Primary Regulators: OCC, OTS, FED & FDIC-Failed Institutions in Distributed Form

In Economy on March 17, 2010 at 2:23 AM

Behind the curtain of failed depository institutions, it is notable that the total number of posthumous banks and thrifts having failed during business cycle #34, as ordained by official NBER record, is rapidly approaching 200. This thread analyzes the distribution of failures across primary regulators. Upfront, here is a pie chart displaying that regulator distribution, with warts and all.

One can clearly see, there is plenty of pie allocated across the entire spectrum of regulators, who are charged by law with the task of supervising the nation’s financial intermediary system as a whole, that is, regulating the banks and thrifts in order to prevent excesses from occurring (e.g. poor loan underwriting, overleveraging, etc.).

Recall, NetBank of Alpharetta, GA had originally kicked things off in September 2007, as it was placed into receivership and closed by the Office of Thrift Supervision (OTS) and Federal Deposit Insurance Corporation (FDIC), incurring an estimated loss of $157,792,000 to the Deposit Insurance Fund. The OTS represented the primary regulator in this instance. They have been heavily criticized for overseeing Washington Mutual Bank of Henderson, NV, the largest depository institution to fail to date in the history of FDIC existence, as measured by asset size. Perhaps surprisingly, FDIC supervision leads the way in the overall lion’s share perspective, having supervised 111 institutions effectively failed since January 1, 2007.

As Figure 2 makes clear, OTS failures underperform all other regulators in terms of asset size (see below):

Overtime, FDIC has kept official records on overall bank failures dating back to 1934. Dominant banking crashes in the United States are easily witnessed in the data provided (see below). U.S. Banking Crashes, Three Episodes analyzed those periods from a monetary policy viewpoint during a more recent post.

In other news, U.S. PIRG is offering up to date coverage on the latest U.S. Senate proposal for financial reform — click PIRG Consumer Blog for more. Latest Financial Crisis Inquiry Commission (FCIC) hearings are now publicly posted and scheduled on their website at the following address — http://www.fcic.gov/.

Former Federal Reserve Chairman Paul Volcker has been receiving praise and big backing of the pen lately as well — read Congress Should Implement the Volcker Rule for Banks. Lastly, apparently one accounting firm is receiving heat from involvement in the Lehman Brothers collapse — read Zero Hedge and Marketplace discussing Repo 105.


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