8 ms·

Behind the Scenes of a Bank Takeover by FDIC (1986)

CaliforniaKarl 4y ago
https://archive.ph/rKUK1 https://archive.ph/rKUK1
bombcar 4y ago
This is all fine and dandy for a single bank with a single branch - I wonder how they’ve done the larger ones like WaMu and HomeFed.
- dredmorbius 4y ago
  For WaMu, some deets at Wikipedia: https://en.wikipedia.org/wiki/Washington_Mutual#Seizure_by_OTS_and_FDIC https://en.wikipedia.org/wiki/Washington_Mutual#Seizure_by_O... NYT coverage from the time (2008): https://www.nytimes.com/2008/09/26/business/26wamu.html https://www.nytimes.com/2008/09/26/business/26wamu.html The Times also references the 1984 failure of Continental Illinois National Bank and Trust in Chicago. I don't know of any insider reports of what transpired at CINB, though Worldcat does have an interestingly-timed title: A financial analysis of Continental Illinois and the implications of its failure, by Robert C Jones, University of Central Arkansas, 1984(?) https://www.worldcat.org/title/financial-analysis-of-continental-illinois-and-the-implications-of-its-failure/oclc/20548815 https://www.worldcat.org/title/financial-analysis-of-contine... (Date ambiguity in Worldcat record.) A less specific search turns up a few records of interest: https://www.worldcat.org/search?q=Continental+Illinois+National+Bank+and+Trust&qt=results_page https://www.worldcat.org/search?q=Continental+Illinois+Natio... In particular: Views on the Federal Rescue of the Continental Illinois National Bank and Trust Co. U.S. Government Publishing Office 1984. https://www.worldcat.org/title/views-on-the-federal-rescue-of-the-continental-illinois-national-bank-and-trust-co/oclc/1229513466 https://www.worldcat.org/title/views-on-the-federal-rescue-o...
pintxo 4y ago
While it sounds astounding that you have hundreds of forced bank closings, this is actually a well regulated market working as it should. I am not sure that todays hyper-consolidated megabanks are a better implementation of a well regulated market. As most of them nowadays are just too big to fail. So part of the mandatory market forces cannot be used lest you want to generate broad reaching consequences.
- bobthepanda 4y ago
  I don’t know that they’re actually too big to fail. WaMu failed in 2008 and was handled fairly well for a bank with $300B+ in assets.
  - pintxo 4y ago
    In the US maybe, but Europe seems to be deeply afraid of the idea alone to dispose of a failed bank.
    - Animats 4y ago
      The Economist has pointed that out. Few countries in Europe seem to be set up to do this.
      - bobthepanda 4y ago
        This is because the EU wants to have a common market but refuses to have a common deposit insurance scheme like the US FDIC, so now they've developed continent-scaled banks without a continent-scaled way to save them. A bunch of the euro crisis government bailouts happened because governments went underwater trying to save their banks.
        ggm 4y ago
        And also because governments lied about their eligibility to be on the euro gravy train, and other governments were happy to lend them the money for future gain.
Shank 4y ago
I'm so glad that this was posted. I, too, have recently been thinking about how the FDIC works given the lockout of funds at Celsius. This is an incredible read. I've also dived into this more, however. It turns out the FDIC maintains a list of bank failures and summaries [1][0], respectively. These are awesome to read. There have been zero failures in 2022 so far, zero in 2021, and four in 2020. Most failures in the last few years have resulted in assets being sold to acquiring banks. The most recent failure where the FDIC mailed checks to people (this is what I imagine most people think of when they see the FDIC insurance policy) was First NBC Bank in Louisiana in 2017 [3]. Some of the assets were acquired by Whitney Bank, but a large number of assets were not. The bank failed on April 28th of that year, and the FDIC mailed checks on May 1st [2], which is pretty dang good, in my opinion. I think what I appreciate the most about this article and the recent failures is just how much attention FDIC devotes to keeping services available for customers, even when the situation is changing. Scanning over a few of the bank failure summaries, they all have a similar pattern: