Remarks by Donald Powell, Chairman, Federal Deposit Insurance Corporation,
Before the
Exchequer Club,
Washington, D.C. May 19, 2004
FOR IMMEDIATE RELEASE Media Contact:
PR-54-2004 (5-19-2004) David Barr (202) 898-6992
I could talk about a lot of things this afternoon – developing a two-tiered bank
supervisory system, the ten percent deposit cap, the Basel capital accord, deposit
insurance reform, or corporate governance issues. I could talk about preemption, too
big to fail, regulatory restructuring, taxing the credit unions, the relevance of the FDIC,
the mixing of banking and commerce, the treatment of trust preferred securities for
capital purposes, or regulatory relief. These are all hot topics, worthy of discussion. It is
my hope that I can add value to the discussion on each of these and on many other
issues. In many ways that would make me proud of my time at the FDIC.
Yet I would like to talk about something else. I am sure that each person who has the
privilege of serving as Chairman of the FDIC wonders – fundamentally – did I add value
to the organization? Is the organization better equipped to handle not just the issues of
the day, but all of the issues that are surely to come? Is the organization better suited to
serve the public and the industry by being able to manage itself effectively and
efficiently?
As a newcomer to the federal government, I knew there would be some noticeable
differences from my experiences in the private sector. For example, I knew that the
motivation of public service would be substituted for a profit motive. I knew that there
would be well-established programs and practices used by the Corporation over many
years. At the same time, there were things I didn’t expect, some positive and some
negative. On the positive side I was pleased to find such a high level of competence,
dedication, and a wealth of experience on the part of most of the employees of the
FDIC. On the negative side, I didn’t expect that implementing necessary changes in
how we manage the workforce would be so difficult.
Change affects government just as it does the private sector. To use the FDIC as an
example, we insure deposits, supervise banks and handle bank failures. Each of these
business lines is affected by our rapidly changing financial industry. Globalization,
evolving technology, growing complexity, consolidation and the increased use of non-
traditional banking business lines are just some examples of the outside forces that
dramatically impact how we should do our business. The FDIC needs to be able to
move quickly and responsibly in order to do its job effectively. In this respect, we are no
different than the private sector.
Before the
Exchequer Club,
Washington, D.C. May 19, 2004
FOR IMMEDIATE RELEASE Media Contact:
PR-54-2004 (5-19-2004) David Barr (202) 898-6992
I could talk about a lot of things this afternoon – developing a two-tiered bank
supervisory system, the ten percent deposit cap, the Basel capital accord, deposit
insurance reform, or corporate governance issues. I could talk about preemption, too
big to fail, regulatory restructuring, taxing the credit unions, the relevance of the FDIC,
the mixing of banking and commerce, the treatment of trust preferred securities for
capital purposes, or regulatory relief. These are all hot topics, worthy of discussion. It is
my hope that I can add value to the discussion on each of these and on many other
issues. In many ways that would make me proud of my time at the FDIC.
Yet I would like to talk about something else. I am sure that each person who has the
privilege of serving as Chairman of the FDIC wonders – fundamentally – did I add value
to the organization? Is the organization better equipped to handle not just the issues of
the day, but all of the issues that are surely to come? Is the organization better suited to
serve the public and the industry by being able to manage itself effectively and
efficiently?
As a newcomer to the federal government, I knew there would be some noticeable
differences from my experiences in the private sector. For example, I knew that the
motivation of public service would be substituted for a profit motive. I knew that there
would be well-established programs and practices used by the Corporation over many
years. At the same time, there were things I didn’t expect, some positive and some
negative. On the positive side I was pleased to find such a high level of competence,
dedication, and a wealth of experience on the part of most of the employees of the
FDIC. On the negative side, I didn’t expect that implementing necessary changes in
how we manage the workforce would be so difficult.
Change affects government just as it does the private sector. To use the FDIC as an
example, we insure deposits, supervise banks and handle bank failures. Each of these
business lines is affected by our rapidly changing financial industry. Globalization,
evolving technology, growing complexity, consolidation and the increased use of non-
traditional banking business lines are just some examples of the outside forces that
dramatically impact how we should do our business. The FDIC needs to be able to
move quickly and responsibly in order to do its job effectively. In this respect, we are no
different than the private sector.
