banks and savings associations, and in 

cooperation with the other state and federal 

regulatory agencies, the Federal Deposit 

Insurance Corporation (FDIC) promotes 

the safety and soundness of the U.S. 

fi nancial system and insured depository 

institutions by identifying, monitoring and 

addressing risks to the deposit insurance 

fund.

The FDIC promotes public understanding 

and the development of sound public policy 

by providing timely and accurate fi nancial 

and economic information and analyses. 

The Corporation strives to minimize 

disruptive effects from the failure of banks 

and savings associations. In addition, the 

FDIC assures fairness in the provision of 

fi nancial services and the sale of fi nancial 

products.

The FDIC’s long and continuing tradition 

of excellence in public service is supported 

and sustained by a highly skilled and 

diverse workforce that continuously 

monitors and responds rapidly and 

successfully to changes in the fi nancial 

environment.

Annual Report Highlights 2006
(FDIC) is an independent agency created 

by the Congress that maintains the stability 

and public confi dence in the nation’s fi nancial 

system by insuring deposits, examining 

and supervising fi nancial institutions, and 

managing receiverships.

Vision

The FDIC is a leader in developing and 

implementing sound public policies, 

identifying and addressing new and existing 

risks in the nation’s fi nancial system, and 

effectively and effi ciently carrying out its 

insurance, supervisory, and receivership 

management responsibilities.

as they strive to fulfi ll the Corporation’s 

mission and vision:

Integrity

FDIC employees adhere to the highest 

ethical standards in the performance of 

their duties and responsibilities.

Competence

The FDIC maintains a highly skilled, 

dedicated, and diverse workforce.

Teamwork 

FDIC employees work cooperatively with 

one another and with employees in other 

regulatory agencies to accomplish the 

Corporation’s mission.

Effectiveness 

The FDIC responds quickly and successfully 

to identifi ed risks in insured fi nancial 

institutions and in the broader fi nancial 

system.

Financial Stewardship

The FDIC acts as a responsible fi duciary, 

consistently operating in an effi cient 

and cost-effective manner on behalf of 

insured fi nancial institutions and other 

stakeholders.

Fairness 

The FDIC treats all employees, insured 

fi nancial institutions, and other stakeholders 

with impartiality and mutual respect.

I. Management’s Discussion and Analysis 10

 The Year in Review 10

 Insurance 10

 Supervision and Consumer Protection 14

 Receivership Management 23

 Effective Management of Strategic Resources 25

II. Financial Highlights 30

 Deposit Insurance Fund Performance 30

 Corporate Operating Budget Spending 32

 Investment Spending 34

III. Financial Statements 35

 Deposit Insurance Fund (DIF) 35

 FSLIC Resolution Fund (FRF) 38

 Government Accountability Offi ce’s Condensed Audit Opinion 41

 Management’s Response 42

IV. Other Information 43

 FDIC Organization Chart/Offi cials 43

 Sources of Information 44

 Regional and Area Offi ces 45
2

continues to be healthy and profi table and 2006 saw continuation of 

the longest period in the Corporation’s 73-year history without a failure 

of an FDIC-insured institution — a record 31 months. Nevertheless, 

we continued in 2006 to actively pursue our mission of ensuring the 

stability of and public confi dence in the nation’s fi nancial system.

The past year was a particularly signifi cant one for the FDIC. On 

February 8, 2006, President Bush signed into law the Federal Deposit 

Insurance Reform Act of 2005, culminating a lengthy, multi-year effort 

by the FDIC, the Administration, and the Congress to make sweeping 

improvements to the federal deposit insurance system. The law requires 

the FDIC to make fundamental changes in its deposit insurance policies 

and business processes in 2006 and 2007, and we are well on our way 

toward full compliance with the provisions of that Act.

We focused much of our attention during 2006 on three high priority 

areas of activity: (1) addressing signifi cant policy issues, (2) maintaining 

a strong supervisory program, and (3) concentrating our efforts on 

promoting economic inclusion. I would like to share with you some of 

our major successes during 2006 and some of our challenges for 2007 

and beyond.

