ABSTRACT
The chapter examines the material loss reviews conducted by the inspectors general of the four federal banking agencies to find the causes of the 111 banks and thrifts that failed in the United States with material losses to the Federal Deposit Insurance corporation (FDIC)’s Deposit Insurance Fund during the period 2007–9. The analysis concludes that these institutions failed for reasons long recognized to be causes of bank failure: weak management, fast growth, reliance on volatile sources of funding, inaccurate accounting that exaggerated earnings and capital, concentrated assets, particularly assets involving commercial real estate and construction, acquisition, and development loans. The chapter also examines deficiencies in the supervisors’ implementation of the prompt corrective action provisions of the FDIC Improvement Act. It concludes by asking why prompt corrective action (PCA) failed to achieve its goals and suggesting changes, including macro-prudential oversight, that might improve supervisory achievements in the future.
