How a bank gets taken over by the government : Planet Money Earlier this month, we saw the largest bank collapse since the 2008 financial crisis. For many of us, seeing Silicon Valley Bank's meltdown brought us right back to that time 15 years ago, at the beginning of what would become the Great Recession.

In early 2009, one or two banks were failing every week. That's when Planet Money reporter Chana Joffe-Walt went inside one of those banks: the Bank of Clark County, in Washington State. Her reporting on the inner workings of a bank collapse and government takeover helps explain exactly what happens when a bank goes under, minute-by-minute.

This story originally aired in March 2009 on This American Life, from WBEZ Chicago. We're airing it for the first time in full on our podcast.

This version of the story was produced by Dylan Sloan and edited by Dave Blanchard. It was fact-checked by Sierra Juarez and engineered by Katherine Silva. Jess Jiang is Planet Money's acting executive producer.

Music: "Butter" "Bassline Motion" and "Fantasmi."

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A Great Recession bank takeover

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As we've been sorting through the collapse of Silicon Valley Bank, Credit Suisse and other financial institutions this month, we keep thinking back to the story that we did in collaboration with "This American Life" back in 2009 - so in the depths of the financial crisis, in a time when one or two banks were failing every week. And during all of that, Chana Joffe-Walt managed to get an inside view of a bank as it was taken over to document exactly what happens as a bank fails.

Now, the specifics of this 2009 bank story have some slight differences from what just happened with Silicon Valley Bank. The main difference is that the Federal Deposit Insurance Corporation, the FDIC, they had almost no time to prepare for the Silicon Valley Bank collapse. And so they swooped in. They essentially set up their own FDIC bank to take over Silicon Valley's assets. On the other hand, in the episode you're about to hear, the FDIC had a lot more time to prepare for the takeover of the bank in the story. And so the FDIC was able to line up an existing bank to buy the failing bank in that case. But otherwise, a lot of the details, especially when it comes to the secrecy and precision of the whole operation, are textbook bank takeover.

Hello and welcome to PLANET MONEY. I'm Kenny Malone. Today on the show, we listen back to that 2009 story, which was on the radio. It was on "This American Life." But as far as we can tell, this is the first time we've ever actually featured the full story on the PLANET MONEY podcast. So today we hear the minute-by-minute account of what happened when the FDIC took over the Bank of Clark County.


CHANA JOFFE-WALT: Long before most of the Bank of Clark County employees knew their bank was dead, the FDIC was planning its demise. They'd been having meetings, contacting other banks in the region, trying to find one that would take over the Bank of Clark County's assets after it failed. All of these negotiations were top secret. And then the time came - Thursday, January 15, 2009, the operation begins. Eighty FDIC agents pull into Vancouver, Wash. Their rental cars are generic. Their arrival times staggered. One by one, the agents check into the hotel, each quietly offering a fake name to the guy at the desk. 9 p.m. - the FDIC calls the CEO of another bank nearby, Umpqua Bank. Your bank, they tell him, has been selected to take over the Bank of Clark County. You can't tell anyone. Come to a meeting tomorrow at noon. The FDIC will tell you everything you need to know.

And so Friday morning, the Bank of Clark County employees get up, go to work, turn on the lights and go about their day. And Ric Carey, a vice president from Umpqua Bank, sits down with the FDIC and begins to plan.

RIC CAREY: We actually met with the FDIC beginning at about 12:30 on Friday. And they were in a hotel under a different name. You know, every - we made sure that there was no one from outside of our two organizations there.

TODD ZALK: 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 (laughter). Often, when I would go to a networking meeting or event, I would introduce myself that way.

JOFFE-WALT: Todd Zalk is what you call a team player - 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, constant eye contact, inserting your name whenever possible. Friday, as Ric Carey snuck into the nondescript FDIC secret location, Todd was playing for the team.

ZALK: Most of the day, I had spent out meeting with businesses. I had a couple of networking events. And then I came back to the bank and...

JOFFE-WALT: So you were still bringing business in that Friday.

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

JOFFE-WALT: Todd and his co-workers had no idea the bank was about to be taken over. He knew they were going through a rough time. Just last week, the CEO had called a staff meeting about it. But the CEO was clear - things were under control.

