BGuthrie Photos: DC -- Federal Deposit Insurance Corporation (FDIC) Exhibit

DC -- Federal Deposit Insurance Corporation (FDIC) Exhibit:

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Specific picture descriptions: Photos above with "i" icons next to the bracketed sequence numbers (e.g. "[1] ") are described as follows:
1. FDICEX_151110_007.JPG: The FDIC's Mission: The Federal Deposit Insurance Corporation (FDIC) is an independent agency created by the Congress that maintains stability and public confidence in the nation's financial system by insuring deposits, examining and supervising financial institutions, and managing receiverships.
2. FDICEX_151110_010.JPG: The FDIC: A History of Confidence and Stability
3. FDICEX_151110_012.JPG: '33 The FDIC: A History of Confidence and Stability Since 1933, the FDIC has been an essential part of the American financial system. This exhibit takes you through our history and explores how the FDIC and the banking industry have changed over time. But some things never change -- the FDIC's contribution to depositor confidence and financial stability. You will also see how the FDIC does its work today, from supervising banks and protecting depositors to educating consumers about financial matters.
4. FDICEX_151110_015.JPG: Background and Creation The first bank failure in U.S. history occurred in 1809, and many more would follow. For about the next hundred years, the country's recurring financial crises were often accompanied by bank failures. Fourteen states responded by creating bank obligation/deposit insurance systems (none survived beyond 1930). Not until the tremendous dislocation of the Great Depression, though, was federal deposit insurance enacted. Its value became apparent immediately: the number of bank failures declined sharply, and depositor confidence returned.
5. FDICEX_151110_019.JPG: Note Issued by Farmer's Exchange Bank of Gloucester This note was issued by the Farmer's Exchange Bank of Gloucester, Rhode Island, in 1808; the following year, Farmer's Exchange became the first bank in the U.S. to fail.
6. FDICEX_151110_029.JPG: State Deposit Insurance Fourteen states experimented with insurance programs in two waves. In the 19th century, six states (in blue) protected deposits and/or bank-issued notes, but none of the programs survived beyond 1866. In the early 20th century, eight states (in green) insured deposits. The agricultural depression of the 1920s overwhelmed most of the later systems.
7. FDICEX_151110_031.JPG: An Insured Bank Note This note, issued by the Watervliet Bank in 1836, prominently displays the bank's membership in the New York Safety Fund.
8. FDICEX_151110_034.JPG: Early Panics and Bank Runs Financial panics, often associated with speculative booms, occurred periodically during the 1800s and early 1900s. The panics of 1857, 1873, 1893, and 1907 all involved numerous bank failures. The 1907 panic galvanized a movement for federal banking reform and led to the creation of the Federal Reserve System in 1913, as well as to increased calls for federal deposit insurance.
9. FDICEX_151110_036.JPG: The Panic of 1907 In 1907 the economy weakened, businesses failed, and stock prices fell. By October, many banks and trust companies had suffered runs. Financier J.P. Morgan's efforts to prop up financial institutions were instrumental in restoring financial order.
10. FDICEX_151110_038.JPG: Rising Bank Failures On average, 600 banks failed each year between 1921 and 1929, ten times the rate of the preceding decade. The number of bank failures continued to rise, turning into a full-blown, nationwide crisis in the early 1930s. The crisis did not end until the federal government stepped in with emergency measures.
11. FDICEX_151110_042.JPG: $1,300,000,000 The total dollar amount lost by depositors because of bank failures from 1930 through 1933. The Banking Crisis of the Great Depression Between 1930 and 1933, about 9,000 banks failed -- 4,000 in 1933 alone. By March 4, 1933, the banks in every state were either temporarily closed or operating under restrictions. On March 6, the day after his inauguration, President Franklin D. Roosevelt declared a nationwide banking holiday that temporarily closed all banks in the nation. On March 9, the Emergency Banking Act gave financial regulators time to evaluate each bank before allowing it to reopen.
12. FDICEX_151110_048.JPG: The Bank Holiday The holiday cartoon gives a humorous look at the disruption to American families caused by the emergency bank holidays. Following Roosevelt's proclamation, Congress swiftly enacted the Emergency Banking Act, which the House of Representatives passed after just 40 minutes of deliberation.
