Anatomy Of A Bank Takeover When a bank fails, agents from the Federal Deposit Insurance Corp. slip into town and quietly assume control. Staffers at Washington's Bank of Clark County describe the top-secret mission as amazingly swift and precise.
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Anatomy Of A Bank Takeover

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Anatomy Of A Bank Takeover

Anatomy Of A Bank Takeover

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This is ALL THINGS CONSIDERED from NPR News. I'm Robert Siegel.

A few weeks ago we told you about the hiring boom at the Federal Deposit Insurance Corporation, that's the agency that insures deposits and takes over banks that fail. These days, a bank fails almost every weekend, so the FDIC is hiring about 30 people a week and giving them blitz training on how to take over a bank.

Unidentified Man: Some of you may go to a bank closing this weekend. Don't tell your significant other where you're going or what you're doing because everyone knows someone who knows someone. Just, you know, you are on a secret mission.

SIEGEL: It's secret because the FDIC wants to avoid bank runs and panic. When they take over an undercapitalized bank, FDIC agents carefully time and coordinate all their moves, almost like soldiers on a covert mission. As part of a co-production between NPR and Chicago Public Radio's This American Life, Chana Joffe-Walt spent time with all sorts of people involved in one failure at the Bank of Clark County in southwest Washington state.

CHANA JOFFE-WALT: Thursday night, January 15th, 2009, the operation begins. Around 80 FDIC agents pull into Vancouver, Washington. Their rental cars are generic, their arrival times staggered. One by one, the agents check into the hotel, each quietly offering a pseudonym to the guy at the desk.

9 PM, the FDIC calls the CEO of another bank nearby, Umpqua Bank. They tell him, your bank has been selected to take over at the Bank of Clark County. Do not tell anyone. Come to a meeting tomorrow at noon, we'll tell you everything you need to know. Friday, January 16th, Ric Carey, a vice president with Umpqua Bank, heads into that meeting.

Mr. RIC CAREY (Vice President, Umpqua Bank): The FDIC had taken a location approximately two miles from the main office of the bank in a hotel under a different name. And they've been through quite a few of these. I think one of the gentlemen that was leading the discussion said, you know, I've done 200 of these over my 25 years, and let me tell you how it's going to work.

JOFFE-WALT: Does it feel like a spy movie?

Mr. CAREY: It's almost as - they've done this before - quite a production.

Mr. TODD ZALK (Bank of Clark County): My name is Todd Zalk, Bank of Clark County, the best community business bank because we've changed the game in business banking, and we were winning.

(Soundbite of laughter)

JOFFE-WALT: Todd Zalk is what you call a team player, a total bank loyalist to the end - beyond the end. Four weeks after the failure, Todd's still wearing his Bank of Clark County nametag, still passing out his bank business cards, always with a warm handshake, inserting your name whenever possible. Todd had no idea the FDIC was in town and his bank was about to fail. Friday afternoon, failure day, he was bringing in new business.

Mr. ZALK: I actually was. I had people that wanted to open accounts. In fact, Chana, in the fourth quarter, I opened over 55 accounts.

JOFFE-WALT: Todd knew they were going through a rough time, everyone knew that. The CEO had been using this analogy that the bank was like a ship. They'd taken on some water in a recent storm and they might need a bigger ship, a larger bank to take them on. But basically, things were under control.

Friday, 5:01 PM, a small team enters the Bank of Clark County. Casual, they head straight for the CEO's office. And this is when it happens. They deliver the news. They tell him his bank is undercapitalized. It has failed. 5:03 PM, an agent positioned by the CEO's office door types this news into a BlackBerry. It's received by everyone on the FDIC takeover team, including manager Ron Hodges.

Mr. RON HODGES (FDIC Manager on Location): At 5:04, we receive the notification to - that the bank had been declared failed.

JOFFE-WALT: So you get a message on your BlackBerry or something?

