Who ever knew life for the Federal Deposit Insurance Company could be so… pacy?
In its role as receiver for failed banks, the FDIC acts as a SWAT team, playing equal parts secret agent, medical examiner, salesman and grief counselor. The first 48 hours are typically the most frantic, as the agency must turn a failed bank inside out and oversee its sale — or its orderly burial.
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To keep a low profile, FDIC officials often use personal credit cards while in town. Many will tell curious strangers they work in insurance. In the case of First Integrity, Mr. Walker rented a conference room in a town 30 minutes away for a meeting of “Robinson & Associates,” and a sign near his hotel’s front door welcomed the fictitious company.
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Despite the military-style planning that goes into taking over a bank, things can go wrong. Once, a local motel guessed the feds were coming and put up a welcome banner on the marquee. Another time, FDIC officials hired a hypnotist to get a confused bank employee to remember the vault code. Sometimes, locals pull up lawn chairs and watch from across the street.
Hypnotists! Secret Identities! This is exactly the kind of stuff the FSA should be trying (Not so much the lawnchairs.) Plenty more detail in the WSJ’s article.
The FDIC may find itself doing plenty more undercover work too. Sheila Bair, the FDIC’s chairperson, told the US Senate Banking Committee on Thursday that she expects much larger bank failures looming on the horizon. So far the FDIC has concerned itself with small fry. The largest single institution gone bust – as yet – is ANB financial which had $2.1bn in assets under management. Via Reuters, Bair:
There is also the possibility that future failures could include institutions of greater size than we have seen in the recent past… Uncertainties in today’s economic environment continue to pose significant challenges for the banking industry, households, and bank regulators.
Lookout for secretive “insurance conventions” smalltown America.
Related links
US banks likely to fail as bad loans soar - FT