Policy Challenges

In accordance with the requirements of the deposit insurance reform 

statute, the FDIC in early 2006 merged the Bank Insurance Fund and 

the Savings Association Insurance Fund into the new Deposit Insurance 

Fund, and adopted new regulations increasing coverage for certain 

retirement plan deposits from $100,000 to $250,000. This was the fi rst 

major change in deposit insurance coverage since 1980. The reform 

statute also provided the FDIC Board of Directors (Board) with greater 

fl exibility to manage the Deposit Insurance Fund. The Board adopted 

fi nal rules on a new assessment system that will make assessments 

more risk-sensitive and distribute the assessment burden more fairly 

across insured institutions, and it established new premium rates 

effective for deposit insurance beginning January 1, 2007. In addition, 

the Board adopted fi nal rules on the distribution and use of $4.7 billion 

in one-time assessment credits, a temporary plan for the allocation 

of future dividends, and a designated reserve ratio. In 2007, the FDIC 

will complete and issue guidance on how limited adjustments may be 

made in the pricing of deposit insurance for large banks and publish an 

advance notice of proposed rulemaking seeking comment about how 

to implement a permanent dividend system. 
subgroups, in planning for the implementation of the new Basel II 

capital framework. The Board approved in September 2006 the 

publication of a notice of proposed rulemaking (NPR), jointly with 

the Federal Reserve Board, the Offi ce of the Comptroller of the 

Currency and the Offi ce of Thrift Supervision, seeking comment on 

draft regulations to implement the advanced approaches of the Basel II 

Accord. As a result of the fi ndings in the fourth quantitative impact 

study (QIS-4), which examined the potential impact that the Basel II 

capital framework might have on the minimum risk-based capital 

requirements of a select group of fi nancial institutions, safeguards 

were incorporated into the Basel II NPR to protect against an 

unacceptable decline in minimum risk-based capital requirements.

On December 5, 2006, the Board also approved the publication of a 

second NPR seeking comment on draft regulations to implement a new 

capital framework, referred to as Basel IA, which banks that do not use 

the Basel II capital framework may opt to apply. The Basel IA NPR was 

also issued jointly with the Federal Reserve Board, the Offi ce of the 

Comptroller of the Currency and the Offi ce of Thrift Supervision.

Both draft regulations represent an effort to enhance the risk sensitivity 

of the existing risk-based capital framework while maintaining safety 

and soundness within the banking and thrift industry. Throughout the 

interagency deliberations on both Basel II and Basel IA, the FDIC has 

maintained an unwavering commitment to the maintenance of strong 

capital requirements and to the principle that any changes to these 

requirements should have a minimal impact on competitive equity 

among banks of all sizes. In 2007, the FDIC will continue to provide 

leadership in this effort. It will explore the potential of using simplifi ed 

approaches as an alternative to the advanced approaches in the 

Basel II Accord and, with the other banking agencies, work to achieve 

consensus on the overall package of regulatory capital changes for 

fi nal publication.

Another signifi cant policy challenge is presented by the continuing 

consolidation in the banking industry. While this presents challenges 

for all federal banking regulators, it poses unique issues for the FDIC 

because of its multiple roles as regulator, deposit insurer, and receiver. 

Fortunately, the banking industry and our largest banks are strong and 

have made many improvements to their risk management processes 

in recent years. Even so, the FDIC must be prepared to respond to 

instability in any size insured institution. To meet these challenges, 

3
exercises, system and process improvements for determination 

of deposit insurance claims and management of failing bank assets, 

consultations with domestic and international regulators, improvements 

to the FDIC’s supervisory program for larger banks, and the designation 

of internal and external expertise to focus on larger bank issues. This 

effort will continue and evolve as the challenges change in the future. 

Matters that received signifi cant public interest in 2006 included 

applications to the FDIC for deposit insurance fi led by commercial 

companies for proposed industrial loan companies (ILCs). To obtain 

the public’s insight on the issues, on July 28, 2006, the FDIC placed 

a six-month moratorium, ending on January 31, 2007, on ILC deposit 

insurance applications and change in control notices to give the 

FDIC time to assess developments in the ILC industry; to determine 

whether any emerging safety and soundness or policy issues exist; 

and to evaluate whether statutory, regulatory or policy changes need 

to be made in the oversight of these institutions. The moratorium also 

allowed FDIC time to further evaluate the various issues, facts and 

arguments raised in connection with the ILC industry, and to assess 

whether statutory or regulatory changes or revised standards and 

procedures for ILC applications and supervision are needed to protect 

the Deposit Insurance Fund or important Congressional objectives. 

