Critics of federal buyout programs call them costly "golden handshakes" that eliminate employees who would have retired anyway.

But the Federal Deposit Insurance Corp. claims its buyout program has been cost effective, helping the agency trim its rolls despite the challenge of absorbing employees from the now-defunct Resolution Trust Corp.

Not that it will substitute for layoffs. The robust health of banks and thrifts will require "drastic downsizing" and may result in layoffs next year, particularly in the liquidations and legal divisions, said Dennis Geer, FDIC chief operating officer.

But the buyout program is credited with averting layoffs in some divisions, such as supervision, officials said.

A total of 940 permanent FDIC and RTC employees - 14% of those eligible - accepted the buyout offer of six months' salary and health benefits. That total was nearly twice the 485 workers FDIC officials had expected. The buyout offer was "very well structured" and "generous" and those factors likely triggered the response, said agency spokesman Robert Garsson. Employees had until the end of January to accept the offer.

Buyouts were offered to permanent employees at both agencies: 860 FDIC and 80 former RTC employees took them. More than half of those workers who took buyouts were not eligible for retirement, according to the FDIC.

The buyout approach made sense because 900 of the 2,264 Resolution Trust employees inherited by the FDIC on Jan. 1 could not be laid off for a year. Congress approved the one-year guarantee when it established the RTC in 1989 to deal with the savings and loan crisis. The FDIC concluded that it couldn't lay off its workers when the former RTC employees remained protected. "It's a matter of fairness," Mr. Garsson said. "As a practical matter, we felt we had to wait."

But finding an alternative to layoffs also saved money. If the FDIC had waited until 1997 to lay off those same 940 workers, the delay would have cost $170.6 million, or about $85,000 per worker, which includes estimated salary, benefits, and related expenses such as office equipment and supplies. By comparison, the buyouts cost the agency $41.4 million, yielding a net savings of more than $129 million, officials said.

The buyout program was a kinder way to cut than layoffs, Mr. Geer said. "People spent years and years and poured their hearts out" in extremely difficult times, he said. "We wanted something less draconian."

Union officials who represent FDIC workers agreed. "Philosophically we endorse anything that's an alternative to involuntary layoffs," said Stephen Keller of the National Treasury Employees Union.

And the buyouts reached into the agency's executive suites, Mr. Geer said. Executives usually have many years of government service and are untouchable by layoffs. If their positions are eliminated, they have enough seniority to bump a lower level employee. But buyout offers were accepted by 58 executives, Mr. Geer said.

Buyouts are part of a larger FDIC effort to identify areas that are overstaffed, Mr. Geer said. In 1992, after dealing with bank and thrift crises, the FDIC had about 15,000 workers, and the RTC more than 7,000. Despite absorbing 2,264 RTC employees this year, the buyouts and the termination of temporary and contract workers brought the FDIC rolls down to 10,300 by the end of May.

"What are our needs in a normalized workload?" said Mr. Geer. "We've pulled in our research division to look at pre- and post-crisis historically" to gain more understanding, he said. "Are institutions merging?" Mr. Geer added. "What is the permanent workload for the corporation and do you need a contingency" for future crises?

The agency's target is 6,800 workers, but that number is "very, very dynamic," and subject to change, Mr. Geer said. "More likely it will go down (unless) the health of the banking system suddenly got worse," said William Longbrake, the agency's chief financial officer.

Alexandria, Va.-based banking consultant Bert Ely thinks the agency should cut a lot more sharply. The 6,800 target, he said, "is a good 2,000 too high."

Eliminating employees, he conceded, "is an ugly job." But he's not sure that buyouts cut with enough precision. The agency's goal should not be just downsizing but "downsizing so that what remains is a cadre of the best people," Mr. Ely said.

Mr. Geer acknowledged that the buyout program resulted in the loss of some employees he would have preferred to keep. But overall, he stressed, the program's results have been "extraordinarily positive."

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