Federal Reserve Board: H.2 Release for Week Ending January 23, 2016; “Toxic” Employees Working Paper; Administrative Leave

The Federal Reserve Board (Board) publishes a weekly digest of its activities on its website. The digest is called the H.2 Release and is published every Thursday. The release for the week ending January 23, 2016, is below.

H.2 Release–Actions of the Board, Its Staff, and the Federal Reserve Banks; Applications and Reports Received

Category Action Taken
Change in Bank Control First American International Corporation, Brooklyn, New York — change in bank control of First American International Corporation and its subsidiary, First American International Bank, Brooklyn.

-Permitted, January 21, 2016


PB Financial Group, Inc., Denver, Colorado — withdrawal of the Board’s July 7, 2015, denial letter disapproving a change in bank control notice by Justine Hurry to acquire PB Financial Group, Inc., and its subsidiary, Premier Bank, Denver, in light of the bank’s closure.

-Approved, January 21, 2016






Enforcement Flagship Financial Group, Inc., Eden Prairie, Minnesota — written agreement issued August 19, 2011, terminated January 14, 2016.

-Announced, January 19, 2016


Prospect Financial Corporation, Warwick, Rhode Island — supervisory agreement issued by the Office of Thrift Supervision, dated October 6, 2010, terminated January 14, 2016.

-Announced, January 19, 2016




Separately, I will briefly discuss other items–“toxic” employees and administrative leave.

“Toxic” Employees-A Comment on a Working Paper

Housman, Michael, and Minor, Dylan (2015). “Toxic Workers.” Harvard Business School, Working Paper 16-057. November. 

This working paper suggests that organizations should avoid “toxic workers,” those who engage in behavior that adversely affects fellow workers or other company assets. While an interesting topic, the authors allow for wide interpretations from narrow, industry-specific data.

The authors use 5 standards to determine toxic workers–overconfidence, self-regarding, exposure to toxic employees, a job’s likelihood to produce toxic employees, and profession to follow the rules. It was the last that caught my attention. How could rule following be a sign of a toxic worker? Well, the answer may come from the data the authors use. The data that the authors used for the paper was from job-testing software to large employers (customer care, outbound sales). [Author’s note: These descriptions sound like call center jobs. These jobs tend to be low paying, and have high pressure, and high turnover.]

In the call center environment perhaps being a strict rule follower may lead to unpleasant customer experiences and complaints, hence such a person would be considered toxic.

The weakness of this paper is that the authors did not mention the limitations of their paper due to the source of the data and the specific nature of the jobs covered by the data. Instead, a broad proposition is offered for all workers, when the paper itself is far more limited in fact.

Administrative Leave

The Washington Post, through Joe Davidson, reported on a bill, S.2450, the Administrative Leave Act of 2016. The bill proposes to control the use of administrative leave, which has been used for agencies longer than the limited amounts, according the Comptroller General of the United States. The target of the bill seems to be the payment of leave to employees who are placed on seemingly endless administrative leave.

While that is a good motivation, the zeal to handle this issue ignores paycheck-to-paycheck employees suffering managerial abuse. A likely result is that such an employee would be placed into nonpaid status, potentially starting a spiral of financial disasters. These issues require more care than a quest for a hasty solution. In addition, the employees need to have their voices heard, not just of management, for example, Senior Executives Association, the Federal Managers Association, which not surprisingly support this bill (as they will not likely face financial repercussions for error).

[Author’s Note: The National Border Patrol Council, a part of the American Federation of Government Employees, supports the bill, according to the article–I am not sure why only a component of AFGE is supporting the bill.]

I would hope that these civil service “reform” proposals do not come piecemeal, slowly unraveling the civil service system. Congress should ensure also that all voices, especially employees, are heard before voting on these proposals. It is the responsible, democratic, and fair way forward.


Federal Reserve Board: H.2 Release for Week Ending January 16, 2016; Monetary Policy Report Hearings; A Comment

The Federal Reserve Board (Board) publishes a weekly digest of its activities on its website. The digest is called the H.2 Release and is published every Thursday. The release for the week ending January 16, 2016, is below.

H.2 Release–Actions of the Board, Its Staff, and the Federal Reserve Banks; Applications and Reports Received


Category Action Taken
Banks, Foreign Unione di Banche Italiane, S.p.A., Bergamo, Italy — to establish a representative office in New York, New York.

-Approved, January 14, 2016


Forms Forms — final Board review to extend with revision the Capital Assessments and Stress Testing information collection (FR Y-14A/Q/M).

-Approved, January 13, 2016



Monetary Policy Report, February 2016

In addition, the Monetary Policy Report hearings before the House and Senate have been announced.

