The Federal Deposit Insurance Corp. fostered a workplace rife with sexual harassment, discrimination, bullying and other misconduct for years that management did little to stop, according to the findings of an independent investigation.

The report released Tuesday by law firm Cleary Gottlieb Steen & Hamilton said the top bank regulator needs “cultural and structural change” and questioned whether FDIC Chair Martin Gruenberg is the right person to lead those reforms, citing incidents of him “losing his temper and interacting with staff in a demeaning and inappropriate manner.”

More than 500 agency employees detailed their experiences of misconduct as part of the outside investigation, which a special bipartisan committee of the FDIC’s board commissioned last year in response to a series of stories in The Wall Street Journal. Most of those individuals were current employees in the roughly 6,000-person workforce.

“For far too many employees and for far too long, the FDIC has failed to provide a workplace safe from sexual harassment, discrimination, and other interpersonal misconduct,” the report said of the agency, which insures $10 trillion in deposits. It blasted “a patriarchal, insular, and risk-averse culture” and “widespread fear of retaliation” that have allowed misconduct to persist for years.

Managers’ response to allegations of misconduct has been “insufficient and ineffective,” the report found. It detailed incidents in which senior executives would pursue romantic relationships with subordinates, for example.

“While we do not find Chairman Gruenberg’s conduct to be a root cause of the sexual harassment and discrimination in the agency or the long-standing workplace culture issues identified in our review, we do recognize that, as a number of FDIC employees put it in talking about Chairman Gruenberg, culture ‘starts at the top,’” according to the report.

The report did not say whether Gruenberg or any other official should be removed or disciplined, but its tone was fairly damning: "Chairman Gruenberg’s reputation raises questions about the credibility of the leadership’s response to the crisis and the 'moral authority' to lead a cultural transformation," it said.

The inquiry’s conclusions about pervasive misconduct across the agency and incidents of Gruenberg verbally berating employees were already reigniting calls for his ouster.

Rep. Patrick McHenry (R-N.C.), the chair of the House Financial Services Committee, said the report "details his inexcusable behavior and makes clear new leadership is needed at the FDIC."

“After today’s report, no one can deny the depth of the FDIC cesspool that I have been sounding the alarm on for months,” Sen. Joni Ernst (R-Iowa) said in a statement. “The culture Chairman Martin Gruenberg has allowed and perpetuated at the FDIC for over a decade is a failure of leadership and a degradation of humanity.”

In a message to FDIC employees on Tuesday, Gruenberg indicated that he planned to stay in his role. He called the report a “sobering look inside our workplace” and said he accepted the findings of the investigation.

“To anyone who experienced sexual harassment or other misconduct at the FDIC, I again want to express how very sorry I am,” Gruenberg said in the message. “I also want to apologize for any shortcomings on my part. As Chairman, I am ultimately responsible for everything that happens at our agency, including our workplace culture.”

Rep. Bill Foster, a senior member of the House Financial Services Committee, became the first Democrat to call for Gruenberg to step down.

“I am appalled and deeply disturbed by the details of widespread sexual harassment and discrimination at the FDIC outlined in the report released today, and I commend the brave individuals who came forward to shed light on these abuses,” Foster (D-Ill.) said in a statement. “Sweeping changes must be made to mend the toxic work environment that has run rampant for far too long, and that starts with a change of leadership.”

Gruenberg, who was nominated by President Joe Biden after serving previous stints atop the agency during the Obama administration, has led the agency for 10 of the past 13 years.

White House Press Secretary Karine Jean-Pierre declined to say whether Biden had confidence in Gruenberg’s leadership. But she noted that Gruenberg “apologized and has committed to the recommendations that have been provided by the independent report.”

Rep. Maxine Waters, the top Democrat on the House Financial Services Committee, said it’s up to the FDIC how to proceed.

"I don’t think there was anything really devastating on sexual harassment, so it’s a matter of now the board deciding whether ... they’re going to ask him to resign or not," Waters said in an interview. She said Democrats "have got to be as fair and as objective as we can be, and read the detailed report before we make any decisions about anything."

The report comes as the FDIC and other Biden-era regulators are seeking to finalize a series of tougher regulations against banks, including an increase in capital requirements that the industry is vigorously fighting. Gruenberg’s vote on the panel, in which Democrats have a 3-2 majority, is crucial to moving that proposal forward.

The agency has been particularly active in recent weeks, scrutinizing large investment companies’ stakes in banks and putting out stricter guidelines for oversight of bank mergers. Just a day before the report’s release, the FDIC joined some fellow regulators in publishing a draft rule to put more guardrails around financial executive pay packages, even as the effort was not supported by all the agencies with authority over the rule, notably the Federal Reserve.

The report, citing the FDIC's own public reporting, said none of the 92 harassment complaints made from 2015 to 2023 through an anti-harassment program led to "removal, reductions in grade or pay, or any discipline more serious than a suspension."

"Of those ninety-two, just two resulted in suspensions, two in letters of reprimand, and twelve in counseling, warnings, or trainings," it added. "The rest led to no discipline at all. This lack of accountability stems in part from a risk-averse culture that focuses excessively on the risks associated with taking disciplinary action, while not sufficiently taking into account the institutional damage that can be caused by years of not holding people sufficiently accountable."

The report, commissioned by an internal committee led by Acting Comptroller of the Currency Michael Hsu and Republican board member Jonathan McKernan, is just one of a series of investigations that have been launched into the FDIC in recent months. Two separate inquiries by the agency’s inspector general continue and are expected to produce reports later this year.

“Today’s report establishes the urgent imperative of a cultural transformation at the FDIC led by those with the leadership capacity to effectuate that change,” McKernan said in a press release.

Cleary Gottlieb investigators are slated to brief Republicans on the House Financial Services Committee on the report on Thursday morning, said a House aide granted anonymity to discuss unannounced plans.

Rohit Chopra, the director of the Consumer Financial Protection Bureau who also sits on the FDIC board, said in a statement that the investigation “confirms that there are serious, long-standing issues within the FDIC that must be addressed.” He said the agency “must quickly move forward to implement the report’s recommended reforms to ensure all its employees have a safe workplace free of discrimination or harassment.”

Eleanor Mueller and Victoria Guida contributed to this report.