Federal Deposit Insurance Corporation, Chairman

Department/Agency: Federal Deposit Insurance Corporation

Position:

Chairman

Executive Schedule: Executive Level III - Presidential Appointment with Senate Confirmation

Major Responsibilities:

Examine and supervise banks and thrift institutions
Insure consumers' savings and promote public confidence in the U.S. financial system
Identify, monitor and address risks in banks and thrifts
Limit effect on economy and financial system when a bank fails

Key Competencies and Preferred Qualifications:

Financial and banking expertise
Understanding of economic trends and developments
Knowledge of financial regulation
Ability to work with other financial regulators
Grasp of legislative and policy-making process

Insight:

The Federal Deposit Insurance Corporation oversees the financial health of banks and savings institutions that comprise half the nation's banking system. To maintain stability and public confidence in the financial system, the FDIC steps in to protect depositors when one of the 5,160 insured institutions fails. The job of chairman - who acts in concert with the four other FDIC directors -- has taken on special gravity in the current crisis that began with the breakdown of the market for subprime mortgages in 2007 and escaladed a year later into a global credit crunch.

The FDIC was born in the Depression after bank failures cost thousands of citizens their life savings. Congress created the guarantee agency in 1933 and no one has lost a cent of savings since the FDIC opened its doors in 1934. When Washington Mutual, the country's largest savings and loan, collapsed in September 2008 in the largest bank failure in U.S. history, the FDIC arranged a sale to JPMorgan Chase, and WaMu depositors overnight became Chase customers with their savings intact.

FDIC Chairman Sheila C. Bair has been front and center during this crisis, using her clout as head of an independent agency to prod the White House and the Treasury not only to bail out financial institutions but to help consumers in danger of losing homes because they cannot keep up with escalating mortgage interest payments. Bair has pushed for steps to unravel the home mortgage mess that Treasury Secretary Henry Paulson and other Bush administration officials seemed reluctant to take. Bair herself was appointed by President George W. Bush and confirmed by the Senate in 2006 to a five-year term as the FDIC's 19^th chairman.

Under Bair's leadership, the FDIC has taken an aggressive role in protecting both banks and individuals depositors. It temporarily boosted from $100,000 to $250,000 the limit on insurance for individual accounts at banks and thrifts. It also temporarily expanded its insurance to cover all non-interest bearing transaction accounts, and for now is guaranteeing most loans to insured banks.

The FDIC guarantee covers certificates of deposits, money market, NOW and checking accounts as well as savings acounts. The FDIC does not insure securities, mutual funds or other investment vehicles that banks and thrift institutions may offer.

Bair was critical of the Bush administration's reluctance to help struggling homeowners prevent foreclosure, publicly advocating for stronger action. She said bailing out big banks was necessary, but emphasized that the distress of these institutions was caused by borrower defaults, and urged the government to put a bigger focus on homeowners.

In November 2008, she unveiled a $24 billion proposal to help delinquent homeowners. It calls for limiting the amount delinquent borrowers had to pay to 31 percent of gross monthly income, and letting the government share up to 50 percent of the losses if a borrower defaulted. Another Bair proposal would force troubled thrifts to disclose more to the FDIC about problems on their books.

Asked what happens now with a new president in the White House, FDIC spokesman David Barr said, "The FDIC is an independent government agency. Our board members do not serve at the pleasure of the president; however, our chairman has said that she believes that the president-elect has the right to choose his own team. If asked to step down, she has said that she would do so."

All five FDIC directors are appointed by the President and confirmed by the Senate, with no more than three from the same political party. The other current directors include the comptroller of the currency and the director of the Office of Thrift Supervision at Treasury.

With its $45 billion insurance fund, the FDIC insures more than $5 trillion of deposits in 5,160 U.S. banks and thrifts. The agency is financed entirely by the premiums that banks pay for their FDIC insurance. When the FDIC opened its doors in 1934, the guarantee was for $2,500 per depositor, or roughly $40,000 in today's dollars. By 1980 the guarantee limit had risen to $100,000 per depositor per bank, and there it stayed until the FDIC's recent action boosting it temporarily to $250,000 under a so-called Temporary Liquidity Guarantee Program.

The FDIC has weathered several crises during its seven-plus decades. The S&L crisis that began in the mid-1980s depleted the FDIC insurance fund and the agency was forced to seek government loans, but it recovered its footing after Congress approved a S&L bailout in 1989.

Bair, a former New York Stock Exchange executive and acting chairman of the Commodity Futures Trading Commission, said the FDIC saw a ``storm brewing" in the banking industry more than two years ago, but offered assurances to Congress that her agency was equipped to deal with the mounting problems. The FDIC has a staff of 5,000 headquartered in Washington, with six regional offices and smaller field offices around the country. "We expect bank failures to continue at a higher rate than we've seen in the previous few years. But the industry's problems are manageable, and the FDIC has sufficient resources to deal with them," Bair said.

Bair told the Senate Banking, Housing and Urban Affairs Committee recently, "Despite what we hear about the credit crisis and the problems facing banks, the bulk of the U.S. banking industry is healthy and remains well-capitalized. What we do have, however, is a liquidity problem. This problem is largely caused by uncertainty about the value of mortgage assets, which is making banks reluctant to lend to each other or lend to consumers and businesses." The FDIC reported in November 2008 that the number of firms on its problem bank list grew to 171 during the third quarter - the highest since 1995.

Banks can be chartered by the states or the federal government. The FDIC is the primary federal regulator of state-chartered banks that elect not to join the Federal Reserve System. When a bank or thrift institution fails, the agency that granted its charter - either a state banking agency, the Office of the Comptroller of the Currency, or the Office of Thrift Supervision - customarily turns it over to the FDIC to arrange the sale of the failed institution's deposits and loans to another institution. Customers of the failed bank seamlessly become customers of the solvent institution.

Bair's predecessor, Donald Powell, left the FDIC in 2005 to coordinate the White House's Gulf Coast rebuilding effort.

Key Relationships – Within the Government:

Secretary and Under Secretary of the Treasury
Fed Governors
Chair and members, President's Council of Economic Advisors
Comptroller of the Currency, Treasury Department
Director, Office of Thrift Supervision
State banking regulators

Key Relationships – Outside the Government:

American Bankers Association
Financial Industry Regulatory Association
Mortgage Bankers Association of America
Securities Industry and Financial Markets Association

Nomination Referred to:

Senate Committee on Banking, Housing and Urban Affairs

Current Position Profile:

1. Sheila C. Bair, J.D. (2006- ) Former Treasury assistant secretary for financial institutions. Senior vice president for government relations of New York Stock Exchange. Commissioner and Acting Chairman of Commodity Futures Trading Commission.

Recent Position Profiles:

2. Donald E. Powell (2001-2005). Former president and CEO, First National Bank of Amarillo. Federal Coordinator of Gulf Coast Rebuilding after Hurricanes Katrina and Rita.

3. Donna A. Tanoue, J.D. (1998-2001) Former partner in a Hawaii law firm concentrating in banking. Former commissioner of Financial Institutions for Hawaii.