In a recent American Banker article, journalist John Heltman explores how US President Donald Trump's executive order banning diversity, equity, and inclusion (DEI) initiatives at federal agencies may complicate the US Federal Deposit Insurance Corporation's (FDIC) efforts to recover from its high-profile toxic culture scandal.
In November 2023, a bombshell Wall Street Journal article reported on allegations of rampant sexual harassment and discrimination among FDIC employees. A subsequent independent review labeled the agency a "good ol' boys club" rife with favoritism and insularity. That report, produced by law firm Cleary Gottlieb, included a number of recommendations as to how the FDIC could reform its policies and procedures to protect victims and hold those who commit misconduct accountable.
In one of his many executive orders since taking office last month, President Trump mandated that agencies "coordinate the termination of all discriminatory programs, including illegal DEI and 'diversity, equity, inclusion, and accessibility' (DEIA) mandates, policies, programs, preferences, and activities in the federal government, under whatever name they appear." As Heltman explains, it is unclear how the FDIC can move forward with its remediation plan without running afoul of these new rules.
The agency has already been forced to shutter its Office of Minority and Women Inclusion and to withdraw its request for external experts to provide anti-sexual harassment to its employees. And, while the need for culture change was included in the key priorities set by Acting Chairman Travis Hill, it appeared last on that list.
More importantly, it's not at all clear that the actions set forth in the independent review, and in the FDIC's remediation plan, are fit for purpose in resolving deeply-rooted cultural issues. In a Weekend Reading article we published in May 2024, Starling Founder & CEO Stephen Scott explained why the FDIC would need to go further in order to rebuild trust among its employees and the public.
"There is little in the remedial plan put forward by Cleary Gottlieb... to suggest that the FDIC would successfully satisfy the demands it asserts here vis-à-vis the institutions it oversees," he wrote. "[T]he litmus test question to be answered in circumstances such as those currently faced by the FDIC is this: what will help us to evidence our trustworthiness most sustainably? The FDIC has yet to put forward a compelling answer to that question, and the Clearly Gottlieb report offers little help."
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