Bank-closure workload leads FDIC to open 3rd satellite office
Monday, June 21, 2010
Ten miles northwest of Chicago's O'Hare International Airport and around the corner from Richard Walker's Pancake House, hundreds of government employees are settling into new digs inside a nondescript office building in Schaumburg, Ill.
Next month, they will open the doors to the Federal Deposit Insurance Corporation's third new satellite office since the beginning of the financial crisis. The others, in Irvine, Calif., and Jacksonville, Fla., opened last year.
The geography is no accident.
Each location sits in a region of the country still reeling from the bursting of the housing bubble and especially hard hit by bank failures in recent years.
"If you look where the failures have occurred," FDIC spokesman Andrew Gray said, "we just thought we needed more boots on the ground."
Rather than continuing to dispatch teams from the FDIC's main field office in Dallas to seize failing banks, agency officials envisioned the satellite offices essentially as rapid-response centers in areas where bank failures were rising and almost certain to continue.
"These offices are created strategically," said Mitchell Glassman, director of the FDIC's division of resolutions and receiverships. "It allows us to expand our footprint. . . . . It was done because of where we were handling the actual workload."
And it has been quite a workload.
The FDIC has closed nearly 250 banks since the beginning of 2008, and the number of failures is expected to peak during the third quarter of this year. Cleaning up such financial wreckage has depleted the agency's deposit insurance fund, which goes toward putting seized banks into receivership and backstopping individual accounts of up to $250,000.
Although agency officials say that it's becoming easier to find buyers for failed banks and that some distressed banks have been able to raise enough capital to stay afloat, workers in the satellite offices still have plenty of work. In the short term, that means moving quickly to seize faltering banks and turn them over to other buyers. In the months and years ahead, it means sticking around to manage assets, monitor loss-share agreements and deal with any related litigation.
The FDIC has grown significantly during the financial crisis, with an authorized staff size this year of 8,695 -- up 81 percent from two years ago. That includes massive hirings in the division of resolutions and receiverships, with a total of 2,310 positions authorized this year -- nearly a ten-fold increase from 2008, according to the agency. The actual employment numbers could come in lower, depending on the agency's workload in coming months.
The last time the FDIC expanded so rapidly was during the savings-and-loan crisis in the late 1980s and early 1990s, when the agency and the newly created Resolution Trust Corporation seized and liquidated hundreds of failed banks and thrifts.
During that era, the payroll at the FDIC ballooned to more than 23,000 employees. But when the crisis waned, more than a decade of painful downsizing followed until employment at the agency reached about 5,000.
"It really took its toll on morale," Gray said.
Tom Peddicord, deputy director of the FDIC's division of finance, said many veteran employees recall that time as a particularly dark period in the agency's history.
"We had to lose 80 percent of our workforce," he said. "It was debilitating to the organization to be constantly reducing staff."
This time around, as they began to ramp up hiring and structure the trio of satellite offices, agency officials made efforts to avoid a similar fallout.
"We wanted to be smart about it this time," Glassman said.
The result: Permanent staff members occupy the top management positions in Irvine, Jacksonville and Schaumburg, but employees working on two-year contracts -- some of them retired FDIC employees who agreed to return -- make up the vast majority of remaining spots. The agency also has thousands of on-call contractors.
"We can expand and contract on a moment's notice," said Ronald Bieker, who as deputy director of the FDIC's field operations branch is responsible for the agency's nationwide resolution and receivership operations. He said that when this exceptional period ends and "the need for the temporary satellite offices are over, we then have the ability to shut down these offices, and everything will fold back" into the main field office in Dallas.
But with scores more bank failures on the horizon and the average receivership lasting three to six years, no one expects the new satellite offices to disappear anytime soon.
"We're still in the middle of the cleanup," Glassman said. "Unfortunately, I think the workload will increase."
Still, he's looking forward to the day when that's no longer the case. "In the end, all of these operations are temporary," he said. "When we can do our job and pick up and leave, that's good."