13. FDICEX_151110_051.JPG: This cartoon, "A Wise Economist Asks a Question," won the Pulitzer Prize in 1932.
14. FDICEX_151110_055.JPG: The Banking Crisis of the Great Depression Between 1930 and 1933, about 9,000 banks failed -- 4,000 in 1933 alone. By March 4, 1933, the banks in every state were either temporarily closed or operating under restrictions. On March 6, the day after his inauguration, President Franklin D. Roosevelt declared a nationwide banking holiday that temporarily closed all banks in the nation. On March 9, the Emergency Banking Act gave financial regulators time to evaluate each bank before allowing it to reopen.
15. FDICEX_151110_057.JPG: Addressing Worried Depositors When rumors of bank failure spread, anxious depositors gathered outside the Perpetual Building Association Bank in order to withdraw their deposits. Banker John Poole tried to reassure depositors that their bank was sound.
16. FDICEX_151110_060.JPG: Signing the 1933 Act On June 16, 1933, President Roosevelt signed the act that created the FDIC. He was surrounded by congressional leaders, including Senator Carter Glass and Representative Henry Steagall, both of whom lent their names to the law.
17. FDICEX_151110_066.JPG: FDIC Emblem, 1934 This emblem would have been displayed in insured banks from January to June 1934.
18. FDICEX_151110_077.JPG: Creation of the FDIC The Banking Act of 1933 created the FDIC as a temporary agency. Despite Roosevelt's reservations about deposit insurance, popular support for it was so strong that he signed the Act into law. In January 1934 the FDIC began insuring deposits, covering them up to $2,500. The FDIC also became the federal regulator of state nonmember banks,* the receiver for failed national banks, and -- with state authorization -- the receiver for failed state banks.
19. FDICEX_151110_081.JPG: "You have accomplished in these few months with complete success a gigantic task which the pessimists said could not possibly be done before Jan. 1. That 97 per cent of the bank depositors of the nation are insured will give renewal faith..." -- FDR in a letter to FDIC Chairman Cummings, dated January 1, 1934 7,785 Entrance Examinations Number of state banks examined under FDIC auspices during the last three months of 1933 to ensure that they could apply for deposit insurance.
20. FDICEX_151110_090.JPG: Building Confidence On February 14, 1939, FDIC employees post a notice telling depositors of the New Jersey Title Guarantee and Trust Company that their bank has failed and that their deposits are protected up to $5,000.
21. FDICEX_151110_096.JPG: An Historic Moment Mrs. Lydia Lobsiger was the first insured depositor paid by the FDIC. She received her payment of $1,250 at the closed Fon du Lac State Bank of East Peoria, Illinois, in July 1934.
22. FDICEX_151110_101.JPG: The Earliest Years The small number of bank failures in 1934 and 1935 confirmed the benefits of federal deposit insurance. With little controversy, the Banking Act of 1935 made the FDIC a permanent agency. The Act also enhanced the FDIC's authority and changed the way bank insurance premiums were calculated, making the premiums predictable for banks and adequate to support the insurance fund. An important early FDIC policy emphasized strengthening the capital of the banks it supervised. 9 Number of insured banks that failed in 1934 after federal deposit insurance took effect.
23. FDICEX_151110_106.JPG: STABILITY, CHANGE & CRISIS 1 / 21 Stability, Change and Crisis Nearly 40 years of industry stability were followed by more than a decade of financial turmoil. From the end of WWII through the 1960s, banking prospered: the economic environment was extremely favorable. But during the 1970s and early 1980s, prices and interest rates became more volatile, and recessions deeper and more frequent. When these changes were coupled with a series of regional and sectoral booms and downturns, bank and thrift failures rose to a level not seen since the Great Depression.
24. FDICEX_151110_109.JPG: 2,508 Number of FDIC employees at year-end 1970
25. FDICEX_151110_118.JPG: Repaying the Treasury In September 1947, FDIC Chairman Maple Harl (right) presented a check for $139 million to a representative of the Treasury Department, repaying almost half the government's inittal funding of the FDIC. The balance was paid the following year.