U.S. House of Representatives U.S. Senate
February 10, 2016, 10:00 a.m., House Financial Services Committee February 11, 2016, 10:00 a.m., Senate Banking Committee
http://financialservices.house.gov/news/documentsingle.aspx?DocumentID=400197 http://www.banking.senate.gov/public/index.cfm/2016/2/semiannual-monetary-report-to-congress


A Comment

A slight digression follows. This blog covers the use of Dick Grote’s rank and yank program. Despite leading followers to destruction, organizations like the Board, and recently Mount St. Mary’s University, use (or propose to use) it. The Board additionally is carrying on a long-term case, Artis v. Greenspan Bernanke Yellen.

A quote from the Reverend Thomas Merton (mentioned by Pope Francis during his apostolic visit to the United States of America) to consider in thinking about the Board’s (unacceptable and backward) attitude toward employment discrimination claims:

“In effect we are not going to give the Negro a right to live where he likes, eat where he likes, go to school where he likes or work where he likes, but only to sue the white man who refuses to let him do these things. If every time I want an ice cream soda I have to sue the owner of the drugstore, I think I will probably keep going to the same old places in my ghetto.” (Merton, “Seeds of Destruction,” page 20)

These statements introduce a festering institution in decline–Vanguard, which was exposed in the Philadelphia Inquirer of using Grote’s rank and yank to cull staff. Vanguard, despite using the cruel program, does not want publicity. The only silver lining to the story were the humane managers (some of them also fired) who testified on behalf of their subordinates in their legal suits against Vanguard.

The rank injustice for an abused, paycheck-to-paycheck, employee to have to appeal to an expensive legal system, filled with persons who worked for corporations, to seek “relief” for abuse from a corporate institution, to the extent you have the Benjamins to pay, cries out earnestly for urgent remedy. Without it, the financially vulnerable employee faces a future of being discarded to the bin in penury. This result is bitter and needs serious reform.





Dick Grote: Rank and Yank, a.k.a. Differentiation, Used Ruthlessly and in Stealth at Vanguard

Microsoft. Yahoo. Amazon. General Electric. Enron. Federal Reserve Board. And, now Vanguard joins the list of companies using Dick Grote’s rank and yank performance management program to set targeted people up to fail and then blamed the target for the management-driven “failures.” The Philadelphia Inquirer, through its reporter, Erin E. Arvelund, (and the ex-employees who discussed their experiences) exposed Vanguard’s behavior.

With this blog’s coverage of Grote’s rank and yank, this manipulative management style was not new, but what did draw attention is Vanguard’s interest in covering up its use of rank and yank. When an organization decides to enforce rank and yank, that organization must reduce “management” to the calibration meeting’s ranking process. The managers no longer manage the business but instead spend time sorting out who is going to be placed in the firing-level rank during the calibration meeting.

[Author’s note: I was encouraged by the humanity of managers who stood up for their subordinates (and supported their legal claims) in the article. This action is rarely seen, and I do commend it.]

Rank and yank is a vicious process, practiced in secret with an informed management against under-informed labor (conned with the use of euphemisms and doublespeak). The targeted labor are treated as prey to be attacked and then fired in a way to convince the target and, perhaps, the courts and other applicable agencies, that the management-documented (and directed) failure is the target’s fault and that this forced fault deserves a punishment of penury. (The effect of rank and yank is depicted in the table, below)

Bucket (rank) Percentage [“vitality curve”] (amounts can be adjusted) Effect
A 20 Lavish rewards, encouragement
B 70 Little to paltry increase
C 10 Pressure to quit, firing

I think that it is the secrecy that fuels the use of rank and yank because the focus of the process is to relentlessly expect perfection and then expect the target to produce these impossible goals, fail, and then be fired for not being able to achieve the impossible. See Dick Grote’s article, “Performance Appraisal: Solving the Toughest Challenges.”

It is good for organizations who use rank and yank to be exposed, as its use is evidence of organizational systemic failure.

For further information, see www.vanguardlawsuits.com (author is Vanguard former employee, Leigh Ann Harris, who has filed a lawsuit against Vanguard (according to the article)).

Mount St. Mary’s University (Md.): Simon Newman’s Proposal for Student Retention Numbers is Inhuman and Fails to Incorporate the Teachings of Jesus Christ and His Church

The Lord, Jesus Christ (Matthew 9: 9-13) Simon P. Newman, president, Mount St. Mary’s University, Md. His Holiness, Pope Francis
As Jesus passed on from there,d he saw a man named Matthew* sitting at the customs post. He said to him, “Follow me.” And he got up and followed him.


