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0:16

This is Planet Money from

0:18

NPR. As

0:22

we've been sorting through the collapse

0:25

of Silicon Valley Bank, Credit Suisse,

0:27

and other financial institutions this month,

0:30

we keep thinking back to this story that

0:32

we did in collaboration with This

0:34

American Life back in 2009. So in the depths of the financial crisis,

0:38

in a time when one or two

0:40

banks were failing every week, and

0:43

during all of that, Khanna Jaffee Walt

0:45

managed to get an inside view of a

0:47

bank as it was taken over to document

0:50

exactly what happens as a bank fails.

0:53

Now the specifics of this 2009 bank

0:56

story have some slight differences from

0:58

what just happened with Silicon Valley Bank. The

1:01

main difference is that the federal deposit

1:03

insurance corporation, the FDIC,

1:06

they had almost no time to prepare for

1:08

the Silicon Valley Bank collapse. And so

1:11

they swooped in, they essentially set up

1:13

their own FDIC bank to take

1:15

over Silicon Valley's assets. On

1:18

the other hand, in the episode you're about to hear, the

1:20

FDIC had a lot more time to prepare

1:22

for the takeover of the bank in the story.

1:24

And so the FDIC was able

1:27

to line up an existing bank to buy

1:29

the failing bank in that case. But

1:31

otherwise, a lot of the details, especially

1:34

when it comes to the secrecy and precision

1:36

of the whole operation, our textbook

1:39

bank takeover.

2:00

account of what happened when

2:02

the FDIC took over the

2:04

bank of Clark County.

2:08

discovery

2:30

from wherever you are. Visit betterhelp.com

2:33

slash NPR today to get 10% off

2:36

your first month.

2:38

Your

2:40

morning routine is personal. Up

2:42

First is NPR's 15 minute or less

2:44

daily news podcast, and it fits right

2:47

alongside your breakfast, your daily walk

2:49

or whatever ritual makes your morning

2:50

yours. Start your day on your

2:53

own terms with Up First three top

2:55

stories from across the country and around

2:57

world to make clarity a part of your

2:59

mornings. Subscribe to UpFirst wherever you

3:02

get your podcasts.

3:03

Long before most of the Bank of Clark County employees

3:06

knew their bank was dead, the FDIC was

3:08

planning its demise. They'd been having

3:10

meetings, contacting other banks in the region, trying

3:13

to find one that would take over the Bank of Clark County's

3:15

assets after it failed. All

3:17

of these negotiations were top secret.

3:20

And then the time came. Thursday, January 15,

3:22

2009, the operation begins.

3:25

80 FDIC agents pull into Vancouver,

3:28

Washington. Their rental cars are generic,

3:30

their arrival time staggered. One

3:32

by one, the agents check into the hotel, each

3:35

quietly offering a fake name to the guy

3:37

at the desk.

3:39

9 PM. The FDIC calls the CEO

3:41

of another bank nearby, Umqua Bank.

3:44

Your bank, they tell him, has been selected to take

3:46

over the bank of Clark County. You can't

3:48

tell anyone. Come to a meeting tomorrow

3:51

at noon, the FDIC will tell you everything you need

3:53

to know.

3:54

And so, Friday morning, the Bank

3:56

of Clark County employees get up, go to work,

3:58

turn on the lights, and go about their day. and

4:00

Rick Carey, a vice president from Umpqua

4:02

Bank, sits down with the FDIC

4:05

and begins to plan.

4:07

We actually met with the FDIC

4:09

beginning at about 1230 on Friday, and

4:12

they were in a hotel under

4:15

a different name. You

4:17

know, we made sure that there

4:19

was no one from outside of our

4:21

two organizations there.

4:23

My name is Todd Zalk, Bank

4:25

of Clark County, the best community

4:27

business bank because we've changed

4:29

the game in business banking and

4:32

we were winning. Often

4:35

when I would go to a networking meeting or

4:37

event, I would introduce myself that way.