bank closes, all ATMs stay online, checks clear as soon as reasonably possible, and branches remain open. In the First NBC Bank failure, the worst "downtime" was experienced by people who had accounts backing other more complex financial products that didn't have immediacy attached (certificates of deposit, which are predicated on being held for a long time, for example). Everything else was "zero downtime", which is really stellar. Seeing other bank failures on the list, particularly in 2017, that I never heard about, also reminds me of the fact that this is stuff that matters more frequently than I would have expected (i.e., outside of financial crises, like 2007/2008). [0]: https://www.fdic.gov/bank/historical/bank/ https://www.fdic.gov/bank/historical/bank/ [1]: https://www.fdic.gov/resources/resolutions/bank-failures/failed-bank-list/ https://www.fdic.gov/resources/resolutions/bank-failures/fai... [2]: https://www.fdic.gov/resources/resolutions/bank-failures/failed-bank-list/firstnbc.html https://www.fdic.gov/resources/resolutions/bank-failures/fai... [3]: https://www.fdic.gov/bank/historical/bank/bfb2017.html https://www.fdic.gov/bank/historical/bank/bfb2017.html
- DSingularity 4y ago
  I wonder where cryptocurrency will end up. Eventually people will want entities like FDIC to step in and soften the blow. If Celsius auctioned its assets would we be where we are?
greenyoda 4y ago
Another story of an FDIC bank takeover, this one from 2009: https://www.npr.org/2009/03/26/102384657/anatomy-of-a-bank-takeover https://www.npr.org/2009/03/26/102384657/anatomy-of-a-bank-t...
DeathArrow 4y ago
I like how the articles were written in 1986. Even reading what would be mostly boring stuff, you feel like you've descended in the middle of a James Patterson thriller.
- kmbfjr 4y ago
  The internet seems to have imparted an effect on the writing style for journalists, and it isn’t always positive.
  - jaywalk 4y ago
    Is it ever positive?
thathndude 4y ago
As a young lawyer in 2011 I had the chance to work on some of this stuff. The FDIC farms all of the legal out to law firms, and we have to litigate the hijinks (in the cases I worked in, rampant embezzlement (alleged) and terrible loans being made to buddies at the height of the 2008 madness). It was cool work.
- deleted 4y ago
  [deleted]
snowwrestler 4y ago
See also, from the 2009 major financial crisis: Anatomy Of A Bank Takeover > On a mid-January night, some 80 agents of the Federal Deposit Insurance Corp. pull into Vancouver, Wash. Their rental cars are generic, their arrival times staggered. One by one, agents check into a hotel, each quietly offering a pseudonym to the guy at the desk. > They're here to take over the Bank of Clark County, which the FDIC has decided is insolvent. https://www.npr.org/2009/03/26/102384657/anatomy-of-a-bank-takeover https://www.npr.org/2009/03/26/102384657/anatomy-of-a-bank-t...
- nradov 4y ago
  It's getting harder to check into hotels with a pseudonym now. Even if you're paying cash, most hotels require a government-issued photo ID plus a credit card with a matching name.
  - Retric 4y ago
    I wonder how difficult a government agency would find getting around this.
    - theguyovrthere 4y ago
      a company I used to work for would sometimes have to bulk book rooms with little notice for certain types of response operations. Sometimes we'd get a room key with a number when we checked into the ops center, sometimes we were simply told what hotel we were at, and all we had to do was give a company name and our name. Sometimes they'd ask to see our company badge but that was about it.
  - deleted 4y ago
    [deleted]
  - the_biot 4y ago
    Yup, and it's been like that for a very long time. But I'm sure you could find something like a travel agency to make an arrangement with hotels to just charge room + minibar etc to them, with the condition that the hotel doesn't ask for ID.
hoosieree 4y ago
Netflix has a documentary series called "The G Word" (about the US government) - episode 3 shows part of a bank takeover. https://en.wikipedia.org/wiki/The_G_Word https://en.wikipedia.org/wiki/The_G_Word

https://archive.ph/rKUK1 https://archive.ph/rKUK1

This is all fine and dandy for a single bank with a single branch - I wonder how they’ve done the larger ones like WaMu and HomeFed.

