WASHINGTON - Donald E. Powell is a frustrated general.
Having served as the Federal Deposit Insurance Corp. chairman since Aug. 29, 2001, the former community banker from Texas has realized it is tough to make an impact in government without a pressing problem.
"I've discovered in my short time in Washington that most things happen because of a crisis, and there's no crisis in the banking business," Mr. Powell said in an interview. "Some of the things that we'd hoped would happen have not happened."
Topping that list is his desire to elevate the FDIC's stature.
After he had been on the job about six months, Mr. Powell unveiled a bold, three-pronged strategy to restore the FDIC to its former glory of the late 1980s and early 1990s, when it was managing the resolution of hundreds of failed banks and thrifts.
Mr. Powell has delivered on the first stage: turning the FDIC into the undisputed leader in industry research and analysis. But he has been unable to accomplish the second and third steps: establishing it as the leader in supervision and emerging risks and the principal authority on banking policy.
Ricki Helfer, the FDIC's chairman from 1994 to 1997, complimented Mr. Powell's performance but said his goal is not practical.
"It was never realistic to assume the FDIC would stand out ahead of all the agencies," said Ms. Helfer, who now runs her own consulting firm in New York, Financial Regulation and Reform International.
The FDIC does not set monetary policy, as the Federal Reserve Board does, nor does it supervise huge national banks, like those under the Office of the Comptroller of the Currency's purview.
Ms. Helfer agreed that the strength in research and analysis - a move she said started during her chairmanship - allows the FDIC to "proudly consider itself an equal with the others."
With two years left in his term, Mr. Powell has time to accomplish his goals, but even fans say the agency's 18th chairman appears to have lost the will to fight.
"I think he's probably ready to move on, to be Secretary of the Treasury or something like that," said L. William Seidman, who led the FDIC from 1985 to 1991, during the bank and thrift failures. "I think Powell would be much happier if he had something like that to deal with."
Mr. Seidman's immediate predecessor, William Isaac, agrees.
"I think he would have relished being FDIC chairman in the 1980s. He loves challenge. He loves action," said Mr. Isaac, who now heads the Secura Group consulting firm in Washington. "I think there are times when he feels he is the Maytag Repairman."
Both Mr. Isaac and Mr. Seidman consider Mr. Powell an outstanding FDIC chairman, but each echoed his point about how trouble is a necessary impetus for change. (Just 18 banks and thrifts, with combined assets of $4.2 billion, have failed on Mr. Powell's watch.)
"Don's doing all the things that you do to run an agency right," Mr. Isaac said.
Mr. Seidman, now a commentator on CNBC, said, "I really think that he has done an excellent job. He's cut down the size of the place, gotten expenses under control, and provided good leadership.
"But the FDIC is a crisis organization - it's a fire department," he said. "The fire department folks are not heroes until there's a fire. Most of the time they sit around looking bored."
In fact, several sources, none of whom would let their names be used, described Mr. Powell as bored with the job.
When he sold his Washington house last summer the rumor mill had him returning to Texas to raise money for President Bush's reelection campaign. But he did not go, and if the President prevails in November, Mr. Powell is expected to move to another job in the next administration. Speculation ranges from Treasury secretary to head of the new agency that might be set up to oversee the housing government-sponsored enterprises.
Observers also blame tranquility for the lack of movement on Mr. Powell's signature policy issue: legislation to overhaul the deposit insurance system.
"It's the dog that didn't bark," said George Benston, a finance professor at Emory University's Goizueta Business School. "It's been a rather uneventful time for the FDIC. ... Lack of a crisis stifles everybody."
The bill would merge the bank and thrift insurance funds, give the FDIC more flexibility to set premiums, and index the $100,000 coverage limit to inflation. Though portions of it enjoy wide support on Capitol Hill, the plan has stalled in the Senate, where key lawmakers object to raising coverage levels.
One reason it is tough to raise the FDIC's profile is that it oversees predominantly small, state-chartered banks that do not belong to the Federal Reserve System. The average asset size of $339 million pales in comparison to the behemoths under the OCC's jurisdiction or their holding companies, which are overseen by the Fed.
Still, the FDIC has expanded its supervisory powers during Mr. Powell's tenure. A January 2002 agreement with three other agencies granted it the right to examine any federal thrift, national bank, or Fed member bank that is undercapitalized or has a Camels rating of 3, 4, or 5.
Further, to better gauge risks to the insurance fund, the FDIC now has full-time examiners inside the six largest institutions - from Citigroup Inc. to Washington Mutual Inc.
There can be no doubt Mr. Powell has left his mark on the agency.
First, it is more involved in broader industry debates, if for no other reason than that he is not afraid to take controversial positions. Citing free market principles, he says he is open to the mixing of banking and commerce, and he backs taxing credit unions and lifting the 10% cap on the share of the nation's deposits controlled by any one bank.
Consumer advocates chafe at Mr. Powell's fervor for market-based solutions and his moves to lighten the regulatory burden on banks.
"I hardly agree with a single position he has taken," said Matthew Lee, a banking activist and the executive director of Inner City Press/Community on the Move in the Bronx, N.Y.
For instance, Mr. Lee opposes the push to exempt more banks from full Community Reinvestment Act exams and the FDIC's willingness to let the banks it regulates make short-term, unsecured consumer loans.
Mr. Powell rarely defends payday lending itself but says banks must be free to develop the products and services its customers demand. A free market philosophy guides much of his thinking on banking matters.
"I think there's a battle occurring in America right now in regards to the capitalistic way of life. Everything that's good about America ... originates in the free enterprise system," he said in a May 19 speech to the Exchequer Club here.
He has managed to use the FDIC's extensive research resources to insert his agency into important policy debates, such as the formation of international capital rules being written by the Basel Committee on Banking Supervision. Because of his insistence, the U.S. version of the rule is expected to set a floor to ensure that no bank can gut its capital levels.
