Sun, Aug 17, 2008 page12

• Veterans of S&L crisis are back fixing bank mess

  With the credit and housing crises in full bloom, the FDIC has called experts on bank failures out of retirement for help

  • By Geraldine Fabrikant / NY TIMES NEWS SERVICE
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  Before he retired from the Federal Deposit Insurance Corp (FDIC) three years ago, Gary Holloway was cleaning up the remnants of the savings and loan (S&L) crisis two decades earlier.
  
  

  His nettlesome problems included selling leaky gas stations in Florida and the Thomas Ranch in California, which was also in need of a cleanup. What Holloway and his co-workers were really doing was working themselves out of jobs. The FDIC closed offices and slashed its staff in the 1990s, as the savings and loan mess wound down after hundreds of failures through the 1980s.
  
  

  Activity slowed, with just 29 bank failures in the five years ended in 2004. So after 30 years with the agency, Holloway retired for a laid-back life of fishing and golf in rural Spicewood, Texas.
  
  

  At the FDIC, what followed was nothing — literally. From 2005 through the end of 2006, not a single bank failed, the longest such stretch since 1993.
  
  

  But in March of this year, the agency came calling for Holloway. With the credit and housing crises in full bloom, the number of troubled banks was again on the rise. A former colleague asked if he would return for a year to help sort out the bad loans of banks that the FDIC was shutting down.
  
  

  Holloway, 57, leapt at the chance. Now, he is on the road with a SWAT-like team that swoops in to handle collapses, sort through loans and reassure the public that their deposits are safe. The work is exciting and rewarding, and he said he just might sign on for another year.
  
  

  The agency, it turns out, is operating more like the rest of the US, with a just-in-time work force that grows and contracts based on its needs. The FDIC, which had a staff of 4,600 at the end of last year, has brought back about 80 people — largely retirees — and may well recruit dozens and even hundreds more people.
  
  

  The extra people will help the agency, whose day-to-day activities are providing insurance for depositors, collecting premiums and regulating the nation’s financial institutions, and work out the loans at failing banks.
  
  

  The advantages to retirees are several. Not only do they work for a specified length of time, but they also have something that the younger people lack: experience overseeing failed institutions.
  
  

  Commuting to faraway cities may prove tiresome, but the older workers do not have the responsibilities of younger people with growing families. Getting home is a hassle, Holloway conceded. The FDIC staff members on bank workouts are sent home every two weeks, but flying and making connections mean frequent delays.
  
  

  The FDIC hopes the retirees will share their knowledge with the less experienced.
  
  

  “We are trying to cross-train them to existing staff to work on bank failures, so we don’t need a huge staff waiting around for the next bank failure,” said David Barr, an FDIC spokesman.
  
  

  Even if the agency’s work force continues to swell, the figure will probably be dwarfed by the nearly 23,000 — many of them part time — who were working at the FDIC at the height of the savings and loan crisis.
  
  

  Few expect the scale of the current crisis to approach that of the 1980s debacle, in which 2,000 banks and savings and loans were eventually closed. Since the mortgage crisis began a year or so ago, the FDIC has seized 11 banks, the largest being IndyMac, a mortgage lender in Pasadena, California, last month.
  
  

  The peak year during the savings and loan crisis was 1989, with 534 closings.
  
  

  “In the 1980s one-third of the S&Ls were insolvent,” Barr said. “Even if you listen to the extreme reports today, it does not sound as if it will be anything like that.”
  
  

  For Holloway, the return to work was quick. Within six weeks of the agency’s call, Holloway and three other returning retirees were working in Dallas on a strategic plan for the troubled ANB Financial, a bank in Bentonville, Arkansas, with US$2.1 billion in assets that had moved fatefully into construction lending.
  
  

  “I came in about three weeks before the bank was closed,” Holloway said.
  
  

  Though he was briefly in Dallas, his real office “is on the road,” he said.
  
  

  For all the pressure and long hours, Holloway said he was invigorated by his new temp job.
  
  

  He finds bailing out troubled banks more exciting and fulfilling. After all, the agency is assuring people that most accounts are guaranteed up to US$100,000 even in a failure, and in larger amounts in certain circumstances.
  
  

  “I get gratification at a job well done and knowing that people did not lose their money,” he said.
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