4:40

Todd Zulk is what you call a team

4:42

player, total bank loyalist

4:44

to the end. Beyond the end.

4:46

Four weeks after the failure, Todd's

4:49

still wearing his Bank of Clark County name tag,

4:51

still passing out his bank business cards. always

4:54

with a warm handshake, constant eye contact,

4:56

inserting your name whenever possible.

4:59

Friday, as Rick carries Nick into the nondescript

5:02

FDIC secret location, Todd

5:04

was playing for the team.

5:06

Most of the day I had spent out meeting

5:08

with businesses. I had a couple networking events,

5:11

and then I came back to the bank

5:13

and...

5:13

So you were still bringing business in that

5:15

Friday? I actually was. I

5:18

had people that wanted to open accounts. In fact,

5:20

in the fourth quarter, I opened over 55 accounts

5:24

for Bank of Clark County.

5:25

Todd and his coworkers had no idea

5:27

the bank was about to be taken over. He

5:29

knew they were going through a rough time. Just last

5:32

week, the CEO had called the staff meeting about it. But

5:34

the CEO was clear, things were under control.

5:37

He used this analogy that we were the ship,

5:39

you know, and we've gone through a storm and that

5:41

we were, you know, a little bit tattered, but

5:44

we were still weathering it well and that we

5:48

maybe were taking on a little bit of water and

5:50

we were looking for someone to maybe buy the

5:52

bank and had a few buyers

5:55

that were very interested and within

5:57

the next 60 We should know

5:59

if

6:00

who the new face of

6:02

the bank would be. So

6:04

that's what I had thought. Many,

6:06

many Bank of Clark County employees told me about

6:09

the SHIP meeting. Mostly it made sense

6:11

to them.

6:12

The CEO said they were doing okay, they were doing okay.

6:15

But in fact, things have been changing at the bank

6:17

since 2005. That's when they

6:19

went big into commercial and real estate loans.

6:21

They were a young bank. They felt they had to be aggressive.

6:24

And sometimes that meant making loans other banks

6:27

wouldn't have made.

6:28

loans that ended up killing them. Washington

6:31

state regulators audit every bank several times

6:33

a year, and they noted the Bank of Clark

6:35

County's declining health. Its

6:37

capital reserves were getting low. So

6:40

low, the bank was in danger of not being able to cover

6:42

its debts and obligations. And

6:44

then, you know this story, housing prices

6:46

dropped, developers couldn't make payments.

6:48

The story finally ends Friday,

6:51

January 16th,

6:54

2 FDIC agents and a Washington

6:56

State regulator enter the Bank of Clark

6:58

County, casual, head straight for the CEO's

7:01

office. There, behind closed

7:03

doors, they deliver the news.

7:05

They tell him his bank is under-capitalized. It

7:08

has failed. 5.03 PM. An

7:10

agent positioned by the CEO's office door

7:13

types this news into a blackberry. It's

7:15

received by everyone on the FDIC takeover

7:17

team.

7:18

5.05 PM. FDIC

7:20

agents begin closing in on the bank. A

7:23

few are already inside, quietly and discreetly

7:25

securing the cash and the vaults. Todd

7:28

Zulk, oblivious to all this, heads back into

7:30

the office after a long day of work.

7:33

I could tell that the mood at the bank seemed

7:35

odd. And I thought, well,

7:37

hmm, I wonder if they found a buyer

7:40

and kind of people have heard because I was gone

7:42

most of the day. And so I went

7:44

in and asked and they

7:46

said that There

7:49

was going to be a meeting at six o'clock

7:51

and there might be an announcement as to

7:53

who the buyer might be here or what

7:55

that would look like.

7:57

Todd hung around said to some customers.