Our needs are not completely unique. Studies of the federal government at large all
point to the need for personnel reform. In testimony before Chairman Paul Volcker and
Members of the National Commission on the Public Service, David M. Walker,
Comptroller General of the United States, acknowledged that we are in a period of
profound transition for our world, our country and the government. He cited key trends
that are shaping the changing nature of our economy and “the long range challenges
that have no boundaries.” He argued for a comprehensive review and reassessment of
how the government operates. He said, and I quote, “The status quo is simply
unacceptable.” (July 2002)
Yet, after years of study and a general acknowledgment that our nation’s business
environment has changed, that the workforce itself is changing dramatically, that
technological advances impact every aspect of our life – the way that the government
manages its workforce has not really changed since the days of the Great Depression.
Unlike the private sector, there is little flexibility in the government’s personnel rules.
Longevity is paramount – merit must wait its turn.
These rules were crafted to protect federal workers from political influence, and unfair
and arbitrary treatment – all necessary principles. However, a change in the rules does
not necessarily mean an end to such protections or that these goals should be
compromised. For example: a streamlined hiring process does not compromise these
protections; the ability to hire experts, consultants and federal retirees does not
compromise these protections; changes to the rules governing how you reduce your
workforce to give greater weight to job performance than to seniority does not
compromise these protections; and the ability to promote employees purely on merit
and not on an archaic formula of years in service does not compromise these
protections.
In some ways, the FDIC has been an innovator in its human resources policies. We
have implemented programs that take our existing authorities nearly to their limit. Last
year we began a program where we recognize only the top third of our employees by
giving them an additional salary increase. This is in contrast to prior programs where no
meaningful distinctions in pay were made and all employees received the same reward
irrespective of their performance. We overhauled the executive and manager pay
programs to align pay with achievement of established corporate goals. Although we
have gained some flexibility through these programs, it is not enough.
Most people in the private sector would be surprised to learn that although the Board of
Directors of the FDIC has a statutory responsibility to manage the deposit insurance
funds effectively, it cannot control its hiring process or employee compensation – some
two-thirds of its annual budget. That is because the FDIC must follow general
government hiring procedures and must negotiate pay and benefits for the
overwhelming majority of its employees. If agreement is not reached on pay and
benefits the final decision is made by a third party with no statutory responsibility to the
insurance funds.
point to the need for personnel reform. In testimony before Chairman Paul Volcker and
Members of the National Commission on the Public Service, David M. Walker,
Comptroller General of the United States, acknowledged that we are in a period of
profound transition for our world, our country and the government. He cited key trends
that are shaping the changing nature of our economy and “the long range challenges
that have no boundaries.” He argued for a comprehensive review and reassessment of
how the government operates. He said, and I quote, “The status quo is simply
unacceptable.” (July 2002)
Yet, after years of study and a general acknowledgment that our nation’s business
environment has changed, that the workforce itself is changing dramatically, that
technological advances impact every aspect of our life – the way that the government
manages its workforce has not really changed since the days of the Great Depression.
Unlike the private sector, there is little flexibility in the government’s personnel rules.
Longevity is paramount – merit must wait its turn.
These rules were crafted to protect federal workers from political influence, and unfair
and arbitrary treatment – all necessary principles. However, a change in the rules does
not necessarily mean an end to such protections or that these goals should be
compromised. For example: a streamlined hiring process does not compromise these
protections; the ability to hire experts, consultants and federal retirees does not
compromise these protections; changes to the rules governing how you reduce your
workforce to give greater weight to job performance than to seniority does not
compromise these protections; and the ability to promote employees purely on merit
and not on an archaic formula of years in service does not compromise these
protections.
In some ways, the FDIC has been an innovator in its human resources policies. We
have implemented programs that take our existing authorities nearly to their limit. Last
year we began a program where we recognize only the top third of our employees by
giving them an additional salary increase. This is in contrast to prior programs where no
meaningful distinctions in pay were made and all employees received the same reward
irrespective of their performance. We overhauled the executive and manager pay
programs to align pay with achievement of established corporate goals. Although we
have gained some flexibility through these programs, it is not enough.
Most people in the private sector would be surprised to learn that although the Board of
Directors of the FDIC has a statutory responsibility to manage the deposit insurance
funds effectively, it cannot control its hiring process or employee compensation – some
two-thirds of its annual budget. That is because the FDIC must follow general
government hiring procedures and must negotiate pay and benefits for the
overwhelming majority of its employees. If agreement is not reached on pay and
benefits the final decision is made by a third party with no statutory responsibility to the
insurance funds.