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**NOVEMBER 17, 2023**

On the Prospect website

How Larry Summers's Bad Predictions Hurt the Planet

The clean-energy transition is faltering because of unexpectedly high
interest rates, which Summers's demands to slow down the economy
helped usher in. BY DAVID DAYEN

Nefarious Corporate Overlord Accidentally Kick-Starts Media Company

Gamurs Group fired the editor in chief of The Escapist. Most of the
publication joined him to start something new, a worker cooperative
called Second Wind. BY RYAN COOPER

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Can Biden and the Democrats Survive Their Divisions on Israel-Palestine?

Herewith, some suggestions. BY HAROLD MEYERSON

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When a Feminist Content Sweatshop Was the Coolest Thing On the Internet

Jezebel is widely blamed for starting "cancel culture." But 16 years
ago, most culture desperately needed to be canceled. BY MAUREEN TKACIK

Kuttner on TAP

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**** The Banks' Latest Hit Job

Hill Republicans want to oust FDIC Chair Martin Gruenberg, citing sexual
harassment elsewhere in the agency. The real issue is Gruenberg's
tough regulation of banks.

Last July 27, the several bank regulators, after long delays and several
bank failures, issued new rules on higher capital standards for banks
.
This means that banks must hold more of their own equity capital as a
cushion against losses. The banks resisted this at every step of the
way,

since it cuts into profits. They have spent massive sums to weaken or
delay implementation of the rules.

Two lead regulators pushing for this were Michael Barr, vice chair for
supervision of the Federal Reserve, and Martin Gruenberg of the Federal
Deposit Insurance Corporation (FDIC). Almost immediately, various people
in Washington began getting calls from the right-wing press trying to
get something, anything, on Gruenberg and Barr.

Last week, **The Wall Street Journal** broke a big story on the FDIC
,
and the big banks and their Republican allies in Congress are trying to
use it to force Gruenberg's resignation. A

**Journal** investigative piece, several months in the making, documents
that FDIC's examinations division has been a toxic boys' club of
sexual harassment. The details are vulgar and appalling. Many women
complained, the agency did not take most complaints seriously, and at
least twenty women quit.

According to my sources, many of the details in the

**Journal** piece began with tips fed to the

**Journal** reporter by Republican FDIC officials and holdover staff,
who might have acted internally to address the problem rather than leak
material to the press. Now Republicans are demanding Gruenberg's
resignation. And here the story gets more complicated.

If Gruenberg resigns, the Republican Vice Chair, Travis Hill, becomes
acting chairman. In July, Hill voted against adopting the higher bank
capital standards, as did the other Republican on the FDIC board,
Jonathan McKernan. Both have parroted industry talking points.

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In addition, there are several pending regulatory rules that would be
killed if Republicans get control of the FDIC, including resolution
plans for banks with $100 billion or more in assets (a direct response
to banking crash of March 2023) as well as rules on corporate governance
and risk management.

Nobody has accused Gruenberg of sexual harassment himself. The
accusation is that he failed to police the agency. It's charming that
Republicans are suddenly obsessed about keeping government safe from
sexual harassment. I can't find another case where congressional
Republicans, the party of serial sexual predator Donald Trump,
investigated abuses.

But on the merits, is Gruenberg culpable for failing to monitor the
conduct of the roughly 6,000 people who work for the FDIC or
establishing procedures for complaints and remedies? We will soon learn
more about that, but here's what we know so far.

In 2020, the FDIC's Inspector General issued a report on sexual
harassment

at the agency, and proposed 15 procedural remedies to create a safer
work climate and avenues of redress.

At the time, the FDIC chair was a Republican appointed by Donald Trump
named Jelena McWilliams ,
previously a bank CEO. Apparently, McWilliams, who was installed in
2018, did nothing to carry out the report's recommendations. The
Republicans who are gunning for Gruenberg have not called McWilliams on
the carpet. They should, because this happened on her watch.

With Biden's election, Gruenberg, who had previously been FDIC chair
under President Obama, became acting chair in 2021 and was confirmed as
chair in December 2022. Should he have looked back at the 2020 Inspector
General report and acted on its recommendations? In hindsight, yes. Is
his failure to have done so grounds for his resignation? That question
is now a political football, whose real goal is gutting the capital
regulations.

At this writing, several House and Senate Republicans have called on
Gruenberg to step down. House Financial Services Chair Patrick McHenry
(R-NC) told Gruenberg in a letter

they will use the panel's "full arsenal" of oversight and
investigative tools against him.

On Friday, the Democrats on the Senate Banking Committee signed a letter
organized by Chair Sherrod Brown (D-OH), calling for a new Inspector
General's Report
,
specifically to investigate "the reports of sexual harassment and
misconduct; the process that led to a lack of meaningful disciplinary
action against individuals who engaged in misconduct; whether the agency
implemented meaningful changes after issuance of the 2020 Inspector
General's report."

The letter was signed by all of the committee's Democrats, including
Sen. Elizabeth Warren (D-MA), who is not exactly an apologist for
workplace sexual harassment, as well as the committee's other women
members, Sens. Tina Smith (D-MN), Laphonza Butler (D-CA), and Catherine
Cortez Masto (D-NV). Gruenberg has commissioned his own outside report
by a law firm. The Republicans are trying to get control of that
investigation by demanding that Gruenberg recuse himself. But of course,
the vice-chair, Hill, has a flagrant conflict of interest, since he
stands to become acting chair if Gruenberg goes down.

My reporting suggests that the FDIC's examination department has long
suffered from morale problems, quite apart from issues of sexual
harassment. Ideally, Gruenberg and his colleagues should be cleaning up
the department now, but that's hard to do (not to mention tending to
other agency duties) when you are overwhelmed responding to at least
three investigations.

Can Gruenberg, a regulator widely respected by progressives, survive
this? Should he? It depends on what the IG's report finds. But Senate
Democrats, at least for now, are determined to stand behind Gruenberg
pending a full investigation and are resisting a cheesy victory for the
banking industry.

~ ROBERT KUTTNER

Follow Robert Kuttner on Twitter

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