have? But what kind of reputation did he have?

Well, that's the thing is that his reputation is really at odds with sort of the version of Marty that you get if you're watching a congressional hearing. You know, people started telling me the version of Marty that you see on TV is not really what he's like in person, that he has a reputation of being a screamer. And that was super surprising to me. But the more I asked around, the more this seems to be sort of an open secret in the financial services world. He spent decades on the Hill before coming to the FDIC, and he had a reputation there too as being very sort of aggressive. People could sometimes hear him screaming across the hall, and it seems like that's something he took with him to a certain extent when he came to the FDIC, because I've heard stories of him cursing at employees,

shouting at people, very aggressively questioning people who came in to brief him. And I think that's kind of ebbed and flowed over the years, but a lot of people do describe it as continuing to this day. Sounds like the opposite of stayed. That's right. Some staffers have downplayed the allegations,

comparing Grunberg's communication style to that of a prosecutor. Grunberg recently acknowledged an investigation into a complaint against him when he was vice chairman. That was back in 2008. The inquiry was prompted by an incident in which Grunberg allegedly lost his temper with a female FDIC official. There were also unrelated incidents in which he broke multiple office phones in frustration, according to officials. Several Republican lawmakers are now calling for Grunberg to resign.

are now calling for Grunberg to resign. Aside from Grunberg's own behavior, though, former FDIC officials say he also let bad conduct go unpunished. So, I mean, to give you a couple examples, there was a legal official who, in 2019, left a ranting and cursing voicemail for an employee where he was criticizing her work on a matter. The agency ended up paying her a $100,000 settlement. And three years later, that official

was named general counsel. Oh, wow. The FDIC declined to comment on the general counsel's behalf, and the general counsel did not respond to requests for comment directly. In another instance, you had the chief operating officer of the FDIC reassign the director of the agency's Office of Minority and Women Inclusion, which is the division that handles diversity efforts. He had faced multiple complaints of discrimination and harassment, including that he had said that slavery was not all bad. And they just moved him to a job in the division that trains bank examiners. In an internal investigation,

that official denied making the remark about slavery. His lawyer declined to comment. Rebecca did find that some problems predated Grunberg's time as chair. His predecessor, Sheila Baer, also faced some complaints about her management style, a style that employees told the journal was, quote, head-cracking. Baer declined to comment on the criticisms.

I feel like we hear stories about toxic work environments at companies, unfortunately, quite regularly. Like, how would you say this case is any different? I think there's a couple of things. I think for starters, anytime you hear about this sort of thing happening at a government agency, I think it's more disturbing in part because people don't join a federal agency with the aim necessarily of getting rich. They join it to sort of, you know, fulfill a mission. And so to feel like they joined that agency and then are wildly mistreated is just sort of an upsetting thing. But I think the other aspect is that the FDIC has a really important job. And I think if we are concerned about the stability of the nation's banks, if that's something you care about,

you want the FDIC to be running as tight a ship as it possibly can. You don't want to feel like people are distracted by personnel issues. You don't want to feel like people are joining this agency with a very important mission only to be mistreated. Last spring, after three U.S. banks failed, Congress asked how the FDIC missed the signs. Why didn't the agency catch problems sooner? One potential answer was cited in an internal review. It found that the agency was facing staffing challenges. The agency's inspector general also issued its own report. The FDIC's IG warned about increased resignations of the people who were training to become examiners.

You know, the AG report does not specify why people are leaving, so we cannot presume that these resignations are doubling because of a toxic work environment. But we do know that a number of women have left because of this culture. And so given the staffing challenges the agency is already facing, this is not helping. Lauren Lemmer is now 35 years old. She says she learned a lot at the FDIC, but her memories of her time there are complicated.

It became clear to me, like, I don't think this is going to be a long-term thing for me. You know, I went into it with the intent, like, oh, I could really spend my entire career here and end up in D.C. ultimately at the headquarters. And while I would have loved to do that, at some point it just became clear, like, there's just no way.

Lauren now works for a private company, and she told Rebecca that the workplace culture there is much healthier. She actually feels like socializing with coworkers now. So what's your message now to a young woman who wants to work at the FDIC? What would you tell that person? I would tell them that in the same way that they're taught to trust their gut and their instincts as a bank examiner

when they're in that examination room, they need to do that outside of it too. That's all for today, Wednesday, November 29th. The Journal is a co-production of Spotify and The Wall Street Journal. If you like our show, follow us wherever you get your podcasts. We're out every weekday afternoon. Thanks for listening. See you tomorrow.