FDIC Cuts Budget
Philip van Doorn
12.15.10TheStreet) -- The Federal Deposit Insurance Corp. on Wednesday announced that it board of directors had approved a $4 billion operating budget for 2011, which was down slightly from the 2010 budget.
FDIC Chairman Sheila Bair said in a statement that the agency's staff had "met the challenge to find savings to offset a portion of the additional resources needed to carry out our new responsibilities under the Dodd-Frank Act," adding that "the FDIC's operating budget does not in any way involve the use of taxpayer funds," since the budget is fully funded by deposit insurance premiums paid by banks and thrifts.
The agency's board authorized a staffing level of 9,252 employees for 2011, increasing about 2.5% from 2010.
The decrease in the FDIC's budget comes at a very busy time for the agency, as it develops new regulations to implement the Dodd-Frank Act, and also faces continued findings by its Inspector General's Office that the agency could have taken earlier and stronger actions over the years leading up to some bank failures.
For example, in the Material Loss Review for Westernbank Puerto Rico, which failed on April 30, with most of its assets purchased from the FDIC by Banco Popular de Puerto Rico, which is the main subsidiary of Popular (BPOP).
The Inspector General said that "In hindsight, initiating an informal supervisory action in response to the 2006 examination and imposing a stronger supervisory action in response o the 2007 examination findings may have been prudent."
While hindsight is always 20-20, Westernbank's failure cost the deposit insurance fund an estimated $3.31 billion.