Sheila Bair’s FDIC: “60 Minutes” Video
By SusanUnPC on March 13, 2009 at 6:10 PM in Current Affairs
(Linda: **BUMPED UP – Sheila’s words are so important and she speaks with such confidence and assurance that I thought everyone should have a chance to see this. Doesn’t she remind you a bit of Hillary?)
– “60 Minutes,” CBS, March 8, 2009
CBS’s “60 Minutes” videos (there are three videos below for your viewing) don’t show much of its extensive interview of FDIC chair Sheila Bair, but I have quoted her smart remarks, below, from the accompanying, exhaustive four-page CBS News story, “Your Bank Has Failed: What Happens Next?.” Of Note: This fascinating segment on “60 Minutes” taught me how the FDIC professionally and authoritatively — and stealthily! — assumes control of a failed bank.
Sheila Bair, chairman of the FDIC, told Scott Pelley 25 banks had failed in 2008.
Asked how many she expected to fail in 2009, Bair said, “It’s going up. There have been 16 already now. And, so our loss projections are going up. We’re having to increase premiums on banks to address the loss projections going forward. It’s a very distressed environment right now.” [...]
Asked what sorts of specialists were part of the FDIC team, Bates said, “We have accountants, we have asset specialists who specialize in loans, we have people who specialize in just the physical facilities. And we have a group of investigators that come in and do a review on the reasons of the bank failure.”
VIDEO #1: How Many More Will Fail?
The head of the Federal Deposit Insurance Corporation, Sheila Bair, expects more bank failures ahead.
From the story:
A lot of people are worried about their banks these days. While devastated giants like Citigroup get bailed out again and again and again, many smaller banks are failing. The federal agency that takes over unsound banks is the Federal Deposit Insurance Corporation – the same people who guarantee depositors won’t lose their money.
Most every Friday night now the FDIC seizes several banks. You haven’t seen these takeovers happening because they’re done secretly at night to make sure there’s no needless panic by depositors.
But last week 60 Minutes and correspondent Scott Pelley were given extraordinary access to one of these operations because the FDIC wants you to know what happens to your money when your bank has failed.
VIDEO #2: Your Bank Has Failed
What would happen if your local bank failed? Scott Pelley and “60 Minutes” were given extraordinary access, as the Federal Deposit Insurance Corporation moves in to take over a failed bank in Chicago.
A team of FDIC agents prepared to seize a bank outside Chicago. They checked into a hotel under a fictitious name, CB and Associates, to prevent a run on the bank. They didn’t want anyone to know who they are or why they were in town.
Cheryl Bates and Arthur Cook are in charge of the operation that had been given the code name “HAPPY,” strange considering what they were about to do.
“Do not discuss outside this room, what is going on, what we’re here for,” Cook instructed team members in a meeting at the hotel. Cook is the receiver-in-charge for the FDIC, who will take control when the bank is shut down. Bates is the closing team manager.
They’re there to seize all five branches of Heritage Community Bank, a 40-year-old institution for savings, student loans, mortgages and checking. But like so many others recently, it made ruinous bets on real estate.
VIDEO #3: Planning The Takeover
Cheryl Bates and her FDIC team have specialists in every banking area to ease the takeover.
More from the four-page story featuring Bair’s comments:
Fear created the FDIC in 1933 after the Depression set off a panic that wiped out even healthy banks.
“We’ve been around for 75 years and nobody’s ever lost a penny of insured deposits,” FDIC head Sheila Bair told Pelley. “…which is why you need to make sure you are below the insured deposit limits.”
Bair told Pelley the insured deposit limit is $250,000 right now.
“When the FDIC comes in and makes depositors whole at a bank that has failed, is that tax money?” Pelley asked.
“No. it is money from our reserves which, and we are funded by insurance premiums that are assessed on banks. So, no it’s not taxpayer money,” Bair explained.
Bair is a former Treasury official and professor of finance who has written children’s books on the wisdom of saving.
“Maybe the CEOs on Wall Street should have read the children’s books,” Pelley joked.
“Maybe so,” Bair replied, laughing. “Maybe so.”
[...]
Bair warned two years ago that bad mortgages threatened the financial system. Now, she’s managing the biggest bank failures in years including the collapse of Washington Mutual and last summer’s sudden failure of IndyMac in California.
“When IndyMac failed, you were watching these scenes on television of people lining up outside the bank like it was 1932,” Pelley told Bair.
“Yes, it was amazing,” she replied.
Asked what she thought of that, Bair said, “I think people forgot that banks do fail and how the FDIC works their money was safe, it was safe, it was probably the safest place in the world to have your money because we were operating the institution at that point.”
“What sort of hit was that on your balance sheet?” Pelley asked.
“I think we ended up to, it was over $9 billion for a $33 billion – yes, it was very stiff,” she replied.
“The question becomes how many times can the FDIC do that at what point is the FDIC broke?” Pelley asked.
“The FDIC is backed by the full faith and credit of the United States, so if we need to – we try not to and don’t want to – but if we need to, we can borrow from the Treasury to make up for any shortfalls,” Bair explained. “We don’t go broke. We’re the government we are backed by the full faith and credit of the United States government.”
[...]
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