Dedicated to Deposits: Deals, Data, and Discussion

FDIC in Action - Behind the Scenes at Last Week's Bank Closure

POSTED ON BY

This Wall Street Journal article has an interesting look at the behind the scenes operation of the FDIC during the closure of First Integrity Bank. I reported on the closure of this bank last Friday. It was the fourth bank to fail this year. The FDIC allowed a WSJ reporter to go along with its team last weekend to get a look at the FDIC task force in action.

Here's how the WSJ described the tasks of the FDIC during a bank closure:
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.

The FDIC has to be secretive to prevent a bank run. It's interesting to see all the manpower the FDIC put into the closure of this small 2-office bank. You have to wonder how difficult it would be for them to handle the closure of a 100-branch bank or many 100-branch banks at one time. I just noticed this Reuters article in which the FDIC chairwoman says it's unlikely we'll see very large institutions fail, but warns we may see some mid-sized banks fail.

Thanks to the reader who mentioned this news article in the finding-the-best-deals post.

[Edit: Corrected/clarified comment on Reuters' article.]

Related Posts

Comments
12 comments.
Comment #1 by Anonymous posted on
Anonymous
The headline for the linked Reuters article is "FDIC chief says big bank failures not likely."

-> Not <- likely, which is different than Banking Guy's comment.

1
Comment #2 by tuphat (anonymous) posted on
tuphat
Look closely. Her prepared testimony states: "There is also the possibility that future failures could include institutions of greater size than we have seen in the recent past." The Reuters article quotes her as saying, apparently during the Q&A session: "In terms of the very large institutions failing, I don't see that happening."

There's a difference between "institutions of greater size" and "very large institutions."

1
Comment #3 by Banking Guy (anonymous) posted on
Banking Guy
I'm afraid I added that Reuters article link in too quickly. I updated my comment to better describe the article.

1
Comment #4 by Anonymous posted on
Anonymous
Major financial institutions will go bust.

Washington Mutual is one of those!

1
Comment #5 by Anonymous posted on
Anonymous
HSBC will NOT go bust. The problem is Countrywide's rate is still higher and so I am waiting to see if there is any uncertainty with the BoA and Countrywide merger and any rate cuts.

If there are, my deposits start moving to HSBC and other safe and secure banks.

1
Comment #6 by Peyton (anonymous) posted on
Peyton
No way WaMu will go bust.

No way.

It will either survive outright or be swallowed up by another bank.

And you can take that to the bank!

1
Comment #7 by Anonymous posted on
Anonymous
WaMU is a ****ty bank and will be a bank failure. Noone needs or wants WAMU's branch structure. I would not put a cent of money into WaMU nor would use them with a 10 foot pole. I usually never opt out of credit card offers, in fact I want all the offers coming. Except for one bank, WaMU.

WaMU is going to die and be the 1st major bank failure. It does not have the clout of a Citicorp who is also in deep trouble right now.

Countrywide just got approval for the merger with Bank Of America today by federal regulators and Bank Of America still says it will complete the deal.

If a lowering of interest rate comes from Countrywide I will pop it into HSBC which is a safe and stable bank right now.

1
Comment #8 by Anonymous posted on
Anonymous
WaMU is definitely the worst bank from a corporate internal standpoint right now.

Expect it to fail hard.

1
Comment #9 by Dolly (anonymous) posted on
Dolly
WaMu has a ton of assets.

WaMu will not fail.

WaMu will either survive all by itself or will be merged with another bank.

1
Comment #10 by Anonymous posted on
Anonymous
National City Corp. Scrutinized by Regulators.

National City Corp.'s banking unit, which has been buffeted by rising bad loans, has recently entered into a "memorandum of understanding" with federal regulators, effectively putting the bank on probation.

They have 90 days to pull it off or
FDIC will take over.

1
Comment #11 by Anonymous posted on
Anonymous
WaMU is catapulting and is at record lows now.

They are losing money really fast.

I wouldn't be surprised if WaMU went bust.

1
Comment #12 by Anonymous posted on
Anonymous
I've been a WAMU customer since the mid 90's when they bought out my then longstanding Bank United account here in Texas.
In the past 12 years of being a loyal customer they have handled a huge chunk of my financial resources. At times their rates have been competitive and at other times they have fallen considerably short. Lately it's been the latter but I've kept the account active because I need a local bank and it's one of my oldest accounts which I think helps maintain my high credit score. However not only have their rates taken a dive, so has their customer service. It has become increasingly substandard and after an incident recently where they refused to allow my 8 year old daughter to use their restroom and instead told us to go to the dirty gas station across the street - YUCK!- I have decided to call it quits with them. They are falling fast I am afraid and IMO are no longer competitive in any area.

1