26. FDICEX_151110_123.JPG: Increased Protection Congress increased FDIC insurance coverage levels six times between 1934 and 1980. 1933 -- $2,500 1934 -- $5,000 1950 -- $10,000 1966 -- $15,000 1969 -- $20,000 1974 -- $40,000 1980 -- $100,000
27. FDICEX_151110_126.JPG: Interest Rate Volatility This chart, showing federal fund interest rates, demonstrates how interest rates spiked to record levels in the early 1980s. The pale orange bars indicate periods of economic recession.
28. FDICEX_151110_132.JPG: A Changing Industry During the 1970s and early 1980s, the economic environment became increasingly volatile. In addition, the banking industry was transformed by a combination of gradual deregulation, financial innovation, and technological change. Under these new conditions, banks faced growing competition from other depository institutions and non-bank financial firms. This changing environment created both opportunities and risks for banks, and bank failures began increasing. S&Ls: Problems Emerge S&Ls had specialized in long-term, low-rate mortgages. But as interest rates rose, thrifts had to pay higher rates to depositors. This mismatch often caused substantial losses. Furthermore, depositors began shifting funds to higher-yielding competitors. To stem the outflow and bolster the industry, Congress removed interest rate ceilings and gave S&Ls new and expanded investment powers.
29. FDICEX_151110_141.JPG: Mechanical Bank, c 1950s During the 1950s, mechanical banks were popular gifts for new banking customers. This one advertises Western Savings Fund Society at Philadelphia, which failed in 1982.
30. FDICEX_151110_144.JPG: Addometer, c 1900-1960 Before the advent of electronic calculators, Addometers were used by FDIC staff.
31. FDICEX_151110_151.JPG: $153 Billion: Cost to the taxpayers and the S&L industry of resolving failures from 1986 through 1995. $36 Billion: Losses to the FDIC's insurance fund as a result of the conflict.
32. FDICEX_151110_153.JPG: "It's agreed then. We use the last 50 bucks for lunch and call the FDIC." -- Dave Carpenter
33. FDICEX_151110_157.JPG: he Banking Crisis The banking crisis of the 1980s and 1990s was the greatest challenge the FDIC had ever faced. The crisis had four main causes. Boom-and-bust economic activity occurred in certain regions and economic sectors. Legal restrictions on branching made banks more vulnerable to regional and sectoral recessions. Many banks exhibited weak risk management. And inappropriate government policies, such as less-frequent bank examinations, also played a role. The S&L Crisis Deregulation let S&Ls enter new fields where they had little expertise. In addition, capital standards were lax and supervision inadequate. Given government policy and the FSLIC's lack of resources, many institutions that should have been closed stayed open. By 1986, the industry was clearly in crisis -- 672 S&Ls and the FSLIC itself were insolvent.
34. FDICEX_151110_159.JPG: Regional and Sectoral Recessions Agriculture A 1970s boom in farm commodity prices and farm real estate values was followed by a downturn in the early 1980s. Many banks that concentrated in agricultural lending failed. Energy Soaring oil prices in the 1970s and early 1980s generated a boom in the Southwest. When energy prices dropped sharply, the region's economy was devastated and many banks failed. Real Estate Both the Northeast and California had booming economies in the 1980s. But aggressive real estate lending led to overbuilding and inflated prices. When recessions struck in the early 1990s, banks in both regions failed.
35. FDICEX_151110_168.JPG: Totaling the Failures This chart shows the combined institutional failures handled by the FSLIC, RTC, and FDIC between 1980 and 1994. $36 Billion Losses to the FDIC's Insurance fund as a result of the crisis. $153 Billion Cost to the taxpayers and the S&L industry of resolving failures from 1986 through 1995.
36. FDICEX_151110_174.JPG: In September 1990, this cartoon appeared in the Knoxville Journal. by Charlie Daniel
37. FDICEX_151110_179.JPG: RTC The RTC, operating from 1989 to 1995, resolved 747 failed thrifts with assets of about $450 billion, successfully ending the thrift crisis. FDIC personnel and expertise were essential to the creation and operation of the RTC, and the FDIC managed the RTC during its first two years.
