FDIC Rebuttal

The FDIC issued its own statement following yesterday's hearing.

In typical Washington bureaucratic fashion, the statement cites many facts and figures marginally related to the actual point.  After wading through all of these, the FDIC regurgitates from its own policy handbook.  The tenor is one of an executive in Washington who has no idea what is going on down here on Earth.  For example:

"The FDIC has a number of outlets for bankers to express their concerns when this occurs. When banks disagree or are uncomfortable with examination findings, they are advised to discuss such concerns with us."

Technically, yes, this is true.  And this is what the FDIC should strive for.  However, reality is very different.  The process is all but transparent - the FDIC's methodology is vague and undocumented, and "discussion" is not an option.  If a banker disagrees with the examiners, he can appeal the findings - to the FDIC.  He must appeal within 14 days, and that appeal goes to a group of examiners in another region, not up the chain.  They have 60 days to respond, and 99% of the time they defer to the local examiners.

Further appeals up the chain follow similar timelines - a very short time to file an appeal, followed by a long waiting period before the FDIC responds.  No one but the local examiners really know what's going on, so each successive review takes the easy way out and again defers to the original findings.

"We are aware of concerns expressed by some bankers that examinations are being conducted in an overly conservative manner during this challenging economic time. To address these perceptions, we have expanded our outreach at the national, regional, and state level to broaden our communication with both individual banks and trade associations. The FDIC welcomes feedback from the industry and relies on bankers' informed perspective as we consider refinements to our supervisory process."

They are aware of concerns, but they do not address the actual concerns.  They address "perceptions" through "outreach."  Community banks don't need outreach - they know exactly what the FDIC policies are.  What they want is for Washington to recognize that their policies are neither the problem nor the solution.  The problem is the actual workings of the FDIC - not its administration, not its public perception.  Those examiners who hold the fate of every community bank in their hands are not held accountable, and banks have no real recourse.