Andrew C. Hove, Jr.
Federal Deposit Insurance Corporation
Heartland Community Bankers Association
October 20, 1997
The last several months, I have been thinking a lot about
luck. Growing up, I heard teachers and coaches tell me again and
again, "You make your own luck." I also heard a number of
educators tell fellow students, "If you do nothing else in life,
you can serve others as a bad example."
Certainly, a few counterfeiters I heard about recently have
borne both observations out. One fellow, in Baton Rouge,
Louisiana, was convicted of trying to pass a single bogus $20
bill. He had cut the corners off a $20 bill and pasted them
over the ones on a one-dollar bill. His sentencing judge said
this was, quote, "the most inept counterfeiter I have ever heard
of," and I am inclined to agree with him. A second fellow was
arrested in a printing-supply store in Madison, Wisconsin, after
alert employees notified the police of a suspicious customer. He
had lingered for a long time beside a color chart, holding dollar
bills up to it until he was sure which shade of green ink to
order. After he placed the order and left, store employees
copied down his car's license plate number and notified the
authorities. A third counterfeiter was convicted in 1990 in
Orlando, Florida, as the first U.S. citizen ever convicted of
counterfeiting Polish currency -- the zloty. His work -- done on
a Canon color copier, came to three million zlotys -- which the
court valued at $316. The federal agent who arrested the
counterfeiter said that he could have printed a boxcar full of
them and still he would not have had enough money to have bought
an expensive suit.
Clearly, these guys created their own bad luck -- and serve
as bad examples to all of us.
I think that you would agree, however, that for most of us,
luck is a combination of what we do and the circumstances in
which we find ourselves. As luck would have it, I'm serving my
third round as acting Chairman of the Federal Deposit Insurance
My first time as acting Chairman lasted days. My second
time lasted years. This third time I have already been Chairman
for more than four months -- and I intend to serve in office for
as long as it is necessary.
There are four goals that I want to accomplish as Chairman -- four ways that I am working to leave the Corporation as strong
or stronger than I found it when I became Chairman last June.
The first is to underscore the enduring value of deposit
insurance for the American people. The second is to preserve the
FDIC's independence. The third is to continue to prepare the
agency to meet the challenges of the future. And the fourth is
to make the FDIC the acknowledged leader in assessing risk in the
banking industry. Bankers will benefit from these efforts just
as much as the FDIC will itself.
It is no secret to any of you here in America's heartland
that deposit insurance has anchored public confidence in the
banking system for the past three generations. In one critical
way, it puts the smallest bank in Nebraska on the same
competitive footing as the largest banks in New York, or
California, or North Carolina -- insured depositors never have to
worry about the safety of their funds if their banks fail. The
guarantee that their funds will be returned is an absolute
certainty. There is not much that is certain in life -- and all
of us know how little is certain in the financial world -- but
tens of millions of Americans have been able to sleep peacefully
at night with the knowledge that -- come what may -- their
savings are not in doubt. As important as it is to protect the
saver, however, deposit insurance has a wider benefit -- a
benefit for all the people touched by our economy, and that means
Agriculture, industry and commerce depend on a source of
finance and a reliable system of exchanging payments. The
lawmakers who created deposit insurance more than 60 years ago
had witnessed a meltdown in the financial system that brought the
rest of the economy to the edge of collapse. That meltdown had
been triggered by runs on banks and banking panics. In restoring
confidence in the banking system, federal deposit insurance
assured that the farmers and business people, the local
governments and the manufacturers of America, would never have to
worry that uncertainty about the soundness of banks would again
disrupt their lives.
Deposit insurance is a means to an end: a stable economy.
Banks of all sizes -- community banks, regional banks and money
center banks -- benefit from that stability along with everyone
Recently, a number of people have suggested that deposit
insurance be scaled back dramatically, or eliminated entirely.
If we did so, they argue, the regulatory burden on the industry
will be lessened. Well, the federal government got into bank
regulation in 1864, but did not get around to deposit insurance
There is more to regulation than a desire to protect the
insurance fund from loss -- there is the desire to assure a
source of finance and a payments system, the very same goals that
led to the creation of deposit insurance. Experience underscores
that regulation won't end if deposit insurance is eliminated.
The lawmakers who created Federal deposit insurance for
banks also made clear that they intended the insurer to be
The stability of the financial system was too important to
leave it exposed to partisan struggling. They wanted people who
managed the FDIC to make decisions in the public interest, not in
the interest of political expediency. Sometimes those decisions
involve tens of billions of dollars and affect the fortunes of
economic sectors and regions. They are not the easiest of
decisions to make. At bottom, independence is a matter of
integrity. The integrity of our insurance funds rests on the
integrity of the people who manage them. Independence assures
everyone that our decisions are not the result of some hidden
My third goal -- making sure the FDIC is prepared for the
challenges of the future -- covers a number of initiatives at the
Corporation to improve and enhance our systems, skills, and
sophisticated knowledge base. These three elements work together
-- if we want them to.
Let me give you an example of what I mean.
A few days ago, American Banker reported on our new process
for examining state-chartered banks that allows our examiners to
leverage our computer resources and focus more on risk assessment
than on procedure.
We call it the Examiner Laptop Visual Information System --
or Elvis for short, though I have found that a distressing number
of our younger examiners do not have memories of Mr. Presley to
connect the name to. Our Elvis is software that guides examiners
through a range of examination modules that analyze how -- and
how well -- a bank's management handles risk. Using the
software, an examiner conducts a core analysis, and then decides
whether an area such as loan portfolio management or internal
controls warrants an in-depth look. Elvis helps examiners move
quickly through areas where banks have no problems and to
identify and focus on areas where problems may lurk.
Our commitment to computer technology in the field --
through Elvis and otherwise -- allows our examiners -- always the
heart of our safety and soundness effort -- to do a better,
faster job, bank by bank. Our examiners are trained better than
they have ever been and they benefit enormously from the leverage
that computer technology gives them.
They also benefit from the analytical backup -- the
sophisticated knowledge base -- that our Division of Insurance
and our Division of Research and Statistics provide. Our team
approach to monitoring and assessing risk in the banking system
gives us a view of risk in the institution, in the region and in
the banking system that is at the same time both deep and
comprehensive. With experience, that view will become even
For example, our Division of Insurance recently looked at
the causes of personal bankruptcy around the country. One of its
conclusions was that there is no one cause for the dramatic rise
in bankruptcies in recent years -- the mix of causes changes from
state to state and region to region.
If there is one thing that I have learned from reading about
the mistakes of criminals over the years, it is the importance of
both planning and judgment. Planning without judgment is simply
a drill. A number of years ago, three thieves in Essex in
England thought that they had planned a perfect raid on the local
post office. Among the details that they discussed were the
times when there was probably the most cash and the least number
of security guards on the premises. They invested in high
quality masks and a new getaway car.
At what seemed to them the perfect time, they entered the
building -- and then discovered that the Post Office had been
closed for twelve years.
It had been replaced by a general store.
No one had though to look.
They made away with the six pounds they found in the till.
My plan as Chairman of the FDIC is to preserve the benefits
that our Corporation delivers to the public by changing some of
the ways that we operate. Preservation through change might seem
a contradiction. But I've been able to take a long look at the
Corporation in the seven years that I have been there, and I
don't think that it would be a rush to judgment to conclude that
embracing change is the best way to assure that we endure.