38. FDICEX_151110_182.JPG: Crisis and Resolution From 1980 through 1994, a total of 1,618 banks failed. The FDIC handled these failures without the public losing confidence in the banking system and without the need for taxpayer funding. By the early 1990s, favorable interest rates and economic conditions helped the industry rebound and enter a period of unparalleled growth and profitability. S&L: Reform In 1989, a new law reformed the S&L industry, imposing stricter capital requirements and limiting investment and lending activities. The industry's regulatory structure was overhauled. The FSLIC was abolished, and the FDIC became the federal deposit insurer of thrifts. S&Ls received a new federal regulator, the Office of Thrift Supervision, and the Resolution Trust Corporation (RTC) was created to dispose of the assets of failed thrifts.
39. FDICEX_151110_185.JPG: Banking Reform In 1991, a new law strengthened the insurance funds and increased regulatory supervision. Its provisions called for insurance premiums based on risk and annual on-site examinations of most banks and thrifts. Regulators also were required to take "prompt corrective action" against weakening institutions and to close critically undercapitalized institutions at the least cost to the FDIC. On August 9, 1989, President George H.W. Bush signed the Financial Institutions Reform, Recovery, and Enforcement Act.
40. FDICEX_151110_189.JPG: Recovery, Crisis & Reform More than a decade of industry growth and profits was followed by a widespread and severe financial crisis. The banking industry recovered quickly in the mid-1990s, and the next decade was marked by consolidation, record profits, and few failures. But the growth of the nonbank financial sector, a historic housing bubble, lax oversight, imprudent industry practices, and inadequate systemic resolution authority combined in 2008 to create the worst U.S. financial crisis since the Great Depression. The crisis required extraordinary governmental action, which was followed by measures designed to address the causes of the crisis.
41. FDICEX_151110_206.JPG: Rebuilding the Deposit Insurance Funds The failures of the 1980s and early 1990s left the deposit insurance funds undercapitalized. But a period of high insurance premiums, a 1996 special assessment to recapitalize the thrift insurance fund (SAIF), and a low number of bank failures restored the funds by the mid-1990s. This chart sums the amounts in the bank insurance fund (BIF) and the SAIF. Deposit Insurance Reform The FDIC was further strengthened by a 2005 law that merged the two deposit insurance funds and empowered the agency to tie insurance premiums more closely to risk. The law also provided that insurance coverage be adjusted for inflation, and it increased coverage for certain retirement accounts to $250,000.
42. FDICEX_151110_208.JPG: A Precarious Recovery From 1994 to 2000, new laws permitted nationwide interstate branching; allowed banks, brokerages, and insurance firms to enter one another's traditional businesses for the first time since the 1930s; and left the burgeoning derivatives market largely free of regulation. From 1995 to 2007, failures were infrequent and the banking industry earned $1.2 trillion. However, the bulk of the earnings came from what would soon emerge as the largest housing bubble in U.S. history.
43. FDICEX_151110_210.JPG: Record Profits In almost every year from 1992 to 2007, the banking industry reported record profits. Larger banks experienced particularly strong growth in assets related to residential mortgages, while smaller banks turned increasingly to commercial real estate lending.
44. FDICEX_151110_212.JPG: The Shadow Banking System Grows This period was marked by tremendous growth in parts of the financial sector not subject to bank and thrift supervision and commonly called the shadow banking system. The category includes investment banks, mortgage finance companies, and hedge funds. By the time of the crisis, this sector was responsible for as many as half of all financial services.
45. FDICEX_151110_215.JPG: A Housing Boom Becomes a Bubble An unprecedented housing boom developed in the late 1990s, encouraged by low interest rates, new mortgage products, investors' demand for mortgage-backed securities, and the assumption that housing prices would always rise. As the boom became a bubble, increased mortgage lending was fueled by a compensation system that rewarded volume rather than long-term performance, and many borrowers, lenders, and investors made imprudent decisions that would have serious consequences for the economy.
46. FDICEX_151110_216.JPG: Zero Failures The number of failures between June 23, 2004, and February 2, 2007 -- the longest period in FDIC history without a bank failure.
