Martin J. Gruenberg is the chair of the Federal Deposit Insurance Corp. (FDIC) Board of Directors. He was sworn in to his current term on Jan. 5, 2023. In March 2023, under his leadership, the FDIC managed the receivership of Silicon Valley Bank (SVB), the largest bank failure since the 2008 financial crisis.
Gruenberg’s long career in banking and financial regulation and policy has spanned national and international institutions. In addition to his long tenure on the FDIC board, he has also served on several U.S. Senate committees and on the Financial Stability Board of the G-20.
- As of January 2023, Martin J. Gruenberg is the chair of the Federal Deposit Insurance Corp. (FDIC) Board of Directors.
- Under his leadership, in March 2023, the FDIC handled the receivership of Silicon Valley Bank (SVB), the largest bank to fail since Washington Mutual in 2008.
- Gruenberg correctly assessed the risks that led to the collapse of SVB in a speech given just one week before the bank failed.
Education and Career
Gruenberg attended the Princeton School of Public and International Affairs, earning an A.B. (Artium Baccalaureus, or Bachelor of Arts) in 1975. He then pursued law at Case Western Reserve Law School in Ohio, graduating with a J.D. (Juris Doctor) in 1979.
Gruenberg’s long career in the financial and banking regulatory sectors began in 1979. His experience spans national and international organizations, having served congressional and federal institutions as well as advising on international monetary policy.
From 1987 to 1992, he held the position of staff director on the Congressional Banking Committee Subcommittee on International Finance and Monetary Policy. In 1993, he became senior counsel to then-Sen. Paul S. Sarbanes on the Senate Committee on Banking, Housing, and Urban Affairs, a position he held until 2005.
2005 also marked the first year that Gruenberg sat on the FDIC board as vice chair, a position he held more or less constantly (with the exception of a period as acting chair) until July 2011.
During this time, he also became chair of the Executive Council and president of the International Association of Deposit Insurers (IADI), serving from 2007 to 2012.
From July 2011 to November 2012, Gruenberg was once again acting chair of the FDIC, until his eventual appointment to chair by the Senate. He served as chair until mid-2018 and was reappointed to the position on Jan. 5, 2023.
Gruenberg has also chaired other boards, including the Federal Financial Institutions Examination Council (FFIEC) from April 2017 to June 2018 and the board of directors of the Neighborhood Reinvestment Corp. (NeighborWorks America). He became a member of the latter in April 2018 and has been chair since 2019.
Since February 2022, Gruenberg has also chaired the Resolution Steering Group (ReSG) of the G-20’s Financial Stability Board.
The FDIC and Silicon Valley Bank (SVB)
On March 6, 2023, Gruenberg gave a speech at the annual conference of the Institute of International Bankers. Among other topics, he spoke about current interest rates and their relationship to the risk profile of banks.
In a seemingly prophetic statement, given that he spoke just days before the collapse of Silicon Valley Bank (SVB), Gruenberg warned:
“[A]s a result of the higher interest rates, longer-term maturity assets acquired by banks when interest rates were lower are now worth less than their face values. The result is that most banks have some amount of unrealized losses on securities.”
According to Gruenberg, this is not an issue when banks are in a “strong financial condition” and are not “forced to realize losses by selling depreciated securities;” however, it does pose a problem when “unrealized losses weaken a bank’s future ability to meet unexpected liquidity needs.”
Unfortunately, the latter situation described by Gruenberg is a textbook description of the Silicon Valley Bank failure. After SVB’s significant holding of Treasury bonds declined in value, they were forced to sell a substantial portion of their portfolio at a $1.8 billion loss, spurring the eventual collapse of the bank. The FDIC was forced to step in and assist with a resolution strategy to minimize risks to the U.S. banking system as a whole.
Speaking to the Senate on March 27, 2023, Gruenberg underscored that “rapidly accelerating liquidity demands” experienced by SVB caused them to sell securities at a loss. In his words, “The now-realized losses created both liquidity and capital risk,” which led to “self-liquidation and failure.”
Warnings About Risks to the U.S. Banking Industry
Given his role at the FDIC, Gruenberg often sets priorities and forecasts risks to the banking sector. However, March 2023 was not the first time when he expressed concerns that would prove prescient in the case of the Silicon Valley Bank collapse.
In 2019, Gruenberg gave a keynote speech at an event at The Brookings Center on Regulation and Markets. His talk, titled “An Underappreciated Risk: The Resolution of Large Regional Banks in the United States,” highlighted the risks posed by “banks with assets between $50 billion and $500 billion.” (Silicon Valley Bank had $209 billion in assets at year-end 2022.)
In his speech, Gruenberg described the risk factors associated with banks of this nature and size, including their “heavy reliance” on uninsured deposits; their dependence on “credit sensitive market funding,” which increases their susceptibility to “a rapid failure caused by a lack of liquidity;” and the limited number of banks that would be able to acquire them in a relatively straightforward manner in the case of failure. He also detailed several ways in which banks of this size lack regulatory oversight.
These were all factors that played a large role in the collapse of Silicon Valley Bank, as Gruenberg would detail when speaking to the Senate on March 27, 2023.
What are Martin J. Gruenberg’s qualifications?
Martin J. Gruenberg has a bachelor of arts from the Princeton School of Public and International Affairs and a law degree from Case Western Reserve Law School in Ohio. His career in the banking and financial regulation sector began in 1979 and has included a long tenure on the Federal Deposit Insurance Corp. (FDIC) board as well as other prominent board positions.
What is Martin J. Gruenberg known for?
As of January 2023, Martin J. Gruenberg is the chair of the FDIC Board of Directors, on which he has served multiple terms over several decades. Under his leadership, the FDIC managed the receivership of Silicon Valley Bank (SVB), the second-largest bank failure since the 2008 financial crisis.
What is the FDIC?
The FDIC, or Federal Deposit Insurance Corp., was created by Congress in 1933 to oversee the U.S. banking system; however, it is an independent agency funded by banks. It stabilizes, monitors, and regulates the banking sector, insures deposits, and manages receiverships.
The Bottom Line
Martin J. Gruenberg’s long career in the banking and financial regulation sector has spanned positions with U.S. Senate committees, the FDIC, and the G-20. When Silicon Valley Bank collapsed in March 2023, the second-largest bank to fail since the 2008 financial crisis, the receivership and sale of SVB’s assets and deposits was managed under his leadership.