FDIC chair Gruenberg says he will step down once successor is announced

WASHINGTON — U.S. Federal Deposit Insurance Corp Chair Martin Gruenberg said on Monday he planned to step down, finally succumbing to a months-long scandal over sexual harassment and other misconduct at the top bank regulator.

Gruenberg, whose five-year term ends in 2028, said he would step down once a successor is confirmed. The White House will soon put forward a nominee to replace him, deputy press secretary Sam Michel said in a statement.

The pending departure of Gruenberg, a Democrat and Wall Street critic who had been a senior leader at the FDIC for nearly two decades, comes at a critical time for the agency – just a year after three major banks failed and as many lenders continue to struggle amid elevated Federal Reserve interest rates.

The FDIC is also working with other bank regulators on several efforts to tighten regulations, including a contentious plan to boost big bank capital requirements.

With Gruenberg staying on until a replacement is announced, Democrats can claim a moral victory while allowing the agency to continue with its regulatory agenda, said Todd Baker, a senior fellow at Columbia University’s law and business schools.

“It’s a stalemate and it achieves most of the goals of the administration – that is, to retain control over the FDIC’s agenda,” he added.

Gruenberg had clung to his job since November when a Wall Street Journal report exposed widespread misconduct at the FDIC which was confirmed by a damning external review this month, despite outcry from multiple congressional Republicans and some Democrats.

Gruenberg had clung to his job since November when a Wall Street Journal report exposed widespread misconduct at the FDIC, despite outcry from multiple congressional Republicans and some Democrats. The newspaper report was confirmed by a damning external review this month.

But on Monday, Democratic Senator Sherrod Brown, who chairs the Senate Banking Committee, said there must be “fundamental changes” at the agency and called for Gruenberg to be replaced, in a key development that piled pressure on the FDIC chair.

Analysts said it was unclear how long it could take the White House to get a new nominee through the thinly divided Senate, while Brown’s Republican counterpart, Senator Tim Scott, and other Republicans called for Gruenberg to go immediately.

“We’re skeptical that Gruenberg will be able to hang on,” Ian Katz, managing director of policy research firm Capital Alpha Partners, wrote in a note. “This is like trying to contain a raging fire.”