-
The Federal Deposit Insurance Corp. knows it must put some meat on the bones of its process for dismantling large financial firms, but is struggling to strike the right balance between providing too much detail and not enough.
June 14
WASHINGTON The Federal Deposit Insurance Corp. announced an unexpected changing of the guard on Monday in the management of its new wind-down facility for systemically important companies.
James Wigand, who was tapped in 2010 to oversee the agency's implementation of the unprecedented new resolution powers under the Dodd-Frank Act, will step down July 28, the agency said. Arthur Murton, who now runs the FDIC's insurance and research division, will succeed Wigand as the head of the Office of Complex Financial Institutions.
No reason was given for his departure other than the fact that Wigand, a 32-year veteran at the agency who had previously overseen the FDIC's marketing of failed banks to potential acquirers, had planned to retire. He will stay on at the agency as a senior advisor to FDIC Chairman Martin Gruenberg until Sept. 30.
"I would like to extend my deep personal appreciation to Jim for his service to the FDIC," Gruenberg said in a press release. "Our agency and country have benefited greatly as a result of his outstanding work."
Murton will now assume leadership for carrying out the FDIC's biggest responsibility resulting from Dodd-Frank. (The FDIC also announced that Diane Ellis, who has been one of Murton's deputies, will be promoted to run the Division of Insurance and Research.)
The agency's authority to manage resolutions of failed behemoths which the government deems are too globally connected to be wound down through the bankruptcy process has been a subject of persistent questions from market participants. The success of the new facility is viewed as a crucial test in determining the extent to which Dodd-Frank eliminated the "too big to fail" problem.
Although the FDIC has publicly expressed some of its approaches to resolutions of systemically important firms, and implemented certain aspects of the facility in official rulemakings, the agency is expected to unveil additional guidance to clarify how exactly the wind-down regime will work.
The agency has embraced a "single point of entry" strategy for cleaning up a failed firm, meaning the parent company is closed and its healthy subsidiaries survive under a bridge entity. The shareholders would be wiped out and the bridge firm would be recapitalized in part from the claims of certain creditors of the original company being converted into equity. Yet details of how the strategy would be carried out in practice have been unclear.
In an interview with American Banker last week, Wigand said the agency is currently in the process of prioritizing the most important elements from the laundry list of components related to the "orderly liquidation authority" to form the basis of the guidance, which is expected to be released by yearend.
"We have a list of all of these tasks that we need to address associated with implementing OLA and that list is huge," he said. "But what we've done is culled it down to the key tasks that we believe need to be addressed in this particular policy statement."
Murton has been a key member of the FDIC's senior staff since well before the financial crisis. With the agency since 1986, he has worked on resolutions of failed thrifts coming out of the savings and loan debacle. In 1995, he became the first director of the then-Division of Insurance, which was merged in 2002 with the Division of Research and Statistics.
Murton, a Ph.D economist, has been central in the agency's numerous attempts to reform how it calculates banks' deposit insurance premiums. He also helped lead implementation of the Temporary Liquidity Guarantee Program, established at the height of the 2008 financial crisis to provide special FDIC backing for senior unsecured debt and non-interest-bearing checking deposits.
"During their careers at the FDIC, both Art and Diane have demonstrated the highest levels of leadership ability and professional expertise," Gruenberg said. "The FDIC is fortunate to have two executives of their caliber to assume these important leadership positions."
Ellis, who began her FDIC career as an examiner in Southern California in 1988, later joined the Division of Insurance in Washington as a senior financial analyst. She became a deputy director for DIR in 2008. Since December, Ellis has also been serving a temporary appointment as acting deputy to FDIC Vice Chairman Thomas Hoenig.