47. FDICEX_151110_222.JPG: Causes of the Crisis The financial crisis had a complex set of causes. A credit boom led to increased risk taking, indebtedness, and leverage among both financial institutions and individuals. Unsustainable increases in housing prices fueled a proliferation not only of mortgages but also of financial products and mortgage-based instruments that were inadequately regulated and spread risk throughout the financial system. When the housing bubble burst, the underpinnings of the entire financial system were threatened.
48. FDICEX_151110_224.JPG: Securitization and Derivatives Banks expanded the practice of combining mortgages and selling them to investors as mortgage-backed securities, but repackaged these securities into ever more complex derivatives. The credit rating agencies failed to properly evaluate these products, allowing high-risk investments to appear low-risk. Banks followed up by creating additional derivatives that speculated on the performance of even small portions of the initial high-risk derivatives. These practices fed on one another, encouraging even more mortgage lending and transmitting risk throughout the global financial system. "Our mortgage securities are the picture of quality..." -- Nick Anderson
49. FDICEX_151110_227.JPG: The First Large Bank Failure of the Crisis IndyMac had pursued an aggressive growth strategy focusing on risky, nontraditional mortgage products. The FDIC took over the bank after the Office of Thrift Supervision closed it in July 2008. Although insured deposits were completely safe, customers lined up outside the bank's offices. This California thrift was the third-largest, and the costliest, failure in FDIC history.
50. FDICEX_151110_231.JPG: Unprecedented Banking Consolidation From the mid-1990s onward, banking consolidation increased markedly. The largest U.S. banks reached unparalleled size. At the same time, the total number of insured institutions dropped significantly. During the crisis, two of the three largest banks grew even larger as a result of new acquisitions.
51. FDICEX_151110_235.JPG: Response to the Emergency In the autumn of 2008, the U.S. financial system verged on collapse. Credit markets -- markets for debt securities and short-term commercial paper -- froze, and several major institutions failed. The U.S. government took a series of extraordinary actions designed to keep financial markets liquid and stable and to bolster public confidence in financial institutions. Although the financial crisis had serious economic consequences, a second Great Depression was averted.
52. FDICEX_151110_240.JPG: Systemic Risk At that time, government assistance to individual troubled banks was permitted only if their failure threatened the financial and economic system and only if the FDIC, the Federal Reserve Board, and the Treasury Secretary in consultation with the President approved. Of the three banks authorized to receive open-bank assistance in 2008–2009, only one -- Citigroup -- - actually received support under the systemic risk exception.
53. FDICEX_151110_243.JPG: "Want a hot stock tip? Buy caskets!" -- John Darkow September 2008 The financial system was in upheaval: Fannie Mae and Freddie Mac were taken into government conservatorship, Lehman Brothers and Washington Mutual failed, and American International Group would have failed but for extraordinary government assistance. The stability of the entire financial system seemed in doubt. The Columbia [MO] Daily Tribune published this cartoon the day after Lehman failed.
54. FDICEX_151110_248.JPG: FDIC in the Crisis Congress temporarily raised the basic deposit insurance coverage limit from $100,000 to $250,000. In addition, the FDIC was authorized to take the unprecedented steps of temporarily guaranteeing debt issued by financial institutions and insuring without limit deposits in non-interest bearing transaction accounts (i.e., checking accounts). Other Emergency Measures In October 2008, Congress authorized $700 billion for the Troubled Asset Relief Program to aid financial institutions; and the month before, the U.S. Treasury temporarily guaranteed investments in money market mutual funds. Over several months, the Federal Reserve created many programs designed to promote market liquidity. By 2010, most of these programs had expired. Here, regulators announce a market stability initiative on October 14, 2008.
55. FDICEX_151110_251.JPG: FDIC in the Crisis Congress temporarily raised the basic deposit insurance coverage limit from $100,000 to $250,000. In addition, the FDIC was authorized to take the unprecedented steps of temporarily guaranteeing debt issued by financial institutions and insuring without limit deposits in non-interest bearing transaction accounts (i.e., checking accounts).