In August, the FDIC Board requested public comment on a broad range 

of ILC-related issues. During the 45-day comment period that ended 

on October 10, 2006, we received more than 12,600 comments which 

were carefully and thoroughly evaluated. 

Supervisory Program

In addition to managing an unusually large policy agenda, the FDIC also 

continued to administer strong and effective supervisory programs in 

2006 in both the risk management and compliance areas. The FDIC 

performed 2,388 safety and soundness examinations, 1,959 compliance 

and Community Reinvestment Act exams and 3,052 specialty exams.

During the year, the FDIC enhanced the quality of fair lending 

examinations through the use of residential mortgage pricing data. 

This year represented the fi rst opportunity for the FDIC to use pricing 

data collected by fi nancial institutions pursuant to the 2004 changes to 

the Home Mortgage Disclosure Act. Also in 2006, the FDIC established 

the Large Bank Program to address challenges associated with 

supervising and insuring the deposits of large and complex institutions. 

In addition, the FDIC completed and issued guidance on concentrations 

4
Further, the FDIC became increasingly concerned with the expansion of 

nontraditional mortgage products and the potential risk posed by these 

products to the DIF. To address these concerns, the FDIC implemented 

certain enhancements to the supervisory oversight of nontraditional 

mortgage banking activities and, with the other fi nancial institution 

regulatory agencies, developed and issued guidance to address the 

growing risks in these loan products.

During the year, the FDIC conducted a comprehensive review of the 

compliance examination program’s workload and resources. Based 

on workload projections, we identifi ed the need for additional staffi ng 

in this area. In December, the Board authorized 72 new examiner 

positions to be phased in over a three-year period with the majority 

added in 2007. This will result in an increase of human resources 

dedicated to the compliance and CRA examination areas. 

Refl ecting our commitment to provide current and consistent guidance 

for examiners and banking organizations to comply with the Bank 

Secrecy Act (BSA) and Anti-Money Laundering (AML) requirements, 

we worked closely with the other federal banking regulators to revise 

the Federal Financial Institutions Examination Council (FFIEC) BSA/AML 

Examination Manual. The FFIEC BSA/AML Working Group, which the 

FDIC chairs, collaborated with other federal banking agencies and 

the Financial Crimes Enforcement Network (FinCEN) on the revision 

project. 

Promoting Economic Inclusion

The FDIC has long been committed to bringing all segments of society 

into the fi nancial mainstream. This year, the Board approved the 

establishment of the FDIC Advisory Committee on Economic Inclusion 

to provide the FDIC with advice and recommendations on important 

initiatives focused on expanding access to banking services by 

underserved populations. The Committee members represent a broad 

cross section of interests from the banking industry, state regulatory 

authorities, government, academia, consumer and public advocacy 

organizations, community-based groups and others impacted by 

banking-related practices.

This year, the FDIC took two important steps to focus attention on the 

need for affordable small-dollar loan products. First, the FDIC released 

Affordable Small-Dollar Loan Guidelines for public comment. The 

5
personnel and their families, who are frequently turning to highcost 

providers for short-term loans and other fi nancial services. The banks 

that attended the conference developed a template for an affordable, 

small denomination loan product with a savings component. We will 

continue to work with the industry to fi nd ways to promote both 

affordable short-term loan products and creative ways to encourage 

savings.

To reach an even wider audience of unbanked and underbanked with 

our successful Money Smart fi nancial education program, this year the 

curriculum was released in Russian, large print and Braille. Release of 

the Braille and large-print versions was the fi rst time that a fi nancial 

education program has been specifi cally targeted for individuals with 

visual impairments. The FDIC also completed development of a 

Spanish-language version of our online Electronic Deposit Insurance 

Estimator and a Spanish-language video on federal deposit insurance 

coverage.