Mr. HODGES: Exactly. Yeah.

JOFFE-WALT: And what will it say?

Mr. HODGES: The bank has been declared failed. It's that simple.

JOFFE-WALT: 5:05 PM, FDIC agents begin closing in on the bank. A few are already inside, quietly and discreetly securing the cash and the vaults. Ric Carey with Umpqua Bank, he's assumed position down the street, sitting in his car. Todd Zalk, oblivious to all this, after a long day of work, heads back into the office. And it's weird, he says, everyone seems a little tense. The teller mentions there's a staff meeting at 6.

Mr. ZALK: By this time, it was quarter to 6, and I went up to someone that was senior vice president of the bank and I said, how are you doing? And they said, oh, I'm doing all right. And I could tell something was going on and they didn't want to say. And we looked across to the other side of the bank and there was two employees adjusting pictures on the wall. And he kind of laughed and he said, wow, he says, that reminds me of adjusting the chairs on the Titanic before it sank. And that really told me something was going down.

JOFFE-WALT: 6 PM, main lobby of the Bank of Clark County, the staff gathers. There are a couple people standing around in suits. Nobody knows who they are.

Mr. ZALK: And Mike Worthy, our CEO, came out. And it was very short. And he stood up and said, well, I've used the analogy that we were a ship that was taking on some water and we needed to pull up next to a bigger ship, and we thought we had a few buyers for that. But now the biggest ship that sails the seas has come alongside us, and they are going to be taking us over. And that is essentially the federal government.

JOFFE-WALT: 6:03 PM, down the street in his car, Ric Carey with Umpqua Bank sees his phone vibrate.

Mr. CAREY: At that point in time, a signal was given to myself and…

JOFFE-WALT: What kind of a signal?

Mr. CAREY: It was an email.

JOFFE-WALT: What did the message say when you got it on your BlackBerry?

Mr. CAREY: Oh, just, it's time.

JOFFE-WALT: It's time.

Mr. CAREY: Yeah. It's time. Come in.

JOFFE-WALT: 6:05, Ric gets out of the car and starts walking toward the bank. Inside, Todd Zalk says a woman from the FDIC stands up.

Mr. ZALK: She said, within the next 10 minutes there will be 80 FDIC employees coming into the bank. And I looked out there and it was dark so I couldn't really see. And then all these people, and mostly in suits and professional clothing with attorney-type briefcases, started entering the bank, just flooding into the bank.

And I was so awestruck at them coming in, and so many of them coming into the bank, that I turned around and looked over there and just kept watching them, and they just continued to come. I mean, 80? I mean, our bank had, like, 100 employees. And at this time it was dark outside and a flash flashed out in the parking lot. The flash was the Columbia newspaper taking a picture for Saturday morning's front page news that the bank had failed.

JOFFE-WALT: 6:08 PM, Ric Carey enters the bank he will own in just a few days. And there are the staff, standing in their closed bank headquarters trying to digest this news.

Mr. CAREY: Oh, there were tears. There were gasps. There was disbelief. I remember one of them said to me, my goodness, I just told one of our biggest customers yesterday that, don't worry, everything's fine. And it's almost like they had personal embarrassment that they now had to face those customers.

JOFFE-WALT: It's now around 6:10. The Clark County people have a whole bunch of questions running through their heads. First among them, do we get to keep our jobs? Ric can't answer that. Umpqua will only need about a third of the Clark County staff. But it's too soon to let each person know whether or not he or she just lost their job.

The Bank of Clark County no longer exists. It's not quite Umpqua Bank yet. The FDIC is in charge. The bank has to open its doors Tuesday morning. Monday was MLK Day. To make that happen, the FDIC needs the Bank of Clark County staff to help them. And so they make an announcement: as of right now, for tonight and this weekend, you are all temporary employees of the FDIC. We need your help. Ken Moody was the vice president of information systems at the Bank of Clark County.

