Vice chair for supervision at the federal reserve. Live coverage here on cspan. Mr. Luetkemeyer ive been here a long time. This is my 14th year in this committee. Which is a long time. Also know that you lied to me. You lied to the chairman, you lied to this committee. On operation choke point. And it took an email where we found you involved before we confronted you and you admitted it in my office that you were involved in this and it stopped. Since then, since your new term, youve been involved in it again. You were here with your three representatives and also admitted wrongdoing there. Also theres weak management from the standpoint of regulation. Thats what your job really is. As evidenced by the three banks that failed last year. As a bank examiner, there is no way in the world i would have allowed a bank model of those three banks to exist. 80 to 95 uninsured deposits. Are you kidding me . No way. You knew about it for a year. Did nothing. And in doing that you endangered not only the viability of those banks but the viability of our system. Because what happened . They went down, runs were started on other banks around the country, got phone calls from everybody, bankers worried about what was going to happen. All because of the lax management and lack of regulation. And youre part of the problem as well. You and chopra and gruenberg tried to do something with this bank merger situation. Shame on you guys. You have become the Michael Cohen of the fdic. And you need to go. If you have the decency, please step down. If not, i would urge the president of the United States to replace you asap. With that, mr. Chairman, i yield back. The gentleman yields back. The gentleman from illinois, mrr five minutes. Mr. Foster thank you, mr. Chairman. Last friday the fsoc issued a report on nonbank Mortgage Servicing. In your statement following your vote to approve that report, you stated that the report identifies important Financial Stability concerns that need to be addressed by congress. The press release notes that nonbank Mortgage Companies originated approximately 2 3 of mortgages in the United States and owned servicing rates on 54 . I came in in march of 2008. So i spent a lot of the first years cleaning up the mess of an underregulated mortgage industry and the damage it did to families in america. This note reports the benefits of this trend, such as supporting lending to historically underserved community, but also the risks that are associated with it. Can you speak a little bit about some of the risks associated with concentration in this space and other dangers . Thank you for the question, congressman. So, as the report noted, today Mortgage Servicing is concentrated in a relatively small number of nonbank Mortgage Servicers. There are certain fragilities that come with that. Mr. Foster can you be more specific . What is the scale of this concern . Would it have implications for the g. S. E. s . Fannie, freddie . What would contagion look like in this area that would be a source for financial worry . Mr. Hsu it depends on the nature of the problem that manifests. As you pointed out, there are strong connections with the g. S. E. s. Sometimes these Mortgage Servicers. And of course the g. S. E. s are then connected to the banking system. So the potential for widespread contagion from issues or problems at the nonbank Mortgage Service companies could be severe. Mr. Foster could you be a little more specific . What are a couple example nightmare scenarios where you could have contagion . Mr. Hsu well, so, at the very extreme there could be massive disruption of Mortgage Servicing which would really impact the significant portion of the mortgage market, in which case, thats billions and trillions of dollars that are flowing through the system that would be disrupted. And that could have knockon effects onto both g. S. E. s and the banks. Mr. Foster the report includes several recommendations for congress, including providing additional authorities to help firms manage the risk. To promote information sharing between the state and federal regulators would share the burden here. Can you speak a little bit about how those recommendations, if followed through by congress, would promote Financial Stability . Mr. Hsu sure. So one of the primary recommendations is for congress to strengthen both the supervision and the framework around a Mortgage Service company so theyre held to a standard that enables safety and soundness in that market. Thats the core of it. In addition to that, i think this was discussed earlier, having an industryfunded fund that will provide liquidity as necessary in case theres liquidity issues at those services. Mr. Foster this would be like the depth or liquidity . Is it liquidity in the sense that youd pledge asset or is this something where the industry as a whole would be responsible for replenishing the fund . Mr. Hsu its more the latter. And the detail that was would still need to be worked out obviously but the idea is that the industry itself. Mr. Foster then im immediately led back to the comment about, ok, maybe move this more back into the banks. There already is a dip for it and trying to understand the reason for the market moving away. Mr. Hsu so we want to make sure that for any given activity, especially with mortgages, theres risk and that risk has to be managed and properly buffered for, both for capital and liquidity. We want to make sure those standards are applied equal request and appropriately wherever they take place. Inside or outside the banking system. The fsoc report gets at that. We want to level up. We want to make sure that Playing Field is level and leveled up. Mr. Foster is the fsoc doing exactly the job we hoped you would do to actually look around the corner and look holistically at the system and say, ok, are there things that we are going to be having hearings about next year . After things blow up, to the extent that youre able to foresee and prevent those, youre doing your job well. So thank you and my times up. I yield back. The gentleman from