WASHINGTON - The Federal Deposit Insurance Corp. chief said Wednesday that despite the challenges Gulf Coast banks face as they try to rebuild from this year's hurricanes, he does not expect any will fail.
"Right now, all the institutions in the area are well capitalized or adequately capitalized," acting chairman Martin Gruenberg said in an interview. "We are going to be monitoring very closely the condition of all the institutions, particularly in regards to the smaller ones, working with them to help them get through this period."
Mr. Gruenberg spent Monday and Tuesday in New Orleans and Gulfport, Miss., meeting with state regulators, local bankers, and community leaders. Bank employees and customers have left the area, about 200,000 homes have been destroyed, and many borrowers have lost their jobs.
Still, Mr. Gruenberg described himself as "cautiously optimistic" about the health of Gulf Coast banks, but conditioned his opinion that no banks will fail by saying that circumstances could change. He said the FDIC would do all it can to assist banks in the area, but he would not be more specific about what that might entail.
Even with the caveats, Mr. Gruenberg was more optimistic in tone than some others have been. At a congressional hearing last week, Rep. Richard Baker, R-La., urged federal assistance for local institutions. During his comments, he noted mounting expectations that some banks would not survive independently.
Since then, others have aired similar worries. In interviews with many industry experts in the region and in Washington, three small institutions, whose operations are concentrated in the disaster area, have most often been cited as vulnerable. Those banks were the subject of an article in Tuesday's American Banker.
(Office of Thrift Supervision Director John Reich weighed in Wednesday, saying he doubted that the area would escape at least one bank failure. See related story on page 1.)
The FDIC is still assessing the impact Hurricane Katrina had on banks. The agency is comparing damaged homes block by block and determining which banks held loans on these homes.
When the work is completed next month, Mr. Gruenberg said, the FDIC will share the data with banks and other regulators. Some aggregate data may be released publicly, he said.
Seeing the devastation firsthand was an eye-opener, he said. "What really hits you is the scale of the problem. You see the pictures on television and in the press, but until you really visit and drive around mile after mile and see the dimensions of the damage, only then do you really begin to appreciate the scale of the challenge."
He said community group leaders generally found banks to be willing to renegotiate payment options. He also called the commitment from both community groups and lenders to work together "inspirational."
Mr. Gruenberg said he had not had a chance to review a bill from Rep. Baker that would create a federal agency to buy damaged property from homeowners and keep banks from foreclosing on defaulted mortgages.
Mr. Gruenberg became the FDIC's acting chairman Nov. 15, when Don Powell left the agency to lead the White House's rebuilding effort in the Gulf Coast.
Mr. Gruenberg traveled to Louisiana and Mississippi with Sandra Thompson, deputy to the acting chairman; FDIC chief operating officer John Bovenzi; and Steven Fritts, an associate director in the division of supervision and consumer protection.