As part of our ongoing effort to help combat identity theft, we continued 

to take a leadership role in consumer education initiatives and released 

an online training tool called Don’t Be an Online Victim: How to Guard 

Against Internet Thieves and Electronic Scams. The training tool is 

available through the FDIC’s Web site and via disc. 

In 2006, we continued to analyze the economies adversely affected by 

Gulf Coast hurricanes and worked closely with banks and consumers to 

address issues of concern. We also worked closely with other federal 

and state regulatory agencies to issue guidance outlining examination 

procedures for assessing the fi nancial condition of institutions 

adversely affected by the hurricanes. The FDIC, working jointly with 

NeighborWorks® America, released a homeownership and fi nancial 

counseling guide called Navigating the Road to Housing Recovery in 

the Gulf Coast. This guide was a focal point of an FDIC/NeighborWorks®

Gulf Coast Housing Summit held in New Orleans in October that was 

attended by bankers, housing experts, homeownership counselors 

and others. 

Conclusion

Finally, I am pleased to note that we were able to enhance our efforts 

in each of our major business lines during 2006 while maintaining strong 

fi scal discipline. As detailed elsewhere in the report, the FDIC has had 

an extraordinary record of controlling its operating expenses over the 

6
7

and receivership management activities during that period. These staff 

reductions completed more than a decade of downsizing that followed 

the Corporation’s rapid workforce buildup to address the banking crisis 

of the late 1980s and early 1990s. I am indebted to my predecessor, 

Donald Powell, for his efforts to move the FDIC past the diffi cult era 

of downsizing, and for leaving me with a revitalized workforce that is 

eager and willing to address the new and emerging challenges to the 

safety and stability of our banking system.

Our agenda for 2007 will be full of challenges. Along with continuing 

to implement the changes brought about by deposit insurance reform, 

we will focus our energies on continuing to ensure the safety and 

soundness of our banking system, the effectiveness of our consumer 

protection efforts and the effi ciency of our internal operations.

On a personal note, I would like to say that I am honored to serve as 

the 19th Chairman of the FDIC. Having been sworn in as Chairman on 

June 26, 2006, I clearly joined the FDIC at a critical – but exciting – time 

for the agency and the industry. I look forward to working alongside 

our outstanding Board and the dedicated employees of the FDIC as 

we face the challenges of the future together.

Sincerely,

Sheila C. Bair
8

in providing timely, reliable and meaningful information to its many 

stakeholders. 

As a result of the passage of deposit insurance reform legislation, the 

Bank Insurance Fund and the Savings Association Insurance Fund were 

merged on March 31, 2006, to create the Deposit Insurance Fund (DIF). 

Overall, the combined fund remained fi nancially sound throughout the 

year and I can proudly report that the U.S. Government Accountability 

Offi ce (GAO), for the fi fteenth consecutive year, issued unqualifi ed audit 

opinions on the annual fi nancial statements for both funds administered 

by the FDIC – the DIF and the Federal Savings and Loan Insurance 

Corporation (FSLIC) Resolution Fund. These unqualifi ed audit opinions 

validate our efforts to ensure that the fi nancial statements of the funds 

for which we are stewards are fairly presented. This achievement also 

exemplifi es the hard work and dedication of the FDIC staff.

FDIC’s fi nancial highlights during 2006 include: 

In 2006, DIF’s comprehensive income totaled $1.6 billion compared 

to $1.1 billion in 2005, a year-over-year increase of 44 percent. 

Excluding the recognition of exit fees earned of $345 million (a one-time 

adjustment), comprehensive income rose by $133 million from a year 

ago. This year-over-year increase is primarily due to a decrease in the 

unrealized loss on available-for-sale (AFS) securities of $348 million, 

which was offset by decreases in both interest earned on U.S. Treasury 

obligations of $101 million and the negative provision for insurance 

losses of $108 million.

The signifi cantly lower unrealized loss on AFS securities primarily resulted 

from: 1) a smaller total market value of AFS securities, 2) a lower average 

duration for the AFS securities, and 3) a smaller increase in the market 

yields of the AFS securities. However, the lower unrealized loss 

was partially offset by a decrease in interest revenue on U.S. Treasury 

obligations that resulted from lower infl ation compensation on Treasury 

Infl ation-Protected Securities.