michigan, the chair of the oversight subcommittee, mr. Huizenga is, recognized for five minutes. Mr. Huizenga thank you, mr. Chairman. I want to clarify something that seems to be a wellworn path for some on the committee about this report only being about you because gottlieb didnt look anywhere else. Sheila bear was mentioned twice in that report. One referencing the cultural claiming she started after a 2008 altercation that you had. Chairmaning williams was referenced four times, referencing her attempts to improve the culture, including creating team fdic which stands for fdic employees to get involved, cleaning up your mess once again. If there was any negative or derogatory information on any of the chairs, they would have included it. You had earlier said to the chairman that your staff regularly briefs you on bank policy or issues related to banks and that sometimes that bad news is regarding bank failures. What we learned though in our own investigation as a committee, we did dozens of transcribed interviews and had dozens of whistleblowers that came forward outside of cleary. We learned that in our own investigation that senior advisors actively prepared and coached their staff before briefing you, warning them about your behavior. Did you know that . No. Heuz heuz fdic staff mr. Huizenga fdic staff had been known to cry after leaving meetings with you and others had to comfort colleagues after interacting with you. No such stories were documented about either chair bear or chairmaning williams chair mcwilliams. They delayed delivering news that they fear wood upset you and your reactions feared would upset you and your reactions had a Chilling Effect on communication. If your staff are so afraid to give you bad news and they delay telling you that news, it simply makes a bad situation even worse. Sir, youre the wrong person for the job to clean up this mess. The mission of the fdic is far too important and you are unwilling or unable to accept negative information. Any delay of information getting to the chairman of the fdic is a recipe for disaster. If you cant deal with bad news, you are the wrong person for this job. I want to hit on one other important point. Last time you were before the committee, you were asked directly by the chair if you had ever been subject of an investigation. You said no. Then after some selfreflection during a break for votes and i believe a call from a reporter, you admitted that you actually had. Just like you did today, you were parissing your words parcing your words. Cleary gottlieb report explained that the 2008 incident you were made, where you made a Senior Executive feel personally attacked, the reporter alleged that the staffer felt humiliate the and you created a hostile environment. Id like to include a redacted copy of that 2008 management inquiry into the record. Mr. Mchenry without objection. Mr. Huizenga that person was arlise uptonkey while you were vice chairman at the time and recently you just named an fdic chairmans award for Operational Excellence after ms. Key, uptonkey. So you named an award after the same woman who you screamed at and the same woman who accused of withholding information for being disloyal to you. Sir, i certainly hope this isnt some sick ruse to buy her silence. And im going to use your own Opening Statement to close mine. On page two, well, page two, you said, this misconduct first surfaced last year. Thats simply not true. This had been out there as rumors and innuendo and many other complaints. But you also say you regret not having identified deeper cultural issues at fdic sooner. Sir, you created the culture. You created the culture there. And you are the wrong person for the job. And you finish on page three going on to paining four, the three page four, the three core elements of your action plan outlined. Provide one more support for victims is your first point. Number two, strengthen process for reporting and investigating complaints. Number three, improving accountability for anyone who is found to engage in misconduct, including through separation from the agency. How can this not be you, sir . Youre the wrong person for the job. And i yield back. Mr. Mchenry the gentlewoman from ohio, mrs. Beatty, is now recognized for five minutes. Mrs. Beatty thank you, mr. Chairman, and ranking member. To our witnesses here today. Im not sure where to begin. I have sat here and listened to my colleagues on both sides of the aisle and i agree with a lot that has been said on both sides of the aisle. As a black woman, as someone, when congressman heintz asked to you reflect on talking to those individuals himes asked to you reflect on talking to those individuals and especially women, i was sitting here thinking how i would feel. And then i reviewed again the massive report and executive summary of the fdic report. Im not going to go through it because much has been said and rightly so. This is troubling. It is a longstanding culture of Sexual Harassment and misconduct. I dont know where to start with the blame. But this didnt just happen now. If you go to the middle of the report, which i spent many hours along with my cleel counsel and staff Legal Counsel and staff here going through this, the report says this has been going on for years. So now im not going to maybe accept whether it was william or bear cleaning it up. I think all of you are at fault. I think everybody that sat in that seat has to take some ownership. I dont know what they tried to clean up. Nor you. But i dont make it just this watch. I am so bothered that three of you to me share in this, because this is massive. If we go to the middle of that 300, 400 report, there were some 510 hotline reports. And i think its important for us to know, 97 individuals reported 145 separate incidents of Sexual Harassment, unwelcomed sexual advances, 91 individuals reported 141 separate occasions of gender and sexual assaultbased sexualitybased discrimination. 