8:00

did some banking. By this time

8:02

it was quarter to six and I went

8:04

up to someone that was an

8:07

executive or senior vice

8:09

president of the bank and I said how are you doing

8:11

and they said oh I'm doing all right and I could tell

8:14

something was going on and they didn't

8:15

want to say and we looked across to the other

8:17

side of the bank and there was two

8:19

employees adjusting pictures

8:23

on the wall and he looked

8:25

over at that and I saw his gaze go

8:27

over to the wall and so I looked over at the wall

8:29

and he kind of laughed and he said, wow,

8:33

he says that reminds me of adjusting

8:35

the chairs on the Titanic before it sank.

8:38

And that really told me something

8:41

was going down. Well

8:42

then, we hit,

8:44

it was probably very close, just a minute

8:47

or two after six o'clock and

8:49

Mike Worthy, our CEO, came out

8:51

and he stood up and said,

8:54

said,

8:54

well, I've used the

8:56

analogy that we were a ship

8:59

that was taken on some water and we

9:01

needed to pull up next to a bigger ship

9:03

and see if they wouldn't take us on in

9:05

our crew. And we thought we

9:07

had a few buyers for that, but now

9:10

the biggest ship that sails the seas

9:12

has come alongside us and

9:15

they are going to be taking us over and that

9:18

is essentially

9:18

the federal government. I would

9:20

like to introduce the

9:23

state of Washington regulators.

9:25

And he sat down and

9:28

the state of Washington stood up and said,

9:30

we are now taking possession of the

9:33

bank of all of its assets.

9:36

And we

9:36

are turning them over to

9:38

the receivership of the FDIC.

9:42

6.03 PM,

9:43

down the street from the bank where he's been told by the

9:45

FDIC to wait in his car. Rick

9:47

Carey with Umpqua Bank, here's his phone

9:50

vibrate.

9:51

At that point in time, a

9:53

signal was given to myself

9:55

and basically... What kind of a signal? It

9:58

was an email.

9:58

to the message. when you got it

10:00

on your Blackberry. Oh, just, uh, it's time.

10:04

It's time. Yeah, it's time. Come in.

10:08

605. Rick gets out of the car and starts walking toward

10:10

the bank.

10:11

Inside, a woman from the FDIC takes

10:13

the stage. She said within the next 10

10:15

minutes, there will be 80

10:17

FDIC employees coming

10:19

into the bank. And I looked

10:21

out there, and it was dark, so I couldn't really

10:23

see. And then all

10:26

these people, and mostly

10:28

in suits and professional clothing with

10:31

attorney-type briefcases, started

10:33

entering the bank, just flooding

10:36

into the bank.

10:37

And I was so awestruck

10:39

at them coming in, and so many of them

10:41

coming into the bank, that I turned around

10:43

and looked over there and just

10:46

kept watching them, and they just continued to come.

10:49

I mean, 80? I mean, our bank had

10:51

like 100 employees,

10:53

And at this time it was dark outside

10:54

and a flash flashed

10:58

out in the parking lot. The

11:00

flash was the Columbia newspaper taking

11:02

a picture for Saturday

11:05

morning's front page news that

11:07

the bank had failed.

11:09

All of this happened, Hana, in just a

11:11

matter of minutes. So things are

11:14

going through my mind like I just lost

11:17

almost $25,000 worth of stock I bought four months ago bank

11:21

of Clark County in my bank. I mean

11:22

I'm investing in my bank and most of the

11:25

employees were shareholders and so for

11:28

me there was a sense of gosh

11:30

I think I just lost all my stock and

11:34

I looked around the bank I saw some people crying

11:36

I saw some

11:37

people with

11:40

just a white face blank

11:42

stare on their face just in

11:45

shock some people had their face on their

11:47

hand on their face and and

11:49

just were like, I can't believe this,

11:51

like, oh my gosh. After

11:55

the break, how

11:56

FDIC agents begin the process

11:58

turning around a bank.

12:00

in just three days.

12:27

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12:30

First is NPR's 15-minute or less

12:32

daily news podcast, and it fits right

12:34

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12:38

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12:40

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12:42

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12:44

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12:47

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12:51

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12:54

Money recently released a song.