10 While he was at table in his house,* many tax collectors and sinners came and sat with Jesus and his disciples.e


11 The Pharisees saw this and said to his disciples, “Why does your teacher* eat with tax collectors and sinners?”


12 He heard this and said, “Those who are well do not need a physician, but the sick do.*


13 Go and learn the meaning of the words,f ‘I desire mercy, not sacrifice.’* I did not come to call the righteous but sinners.”




In the midst of discussion of a proposal to dismiss Mount St. Mary’s University students in order to improve retention rates, the Mount St. Mary’s College student newspaper reported that Newman made the following statement.


According to Murry, during the course of the conversation, Newman said, “This is hard for you because you think of the students as cuddly bunnies, but you can’t.  You just have to drown the bunnies…put a Glock to their heads.”




At a joint session of Congress in 2015, His Holiness, Pope Francis made the following statement while discussing the refugee crisis.


“Let us remember the Golden Rule: “Do unto others as you would have them do onto you” (Mt 7:12).


The Rule points us in a clear direction. Let us treat others with the same passion and compassion with which we want to be treated.   Let us seek for others the same possibilities which we seek for ourselves. Let us help others to grow, as we would like to be helped ourselves.   In a word if we want security, let us give security; if we want life, let us give life; if we want opportunities, let us provide opportunities. The yardstick we use for others will be the yardstick which time will use for us. The Golden Rule also reminds us of our responsibility to protect and defend human life at every stage of its development.” (Emphasis, the blog author.)

[Update Mar. 1, 2016: Simon Newman, now former president of Mount St. Mary’s University (Md.), submitted his resignation on Feb. 29, 2016. The Mount’s board named an acting president, Karl Einolf, dean of the Richard J. Bolte Sr. School of Business, according to the New York Times.]

[Update Feb. 9, 2016: According to the Baltimore Sun (see also the Washington Post), Mount St. Mary’s University fired Professor Edward Egan and tenured Associate Professor Thane Naberhaus. President Newman asked for the Provost to step down from the position of Provost, although he will remain on the faculty. Newman was said to have “apologized” (an often misused word), but it is not sincere if the action is to fire or demote those who disagree with his (flawed) student retention proposal. Failure to listen to the Holy Spirit is serious; no mere apology is enough without providing detailed reasons for such apology and the remedial actions that will occur by Newman.]

The Washington Post, following publication of a story from the student newspaper at Mount St. Mary’s University (Mount), a small university in Maryland, reported on the proposal from the university president, Simon Newman. Newman’s proposal was to dismiss 20-25 first-year students, who seemed to indicate difficulty on a university provided survey–a mere six weeks into their first semester. The consequence of being expelled as a result of their answers was not disclosed to the student respondents.

There was an objection to this proposal, which was not ultimately instituted. However, in response to the objections to the proposal, Newman, a former private equity chief executive officer at Cornerstone Management Group and managing partner at JP Capital Partners, wrote the following:

“Amid a conversation about student retention this fall, the president of Mount St. Mary’s University told some professors that they need to stop thinking of freshmen as “cuddly bunnies,” and said: “You just have to drown the bunnies … put a Glock to their heads.””

Newman, according to a Baltimore Sun article, referred to himself as a devout Catholic. So, it was to my dismay, disappointment, and disgust that the teachings of the Lord, Jesus Christ, and of His Church, had absolutely no bearing in Newman’s statements. Jesus welcomed and loved the poor, the sick, and sinners. (Matthew 9: 9-13) At the Mount, the institution is called to educate those desiring increased knowledge and firming their humanity through education and self-development. There is a duty to care for the humanity admitted to the institution. (See Pope Francis’ remarks, above) (If indeed the student runs into difficulty, assistance should be provided with the goal of ensuring that the student participates fully in the process. A secret implementation of a plan to cull students does not fit the requirement.)

Newman’s statement revealed blatant inhumanity and abuse of power, which led to the opposition and the release of information to the student newspaper. Treating students as a wagon of money and viewing the university’s goal as a mechanism to take the money from the student, while refusing to provide any education benefit, is fraudulent and a terrible betrayal of trust.

Further, for Newman and others to defend the plan as a means to improve student retention numbers is boggling, as Newman’s proposal is contrary to the teachings of Jesus and His Church. Newman’s proposal needed to be fully disclosed to all those who would be affected and permitting open, full communication and agreement before any implementation (again, the proposal was not implemented in fact).

Such a process did not occur, and Newman’s and the Mount’s board statements bemoaning the disclosure and attacking those who revealed the information is disappointing yet revealing. Especially, since the teachings of Jesus and of His Church are totally ignored by Newman at an institution that should be an example to the People!