dredmorbius 4y ago
For WaMu, some deets at Wikipedia: https://en.wikipedia.org/wiki/Washington_Mutual#Seizure_by_OTS_and_FDIC https://en.wikipedia.org/wiki/Washington_Mutual#Seizure_by_O... NYT coverage from the time (2008): https://www.nytimes.com/2008/09/26/business/26wamu.html https://www.nytimes.com/2008/09/26/business/26wamu.html The Times also references the 1984 failure of Continental Illinois National Bank and Trust in Chicago. I don't know of any insider reports of what transpired at CINB, though Worldcat does have an interestingly-timed title: A financial analysis of Continental Illinois and the implications of its failure, by Robert C Jones, University of Central Arkansas, 1984(?) https://www.worldcat.org/title/financial-analysis-of-continental-illinois-and-the-implications-of-its-failure/oclc/20548815 https://www.worldcat.org/title/financial-analysis-of-contine... (Date ambiguity in Worldcat record.) A less specific search turns up a few records of interest: https://www.worldcat.org/search?q=Continental+Illinois+National+Bank+and+Trust&qt=results_page https://www.worldcat.org/search?q=Continental+Illinois+Natio... In particular: Views on the Federal Rescue of the Continental Illinois National Bank and Trust Co. U.S. Government Publishing Office 1984. https://www.worldcat.org/title/views-on-the-federal-rescue-of-the-continental-illinois-national-bank-and-trust-co/oclc/1229513466 https://www.worldcat.org/title/views-on-the-federal-rescue-o...

pintxo 4y ago

While it sounds astounding that you have hundreds of forced bank closings, this is actually a well regulated market working as it should. I am not sure that todays hyper-consolidated megabanks are a better implementation of a well regulated market. As most of them nowadays are just too big to fail. So part of the mandatory market forces cannot be used lest you want to generate broad reaching consequences.

bobthepanda 4y ago
I don’t know that they’re actually too big to fail. WaMu failed in 2008 and was handled fairly well for a bank with $300B+ in assets.
- pintxo 4y ago
  In the US maybe, but Europe seems to be deeply afraid of the idea alone to dispose of a failed bank.
  - Animats 4y ago
    The Economist has pointed that out. Few countries in Europe seem to be set up to do this.
    - bobthepanda 4y ago
      This is because the EU wants to have a common market but refuses to have a common deposit insurance scheme like the US FDIC, so now they've developed continent-scaled banks without a continent-scaled way to save them. A bunch of the euro crisis government bailouts happened because governments went underwater trying to save their banks.
      - ggm 4y ago
        And also because governments lied about their eligibility to be on the euro gravy train, and other governments were happy to lend them the money for future gain.