Under Mr. Powell, the FDIC led an interagency effort to make more than 1,000 additional banks and thrifts eligible for simpler CRA exams. Early this year it expanded the program of streamlined exams for well-run banks by quadrupling the asset limit, to $1 billion.
During a speech in San Diego last March, bankers got up on their chairs to protest their compliance burden and yelled, "We're mad as hell, and we're not going to take it anymore."
Not missing a beat, Mr. Powell told them, "I want to go down there and join you."
Bankers seem won over by the Texan's smooth personality, deregulatory zeal, and industry experience.
"I think he's done a fantastic job," said Ignacio Urrabazo Jr., the president and chief executive of the $375 million-asset Commerce Bank, an FDIC-supervised bank in Laredo, Tex. "I think his door has always been open to all bankers and all people. I don't think that's because we're Texans; I think that's because that's how it should be."
Joseph R. Ficalora, the president and CEO of New York Community Bancorp in Westbury, credits Mr. Powell with improving the FDIC's rapport with bankers.
"It's a matter of how people - and we're talking about people who are career FDIC regulators - approach the overall interface with the banks they are dealing with," said Mr. Ficalora, whose $23 billion-asset bank is the seventh-largest supervised by the FDIC. "In those places where there has been interface between banker and regulator ... there's been a significantly more cooperative and reasonable environment."
To get a sense of how his ambitions have eased over time, compare a speech Mr. Powell made to the Exchequer Club in October 2002 with one he gave last month.
In the speech two years ago - which he described as "pulling the pin on a grenade and rolling it down the table" - he proposed consolidating financial services oversight into three federal regulators, one each for banking, securities, and insurance.
The current setup "seems crowded, costly, inefficient, and not really reflective of today's financial sector," Mr. Powell told the group of policy wonks.
But when he addressed the group last month he spoke about the FDIC's internal personnel policies. "Unlike the private sector, there is little flexibility in the government's personnel rules," he said. "Longevity is paramount - merit must wait its turn."
No doubt an important topic, but hardly the sort of sweeping regulatory reform he espoused in 2002.
Going as far as he can without new authority from Congress, Mr. Powell has shifted some employees' pay to a job-performance system from a structure that grants bonuses to at least a third of the rank-and-file workers.
This shift has not endeared him to the National Treasury Employees Union, which represents agency workers. Colleen M. Kelly, the union's president, said morale at the FDIC had begun to rise shortly after Mr. Powell arrived but has since plunged.
"Morale is probably the lowest it's been in a number of years," Ms. Kelly said. "They see a lack of respect for what it is they do."
But you would probably get a different reaction from someone in the research division.
Mr. Powell has tirelessly promoted the FDIC's researchers and has given them the latitude and the resources to think big. The research group, which he merged into the agency's insurance division, is conducting a series of studies on the banking industry's prospects.
The FDIC is also putting a premium on processing data faster. It persuaded the other federal bank and thrift regulators to have all institutions file their quarterly call reports directly with the FDIC. The change lets it sort the data using flexible XBRL software and has halved the processing time, to 30 days.
Mr. Powell closed two (Boston and Memphis) of the agency's six field offices and launched a round of buyouts and retirement incentives that trimmed the work force by 699. It stood at 5,300 at yearend, versus 23,000 in 1993.
As part of his effort to hold the FDIC to business-like standards, the agency got its 2003 annual report out in record time - Feb. 13.
Mr. Powell has also appointed the agency's first chief economist, established an advisory board of outside experts, and created the FDIC Center for Financial Research to sponsor academic research on the banking industry. He lured David Cooke, an FDIC veteran, back to the agency to lead "Corporate University," which cross-trains the agency's employees.
In March 2003 the FDIC launched the Risk Analysis Center, a state-of-the-art facility that tracks and analyzes economic data and gives a nationwide network of supervisors a way to stay in touch and on top of brewing problems.
In applauding Mr. Powell, Donna Tanoue, the FDIC chairman from 1998 to 2001 and now an executive with Bank of Hawaii, cited the Risk Analysis Center and Corporate University. She also credits him for continuing the fight for deposit insurance reform and expanding the SmartMoney financial literacy program.
"I think he has done a great job," Ms. Tanoue said.
Mr. Powell, who keeps bankers and the public abreast of the FDIC's actions via quarterly "letters to stakeholders," will leave a physical legacy: a nine-story addition to its complex in northern Virginia. The $111 million office will house about 1,100 employees when it opens in 2006.
Former Comptroller of the Currency Eugene A. Ludwig said Mr. Powell deserves a standing ovation.
"In these periods of relative calm, these are the great opportunities regulators have to put the foundation blocks in place, and he has used his time wisely to make the FDIC a better organization," said Mr. Ludwig, who now heads the Promontory Interfinancial Network. "He's done just what you should do in this kind of period of time. It's less splashy, but it's awfully important."
Mr. Powell, the former president of a troubled bank, said he will take calm over crisis anytime.
"I would rather be not relevant and have economic stability," he said.
Almost 17 years ago he rescued the former National Bank of Amarillo from near-collapse by changing nearly every aspect of its operations. The experience taught him the value of regulators, he said, and has shaped the way he interacts with the FDIC's employees.
"The people at the FDIC are smart. They're dedicated to their mission. There's times that we disagree, but I have a deep respect for the integrity of their positions. It's important that I listen to them," Mr. Powell said. "Guys like me come and go, and the agency is much, much bigger than the chairman. It is the professionals who have been doing this since 1933 and will be doing this long after I am gone."
Mr. Powell, 63, vows to return to banking.
"Within 24 hours after I complete this assignment, I will charter a community bank," he said.
