Remarks by
Martin J. Gruenberg
Chairman
Federal Deposit Insurance Corporation
Financial Regulation:
A Post-Crisis Perspective
Brookings Institution
Washington, D.C.
November 14, 2017
Martin J. Gruenberg
Chairman
Federal Deposit Insurance Corporation
Financial Regulation:
A Post-Crisis Perspective
Brookings Institution
Washington, D.C.
November 14, 2017
1
Introduction
I’d like to begin by thanking the Brookings Center on Regulation and Markets, and Aaron Klein,
for the invitation to speak here today.
I joined the FDIC Board as Vice Chairman in August 2005, and was confirmed as Chairman in
November 2012. As a result, I’ve had the opportunity to serve at the FDIC prior to the recent
financial crisis, during the crisis, and during this post-crisis period. I thus have some perspective
to offer on this extraordinary period of U.S. financial history and that is my purpose here today.
Much has changed in banking and bank regulation since I started at the FDIC. Yet, I confess to
having a certain sense of déjà vu. Banking conditions today are strong and the possibility of a
serious downturn anytime soon is generally viewed as remote. That was certainly true during the
pre-crisis years as well. If I have one key point to make today, it is that we should guard against
the temptation to become complacent about the risks facing the financial system. That, to me, is
the key lesson we should learn from the crisis. In my remarks I will outline the experience of the
crisis and the post-crisis reforms, and draw on that experience in regard to the situation today and
going forward.
Costs of the Crisis
When I joined the FDIC Board in 2005, banks were benefitting from a decade of benign
economic conditions, interrupted only by a relatively mild recession in the early 2000s. The
FDIC was in the midst of a 2 ½ year period without a bank failure, the longest such period in its
history. The number of problem banks was approaching historic lows. Strong loan growth
helped insured banks set six consecutive annual earnings records from 2001 through 2006.
Banking conditions seemed so favorable that friends asked me at the time if I really wanted to
become a member of the FDIC Board—after all, nothing was happening in the banking industry
and I might be bored.
In retrospect, it is now clear that we—both the public and private sectors—greatly
underestimated the risks we were facing. The economic boom that occurred during the first half
of the decade of the 2000s masked a significant buildup of risk in the banking industry. The
banking agencies did not appreciate the full extent of these risks, and the bank regulatory
Introduction
I’d like to begin by thanking the Brookings Center on Regulation and Markets, and Aaron Klein,
for the invitation to speak here today.
I joined the FDIC Board as Vice Chairman in August 2005, and was confirmed as Chairman in
November 2012. As a result, I’ve had the opportunity to serve at the FDIC prior to the recent
financial crisis, during the crisis, and during this post-crisis period. I thus have some perspective
to offer on this extraordinary period of U.S. financial history and that is my purpose here today.
Much has changed in banking and bank regulation since I started at the FDIC. Yet, I confess to
having a certain sense of déjà vu. Banking conditions today are strong and the possibility of a
serious downturn anytime soon is generally viewed as remote. That was certainly true during the
pre-crisis years as well. If I have one key point to make today, it is that we should guard against
the temptation to become complacent about the risks facing the financial system. That, to me, is
the key lesson we should learn from the crisis. In my remarks I will outline the experience of the
crisis and the post-crisis reforms, and draw on that experience in regard to the situation today and
going forward.
Costs of the Crisis
When I joined the FDIC Board in 2005, banks were benefitting from a decade of benign
economic conditions, interrupted only by a relatively mild recession in the early 2000s. The
FDIC was in the midst of a 2 ½ year period without a bank failure, the longest such period in its
history. The number of problem banks was approaching historic lows. Strong loan growth
helped insured banks set six consecutive annual earnings records from 2001 through 2006.
Banking conditions seemed so favorable that friends asked me at the time if I really wanted to
become a member of the FDIC Board—after all, nothing was happening in the banking industry
and I might be bored.
In retrospect, it is now clear that we—both the public and private sectors—greatly
underestimated the risks we were facing. The economic boom that occurred during the first half
of the decade of the 2000s masked a significant buildup of risk in the banking industry. The
banking agencies did not appreciate the full extent of these risks, and the bank regulatory