Mr. KEN MOODY (Vice President of Information Systems, Bank of Clark County): You know, again, most of us were planning on leaving at the end of the day, and so we had phone calls to make, you know, call our families.

(Soundbite of laughter)

Mr. MOODY: My daughter had a seventh birthday that we were going to go to. Sorry. I didn't anticipate being this emotional about it, kind of silly. Anyway, my daughter had a birthday that night that we had to cancel. So, I mean, all of us had a lot of phone calls to make.

JOFFE-WALT: 6:20 PM, the FDIC spreads out into offices, storage rooms, hallways, any space available. They tape handmade signs to the doors saying things like, audit, security, investigations. And they begin going through files. They changed the Web site. They count the cash, all the cash, by hand. Just that takes three hours. They check the safe deposit boxes. They go through desk drawers. They toss out bank letterhead. They take all that paperwork, all the hard drives, all the files and the FDIC has to reconstruct the bank's entire balance sheet.

It has to know what it's selling to Umpqua, what's actually there. And that includes checking every single account. The ones with a balance under $250,000, they're fully insured by the FDIC. But people have more than 250, and there are business accounts and loans and it gets complicated. Some is covered, some is not. The FDIC now sorts all that out. And while they're doing all this, they can't have customers going online and moving money around, so they need to shut down the bank's computers for a short period of time, maybe a couple hours.

Mr. MOODY: Things started happening very quickly and with what seemed to be a lot of precision.

JOFFE-WALT: 6:25 PM, Ken Moody, the IT guys, sees three agents approaching. They hand him a thumb drive. Please plug this in, they say. It has all the instructions about the computer systems. We're here to help.

Mr. MOODY: It was like watching an autopsy being performed by a really skillful surgeon. They just came in and just sliced and diced and, you know, broke the bank up into different pieces and threw them into different buckets and did it with great efficiency.

JOFFE-WALT: An autopsy of the work that you'd been doing.

Mr. MOODY: Yeah, an autopsy of everything that we'd been creating over the last 10 years.

JOFFE-WALT: Everyone I talked to at the Bank of Clark County said this one thing about the FDIC that stuck with me, something you don't often hear about a government agency: that it did a really good job, that the agents were kind, courteous and efficient. Everything is ordered, structured, everything, even how and when to grieve.

Here's Lisa Stapleton. She was an assistant loan officer with the bank.

Ms. LISA STAPLETON (Former Assistant Loan Officer, Bank of Clark County): So many of the people who came in from the FDIC got to where they were because they were part of a bank that failed, and they were all like, you know what? We've been where you are and we understand, and it's going to be fine, you know? So they were really nice. Having that empathy helped it, kind of make it a little more pleasant, you know?

(Soundbite of laughter)

JOFFE-WALT: The Bank of Clark County had 100 employees and assets of $446 million, which if you're not used to bank numbers is a pretty small bank. But it took 80 FDIC agents, about 50 Bank of Clark County staff and 100 Umpqua employees working round the clock for three days to take it over and have it reopen for business.

Most of the largest banks in trouble right now - Citibank, Bank of America -they're about 6,000 times the size of Bank of Clark County, not to mention much, much more complicated.

JOFFE-WALT: So the secretary of Treasury's latest plan to save the banks does everything it can to avoid using this process on those big banks. When you do this to a little bank, it's called receivership. When you do it to a big bank, people throw around the word nationalization.

But at the same time, check these FDIC guys out. They know what they're doing. Every week, they get more experience. In the 10 weeks since the FDIC took over the Bank of Clark County, 18 more banks have failed, bringing us to a grand total of 20 failures since the start of this year. And more than likely, another few will be added to that list tomorrow.

Chana Joffe-Walt, NPR News.

(Soundbite of music)

SIEGEL: Chana Joffe-Walt's story is part of a coproduction between NPR's Planet Money team and Chicago Public Radio's This American Life.

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