The Federal Deposit Insurance Corp. has “no greater priority” than to demonstrate it has the capacity and willingness to use its new authority to close a failing, systemically significant, financial firm without causing market disruption, FDIC Acting Chairman Martin Gruenberg told Congress July 26, 2011.
Gruenberg, appearing at a confirmation hearing of the Senate Banking Committee, has been nominated to replace Sheila Bair as FDIC chairman. “What we’re going to have to demonstrate with credibility to the financial markets is our capability to implement the authorities that we’ve been given,” Gruenberg said during questioning.
He added that it was not surprising “that markets are in some sense taking a show-me attitude. Simply providing the authority is not a demonstration of a capability and willingness to carry it out.”
Gruenberg, who was a Senate Banking Committee staff member for almost 20 years, joined the FDIC in 2005. In his prepared comments Gruenberg noted that although over 800 insured institutions remain on the FDIC’s problem bank list, “we believe that number may have peaked and may start heading down in the near future.”
While the FDIC closed 157 failed banks last year, he said, the FDIC is projecting a substantially smaller number of failures this year. Gruenberg said 58 banks have failed so far this year, compared with 103 at the same point a year earlier.