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Remarks by FDIC Chairman Sheila C. Bair at the 75th
Anniversary "Face Your Finances" Road Show Event

New York, NY - September 19, 2008

Thank you Jeff.  That was a very kind introduction and it is- it is certainly nice to be back.  I used to be a member of this luncheon club when it was a luncheon club and spent many fond memories of this building and this room.  I also want to thank the New York Stock Exchange for making this wonderful facility available to us and for letting me ring the Opening Bell. 

I've been up on the podium probably hundreds of times with other members of Congress and visiting government dignitaries – but I never got to put my finger on the button myself.  So, it was a nice treat and I'm especially grateful that you arranged for an up market because I think it was up 400 points by the time we left.  That's always a nice thing. 

It's no secret to anyone on Wall Street or Main Street that we're a very critical time in the American economy.  There's a lot of uncertainty out there.  People are worried about their jobs.  They're worried about paying their bills in Main Street. They're worried about their pensions and retirement accounts and many are worried about keeping their homes. 

Bank Failures & Lessons Learned

The latest developments come this week obviously with Merrill Lynch's sale, the Lehman Brothers bankruptcy and the Fed's required assistance to AIG Insurance.  Last month as you know, the government took control of Fannie Mae and Freddie Mac as well. That takeover was unfortunately unavoidable.  I believe those institutions were certainly severely under-capitalized from the standpoint of a depository institution if they'd been regulated as a bank.

The clarity and certainty I think that the government conservatorship has taken, will give the status of these two mortgage finance companies a stabilizing effect on the credit markets, will help home prices in the mortgage industry in particular. 

Mortgage interest rates have come down.  Their debt has stabilized somewhat and I think it will be providing additional funding to all banks large and small to do more mortgage lending at reasonable rates in their communities.  This is significant because a lot of our economic turmoil, most of our economic turmoil really goes back to the housing market.  Notwithstanding some of the problems we have, I'm glad to say that as of the end of the second quarter, the banking system was still doing pretty well.  98 percent of banks remain well-capitalized, representing 99 percent of total bank assets.  

I think that is something that the public generally needs to understand – the difference between federally insured depository institutions and other types of financial institutions such as mortgage bankers, investment banks and insurance companies.  We all have challenges right now.  But, FDIC insured institutions are heavily regulated. They do have fairly stringent capital standards which inhibit leverage and I think that has helped us so far. 

We have our own problems, but so far, the banking system itself has been weathering this pretty well.  And, I think the FDIC has played a very important role in that because we have provided stability in deposit funding, particularly as funding from the securitization markets and secondary markets has seized up and has for quite some now. 

The deposits have been there for banks to continue lending activities.  We encourage the banks that we regulate to keep lending.  We want healthy lending to obviously credit-worthy borrowers, loans that people can repay.  But we want that lending to continue because it's such a vital source of support for economic activity.  And, I think the deposits are a very crucial funding source now for the extension of credit. 

I think the FDIC and our wonderful staff and the wonderful historic role we've played have helped provide stability to that funding base.  That being said, 11 banks have failed this year, and that's actually low by historical standards, but certainly high by recent history.  We went two and a half years without any banking failures, which was unusual.  Had three last year, 11 this year.  And, there's going to be more – no doubt about it.  We are in a challenging environment.  But we stress test periodically and based on the information we have now even in high loss scenarios, we think our industry-funded reserves will be more than adequate to protect insured depositors.

75 Years of Success

It's very important for the public to understand we are backed by the full faith and credit of the United States Government.  Throughout our 75 year history, nobody has ever lost a penny of insured deposits and none will ever- ever will.  It's a sacred trust for us for the Treasury Department, a long-standing promise.  And, so, I think people do need to understand that if- if we do need to borrow from the Treasury – which I don't think we'll have to do but if we do, we have wide latitude to do that to fulfill whatever needs we might have. 

And those loans will be, I might add, repaid.  Only once before in the FDIC's history did we have to go beyond our industry-funded reserves and borrow through our treasury lines – that was in the early 1990s.  I'm happy to say that we repaid those loans in two years with interest at no cost to the taxpayer and we're trying very hard to rely solely on industry-funded resources now and not- we're one of the few that have not had to- to go to the Treasury and ask for help. 

I think there are lessons to be learned from this crisis, obviously.  And, we're certainly constantly trying to improve our process and make it as seamless as possible.  Closing a bank is not an easy task.  It's not a happy task for anyone.  But, I would like to commend all of our staff.  I think the bank closings we've had so far have been smooth and we have insured virtually uninterrupted access to insured deposits.  Even over the weekend – we typically close a bank on a Friday and then reopen Monday – we usually try to transfer the deposits to a healthier institution over the weekend and usually are successful in doing that. 

So, they have been a fairly smooth process.  And, I think it's helped people reacquaint themselves with the FDIC, how it works and the safety of their insured deposits because people need to learn more about their money.  Frankly, you know, we have some financial education weaknesses here in this country.  And, they need to know about FDIC insurance, they need to know lots of things about their money.  They need to know how to spend it, and they need to know how to save it, and they need to know how to invest it.  And, they need to know how to access safe, traditional banking services, which is one of the things that we want to talk with the panel this morning.  Banks are a very nice, safe, stable place to keep money.  But, you can get yourself in trouble with high fees if you don't understand how the account works.  And, so, that's part of this public education campaign not only to educate people banks- about banks and- and deposit insurance, but also make sure that they understand how to- how to use a bank account. 

