From: lessgovt@gmail.com   
      
   Brain Drain Threatens the F.D.I.C. and Its Efforts to Regulate Banks   
   By Alan Rappeport, May 8, 2023, NY Times   
      
   After years of relative calm, F.D.I.C. officials have been working at a   
   frenzied pace this year. The March failures of Signature Bank, which was   
   overseen by the F.D.I.C., and Silicon Valley Bank, which was regulated by the   
   Federal Reserve, threatened to    
   set off runs at regional banks across the country. The collapse of First   
   Republic Bank late last month and the sinking stock prices of similarly   
   situated financial institutions have renewed the focus on the nation’s   
   financial regulators and spurred    
   calls for more aggressive oversight and for a bigger backstop on bank   
   deposits. Right now, the F.D.I.C. insures bank deposits up to just $250,000.   
      
   Biden admin officials and federal regulators have described the recent bank   
   failures as largely the result of poor management. But the F.D.I.C.   
   acknowledged a shortcoming of its own: a lack of staffing.   
      
   In a report released in late April reviewing the failure of Signature Bank,   
   the F.D.I.C. pointed to its own “persistent” staffing shortages as a   
   problem that has hampered its ability to supervise lenders. It said that it   
   had difficulty attracting    
   examiners and other regulatory staff to New York, where the cost of living is   
   high and the quality of city life has deteriorated since the coronavirus   
   pandemic. On average, 40 percent of the positions that scrutinize large   
   financial institutions in the    
   New York City area have been vacant or filled by temporary staff since 2020.   
      
   “It’s disheartening that staffing and resource shortages are again a   
   problem with the F.D.I.C.’s supervisory functions,” said Sheila Bair, who   
   was chair of the regulator from 2006 to 2011 and recalled confronting a   
   similar problem when she    
   assumed the job after a period of bank health and profitability.   
   “Complacency sets in. It’s always a risk at any regulatory agency.”   
      
   The F.D.I.C. is not the only regulator that has been diminished in the last   
   few months by thin resources.   
      
   The Fed said in a separate report in April that the number of scheduled hours   
   dedicated to the supervision of Silicon Valley Bank fell by more than 40   
   percent from 2017 to 2020. That came as resources dedicated to bank oversight   
   across the Fed system    
   were also limited. From 2016 to 2022, the head count of the Fed system’s   
   supervisory staff fell by 3 percent even as banking sector assets grew by   
   nearly 40 percent, the report said.   
      
   In a report released on Monday, the California Department of Financial   
   Protection and Innovation said that from late 2021 through 2022, the examiner   
   in charge of Silicon Valley Bank had asked for more resources to adequately   
   review its books but was not    
   able to get them.   
      
   “Examiners with the necessary experience and skill sets were already   
   assigned to key roles in other bank examinations, which delayed the allocation   
   of additional staff,” the report said.   
      
   The I.R.S., which recently received $80 billion from last year’s Inflation   
   Reduction Act, has also seen its staff size fall sharply in the last decade,   
   making it difficult to conduct complex audits and enforce the tax code.   
   Although the tax collection    
   agency is trying to ramp up hiring, Biden administration officials have   
   acknowledged that attracting skilled tax specialists, who can earn more   
   working for accounting firms, can be difficult.   
      
   The F.D.I.C. was created in 1933 to stabilize the United States financial   
   system after a wave of thousands of bank failures. Its 8,000 employees   
   supervise and examine over 3,000 banks across the country. It insures nearly   
   $10 trillion in deposits.   
      
   But with salaries that top out at just over $200,000, turnover among top   
   talent can be high when the banks that the F.D.I.C. supervises decide to lure   
   their examiners away.   
      
   An aging work force also poses problems. In February, weeks before the spring   
   banking turmoil, the F.D.I.C.’s inspector general published a report   
   projecting that nearly 40 percent of the regulator’s work force would be   
   eligible to retire in the next    
   five years. It warned that this attrition could leave the F.D.I.C. scrambling   
   if a banking crisis were to happen.   
      
   “Absent seasoned professionals from key divisions with institutional   
   knowledge of lessons learned from past crises, the F.D.I.C. may not be able to   
   execute its responsibilities with respect to resolution and receivership   
   activities,” the report said.   
      
   The inspector general also highlighted an exodus of its examiners in training.   
   Resignation rates among those entry-level employees, know as financial   
   institution specialists, doubled since 2020. More than half of the departures   
   occurred between the first    
   and second year of the four-year program that is designed to groom future   
   examiners.   
      
   The F.D.I.C., in its review of the Signature Bank failure, noted that the high   
   cost of living in New York City was one reason for its staffing troubles and   
   suggested that higher pay and more flexible work-from-home options could be a   
   solution. The pay    
   scales at the F.D.I.C. are negotiated between its management and the National   
   Treasury Employees Union.   
      
   Settling on a remote work policy has been a struggle at the F.D.I.C. The   
   National Treasury Employees Union filed a grievance against the regulator last   
   year, accusing it of backing out of an agreement that would have allowed most   
   of its staff to have    
   broad flexibility to work from home.   
      
   “Telework is a really important recruiting tool,” said Vivian Hwa, a   
   senior research economist at the F.D.I.C. and president of the N.T.E.U.   
   chapter that represents its employees in Washington. “Long term, if we want   
   to build up our rosters again    
   and retain talent, we have to continue with telework flexibilities.”   
      
   Ms. Hwa added that many banks have flexible work from home policies and that   
   the F.D.I.C. was able to successfully conduct examinations during the pandemic.   
      
   An F.D.I.C. spokesman, David Barr, said that the F.D.I.C. was taking steps to   
   address the staffing shortages.   
      
      
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