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FDIC Board divided on oversight of independent investigations

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Banking, Inside the Beltway
Tuesday, September 3, 2024

The Federal Deposit Insurance Corp. (FDIC) Board voted down a resolution to establish a committee to oversee independent investigations into alleged workplace misconduct. Instead, the board decided to explore a process that would outsource such oversight to other federal regulatory bodies.

If adopted, it would have taken effect following the establishment of the FDIC’s Office of Professional Conduct (OPC) and the Office of Equal Employment Opportunity (OEEO), as called for in the plan of action mandated following the completion of the investigation by the law firm Cleary Gottlieb Steen & Hamilton LLP.

It also would have allowed for sharing information regarding allegations against FDIC leaders while protecting confidentiality.  

FDIC Board Director Jonathan McKernan and FDIC Vice Chair Travis Hill introduced the resolution that was voted down. McKernan expressed his disappointment at the board’s vote against his resolution in a statement published on the FDIC’s website.

“My proposal would have just replicated the same committee structure that successfully and quickly oversaw Cleary Gottlieb’s review, tasked that committee with retaining and overseeing outside investigators, and directed Cleary Gottlieb to provide all information relevant to potential executive misconduct to those outside investigators, subject of course to Cleary Gottlieb first obtaining the consent of individuals who provided hotline information or interview information to the sharing of that information with the outside investigators,” McKernan said.

FDIC member and Acting Comptroller of the Currency Michael Hsu, who served as co-chair of the committee that oversaw the Cleary Gottlieb investigation, issued a statement expressing opposition to McKernan’s resolution.  

“Throughout this process, I have put the interests of FDIC employees first and repeatedly emphasized the need to focus on substance – namely, the steps necessary to transform the culture and structure of the agency,” Hsu said. “The proposal adopted by the board today provides a clear path for executives and board members to be held accountable in a timely and fair manner pending the full operationalization of the OPC and OEEO, while also respecting the confidentiality and anonymity of those who engaged in the Cleary Gottlieb review. I was surprised by Director McKernan’s objection, as his counterproposal distracts from our substantive goals. I remain committed to protecting and serving the employees of the FDIC and continuing to work with all members of the Board to seek consensus to make the agency safe, fair, and inclusive for all.”

The board elected to explore whether the National Credit Union Administration (NCUA), the Government Services Administration (GSA), or another regulator might be amenable to overseeing investigations by outside investigators of potential executive misconduct on behalf of the FDIC.

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