During 2006, we continued our efforts to control costs and to prudently 

manage the funds administered by the FDIC. Annual budgeted 

operating expenditures in 2006 totaled approximately $973 million, 

which represents a decline of $17 million (1.7 percent) from 2005. As 

Chairman Bair indicates in her message, the FDIC has an exceptional 

record of controlling its budgeted operational spending, which declined 
2006 budget, largely due to the cost of employee pay increases 

negotiated for 2007. 

Capital investment spending also declined substantially in 2006 to 

$25 million. In 2006, we completed two major investment projects, 

the Virginia Square Phase II building and the New Financial Environment 

(NFE) (an integrated state-of-the-art fi nancial system), reducing to three 

the inventory of active investment projects. This is down from a high 

of ten active projects in 2003 and 2004. In late 2006, the FDIC Board 

approved a new investment project, an insurance claims determination 

system. It is the fi rst new investment project approved since 2003. 

Investment spending is projected to total between $19 million and 

$23 million in 2007. 

We are especially proud of our staff for the successful completion of 

Virginia Square Phase II – an outstanding facility that should serve the 

Corporation well for years to come. The project was completed on 

time and under budget, and has begun to yield substantial cost savings 

for the FDIC. We are also beginning to explore how to leverage the 

enhanced capabilities of the NFE to continue to improve our fi nancial 

and cost management.

In accordance with the requirements of the Federal Managers’ Financial 

Integrity Act of 1982, the FDIC’s management conducted its annual 

assessment and concluded that the system of internal controls, taken 

as a whole, complies with internal control standards prescribed by the 

GAO and provides reasonable assurance that the related objectives are 

being met.

Looking ahead to 2007, the FDIC will continue to work toward sound 

management of the Corporation’s fi nancial and other resources.

Sincerely,

Steven O. App

9
from deposit insurance reform, to capital reform, to the appropriate role 

of industrial loan companies. In addressing these issues the Corporation 

published numerous notices of proposed rulemaking throughout the 

year, seeking comment from the public, and issued fi nal rules to 

implement most of the components of deposit insurance reform 

legislation enacted early in the year. The Corporation also maintained 

its emphasis on a strong supervisory program, and pursued fi nancial 

education and outreach initiatives focusing primarily on those adversely 

affected by Hurricanes Katrina and Rita and those not participating 

in the banking system. For the second year in a row, there were 

no insured institution failures, refl ecting the continued strong health 

of the banking and thrift industry. 

Highlighted in this section are the Corporation’s 2006 accomplishments 

in each of its three major business lines – Insurance; Supervision and 

Consumer Protection; and Receivership Management – as well as its 

program support areas. 

The FDIC insures bank and savings association deposits. As insurer, the 

FDIC must continually evaluate and effectively manage how changes in 

the economy, the fi nancial markets and the banking system affect the 

adequacy and the viability of the deposit insurance fund.

In February 2006, the President signed into law the Federal Deposit 

Insurance Reform Act of 2005 and the Federal Deposit Insurance 

Reform Conforming Amendments Act of 2005. These new statutes 

instituted most of the key changes in the deposit insurance system 

that the FDIC had been pursuing for the previous fi ve years:

• Merges the Bank Insurance Fund (BIF) and the Savings Association 

 Insurance Fund (SAIF) into the new Deposit Insurance Fund (DIF).

• Permits the FDIC's Board of Directors to price deposit insurance 

 according to risk for all insured institutions, regardless of the level 

 of the reserve ratio.

• Grants a one-time initial assessment credit of approximately 

 $4.7 billion to recognize institutions' past contributions to the 

 combined fund.

Insurance

Deposit 

Insurance 

Reform

10
 ratio falls below 1.15 percent or is expected to do so within six 

 months, the FDIC must adopt a restoration plan that provides 

 that the DIF will return the reserve ratio to 1.15 percent within 

 fi ve years.

• Generally mandates dividends to the industry of one-half of any 

 amount above the 1.35 percent level and of all amounts in the fund 

 above the 1.50 percent level.

