Inside the FDIC: Thirty Years of Bank Failures, Bailouts, and Regulatory Battles

Inside the FDIC: Thirty Years of Bank Failures, Bailouts, and Regulatory Battles

John F. Bovenzi

Language: English

Pages: 224

ISBN: 1118994086

Format: PDF / Kindle (mobi) / ePub


Witness how the FDIC manages your money during financial crises

Inside the FDIC tells the real stories behind bank failures and financial crises to provide a direct account of the Federal Deposit Insurance Corporation and other bank regulators. Author John Bovenzi served in senior level positions within the FDIC for over twenty years, including a decade as the Deputy to the Chairman and Chief Operating Officer. This book describes what he witnessed as the person in charge of day-to-day operations, as a nearly invisible agency grew to become a major, highly independent force impacting US financial markets.

Readers will learn how the FDIC and other bank regulators use the power of the federal government, spend other people's money, and approach decision-making.

This book takes readers inside the FDIC to showcase:

  • The FDIC's emergence as a major market influence
  • How ten FDIC chairmen helped shape the US financial regulatory system
  • Internal conflicts between the FDIC and other bank regulatory agencies
  • Pressures and challenges presented by financial crises

Since the early 1980s, over 3,400 banks have failed. These failures weren't steady, regular, and easily predictable events; periods of tranquility were followed by turmoil, booms led to busts, and peaceful complacency often turned to sudden devastation. Inside the FDIC chronicles it all, from the perspective of a first hand witness inside the agency responsible for calming the storm.

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town or in a single state due to the restrictions on interstate and intrastate banking. Most of the people who worked at the FDIC either were bank examiners or had other responsibilities related to bank supervision. The culture was like that of a military organization. There was a clear chain of command. Bank examiners were the FDIC's foot soldiers. They were located in about 90 field offices spread throughout the country. This enabled them to be within driving distance of the thousands of banks

described later, there are less understandable reasons why the problem also went unaddressed in the late 1990s and early 2000s. It returned with a vengeance in 2008. During the mid to late 1980s, the U.S. economy began to experience the effects of boom-to-bust cycles in various business sectors of the economy. These cycles resulted in a rolling recession that engulfed different parts of the country at different times. Because banks were geographically restricted in where they could do business,

to insured deposits exceeded 1.25 percent. Between 1950 and 1983, annual deposit insurance premiums were 8.33 basis points, but the FDIC was required by law to refund half of that amount. If the FDIC had been able to keep that money there would have been an additional $32 billion in the fund. The point is not an insignificant one. The banking industry was profitable from 1950 to 1983. Paying the full 8.33 basis points a year would not have been that difficult. But in 1990 and 1991, the banking

a concentration of power if Walmart were allowed to own a bank. Walmart already had nearly $300 billion in annual revenue, 3,600 domestic retail locations, 1.25 million employees, and 100 million customers per week. The ICBA pointed out, “If Walmart were a country, it would rank as China's 8th largest trading partner, ahead of Russia, Australia, and Canada.” One banker asked, “Where is Teddy Roosevelt when you need him?” The FDIC must assess whether the applicant will serve the convenience and

indicate severe stress and then to assess the banks' responses and determine the results. The stress test they developed imposed tougher loss rates on participating banks than what was experienced each and every year since 1922, a period that included the Great Depression. As a result, there would be no doubt about the severity of the tests. Nineteen U.S. banking organizations with more than $100 billion in total assets, together holding two thirds of the assets in the entire banking industry,

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