Upon reading this article, I was surprised that I was seeing Newman propose a form of rank and yank. Dick Grote uses similar justification to defend the firing of those placed into a low ranking as a result of a secret managerial meeting. [Author’s note: Grote’s daring to place himself in the position of God (second paragraph, first sentence), is jarring, the statement written is an incorrect, biased value statement, and is unacceptable.]

Forced ranking is a subject that makes many top managers cringe. “I believe that the reason for the great reluctance about talking about forced ranking,” says Dick Grote, founder and head of Grote Consulting Corporation in Addison, Texas, “is that in our culture we have a bone-deep belief in egalitarianism. That all people are essentially the same. And one of the great advantages of forced ranking is that it requires reluctant managers to actually identify the most and the least talented members of the work group.”

That’s a necessity because “all God’s children are not the same,” Grote adds. “And that is treated as management’s dirty little secret.” Grote is one of the country’s foremost advocates of the rating system and has helped implement it at half a dozen or so large companies, which he is contractually forbidden to name. “The benefits of forced rating, intelligently and ethically conducted, are numerous,” he wrote recently in an article published by the Conference Board. “More than any other process, the system creates and sustains a high-performance, high-talent culture.” “

As covered in many blog posts, the expectation of perfection is not applicable to the management playing games with employee livelihoods. It is with the same dismay, disappointment, and disgust that I have for Grote’s inhumane program that I viewed Newman’s statements. It is stunning the similarity of their proposals, but the application of this rank-and-yank process in a Church-inspired institution that must value human life is galling and must be called out and rejected completely.

[Author’s note: Newman provided a response to the Washington Post, but he did not address his statements as discussed in the Mount’s student newspaper or the Post, so I do not consider them responsive. All proposals at the Mount must be in line with the teachings of Jesus Christ and His Church. Newman does not begin to satisfy this reality. (Consider, carefully,  Matthew 23: 1-36.)]

In closing, please reflect on this Gospel passage.

Matthew 23: 1-12.

1a Then Jesus spoke to the crowds and to his disciples,

2* saying, “The scribes and the Pharisees have taken their seat on the chair of Moses.

3Therefore, do and observe all things whatsoever they tell you, but do not follow their example. For they preach but they do not practice.

4b They tie up heavy burdens* [hard to carry] and lay them on people’s shoulders, but they will not lift a finger to move them.

5* c All their works are performed to be seen. They widen their phylacteries and lengthen their tassels.

6* d They love places of honor at banquets, seats of honor in synagogues,

7greetings in marketplaces, and the salutation ‘Rabbi.’

8* As for you, do not be called ‘Rabbi.’ You have but one teacher, and you are all brothers.

9Call no one on earth your father; you have but one Father in heaven.

10Do not be called ‘Master’; you have but one master, the Messiah.

11e The greatest among you must be your servant.

12f Whoever exalts himself will be humbled; but whoever humbles himself will be exalted.






Federal Reserve Board: H.2 Release for Week Ending January 9, 2016

The Federal Reserve Board (Board) publishes a weekly digest of its activities on its website. The digest is called the H.2 Release and is published every Thursday. The release for the week ending January 9, 2016, is below.

H.2 Release–Actions of the Board, Its Staff, and the Federal Reserve Banks; Applications and Reports Received

Category Action Taken
Forms Forms — final Board review to revise and extend the Annual Company-Run Stress Test Report for State Member Banks, Bank Holding Companies, and Savings and Loan Holding Companies with Total Consolidated Assets Greater Than $10 Billion and Less Than $50 Billion (FR Y-16).

-Approved, January 4, 2016






Enforcement Covenant Bancgroup, Inc., Leeds, Alabama — written agreement with the Federal Reserve Bank of Atlanta and the Alabama State Banking Department.

-Announced, January 7, 2016



Federal Reserve Board: H.2 Release for Week Ending January 2, 2016

The Federal Reserve Board (Board) publishes a weekly digest of its activities on its website. The digest is called the H.2 Release and is published every Thursday. The release for the week ending January 2, 2016, is below.

H.2 Release–Actions of the Board, Its Staff, and the Federal Reserve Banks; Applications and Reports Received

Category Action Taken
Bank Branches, Domestic Chemical Bank, Midland, Michigan — to establish a mobile branch to operate in certain counties in Michigan.

-Approved, December 27, 2015





Forms Forms — initial Board review to conduct with revision the Survey of Finance Companies (FR 3033).

-Proposed, December 31, 2015



Personnel Division of Banking Supervision and Regulation — appointment of Steve Merriett as associate director.