• Increases the coverage limit for certain retirement accounts to 

 $250,000 but leaves the basic insurance limit for other deposits 

 at $100,000. 

• Indexes both coverage limits for infl ation, and allows the FDIC 

 (in conjunction with the National Credit Union Administration) 

 to increase the limits every fi ve years beginning January 1, 2011,

 if warranted. 

Implementation of deposit insurance reform was a major initiative for 

the FDIC in 2006. On March 14, 2006, the Board adopted an interim 

fi nal rule implementing the substantive changes to the FDIC’s insurance 

coverage rules, effective April 1, 2006. (The fi nal rule was adopted on 

September 5, 2006.) In addition, the FDIC merged the BIF and SAIF 

into the newly-created DIF, effective March 31, 2006, and adopted all 

of the required implementing regulations prior to the statutory deadline 

effective date of July 1, 2006.

On October 10, 2006, after considering comments on a notice of 

proposed rulemaking (NPR) published in May 2006, the Board adopted 

a fi nal rule governing the distribution and use of the $4.7 billion onetime assessment credit. After considering comments on another NPR 

published in May 2006, the FDIC Board also adopted on October 10, 2006,

a temporary fi nal rule governing dividends from the DIF. Under this 

temporary rule, any dividend will be distributed based upon an institution’s 

portion of the December 31, 1996, assessment base. In 2007, the 

FDIC will undertake a more comprehensive rulemaking on dividends 

to replace the temporary rule. 

On November 2, 2006, after considering comments on an NPR 

published in July 2006, the Board adopted a fi nal rule setting the DRR 

at 1.25 percent. The Board also adopted two fi nal rules governing 

assessments after considering comments on NPRs published in 

11
permit consideration of more current supervisory information and 

capital data. Among its other provisions, the rule requires larger 

institutions to use average daily deposit balances as the basis for 

assessments. 

The other rule establishes new assessment rates based on four new 

risk categories. Effective January 1, 2007, assessment rates will range 

from 5 to 7 basis points for Risk Category I institutions and will be 

10 basis points for Risk Category II institutions, 28 basis points for 

Risk Category III institutions and 43 basis points for Risk Category IV 

institutions. Base assessment rates range from 2 to 4 basis points 

for Risk Category I institutions and are 7 basis points for Risk Category 

II institutions, 25 basis points for Risk Category III institutions and 

40 basis points for Risk Category IV institutions. The Board retains 

the fl exibility to adjust rates in the future, within limits, without further 

notice-and-comment rulemaking.

The FDIC, as insurer, has a substantial interest in ensuring that bank 

capital regulation effectively serves its function of safeguarding the 

federal bank safety net against excessive loss. During 2006, the FDIC 

participated on the Basel Committee on Banking Supervision and many 

of its subgroups. The FDIC also participated in various U.S. regulatory 

efforts aimed at interpreting international standards and establishing 

sound policy and procedures for implementing these standards. 

One of the FDIC’s key objectives has been to ensure the adequacy of 

insured institutions’ capital under Basel II. In 2006, the FDIC devoted 

substantial resources to domestic and international efforts to ensure 

that the new capital rules are designed and implemented appropriately. 

These efforts included the publication in September 2006 of an NPR 

seeking comment on draft rules for Basel II and revisions to the Market 

Risk Rule and the continued development of examination guidance, 

which is intended to provide the industry with regulatory perspectives 

on implementation. 

The fi ndings of the fourth quantitative impact study (QIS-4), which were 

completed in 2005, suggested that, without modifi cation, the Basel II 

framework could result in a signifi cant decline in minimum risk-based 

capital requirements. As a result, several safeguards were incorporated 

into the Basel II NPR to protect against a signifi cant decline in minimum 

risk-based capital requirements. These safeguards included a one-year 

delay in the targeted effective date of the regulation, a longer transition 

Capital 

Standards

12
a 10 percent downward limit on the aggregate reduction in minimum 

risk-based capital that could result from the implementation of Basel II. 

The FDIC is actively involved in efforts to revise the existing risk-based 

capital standards for those banks that will not be subject to Basel II. 