12:58

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13:01

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13:06

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13:33

Six-ten pm, Rick Carey from UMCWA

13:36

Bank is introduced to the confused

13:38

employees of the bank he now owns.

13:41

They have a whole bunch of questions running through their heads. First

13:43

among them, do we get to keep our jobs?

13:46

Rick can't answer that. UMCWA will only

13:48

need about a third of the Clark County staff, the

13:50

people who actually deal with customers in the branches.

13:53

the support staff and administration will be let go.

13:55

But

13:56

it's too soon to let each person know whether

13:58

he or she has a job. Rick

14:00

is put in charge of supervising a full-on,

14:03

manual hand count of all the bank's

14:05

cash. A couple of his staff grab

14:07

the cash and begin to count. The

14:09

Bank of Clark County people watch AMQA.

14:12

The FDIC watches them both.

14:14

This takes three hours. Meanwhile,

14:17

Bank of Clark County staff come up to Rick to introduce

14:19

themselves. Tell him how important they are

14:21

at the bank. They're

14:22

worried for their jobs. And Rick

14:24

has other things on his mind. He bought

14:26

the bank from the FDIC for a pretty good price,

14:29

He only has to take the good parts, the insured

14:31

deposits and the actual branch buildings.

14:33

The FDIC will keep all the bad stuff, the problem

14:36

loans. But there's still a lot to

14:38

think about.

14:38

You know, I have to be open in three

14:40

days. What do I want that store

14:43

to look like? I remember

14:45

that one of the first things we did that

14:48

evening was contact their plants provider

14:51

and make sure that they were arranged to have 25

14:55

large plants taken out of the, you

14:57

know, out of the facility. We have a very

15:00

clean operating environment at Umpqua,

15:02

and plants aren't part of our MO,

15:05

and so those were to be removed immediately.

15:09

We were looking at signage, so I basically

15:12

was making a note of what signs that

15:15

we needed to change, replace,

15:17

how quickly we wanted to do that. We wanted to

15:19

make it look like Umpqua as quickly as

15:22

possible.

15:23

Meanwhile, FDIC agents have already secured

15:25

the vaults and the cache. They've grabbed a couple hard

15:27

drives. Now they need to inventory

15:30

the entire bank. Every account

15:32

needs to be transferred to UMCWA. The bank

15:34

has to open its doors Tuesday morning. Monday

15:36

was Martin Luther King Day, the bank holiday. To

15:39

get all this done, the FDIC needs the

15:41

Bank of Clark County staff to help them, to show them

15:43

where the files are, who the customers are,

15:46

how to get to the bathroom. And so

15:48

at 6.15 p.m., the FDIC makes

15:50

an announcement. We need y'all to sign

15:52

in on this sheet of paper, everyone. As of right

15:54

now, for the weekend, you're all temporary employees

15:57

of the FDIC.

15:59

We're going to need you to stay late. tonight, work through the

16:01

weekend, you will be paid for your time.

16:03

We'll feed you. We need your help.

16:05

Ken Moody was vice president of information

16:08

systems at the bank of Clark County.

16:10

You know, again, most of us were planning on leading at the end of the

16:12

day. And so, you know, after that

16:14

announcement was made, we had phone calls

16:16

to make, you know, call our families. Um,

16:20

my daughter, uh, had a seventh

16:25

birthday that we were going to go to. Pick

16:28

your time. Sorry, I

16:31

didn't anticipate being this emotional about

16:33

it. Kinda silly.

16:36

6.20 p.m., agents take over

16:38

offices, storage rooms, hallways, any

16:40

space available. They tape handmade

16:42

signs to the doors, written on eight and a half by 11

16:45

sheets of printer paper, saying things like

16:47

audit, security, investigations.

16:50

It's a little chaotic. The FDIC moves

16:53

room to room. They go through files,

16:55

transfer accounts. They change the website.

