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 longrunning problems. For far too long if leaders leaders failed to take action to protect its most valuable resource, that is its 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 youll ensure perpetrators are finally held accountable. The fdic cant fulfill its mission of maintaining stability and Public Confidence in the nations 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 dont speak up when they spot problems if they are afraid of retaliation. Is not a small, internal problem, it affects the public. Most americans dont think much about the fdic. They shouldnt 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 fdics 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 its workers can continue to protect americans in their hardearned money. Chair gruenberg, its 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 its 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 wellfunded 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 countrys largest banks told us they would be unable to meet the capitals required under the proposal. Thats whites imperative your agency finalize a strong rule that protects americans and doesnt reward wall streets 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 peoples 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 cant go forward without the Federal Reserve joining the process. The fed must know whats at stake. Its only report on Silicon Valley noted how compensation encouraged risktaking which led to the banks 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 cant afford mergers the pave the way for banks to take out competitors, close branches, lay off employees. Weve 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 dont 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 its 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 its 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 dont take care of your employees, they cant take care of the customer. And the customers of the fdic, they are the American People. Cspan2, chair gruenberg, you stated it doesnt 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 dont. 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. Gruenbergs 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 youre 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 im 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 Administrations 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 Reserves 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 its 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 spvs 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 years 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 Reserves 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 wellcapitalized 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 fdics ongoing efforts to transform its Workplace Culture. Let me begin by saying that i am deeply committed to the fdic and it