Readying for Raucous Hearings

Bank-regulator appearances before Congressional committees have become increasingly lively of late what with all the Basel, merger, process, and CRA battles.  However, the sessions this week will be marked by unusual drama due to the devastating report filed last Tuesday on the FDIC’s internal culture and employee reports of ongoing sexual harassment, discrimination, and insularity.  As we noted, Republicans are united in demanding that Chair Gruenberg resign or be forced out, but Democrats with the exception of Rep. Bill Foster (D-IL) are either biding their time or supporting him on grounds he is mounting needed corrective action and many problems were not on his watch.  The White House carefully positioned itself to side with Democrats without at the same time expressly backing Mr. Gruenberg, a nuanced stand essential given the President’s commitment early in his term to oust any federal employee accused of serious workplace misconduct.  Republicans will surely try to catch Mr. Gruenberg in a misstatement or misstep in order to force the White House to dismiss him, but Mr. Gruenberg in fact still can only be dismissed if the White House comes to this view or, a lot less likely, the GOP tries to impeach him.  All this will take a lot of hearing bandwidth, but there will still be time for critical issues such as the end-game capital rule’s status, forthcoming liquidity rules – if any – and the OCC’s and FDIC’s merger proposals (see FSM Reports MERGER14 and MERGER15).  We’ll provide updates during these hearings as needed and analyses upon conclusion, perhaps differentiating our analyses of the FDIC’s outlook from those for substantive regulatory and supervisory developments.