-Announced, December 29, 2015




Federal Reserve Board: Legal Cases against the Board (Current as of January 3, 2016)

Board of Governors of the Federal Reserve System

Legal Cases against the Board (current as of January 3, 2016)

[Board information last updated on November 4, 2015.]

(Case dockets can be accessed through www.pacer.gov.)

Case name Docket number Issue of Case (and case history)
White Arnold & Dowd, P.C., v. Board of Governors No 15-CV-00789 (N.D. Ala., filed May 12, 2015) Freedom of Information Act case.

On October 30, 2015, the district court dismissed the case on the parties’ stipulation.




Love v. Board of Governors No. 16-CV-1077 (D. Kan., filed March 13, 2015) Claim involving the Board’s alleged failure to comply with its mandate under the Federal Reserve Act. On June 11, 2015, the district court granted the Board’s motion to dismiss.
Ramey v. Board of Governors No. 14-CV-220 (D.D.C., filed December 22, 2014) Freedom of Information Act case.
The Loan Syndications and Trading Association v. Board of Governors No. 14-1240 (D.C. Cir., petition for review filed November 10, 2014) Petition for review of credit risk retention rules issued under Section 941 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.
Richardson v. Board of Governors No. 14-CV-01673 (D.D.C., filed October 8, 2014) Employment discrimination claim.
Community Financial Services Association of America, Ltd., v. Board of Governors No. 14-CV-00853 (D.D.C., filed June 11, 2014) Administrative Procedure Act challenge to actions of the Board, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency that allegedly disadvantage payday lenders.
NACS et al. v. Board of Governors No. 13-5720 (D.C. Circuit, notice of appeal filed August 21, 2013) Appeal from district court ruling invalidating Board regulations issued pursuant to section 1075 of the Dodd-Frank Wall Street Reform and Consumer Protection Act relating to debit card interchange fees. On March 21, 2014, the Court of Appeals reversed the district court’s grant of summary judgment and remanded the action to the district court. On August 18, 2014, the plaintiff filed a petition for certiorari. On January 20, 2015, the Supreme Court denied NACS’s petition for certiorari (No. 14-200). On October 2, 2015, the district court entered judgment for the Board.
WMI Liquidating Trust v. Board of Governors   No. 13-CV-01706 (W.D. Washington, filed September 20, 2013) Action for a declaratory judgment regarding golden parachute payments. On July 3, 2014, the action was transferred to the United States Bankruptcy Court for the District of Delaware (Adv. Pro. No. 14-50435-MFW (Bankr. D. Del.)), and on March 19, 2015, the district court withdrew the reference and took jurisdiction of the matter (No. 14-CV-01097).
Ferrer v. Bernanke     No. 13-CV-01145 (S.D. Fla, filed July 30, 2013) Claim on behalf of putative class of mortgagors that the Board’s Independent Foreclosure Review and related enforcement actions failed to provide sufficient benefits to borrowers. On October 28, 2014, the district court granted the Board’s motion to dismiss the action. On November 25, 2014, the plaintiffs filed a notice of appeal (Eleventh Circuit, No. 14-15325).
Ball v. Board of Governors No. 13-CV-00603 (D.D.C., filed April 30, 2013) Freedom of Information Act case. On March 31, 2015, the district court granted the Board’s motion for summary judgment.
Crisman v. Board of Governors No. 12-CV-1871 (D.D.C., filed November 19, 2012) Freedom of Information Act and Privacy Act case.
Wise v. Federal Reserve Board No. 12-CV-1636 (D.D.C., filed October 2, 2012) Federal Tort Claims Act case.
State National Bank of Big Spring v. Bernanke No. 13-5247 (D.C. Cir. Notice of appeal filed August 2, 2013) Appeal from district court’s dismissal of challenge to the constitutionality of the Consumer Financial Protection Bureau and the Financial Stability Oversight Council. On July 24, 2015, the Court of Appeals affirmed in part and remanded in part to the district court to consider issues related to the CFPB.
Artis v. Greenspan No. 01-CV-0400(ESG) (D.D.C., complaint filed February 22, 2001) Employment discrimination action. On September 29, 2014, the district court denied the plaintiffs’ motion for class certification. On January 14, 2015, the D.C. Circuit denied plaintiffs’ petition to appeal that ruling (No. 14-8003). On June 22, 2015, the district court dismissed the case with prejudice.


No. 15-5260 (D.C. Cir., notice of appeal filed September 19, 2015). Appeal of dismissal of plaintiffs’ Equal Employment Opportunity claims.


[Author’s note: The Artis case has some related blog posts.]