BankNotes ...

Recently Ms. Sheila Blair presented the FDIC's 2008 Annual Performance Plan. Ms. Blair's published introduction to the Plan discusses the historical mission of the FDIC as well as the current economic environment. This year, the FDIC will celebrate its 75th year of insuring the nation's bank deposits. And the organization is perhaps finding itself in one of the most demanding years since its founding. Indeed, the FDIC plays a critical role in "maintaining public confidence in the nation's financial system." The challenges associated with this role, given the current financial difficulties, are broad and deep.

The maintenance of public confidence requires the FDIC to manage many different aspects of our nation's financial system. The organization currently administers approximately 250 programs to help keep the banks operating in a safe and sound manner; the FDIC is tasked with insuring deposits, keeping the public informed, helping the banks manage risks, as well as many other action items associated with our banking and financial system.

When problems arise, the goal is to address them promptly, solving them before they become issues that can cause serious financial problems. This requires the FDIC to be prepared to handle failures of insured institutions, "regardless of their number and size." Yes, this means that the FDIC is expecting some bank failures this year and perhaps even some large banks. There have already been two to date; see BankNotes for the press releases on these events. Both failed entities were small banks in Missouri, not much in the overall financial market, but still important nonetheless. In preparation for more extreme events, the FDIC is finalizing a "claims process to manage large/complex bank failures, including a new automated system to support this process."

The FDIC is also working closely with consumer protection groups to help with the current foreclosure issues facing many Americans. While we as Americans pride ourselves in our education system (for all its faults, it is still very good), our financial literacy is quite low-a statement that can be supported by our low savings rate. The FDIC is working to improve that by finalizing plans to distribute 10,000 booklets addressing financial literacy.

An additional challenge the FDIC is facing is the attrition of its workforce. Nearly 40 percent of the FDIC workforce will be retiring within the next ten years. This will create a large demand for new employees to be trained to take over and manage this critical institution. The FDIC expects to be regarded as an "outstanding employer." It will be looking to secure well-educated people with advanced technical and analytical skills, who can effectively support and carry out the FDIC mission. The plan has many more discussion points, which will be addressed in future articles.