ZALK: He used this analogy that we were the ship, you know, and we've gone through a storm and that we were, you know, a little bit tattered, but we were still weathering it well and that we maybe were taking on a little bit of water, and we were looking for someone to maybe buy the bank and had a few buyers that were very interested. And within the next 60 days, we should know if - who the new face of the bank would be. So that's what I had thought.

JOFFE-WALT: Many, many Bank of Clark County employees told me about the ship meeting. Mostly, it made sense to them. The CEO said they were doing OK; they were doing okay. But in fact, things had been changing at the bank since 2005. That's when they went big into commercial and real estate loans. They were a young bank. They felt they had to be aggressive. And sometimes that meant making loans other banks wouldn't have made, loans that ended up killing them. Washington state regulators audit every bank several times a year, and they noted the Bank of Clark County's declining health. Its capital reserves were getting low, so low the bank was in danger of not being able to cover its debts and obligations.

And then - you know the story - housing prices dropped, developers couldn't make payments. The story finally ends Friday, January 16, 5:01 p.m. Two FDIC agents and a Washington state regulator enter the Bank of Clark County, casual, head straight for the CEO's office. There, behind closed doors, they deliver the news. They tell him his bank is undercapitalized. It has failed. 5:03 p.m. - 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. 5:05 p.m. - FDIC agents begin closing in on the bank. A few are already inside, quietly and discreetly securing the cash in the vaults. Todd Zalk, oblivious to all this, heads back into the office after a long day of work.

ZALK: I could tell that the mood at the bank seemed odd. And I thought, well, I wonder if they found a buyer and kind of people have heard - 'cause I was gone most of the day. And so I went in and asked, and they said that there was going to be a meeting at 6:00 and that there might be an announcement as to who the buyer might be or what that would look like.

JOFFE-WALT: Todd hung around, said hello to some customers, did some banking.

ZALK: By this time, it was quarter to 6, and I went up to someone that was an executive or 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 looked over at that, and I saw his gaze go over to the wall, and so I looked over at 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.

Well, then we hit - it was probably very close, just a minute or two after 6 o'clock. And Mike Worthy, our CEO, came out, 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 see if they wouldn't take us on and our crew. 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. I would like to introduce the state of Washington regulators. And he sat down, and the state of Washington stood up and said, we are now taking possession of the bank, of all of its assets, and we are turning them over to the receivership of the FDIC.

JOFFE-WALT: 6:03 p.m. - down the street from the bank, where he's been told by the FDIC to wait in his car, Ric Carey with Umpqua Bank hears his phone vibrate.

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

JOFFE-WALT: What kind of a signal?

CAREY: It was an email.

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

CAREY: Oh, just it's time.

JOFFE-WALT: It's time.

CAREY: Yeah, it's time. Come in.

JOFFE-WALT: 6:05 - Ric gets out of the car and starts walking toward the bank. Inside, a woman from the FDIC takes the stage.

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 in - 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, a hundred employees. And at this time, it was dark outside. And a flash flashed out in the parking lot. The flash was The Columbian newspaper taking a picture for Saturday morning's front-page news that the bank had failed.

All of this happened, Chana, in just a matter of minutes. So things are going through my mind, like I just lost almost $25,000 worth of stock I bought four months ago in Bank of Clark County, in my bank. I mean, I'm investing in my bank. And most of the employees were shareholders. And so for me, there was a sense of, gosh, I think I just lost all my stock. And I looked around the bank. I saw some people crying. I saw some people with just a white face, blank stare on their face, just in shock. Some people had their face on - their hand on their face and just were like, I can't believe this, like, oh, my gosh.


MALONE: After the break, how FDIC agents begin the process of turning around a bank in just three days.


JOFFE-WALT: 6:10 p.m. - Ric Carey from Umpqua Bank is introduced to the confused employees of the bank he now owns. They 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, the people who actually deal with customers in the branches. Most of the support staff and administration will be let go. But it's too soon to let each person know whether he or she has a job. Ric is put in charge of supervising a full-on manual hand count of all the bank's cash. A couple of his staff grabbed the cash and begin to count. The Bank of Clark County people watch Umpqua. The FDIC watches them both. This takes three hours.

