DS News

52 DS News Government Progress Report k ey per sonnel Martin J. Gruenberg Chairman Thomas M. Hoenig Vice Chairman Jeremiah O. Norton Director Thomas J. Curry Director, Office of the Comptroller of the Currency Richard Cordray Director, Consumer Financial Protection Bureau (CFPB) DS News Housing Score C+ BUSINESS SCOPE: The Federal Deposit Insurance Corporation (FDIC) preserves and promotes public confidence in the U.S. financial system by insuring deposits in banks and thrift institutions for at least $250,000; by identifying, monitoring, and addressing risks to the deposit insurance funds; and by limiting the effect on the economy and the financial system when a bank or thrift institution fails. REGULATION AND OVERSIGHT: The FDIC is a U.S. corporation operating as an independent agency created by Congress. It receives no Congressional appropriations and is funded by premiums that banks and thrift institutions pay for deposit insur- ance coverage and from earnings on investments in U.S. Treasury securities. The FDIC is managed by a five-person Board of Directors, appointed by the President and confirmed by the Senate, with no more than three being from the same political party. MISSION » The FDIC was created in 1933 to protect deposi- tors' funds. It insures bank deposits up to $250,000 per depositor. The FDIC raised the amount from $100,000 to $250,000 in 2013. » The Great Recession caused the demise of more than 300 banks in 2009 and 2010 before leveling off to approximately 50 in 2011, despite FDIC's best efforts. » In response to the 2008 crisis, FDIC unsuccessfully attempted to save Washington Mutual Bank, one of the largest mortgage lenders in the country with a re- ported $307 billion in assets. The bank experienced a 10-day run on its deposits and became the largest bank failure in history. » At the close of 2009, a total of 140 banks were in- solvent, the largest number of bank failures in a year since 1992. » The agency maintains that since its inception, no depositor in an FDIC-insured bank has ever lost a penny in a bank failure. SUCCESSES » The FDIC budget for 2013 totaled $2.7 billion; $1 bil- lion went to the Supervision and Consumer Protec- tion division, while $1.1 billion went to the Receiver- ship Management Program. » During the past year, the bureau participated in the examinations of selected financial institutions, for which the FDIC is not the primary federal regulator, to assess risk to the Depositors' Insurance Fund (DIF) and carry out back-up procedures. OPPORTUNITIES/ISSUES » In 2012, the General Accounting Office (GAO) stated that the FDIC had overestimated the cost of certain loss-sharing activities. The FDIC's most common method of disposing of institutions since the start of the crisis has been to sell most, if not all, of a failed bank to an investor while agreeing to share losses with the buyer. » Additionally, the GAO has repeatedly cited the FDIC for faulty estimates of its own losses from these agreements. Of nearly $43 billion in estimated losses from shared-loss agreements by the end of 2011, the GAO highlighted $769 million in errors in loss provisions in the agency's draft financial statements. In the finalized statements, those loss estimates had been reduced by a total of $274 million. » GAO stated that these deficiencies did not constitute a material weakness in internal control over financial reporting, but they nevertheless increased the risk of undetected errors or irregularities in the DIF's financial statements. » There has been some criticism concerning the fact that the FDIC has sued very few of the officers and directors of the more than 500 banks that have failed since 2007. FDIC defends its actions, saying\ it takes at least 18 months to investigate each case, and if the agency finds evidence of dishonesty, it first holds settlement talks. These can go on for months before suing. » During the past few years, the FDIC has taken a hit on near-worthless loan portfolios inherited from failed banks, which has led to a gaping hole in the FDIC's insurance fund. The cause is attributed to the agency's failure to review loan portfolios at so-called "healthy" banks, thereby missing that some banks had made huge bets on loans of dubious quality. » Sources say this explains the miniscule number of lawsuits filed, since it is easier to investigate an open bank than to reconstruct event at a closed bank. $4 billion decline in noninterest income from a drop in mortgage sales, securitization, and servicing 6,730 institutions are insured by the FDIC 92.7% of FDIC institutions are profitable 563 mortgage lenders are insured by the FDIC $14.9 trillion in total assets Federal Deposit Insurance Corporation (FDIC) | CORPORATE HEADQUARTERS: Washington, D.C., with regional offices in Atlanta, Chicago, Dallas, Memphis, Kansas City, New York City, Boston, and San Francisco $4 BILLION 6,730 92.7% 563 $14.9 TRILLION as of the first quarter of 2014

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