187 individuals reported 320 separate incidents of workplace bullying, threat and verbal abuse. This is not small. Now, i do welcome the fact that you accepted responsibility. That you have put a plan together. But i guess im curious, are we going to go back and look at all of those things . Where is the accountability . Was somebody terminateed . Will people go back as a result of this and be terminateed . And while that wont repair what has happened to some of these individuals, for anyone, for a female employee to be touched or to have to watch videos, to be asked to carry a child, that is not something that this congress would accept. This is not a democrat or republican but i want to be fair on both sides. Its not you just as a leader with this administration who should be admonished. Everybody should be admonished. And i guess what i want to hear is lets open up pandoras box. Lets go look at all those managers. It is from the top down. But there are a whole lot of people that are getting a pass today while were beating the heck out of you. A whole lot of people should be sitting with you and behind you that should also carry in this blame. So i dont want anyone to think because im all about putting people over politics. People over politics. And that is what i stand for and i know my colleagues here do as well. So i just wanted to put it into the record, i dont think i have a question. But i want you and all those who report under you, you should not carry this burden alone. Now, you should lead it and everything that has been said on both sides of the aisle, youre going to have to weather because we have it here before us. But i am suggesting that you go back and a whole lot of other folks need to be responding to the questions that my colleagues are asking to help at least show that we care about all of these individuals that have had to have been exposed to this. Mr. Chairman, i yield back. Mr. Mchenry the gentlelady from missouri, the chair of the Capital Markets subcommittee, mrs. Wagner is, recognized for five minutes. Mrs. Wagner i thank you, mr. Chairman. Youve been at the fdic for 19 years. Leading it mostly for 10 of those years. During that time, you apparently never once took it upon yourself to look into the toxic workplace that youre leading. That is until the wall street journal published articles details your ill temper and inappropriate behavior towards fdic employees. After your reputation was put at risk, then and only then did you decide to work on getting your house in order, sir. In this report, 500, north of 500 employees came forward with complaints of Sexual Harassment, discrimination and other workplace misconduct. This is a massive number and its only scratching the surface. For context, you have over 5,000 employees, the fdic today. Quick answers to these questions, sir. Chairman, how often do you get out of d. C. And visit fdic regional and field offices . Mr. Gruenberg i try to visit each we have six Regional Offices around the country. I try to visit each Regional Office at least once a year. Mrs. Wagner and the field offices . Mr. Gruenberg generally not we have 70 mrs. Wagner do you not go to the field offices, once a year you go to the regionals. Do you meet with rank and file employees when you have those once a year visits . Mr. Gruenberg yes, i do. Mrs. Wagner did it ever once occur to you that something highly inappropriate was going on at these offices . Mr. Gruenberg the kind of deepseeded Workplace Culture did not come through in those visits. Mrs. Wagner you got to be kidding me. Why . How could you not know . Youve been there on the board 19 years and you are telling me that youve never heard a single story of harassment and, sir, i remind you, you are under oath. Mr. Gruenberg congresswoman, i understand the question and why you ask it. In those visits i met with employees, rank and file employees. It simply did not come forward. Mrs. Wagner well, this report has some of the most horrific h. R. Abuses that i have ever read in my life. We can talk all day about your personal management problems and that i find appalling also. But whats more concerning is the complete ignorance and the of the wellbeing of the employees that youre entrusted with leading and the fact that you dont even visit or talk to them once a year to six field or Regional Offices, never to one of the 70 field offices . Your employees have lost confidence in you, sir. I have lost confidence in you. And congress has lost confidence in you. You, sir, should be fired. Not resign. Fired. Mr. Chairman, i ask unanimous consent to enter into the record a letter from the independent womens forum and the independent womens voice requesting the chairs resignation. Mr. Mchenry without objection. Mrs. Wagner mr. Hsu, your report identified a, quote, these are all quotes, patriarchal insular Toxic Boys Club culture where there was, quote, widespread fear of retaliation and where, quote, managements response to allegations of misconduct as well as culture and conditions gave rise to them have been insufficient and infective ineffective. The report found that cultural and structural changes were necessary. Mr. Gruenberg has been on the fdic board for is the years and the patriarch for 10 of those years. In those 10 years of leadership, has he failed to address these abhorrent workplace conditions . And what makes you believe he remains qualified to implement the necessary cultural and structural changes outlined in your report . Mr. Hsu so as the report notes, whats needed for effective leadership of the agency at this time is leadership that empathizes and fully recognizes all of the mrs. Wagner ok, i dont need a regurgitation. Mr. Hsu, your own report states chairman gruenbergs reputation raises questions about the credibility of the leaderships response to the crisis and the moral authority to lead a cultural transformation. Do you now renounce the findings of your own report, sir . Mr. Hsu no, i accept those findings. I fully accept those findings. Mrs. Wagner how on earth do you believe that he can lead this agency into a new and better day and culture . Mr. Hsu i believe he has taken full responsibility for all mrs. W