MONTEREY, Calif. - In California, regulators don't come from hell, as some bankers frequently claim. They come from the Midwest.
George Masa, an Illinois native with a thick Chicago accent seemingly at odds with his West Coast surroundings, has been director of the Western Region of the Federal Deposit Insurance Corp. since 1991. He has spent 23 years at the FDIC in relative obscurity, both as a regional director in Chicago and as a well-liked administrator at the Washington headquarters.
Then why do bankers here hate him so much?
"He's scared everyone to death." says one Los Angeles banker who wished not to be named. "We had real estate problems. But Mr. Masa, more than anyone else, is responsible for the chilling effect at banks that lead to the liquidity crisis in Southern California real estate."
That sentiment, which Mr. Masa said is unwarranted given his past and the economics of the state right now, is most predominant among California's community bankers, 160 of whom met at this posh resort community for their third annual meeting.
The last seminar of the conference was a panel of federal regulators, with Mr. Masa in the hot seat answering questions from the bankers he regulates.
So far this year 13 financial institutions have failed in California, 11 of them in Southern California and all them community banks. Nationally, just 33 have failed so far this year.
But Mr. Masa and the other regulators sounded a conciliatory tone at the conference.
Addressing Bankers Concerns
And Mr. Masa confirmed that over the last six months, he has met six times with California banking groups to drive home that he and his examiners want to hear and address their concerns about the regulatory process.
"The memos sent out to our examiners these days are filled with phrases like |balanced,' |middle of the road,' |take a proper tone,' |put positives into the examination reports,'" Mr. Masa said. "Our supervision game plan is to work with institutions early to keep them out of trouble."
One example of the more cooperative approach in California, he said, is the FDIC's new policy regarding civil money penalties. No longer will the FDIC overtly threaten civil money penalties against errant institutions and their directors "unless there is a likelihood that the civil money penalty will actually occur." Mr. Masa said.
Several bankers said the threat of civil money penalties has been in wide practice by the FDIC in the last two years, contributing to the adversarial relationship with the agency.
|This Regulator from Hell'
And one banker, in a written question to Mr. Masa, said that FDIC examiners continue to take a "hostile" attitude when they first arrive on site for an examination.
Mr. Masa said that his examiners are always professional, and are even more "middle of the road" than they used to be as part of the administration's broad-based effort to ease the credit crunch, an effort that at least in California has failed miserably. The economy is what should be giving bankers fits, he said, not the regulators.
"I, this regulator from hell, as I'm known, was a regional director in Chicago for two-and-a-half years. That covered 3,000 banks," 1,500 of them state-chartered institutions that are not members of the Federal Reserve Bank, he said. "And not once did I get the kind of complaints that I get here."
In the three stages of acceptance, the first two of which are denial and anger, too many bankers in Southern California are still deeply in the anger stage, said Derek Thomas, partner in charge of real estate consulting at Kenneth Laventhal & Co. in San Diego.
We're listening and we're trying to change our approach in a lot of cases." Mr. Masa acknowledged. "But that will not change the fact that we still have an awful lot of [Camel] four-and five-rated institutions."