“I’m shocked, shocked to find that gambling is going on,” said Captain Renault just before a porter handed him his winnings. This notorious scene from Casablanca could easily have played out at the Federal Deposit Insurance Corporation (FDIC) this year, when reports of rampant sexual misconduct, racial discrimination, and a noxious work environment were leveled in excruciating detail by independent investigations.
Yet through years of worker complaints, internal investigations, and hush-hush settlements FDIC continued with business as usual, even promoting and maintaining managers who had engaged in inappropriate behavior with subordinates, among other misdeeds. When the breadth of the scandals was publicly exposed, FDIC Chairman Martin Gruenberg was forced to walk the plank.
FDIC was already skating on thin ice with the collapse of Silicon Valley Bank, the biggest failure since the 2008 financial crisis. Public confidence in regulators waned as FDIC bailed out the bank’s customers beyond the standard $250,000 insurance limit.
A year later, the whole matter remains opaque. Bank Policy Institute President and CEO Greg Baer noted, “The FDIC has provided very little clarity, but all the available evidence suggests FDIC made missteps throughout the winddown of the bank—starting with the initial failed strategy on resolution weekend, followed by a protracted and confusing process to ultimately find a buyer.”
Additional FDIC bungling arose with the exposure of bank customers’ personal information during the bailout process, raising significant concerns about the agency’s data security practices and handling of sensitive personal information.
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