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Martin Gruenberg

A viewer’s guide to some rocky bank regulator hearings

The hottest ticket in financial services politics today? Rayburn 2128 at 10 a.m., and it’s not close.

FDIC Chair Martin Gruenberg will appear before the House Financial Services Committee this morning. He’ll be joined by Federal Reserve Vice Chair for Supervision Michael Barr and acting Comptroller of the Currency Michael Hsu. Regulators will head to the Senate for Round 2 tomorrow.

As we’ve written elsewhere, we expect these hearings to revolve largely around the FDIC. Last week’s independent investigation from the law firm Cleary Gottlieb corroborated widespread reports of sexual harassment and discrimination first reported by the Wall Street Journal in 2023. The investigation also documented Gruenberg’s sharp temper with staff.

Tuesday night, we had two scoops: the House Democratic plan to defend Gruenberg, and Sen. Tim Scott’s (R-S.C.) phone call with the FDIC chair in which Scott told Gruenberg to resign.

Even before this week, a lot of Democratic lawmakers suggested the hearings today and tomorrow could be make-or-break for the embattled bank regulator. Most top Republicans in this space have already called for Gruenberg to resign. At stake is the Biden administration’s ability to finalize much of its financial agenda.

But there’s other stuff: As bad as things look for Gruenberg, plenty of lawmakers will have broader policy questions for the regulators assembled today. A lot of them will be familiar to readers of The Vault.

Expect the Fed’s Barr to be peppered with questions about Basel III capital reform. Jointly issued by the prudential bank regulators last year, the banking industry mounted a mighty campaign against the proposal to increase large banks’ capital requirements.

Barr said in his prepared testimony that he expects there will be “a set of broad, material changes to the proposal” before it is finalized. How exactly those changes come about is an open question. We expect Republicans to grill Barr on whether the Fed and other regulators have decided to finalize a modified version of last year’s proposal versus going back to the drawing board and restarting the reform effort.

Democrats will have their own policy priorities, changes to the Community Reinvestment Act, what regulators are doing to guard against climate risk in the financial system and the risks of the proposed Capital One and Discover mega-merger.

— Brendan Pedersen

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