The Federal Deposit Insurance Corp. is looking for a few good men and women, as it prepares for a likely wave of bank failures. According to a story in the Washington Post published Wednesday morning, the FDIC is looking to boost staffing in the division that handles bank failures by as much as 60 percent -- that's 140 additional workers. From the WaPo's coverage:
"We want to make sure that we're prepared," [John Bovenzi, the agency's COO] said yesterday, adding that most of the hires will be temporary and based in Dallas. ... The last time the agency was hit hard with failures was during the 1990-91 recession, when 502 banks failed in three years. Analysts predict more failures but said they don't think they will reach early-1990s levels. Gerard Cassidy, managing director of bank equity research at RBC Capital Markets, projects 150 bank failures over the next three years, with the highest concentration coming from states such as California and Florida where an overheated real estate market is in a fast freeze.
The decision to hire comes after the FDIC has already made moves to bolster staffing. In February, the Wall Street Journal reported that the FDIC was looking to bring back 25 retirees from its division of resolutions and receiverships. Way back in January, Housing Wire was the first to note that the FDIC was looking to beef up staff ahead of a spate of expected bank failures. Our sources tell us that the FDIC is expecting roughly 90 banks to fail in the next two years, although that number is wholly unconfirmed through official channels. We've also heard that the core issue concerning FDIC officials isn't residential lending, but construction and commercial lending concentrations at smaller regional banking outfits. The agency even recently went so far as to issue a formal letter to insured institutions warning of its "increased concern" for banks with strong exposure to construction and development lending. "Some institutions have significant CRE concentrations in areas with surplus housing units amid declining home prices," the agency said in the letter. "In addition, examiners have noted a few instances of potential underwriting weakness whereby institutions are inappropriately adding extra interest reserves on loans where the underlying real estate project is not performing as expected. This practice can erode collateral protection and mask loans that would otherwise be reported as delinquent." For more information, visit