Meanwhile, Bank of Clark County staff come up to Ric to introduce themselves, tell them how important they are at the bank. They're worried for their jobs. And Ric has other things on his mind. He bought the bank from the FDIC for a pretty good price, and he only has to take the good parts, the insured deposits and the actual branch buildings. The FDIC will keep all the bad stuff, the problem loans. But there's still a lot to think about.

CAREY: You know, I have to be open in three days. What do I want that store to look like? I remember that one of the first things we did that evening was contact their plant provider and make sure that they were arranged to have 25 large plants taken out of the - you know, out of the facility. That's - we have a very clean operating environment at Umpqua, and plants aren't part of our MO, and so those were to be removed immediately. And we were looking at signage. So I basically was making a note of what signs that we needed to change, replace, how quickly we wanted to do that. We wanted to make it look like Umpqua as quickly as possible.

JOFFE-WALT: Meanwhile, FDIC agents have already secured the vaults and the cash. They've grabbed a couple hard drives. Now they need to inventory the entire bank. Every account needs to be transferred to Umpqua. The bank has to open its doors Tuesday morning. Monday was Martin Luther King Day, a bank holiday. To get all this done, the FDIC needs the Bank of Clark County staff to help them - to show them where the files are, who the customers are, how to get to the bathroom. And so at 6:15 p.m., the FDIC makes an announcement. We need you all to sign in on this sheet of paper, everyone. As of right now, for the weekend, you're all temporary employees of the FDIC. We're going to need you to stay late tonight, work through the weekend. You will be paid for your time. We'll feed you. We need your help.

Ken Moody was vice president of information systems at the Bank of Clark County.

KEN MOODY: You know, again, most of us were planning on leaving at the end of the day. And so, you know, after that announcement was made, we had phone calls to make, you know, call our families. My daughter had a 7th birthday that we were going to go...

JOFFE-WALT: Take your time.

MOODY: Sorry. I didn't anticipate being this emotional about it (laughter). Kind of silly.

JOFFE-WALT: 6:20 p.m. - agents take over offices, storage rooms, hallways, any space available. They tape handmade signs to the doors, written on 8-1/2-by-11 sheets of printer paper, saying things like audit, security, investigations. It's a little chaotic. The FDIC moves room to room. They go through files, transfer accounts. They change the website. They check the safe deposit boxes, make sure everything that's supposed to be in there is in there. They go through desk drawers. They toss out bank letterhead.

Once agents have scanned a room for all critical information, they place a green dot on its door frame. Then 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. Any account with a balance up to $250,000 is fully insured by the FDIC. If the bank doesn't have the money to cover the balance, the government will pay it out. But some 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.

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

JOFFE-WALT: 6:25 p.m. - in the IT department, three agents approach Ken Moody, the IT guy. They hand him a thumb drive. Please plug this in, they say. It has all the software to change your computer systems over to Umpqua Bank.

MOODY: That was, you know, kind of a fascinating part about it. So it was almost like, you know, on one hand, it's very sad. You have the death of a loved one. But at the same time, 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.

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

JOFFE-WALT: At the Bank of Clark County, everyone I talked to said this one thing about the FDIC that's 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. In fact, everything is ordered, structured, everything, even how and when to grieve. Here's Lisa Stapleton. She was an assistant loan officer with the bank.

LISA STAPLETON: 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.

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 really small bank. But it took 80 FDIC agents, about 50 Bank of Clark County employees and a hundred Umpqua employees working around the clock for three days to take it over and have it reopened for business.

MALONE: That was Chana Joffe-Walt of "This American Life" and "Serial" and formerly PLANET MONEY. This episode originally aired in March 2009 on "This American Life" from WBEZ Chicago.

Now, this is obviously a very strange time for our financial system, and you probably have a lot of questions, whether it's about Silicon Valley Bank, Credit Suisse - any of this stuff. We want to help you get answers. You can email us those questions, preferably as a voice memo so we could possibly use it on air - email those to You can also find us on social media. We are just generally at @planetmoney. The updated version of the episode you just heard was produced by Dylan Sloan and edited by Dave Blanchard. It was fact-checked by Sierra Juarez and engineered by Katherine Silva. Jess Jiang is PLANET MONEY's acting executive producer. I'm Kenny Malone. This is NPR. Thanks for listening.

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