This year is our 75th anniversary.  We have been protecting people's money since the Great Depression.  We're the oldest and largest deposit insurer.  Our system works so well that there are actually over 100 nations today that have followed our example in setting up some type of deposit insurance system.  So, they say imitation is the greatest form of flattery and we are- we are flattered a lot nationwide.  It's a great opportunity to reacquaint the American people about the virtues of deposit insurance.  Our message has been and always has been confidence and stability.  I think that's a nice thing for people to hear right now in these uncertain times.  One of the ways that we're getting the word out is by holding this series of town hall style meetings.  And, we've had meetings in Chicago, San Francisco, Dallas, and now New York City.  I really appreciate excellent turnout we have and the Exchange's willingness to host us and provide the facilities for this important event. 

It's important to try to figure out ways to get more people under the deposit insurance umbrella and we also want to talk about how banks can better serve consumers in a broader swath of consumers, including doing more to reach out to under-served populations. 

Key Questions

We'll be asking our panelists as well as the audience to consider a couple of key questions.  And, these include what are the obstacles to opening a bank account, what kinds of bank accounts can best- best maximize wealth accumulation, what forms of financial education will help people make good decisions about taking out a mortgage or saving for retirement.  And, what are bankers saying about the biggest roadblocks that consumers face in building assets and tapping mainstream banking. 

We also want you to think about solutions to the problems and to think in terms not only for the New York area, but also for the rest of the country. 

75th Anniversary Campaign

Let me explain a little bit more about how and why we're marking the FDIC's 75th anniversary.  We've set up a series of national news events.  And, we're really aiming at protecting our economic unintelligible for the next 75 years. 

We're very proud of our history and what we've accomplished.  We have built confidence and stability into the American economy and we will continue to do so.  When things get tough, we provide that safety net for the average American.  We protect mainstream and everyone who walks into a bank that displays a member FDIC sign knows that their money is the safest place on the planet.  That includes checking accounts, savings accounts, CDs, or individual retirement accounts

On June 16th, we launched a national campaign to raise public awareness about deposit insurance and how it protects your money.  That was the date that FDR signed the law that created the FDIC.  And, the campaign has included advertisements in major newspapers, magazines, lifestyle publications on the Internet.  The ads explain how basic insurance works and what our limits are and where consumers can get more information. 

New PSAs

This week, we're also announcing a series of short public service announcements for television and radio.  The PSAs feature personal finance expert, Suze Orman.  She's been really great.  She volunteered to do this.  She's given us a lot of free time.  The ads are really wonderful.  You can access them on our Web site, although they'll start airing in a few weeks.  And they tell Americans that FDIC insurance protects their money 100 percent and urges them to use our new Web site, to use EDIE the Estimator to calculate coverage.  If they're over those basic limits of $100,000 per institution, $250,000 for an IRA, we encourage folks to go online to EDIE to make sure their accounts are structured.  You can actually get significantly more than $100,000 per institution depending on different account categories, but there are some rules that apply there.  So, if people are over $100,000 per institution, we're now encouraging them to go to this very consumer-friendly Web site. It's MyFDICInsurance.gov if you'd like to check it out later. 

Our new Web site I understand had 6 million hits yesterday and Suze Orman has been out on the various talk shows getting the word out.  And, again, we thank her for all the free time she is giving to this.  So, I think we're making a lot of progress in terms of educating the public. 

There's an easy-to-understand one-page rundown on how deposit insurance works that we've been working on and a new consumer education awards program for the best new ideas on financial literacy.  We certainly want to recognize new ways to reach consumers, and we're accepting nominations actually to the end of October, so if you know of anyone who's done outstanding work in the area of financial education and banking, please send their names to us.  We've already seen a lot of impact from our public education campaign.  Literally hundreds of news stories and personal finance columns about deposit insurance have been blazing across lots of variety of media including the print media as well as You Tube and blogs and chat rooms. 

So, let's get started with the panel discussion.  We've got a wonderful, talented panel that I'd like to introduce first and then we will go ahead and start the discussion. 

• Richard Neiman is New York's Banking Department's 43rd superintendent.  He has extensive experience in the financial industry, giving him a big-picture view of executive, regulatory, and legal policy.  Before becoming superintendent, Mr. Neiman was president and chief executive officer of TDA Bank USA, a wholly owned subsidiary of the Toronto Dominion Bank. 
• Derrick Cephas is the president and chief executive officer of Amalgamated Bank.  This bank was established in 1923 by the Amalgamated Clothing Workers of American primarily to meet the banking needs of low income working men and women.  And, before joining Amalgamated, Mr. Cephas was a banking and corporate law partner in the New York office of Cadwalater, Wickersham & Taft. 
• Reverend Emma Jordan Simpson.  She is the executive director of the Children's Defense Fund in New York.  She is responsible for leading the Defense Fund's strategic direction and is the lead advocate for children to New York's elected officials, policy makers, and communities. 
• Jonathan Mintz, Commissioner of the New York City Department of Consumer Affairs.  Since he joined the department at the start of Mayor Bloomberg's term, the DCA has tackled any number of large-scale actions to protect consumers.  Among them are financial education such as debt collection and tax preparation, and the nation's most comprehensive campaign to boost awareness of the earned income tax credit for working families and individuals.

 

So, why don't we give a round of applause to our panelists before we get started. 

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