Embattled Bank Regulator Says He Will Resign Once a Successor Is in Place

Martin Gruenberg, the chairman of the Federal Deposit Insurance Corporation, said on Monday that he would resign from his post once a successor had been confirmed to replace him, according to an email to employees seen by The New York Times.

His announcement came hours after the top Democrat on bank regulation, Senator Sherrod Brown of Ohio, called on President Biden to choose a new leader for the agency, saying he no longer had confidence that Mr. Gruenberg could heal its “toxic culture.”

“In light of recent events, I am prepared to step down from my responsibilities once a successor is confirmed,” Mr. Gruenberg wrote to employees. “Until that time, I will continue to fulfill my responsibilities as chairman of the F.D.I.C., including the transformation of the F.D.I.C.’s workplace culture.”

Mr. Brown, the chairman of the Senate Banking Committee, said on Monday that after a committee hearing with Mr. Gruenberg on Thursday, he no longer believed that Mr. Gruenberg could put an end to a culture of sexual harassment and discrimination at the agency, which oversees U.S. banks. He called for Mr. Biden to nominate a successor and for the Senate to quickly confirm that person, who could then take over for Mr. Gruenberg.

“There must be fundamental changes at the F.D.I.C.,” Mr. Brown said. “Those changes begin with new leadership, who must fix the agency’s toxic culture and put the women and men who work there — and their mission — first.”

An F.D.I.C. spokesman declined to comment further beyond Mr. Gruenberg’s email.

The agency’s problems were detailed in a report released this month, prepared by the law firm Cleary Gottlieb, that the F.D.I.C.’s board commissioned in response to a series of articles in The Wall Street Journal. Since then, Mr. Gruenberg has faced some calls to resign from members of both political parties who said they felt he had played too big a role in shaping the agency’s culture in recent years, including by making the agency’s staff fear communicating with him.

Until Monday, Mr. Gruenberg, who is in the middle of a five-year term as chairman, was in a relatively safe position as a key protector of the Biden administration’s efforts to strengthen bank regulations. The fate of a proposed overhaul to capital requirements for the country’s largest banks hangs in the balance, with institutions furiously fighting it.

Mr. Gruenberg leads a five-person board of directors and, as a Democrat, helps keep the agency’s rules in line with Mr. Biden’s agenda.

No more than three F.D.I.C. board members can belong to the same political party, according to the agency’s rules. With Mr. Gruenberg in charge, Democrats hold three of five board votes. This is most likely a factor in why Mr. Brown called for Mr. Gruenberg to resign only after a successor is confirmed.

Support for the new capital rules changes generally runs along partisan lines. The two Republicans on the F.D.I.C. board, including the vice chair, Travis Hill, are likely to vote against it.

On Wednesday and Thursday last week, Mr. Gruenberg made back-to-back appearances in Senate and House committee hearings, and his performances were not enough to satisfy Mr. Brown.

“After chairing last week’s hearing, reviewing the independent report and receiving further outreach from F.D.I.C. employees to the Banking and Housing Committee, I am left with one conclusion: There must be fundamental changes at the F.D.I.C.,” Mr. Brown said.

The Cleary Gottlieb report found a pattern of abuse by senior examiners and other officials at the agency, including instances in which supervisors sent their employees nude photos of themselves or took them to brothels during business trips. It also questioned whether Mr. Gruenberg, who has led the agency for 10 of the past 13 years, could remain effective in his role, given “the incidents of — and resulting reputation for — losing his temper and expressing anger with staff.”

During his testimony last week, Mr. Gruenberg apologized for hurting employees, saying, “It’s incumbent on me to be more sensitive to how my behavior is received by employees and to understand that the only thing that matters is not my perception but their perception.” He also said he would be willing to take anger-management classes.