For the past three years, Hannah Johnson has worked on the Federal Deposit Insurance Corporation’s team of bank examiners in New York, assessing the health of local banks and looking for potential red flags.
In March, Mr. Johnson left the FDIC for a job at a bank that offered him a 20% raise. Although she appreciated her experience at her agency, she didn’t find it easy to live paycheck to paycheck in New York.
“I wasn’t spending more money than I had, but I definitely wasn’t saving it,” said Johnson, 24. FDIC Junior Analysts and Examiners Less than $100,000 per year.
Johnson’s decision to leave the FDIC for a higher-paying job in the private sector is a common one for banking regulators struggling to contain the most volatile episode of turmoil in the banking sector since the 2008 financial crisis. is a problem. With a tight labor market and rising inflation, regulators are struggling to keep employees from being lured to more lucrative jobs as they face the threat of a banking crisis, and the position is exhausted.
After years of relative calm, FDIC officials are working at a breakneck pace this year. His March failures of FDIC-controlled Signature Bank and Federal Reserve-regulated Silicon Valley Bank threatened to spark a scramble for local banks across the country. The collapse of First Republic Bank late last month and the decline in stock prices of similarly situated financial institutions has rekindled interest in U.S. financial regulators, prompting more aggressive scrutiny and larger backstops on bank deposits. There is a growing demand for Currently, the FDIC only guarantees him up to $250,000 on bank deposits.
Biden administration officials and federal regulators have said recent bank failures were largely the result of management mismanagement. However, the FDIC has acknowledged its own shortcomings. It’s understaffed.
In a report released in late April reviewing the failures of undersigned banks, the FDIC pointed to its own “permanent” staffing shortage as a problem hampering its ability to oversee lenders. Since the coronavirus pandemic, it has struggled to attract examiners and other regulatory staff to New York City, where the cost of living is high and the quality of city life is declining. An average of 40% of positions are filled with vacancies or temporary staff.
Sheila Bair, chairman of the regulator from 2006 to 2011, said, “We are disappointed that staffing and resource shortages are again a problem for the FDIC’s supervisory function.” I remembered facing a similar problem when I was on duty after the . and profitability. “Complacency sets in. It’s always a risk in any regulatory body,” she said.
The FDIC isn’t the only regulator to suffer a shortage of resources over the past few months.
In a separate report in April, the Fed said the number of hours it plans to devote to supervising Silicon Valley banks fell by more than 40% from 2017 to 2020. From 2016 to 2022, the number of supervisory staff in the Fed system fell by 3%, even as banking sector assets increased by nearly 40%. the report said.
The Internal Revenue Service, which recently received $80 billion from last year’s Inflation Reduction Act, has also seen its staff numbers plummet over the past decade, making it difficult to conduct complex audits and enforce tax laws. The IRS is looking to expand hiring, but Biden administration officials admit it can be difficult to attract skilled tax professionals who could earn more by working for accounting firms. .
The FDIC was established in 1933 to stabilize the US financial system after a wave of thousands of bank failures. Its 8,000 employees oversee and inspect his more than 3,000 banks nationwide. Guaranteed about $10 trillion in deposits.
But with salaries topping just over $200,000, there could be high turnover of top talent if an FDIC-supervised bank decides to turn examiners away.
Another problem is the aging of the working population. In February, just weeks before the spring bank ruckus, the FDIC’s inspector general released a report predicting that nearly 40% of the regulator’s workforce would be eligible to retire in the next five years. He warned that the decline could upset the FDIC in the event of a banking crisis.
“Without experienced professionals in key sectors with institutional knowledge of lessons learned from past crises, the FDIC may not be able to fulfill its resolution and fiduciary responsibilities.” the report said.
The inspector general also highlighted the drain of inspectors in training. The attrition rate for new hires known as financial institution specialists has doubled since 2020. More than half of the retirements occur during her first and second years of her four-year program designed to develop future examiners.
In its investigation into the Signature Bank collapse, the FDIC said the high cost of living in New York City was one reason for staffing problems, and higher wages and more flexible work-from-home options could be the solution. suggested something. The FDIC’s pay scale is negotiated between its management and the Treasury Workers Union.
Telework policy decisions have been a struggle at the FDIC, where the National Treasury Employees Union filed a complaint with regulators last year, saying it withdrew an agreement that would allow most staff to work with wide flexibility. Condemned. House.
Vivian Hwa, senior research economist at the FDIC and president of the NTEU chapter representing Washington employees, said: “Long-term, if we want to rebuild our roster and retain talent, we need to continue to have the flexibility to telework.”
Fa added that many banks have adopted flexible work-from-home policies and that the FDIC was able to successfully conduct its investigations during the pandemic.
FDIC spokesman David Barr said the FDIC is taking steps to address the staffing shortage.
“The FDIC has taken a multifaceted approach to increasing its examiner staff,” said Barr. “This approach includes increased entry-level employment, targeted recruitment of experienced professionals, rehiring of retired pensioners, commissioned examiners and experts elsewhere in the FDIC. This includes temporary reassignment and reduction of examiner travel.”
Johnson, who joined the FDIC after college and initially lived with his parents, found the rules about where he worked to be flexible enough, but eventually found wages to be low in expensive cities like New York. He said it wasn’t high enough.
“It really paid off for me,” Ms. Johnson said. “When the opportunity arose to build more and learn the same or more, I jumped at it.”
