Inside the FDIC

Chapter 7

Transition and the Power of the Federal Government

Those of us working at the FDIC during the banking crisis of the late 1980s and early 1990s became addicted to the adrenaline that came from having an overwhelming amount of work to do without enough time to do it. It was easy to put off thinking about what would happen when the banking crisis ended, which it abruptly did near the end of 1992. Once again, businesses and consumers resumed their borrowing, and banks started lending to them. The economic growth that followed continued, almost without interruption, for 15 years.

The benefits of the economic turnaround were felt throughout the world, but at the FDIC and the Resolution Trust Corporation (RTC), it marked the beginning of a long and difficult transition period. Our workload quickly shrank, but our staff had grown to 23,000—up from just 4,000 in the precrisis period. We now faced the need to begin an unprecedented and massive downsizing.

This marked the beginning of a very difficult period for the FDIC and its staff. The sweeping layoffs sapped morale, and among those who survived the layoffs, there was a wave of unwarranted investigations into the behavior of many FDIC and RTC staff members that also took its toll. As a result, the FDIC staff turned increasingly inward, with a focus on preserving their jobs and responsibilities. The cumulative effect significantly contributed to a weakening of the institution's voice and diminished influence in important ...