Who Watches the Watchmen? The FDIC has been credibly accused of being a "sexualized, boys' club environment"

 

Today's article provides an overview of the findings of a third-party investigation into the culture of the The Federal Deposit Insurance Corporation (FDIC), referred to herein as the "Report." Several media outlets have articles about the report (e.g. here and here).

Who is the FDIC and what does it do?

According to the FDIC website, the FDIC: 1) provides deposit insurance (it is the government entity that guarantees each depositor up to $250,000), 2) supervises and examines the banks and other financial institutions in the US. The FDIC was created by the Banking Act of 1933, enacted during the Great Depression to restore trust in the American banking system.

The FDIC is the "Watchmen" of the banks and other financial institutions. They make sure that the acts of these institutions meet certain regulations and are generally "above board." When the FDIC removes its insurance from a bank, patrons of that bank typically abandon it and the bank fails (generally).

What are the allegations?

Current and former employees have made allegations of sexual harassment and interpersonal misconduct at the FDIC, including hostile, abusive, unprofessional, or inappropriate conduct, as well as management’s response to these allegations.

What are the findings?

Here are some selected findings in the Report:

"This toxic “boys club culture” fosters an environment in which subtle and not so-subtle forms of gender and other biases are permitted. For women and individuals from underrepresented groups, this includes gender and race-based name calling, difficulty being promoted after having children, a lack of respect for women, pressure to participate in offensive jokes to avoid 'being considered a prude,' experiencing different accountability standards, and their opinions not being heard."

"A number of current FDIC employees who had had other government service experience, consistently compared the FDIC culture negatively to their experience at other agencies, including individuals with decades of government service. One such individual noted that the 'experience I have had at the FDIC is not like anything else I have had elsewhere which makes me know it isn’t right' and another said, 'I have been at two other federal agencies and the FDIC is the worst.' Current employees with experience at other federal agencies also described how the FDIC has a sense of exceptionalism, manifesting itself in the attitude that the 'FDIC is a separate special agency and we can make up the rules as we go' because of a lack of day-to-day oversight that other federal agencies have."

"In describing the basis for the fear of retaliation, FDIC employees described a perception that when complaints are made, managers 'close ranks' and work to protect themselves instead of taking concerns seriously. This was described as 'circling the wagons' or 'CYA' or a 'protect their own' mentality. One employee summarized this by saying that many at the FDIC go “back 20-30 years,' and '[w]hoever I tell, they will protect each other, they’ve worked together 30 years—[and] then who am I?' These perceptions contributed to an overall description of the FDIC as an insular, and in many ways, a 'toxic culture.'"

"We found in our review that the core value of “accountability” had been negatively impacted by a widely held view that the consequences for misconduct, including sexual harassment, discrimination, and other forms of interpersonal misconduct, are not sufficiently severe."

"FDIC employees also reported that, instead of being disciplined, individuals who were known to have engaged in interpersonal misconduct appeared to be simply 'moved around.' One FDIC employee described this as 'brushing things under the rug' and another said that it reflected an alternative to actually 'dealing with the issues.' One employee described the FDIC response to interpersonal misconduct as 'pay, promote, or move them,' reflecting a view that those engaged in interpersonal misconduct often received settlement payments, remained at the FDIC, or had been transitioned to different roles or even promoted over time. Some expressed the view that there were particular parts of the agency where people who had engaged in misconduct were moved, noting that 'Corporate University was where executives got exiled' when 'things were not on the up-and-up.' One employee noted that internally people joked that 'if you want to get a promotion you can either relocate or do something bad, and you’ll get a position in Washington or Corporate University.' Others believed that positions that used to never exist were often created to place individuals who had been alleged to have engaged in misconduct but where the FDIC was not prepared—or willing—to take disciplinary action. In that regard, a number of employees compared the FDIC’s approach to internal misconduct to that of the Catholic Church."

This is merely a sample of the Report's findings. There are many others, including redacted accounts of specific allegations of sexual misconduct - for which punishment was inadequate or not given at all.

So What?

There is an old saying that "power corrupts, and absolute power corrupts absolutely." And that adage appears to be correct about the FDIC, at least according to this report. Comments about how the FDIC is "special" and "can make the rules up as they go" are horrifying. And reports about "circling ranks," "moving [alleged offenders] around," and comparing the FDIC's internal approach to internal misconduct to that of the Catholic Church ... yikes. In fact, the Report lists the Number 1 Root Cause of the Issues to be a lack of accountability.

The Report suggests that a culture transformation is needed. I am impressed that they resisted the urge to make the font on that suggestion 48-point for emphasis.

Someone at the FDIC is going to be writing some very large checks, and not because a bank fails.

Takeaways

All, it's 2024. This sort of thing should not be happening anywhere - especially at a government agency tasked with ensuring the integrity of our banking system. And rest assured - if it can happen at the FDIC, it can happen at your company. Does your firm have the resources to compensate the victims if it does?

As always, I suggest an alternative approach - be proactive, not reactive. Don't wait until the entire culture needs reformation. As Ben Franklin reportedly said, "A stitch in time saves nine." Take action when things first happen. Don't bury anything, thinking that it will just "go away." A little course correction at the beginning is the way to treat issues like these.

"An ounce of prevention is worth a pound of cure."

Don't be like the FDIC. Treat your employees with respect and integrity. And when problems arise, do something about them. You will be glad that you did.

 

This post originally appeared on LinkedIn.