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The chair of the Federal Deposit Insurance Corporation, Martin Gruenberg, is facing calls from lawmakers to resign after a report detailed pervasive sexual harassment, discrimination, and bullying at the agency. The report, commissioned by the FDIC, confirmed the findings of a previous investigation and highlighted issues with Gruenberg’s leadership style. While Gruenberg is already implementing recommendations from the report, the majority of calls for his resignation are coming from Republicans, as his resignation would leave the agency deadlocked with one Republican and two Democratic members on the board of directors.

If Gruenberg were to resign, Vice Chair Travis Hill, a Republican appointee, would automatically become chair until a replacement is appointed by the president and confirmed by the Senate. This could lead to a halt in rulemaking and a lack of appetite to work with other regulatory agencies to pass regulations that strengthen bank capital requirements. While Gruenberg’s departure may benefit larger banks, there is skepticism regarding Hill’s abilities to react quickly in case of a banking crisis, as he was not the leader of the agency during the previous year’s crisis.

Progressive Democrats like Sen. Elizabeth Warren are not calling for Gruenberg’s resignation, and the White House has not expressed any reservations about his leadership abilities. The potential consequences of Gruenberg’s resignation on bank regulations and rulemaking are significant, as it could disrupt the ongoing process of finalizing rules related to Basel III Endgame, which aims to increase capital requirements for large banks. Analysts believe that Gruenberg is unlikely to resign in the absence of widespread progressive or White House pressure.

Overall, the situation at the FDIC highlights tensions between political parties and the impact of leadership changes on the banking industry. While calls for Gruenberg’s resignation are primarily from Republicans, the potential repercussions of his departure on regulatory framework and agency functioning are a cause for concern. The FDIC’s role in mitigating banking crises and overseeing financial institutions adds a layer of complexity to the debate surrounding Gruenberg’s future at the agency.

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