16:57

They check the safe deposit boxes,

16:59

make sure everything that's supposed to be in there is

17:02

in there.

17:02

They go through desk drawers. They toss out bank

17:05

letterhead. Once agents have scanned

17:07

a room for all critical information, they

17:09

place a green dot on its door frame.

17:12

Then they take all that paperwork, all the hard

17:14

drives, all the files, and the FDIC has to reconstruct

17:17

the bank's entire balance sheet. It

17:19

has to know what it's selling to UMCQA, what's actually there.

17:22

Any account with a balance up to $250,000 is fully insured by the FDIC.

17:28

If the bank doesn't have the money to cover the balance, the

17:30

government will pay it out.

17:32

But some people have more than $250,000 and there

17:34

are business accounts and loans and it gets complicated.

17:37

Some is covered, some is not.

17:39

The FDIC now sorts all that out.

17:41

Things started happening very quickly and

17:44

with what seemed to be a lot of precision.

17:48

6.25pm in the IT department, three

17:50

agents approach Ken Moody, the IT guy.

17:53

They hand him a thumb drive. Please plug

17:55

this in, they say.

17:56

It has all the software to change your computer systems

17:59

over to...

18:00

That was, you know,

18:02

kind of a fascinating part about it. So it was almost like,

18:04

you know, on one hand, it's very sad. You have

18:06

the death of a loved one. But at the same time,

18:09

it was like watching an autopsy

18:12

being performed by a really skillful surgeon. They

18:14

just came in and just sliced and diced

18:16

and, you know, broke the bank up into

18:18

different pieces and threw them into different buckets

18:21

and did it with great efficiency.

18:23

An autopsy of the work that you've been doing? Yeah, an autopsy

18:26

of everything that we've been creating over the last 10 years.

18:29

At the Bank of Clark County, everyone I talked to

18:31

said this one thing about the FDIC that stuck

18:33

with me. Something you don't often hear

18:36

about a government agency, that

18:38

it did a really good job, that the agents

18:40

were kind, courteous, and efficient.

18:42

In fact, everything is ordered, structured,

18:45

everything, even how and when to grieve.

18:48

Here's Lisa Stapleton. She was an assistant loan

18:50

officer with the bank. So many

18:52

of the people who came in from the FDIC

18:56

got to where they were because

18:58

they were part of a bank that failed. And

19:00

they were all like, you know what, we've been where

19:02

you are and we

19:05

understand and it's

19:08

going to be fine. You know, so they were really

19:11

nice.

19:12

The Bank of Clark County had 100 employees and assets

19:14

of $446 million, which if you're not

19:19

used to bank numbers is a really small bank.

19:21

But

19:21

it took 80 FDIC agents,

19:24

about 50 of Clark County employees and 100

19:26

UMCW employees working around the clock

19:29

for three days to take it over and

19:31

have it reopened for business.

19:35

That was Hanajathi Walt of This American

19:37

Life and Serial and Formerly Planet Money.

19:40

This episode originally aired in March 2009

19:43

on This American Life from WBEZ

19:46

Chicago. Now this is obviously

19:49

a very strange time for our

19:51

financial system and you probably

19:53

have a lot of questions. Whether it's about

19:55

Silicon Valley Bank, Credit Suisse, any

19:58

of this stuff. We want to help. you get answers.

20:01

You can email us those questions, preferably

20:03

as a voice memo so we could possibly use it on air.

20:06

Email those to planetmoney at

20:08

npr.org. You

20:11

can also find us on social media. We are just generally

20:13

at Planet Money. The updated

20:15

version of the episode you just heard was produced

20:18

by Dylan Sloan and edited by Dave Blanchard.

20:20

It was fact-checked by Sierra Juarez and

20:22

engineered by Catherine Silva. Jess Jang

20:24

is Planet Money's acting executive producer.

20:27

I'm Kenny Malone. This is NPR.

20:30

Thanks for listening.