For the past two years, the Federal Deposit Insurance Corp. has maintained a consistent crisis-response posture — bulking up its manpower, swooping in to resolve failed institutions and standing behind their depositors.
But the FDIC will undoubtedly need to pivot in a new direction in 2011. With failures slowing, an agency that has been in constant overdrive will face a fresh set of challenges as it begins to apply the brakes.
Observers credit the agency with learning from past mistakes in responding to the turmoil stemming from the mortgage meltdown, particularly in being more cautious about hiring. The last time the agency downsized from a crisis was after the savings and loan crisis, and it left the FDIC with years of morale issues, a problem officials are hoping to avoid this time around.
"We are trying to explore ways in peacetime to keep them occupied and relevant and fully engaged, so that when we get into the next cycle we won't have to have this rushed hiring process," FDIC Chairman Sheila Bair said in an interview.
By all accounts, the agency is in a better position than in the last crisis to handle staff reductions. Compared with a heavy load of permanent positions that were cut in the downsizing of the 1990s, the vast majority of expected losses this time are among temporary and contract workers, who have been prepared all along for a short tenure.
Overall, the 322 institutions that failed over the past nine quarters are projected to cost a total of about $79 billion. The FDIC has projected that 2010 was the peak for failures stemming from the 2008 crisis. By contrast, in the thrift crisis, from 1986 to 1991, the FDIC handled more than 1,000 failures. In that span, failures averaged 170 a year, and the annual total reached 200 twice.
Many observers said the FDIC will be careful not to pull back too far during its slowdown period. In addition to fighting litigation, and a "problem" institutions list that is still robust at 860, the agency must manage and find buyers for assets still tied to its receiverships.