Shank 4y ago

I'm so glad that this was posted. I, too, have recently been thinking about how the FDIC works given the lockout of funds at Celsius. This is an incredible read. I've also dived into this more, however. It turns out the FDIC maintains a list of bank failures and summaries [1][0], respectively. These are awesome to read. There have been zero failures in 2022 so far, zero in 2021, and four in 2020. Most failures in the last few years have resulted in assets being sold to acquiring banks. The most recent failure where the FDIC mailed checks to people (this is what I imagine most people think of when they see the FDIC insurance policy) was First NBC Bank in Louisiana in 2017 [3]. Some of the assets were acquired by Whitney Bank, but a large number of assets were not. The bank failed on April 28th of that year, and the FDIC mailed checks on May 1st [2], which is pretty dang good, in my opinion. I think what I appreciate the most about this article and the recent failures is just how much attention FDIC devotes to keeping services available for customers, even when the situation is changing. Scanning over a few of the bank failure summaries, they all have a similar pattern: bank closes, all ATMs stay online, checks clear as soon as reasonably possible, and branches remain open. In the First NBC Bank failure, the worst "downtime" was experienced by people who had accounts backing other more complex financial products that didn't have immediacy attached (certificates of deposit, which are predicated on being held for a long time, for example). Everything else was "zero downtime", which is really stellar. Seeing other bank failures on the list, particularly in 2017, that I never heard about, also reminds me of the fact that this is stuff that matters more frequently than I would have expected (i.e., outside of financial crises, like 2007/2008). [0]: https://www.fdic.gov/bank/historical/bank/ https://www.fdic.gov/bank/historical/bank/ [1]: https://www.fdic.gov/resources/resolutions/bank-failures/failed-bank-list/ https://www.fdic.gov/resources/resolutions/bank-failures/fai... [2]: https://www.fdic.gov/resources/resolutions/bank-failures/failed-bank-list/firstnbc.html https://www.fdic.gov/resources/resolutions/bank-failures/fai... [3]: https://www.fdic.gov/bank/historical/bank/bfb2017.html https://www.fdic.gov/bank/historical/bank/bfb2017.html

DSingularity 4y ago
I wonder where cryptocurrency will end up. Eventually people will want entities like FDIC to step in and soften the blow. If Celsius auctioned its assets would we be where we are?

greenyoda 4y ago

Another story of an FDIC bank takeover, this one from 2009: https://www.npr.org/2009/03/26/102384657/anatomy-of-a-bank-takeover https://www.npr.org/2009/03/26/102384657/anatomy-of-a-bank-t...

DeathArrow 4y ago

I like how the articles were written in 1986. Even reading what would be mostly boring stuff, you feel like you've descended in the middle of a James Patterson thriller.

kmbfjr 4y ago
The internet seems to have imparted an effect on the writing style for journalists, and it isn’t always positive.
- jaywalk 4y ago
  Is it ever positive?

thathndude 4y ago

As a young lawyer in 2011 I had the chance to work on some of this stuff. The FDIC farms all of the legal out to law firms, and we have to litigate the hijinks (in the cases I worked in, rampant embezzlement (alleged) and terrible loans being made to buddies at the height of the 2008 madness). It was cool work.

deleted 4y ago
[deleted]

snowwrestler 4y ago

See also, from the 2009 major financial crisis: Anatomy Of A Bank Takeover > On a mid-January night, some 80 agents of the Federal Deposit Insurance Corp. pull into Vancouver, Wash. Their rental cars are generic, their arrival times staggered. One by one, agents check into a hotel, each quietly offering a pseudonym to the guy at the desk. > They're here to take over the Bank of Clark County, which the FDIC has decided is insolvent. https://www.npr.org/2009/03/26/102384657/anatomy-of-a-bank-takeover https://www.npr.org/2009/03/26/102384657/anatomy-of-a-bank-t...

nradov 4y ago
It's getting harder to check into hotels with a pseudonym now. Even if you're paying cash, most hotels require a government-issued photo ID plus a credit card with a matching name.
- Retric 4y ago
  I wonder how difficult a government agency would find getting around this.
  - theguyovrthere 4y ago
    a company I used to work for would sometimes have to bulk book rooms with little notice for certain types of response operations. Sometimes we'd get a room key with a number when we checked into the ops center, sometimes we were simply told what hotel we were at, and all we had to do was give a company name and our name. Sometimes they'd ask to see our company badge but that was about it.
- deleted 4y ago
  [deleted]
- the_biot 4y ago
  Yup, and it's been like that for a very long time. But I'm sure you could find something like a travel agency to make an arrangement with hotels to just charge room + minibar etc to them, with the condition that the hotel doesn't ask for ID.

hoosieree 4y ago

Netflix has a documentary series called "The G Word" (about the US government) - episode 3 shows part of a bank takeover. https://en.wikipedia.org/wiki/The_G_Word https://en.wikipedia.org/wiki/The_G_Word