Inside the FDIC

Chapter 5

Foreclosure Prevention

The newspaper articles were devastating. They claimed that the initials FDIC stood for “Fear, Deception, Intimidation, and Chaos.” In 1994 Scripps-Howard News Service published a highly critical series of articles on the FDIC's loan collection practices under the heading, “Protector Turned Predator.” Needless to say, it was not a flattering portrait. We were referred to, among other things, as Fiscal Robocops.

Some dissatisfied borrowers expressed their feelings more directly. The writer of one letter told us, “The whole damn lot of you at the FDIC ought to be taken out on the steps of Capitol Hill and be given a public whipping.” After colorfully discussing his complaints, he still felt obligated to conclude with the salutation, “You obviously do not have my good will or best wishes.”

That writer would have been pleased to know that the public whippings actually did occur. The only difference was that they took place inside congressional hearing rooms rather than on the steps of Capitol Hill. Congress was as critical of the FDIC as were the letters and newspaper articles.

The brewing controversy over the FDIC's loan collections was turning into a major storm. I was about to find myself in the center of that storm. In November 1992, the FDIC's acting chairman, Andrew “Skip” Hove, had named me as the director of the Division of Liquidation. This was the division that was responsible for closing insolvent banks, paying insured depositors their ...