56. FDICEX_151110_253.JPG: Other Emergency Measures In October 2008, Congress authorized $700 billion for the Troubled Asset Relief Program to aid financial institutions; and the month before, the U.S. Treasury temporarily guaranteed investments in money market mutual funds. Over several months, the Federal Reserve created many programs designed to promote market liquidity. By 2010, most of these programs had expired. Here, regulators announce a market stability initiative on October 14, 2008.
57. FDICEX_151110_258.JPG: Deposit Insurance Fund Trends The sharp rise in bank failures led to high resolution costs for the Deposit Insurance Fund, which reached a record low balance of negative $20.9 billion in 2009. But by mid-year 2011, a reduction in failures and the banking industry's payment of higher deposit insurance premiums had restored a positive balance.
58. FDICEX_151110_261.JPG: "Look, our bank's changed its name again." -- Kevin Pope When banks merge, changes in bank names are common. The man in this cartoon, however, misses the point. This cartoon appeared in US Banker in the fall of 2010, when the number of bank failures remained high.
59. FDICEX_151110_266.JPG: The Great Recession A recession began at the very end of 2007, and the financial crisis made it much worse. Recessions associated with financial crises tend to be the most severe. This recession and its aftermath were characterized by a severely depressed housing market, high foreclosure rates, and an extended period of high unemployment. Bank profits evaporated and bank failures rose sharply. However, by 2010 bank earnings had improved significantly, and by 2011 the pace of failures had significantly slowed.
60. FDICEX_151110_268.JPG: Bank Failures Rise The number of bank failures grew somewhat in 2008 and rose significantly -- mostly among community banks -- in both 2009 and 2010. By 2011, though, the number of failures had begun to recede.
61. FDICEX_151110_271.JPG: Foreclosures Increase As more homeowners defaulted on mortgage payments, foreclosures began to rise as early as 2006. Although at first these defaults were concentrated in the subprime market, the continuing collapse in the housing market coupled with the recession drove foreclosure numbers higher. In 2009 alone, almost 3 million foreclosures were initiated.
62. FDICEX_151110_281.JPG: Deposit Insurance Coverage Increase Dodd-Frank made permanent the October 2008 increase in the basic insurance coverage amount to $250,000.
63. FDICEX_151110_283.JPG: New Financial Oversight The Financial Stability Oversight Council meets in July 2011. Dodd-Frank created the Council to provide comprehensive monitoring of our nation's financial system. The Council is charged with identifying threats to financial stability, promoting market discipline, and responding to emerging risks.
64. FDICEX_151110_287.JPG: Regulatory Overhaul Dodd-Frank made many regulatory changes. It created the Consumer Financial Protection Bureau (CFPB) and abolished the Office of Thrift Supervision, transferring its responsibilities to other agencies. It also mandated stricter capital requirements for financial institutions, provided for some regulation of derivatives, reformed the regulation of credit rating agencies, and required mortgage originators to retain risk in the mortgages they sell for securitization.
65. FDICEX_151110_291.JPG: Financial Reform Signed into Law President Barack Obama signs Dodd-Frank into law on July 21, 2010, while members of Congress, including Senator Christopher Dodd and Congressman Barney Frank, look on.
66. FDICEX_151110_296.JPG: Financial Reform In response to the financial crisis, the Dodd-Frank Wall Street Reform and Consumer Protection Act was enacted in July 2010. Most importantly for the FDIC, the agency was given authority to liquidate systemically important firms in an orderly way. In 2008, at the height of the crisis, the lack of this authority led the government to provide broad support to banks, including several large institutions. More generally, the law was designed to prevent the recurrence of the problems that had led to the crisis.
Bigger photos? To save server space, the full-sized versions of these images have either not been loaded to the server or have been removed from the server. (Only some pages are loaded with full-sized images and those usually get removed after three months.) I still have them though. If you want me to email them to you, please send an email to guthrie.bruce@gmail.com and I can email them to you, or, depending on the number of images, just repost the page again will the full-sized images.
Connection Not Secure messages? Those warnings you get from your browser about this site not having secure connections worry some people. This means this site does not have SSL installed (the link is http:, not https:). That's bad if you're entering credit card numbers, passwords, or other personal information. But this site doesn't collect any personal information so SSL is not necessary. Life's good!
Photo Contact: [Email Bruce Guthrie].