These efforts, referred to as Basel IA, are intended to modernize the 

risk-based capital rules for non-Basel II banks to ensure that the 

framework remains a relevant and reliable measure of the risks present 

in the banking system and to minimize potential competitive inequities 

that may arise between banks that adopt Basel II and those banks that 

remain under the existing capital rules. The revisions proposed in the 

Basel IA NPR are anticipated to be fi nalized by domestic bank and thrift 

regulatory authorities in 2007 for implementation in January 2008. The 

Basel IA NPR was published in the Federal Register for public comment 

in December 2006.

The FDIC’s Center for Financial Research (CFR) co-sponsored two 

research conferences during 2006. The 16th annual Derivatives 

Securities and Risk Management Conference, which the FDIC 

co-sponsored with Cornell University’s Johnson Graduate School 

of Management and the University of Houston’s Bauer College of 

Business, was held in April 2006. In addition, the CFR and the Journal 

for Financial Services Research (JFSR) sponsored their sixth annual 

research conference in September 2006. The conference attracted 

academics from U.S. and foreign universities, U.S. and foreign bank 

supervisors, congressional staff, consultants and bankers. As a part 

of the conference, the CFR sponsored a symposium entitled “U.S. 

Implementation of Basel II,” at which academics and U.S. and foreign 

bank regulators presented 12 research papers analyzing the potential 

effects of the new capital standards. 

Thirteen CFR working papers were completed and published in 2006 

on topics dealing with risk measurement, capital allocation, deposit 

insurance, community development or regulations related to these 

topics. The CFR Senior Fellows met in January 2006 to discuss ongoing 

CFR research on Basel II, deposit insurance reform, developments in 

the area of consumer fi nance and CFR activities for the coming year. 

The FDIC continued to leverage its investment in the Federal Financial 

Institutions Examination Council’s (FFIEC) Central Data Repository (CDR). 

The CDR streamlines the collection, validation and publication of fi nancial 

institutions’ Call Report data. The CDR was used to successfully collect 

Center for 

Financial 

Research

Central Data 

Repository 

13
performance reports, and an interagency team began work on 

modifi cations that will increase the fl exibility of the CDR to process 

additional data series. 

The Risk Analysis Center (RAC) was established in 2003 to provide 

information about current and emerging risk issues. It is staffed with 

employees on detail from each of the FDIC’s three business lines. 

The RAC uses interdivisional teams to analyze selected risk areas and 

carry out special projects which culminate in presentations and reports 

regarding these risk issues. The activities of the RAC are guided by 

the National Risk Committee, which is chaired by the Chief Operating 

Offi cer. In 2006, major projects of the RAC focused on collateralized 

debt obligations, operational risk, and the housing sector/alternative 

mortgage products. The RAC also reported to the National Risk 

Committee on a variety of other topics, including economic conditions, 

industry risk exposure, credit underwriting practices, and consumer 

protection issues.

Supervision and consumer protection are cornerstones of the FDIC’s 

efforts to ensure the stability of and public confi dence in the nation’s 

fi nancial system. The FDIC’s supervision program promotes the safety 

and soundness of FDIC-supervised insured depository institutions, 

protects consumers’ rights, and promotes community investment 

initiatives. In addition to carrying out its established examination program 

and other supervisory activities, the FDIC initiated in 2006 a substantial 

expansion of its programs to promote economic inclusion and confronted 

diffi cult policy issues regarding industrial loan companies.

The FDIC’s strong bank examination program is the core component 

of its supervisory program. At year-end 2006, the Corporation was 

the primary federal regulator for 5,237 FDIC-insured state-chartered 

institutions that are not members of the Federal Reserve System 

(generally referred to as “state nonmember” institutions). Through 

safety and soundness, consumer compliance and the Community 

Reinvestment Act (CRA), and various specialty examinations, the FDIC 

assesses their operating condition, management practices and policies, 

and compliance with applicable laws and regulations. The FDIC also 

educates bankers and consumers on matters of interest and addresses 

consumers’ questions and concerns.

Risk 

Analysis 

Center

Supervision and Consumer Protection

Examination 

Program 

14
supervised problem institutions within prescribed timeframes. The 

FDIC also conducted 1,959 CRA/Compliance examinations (777 joint 

compliance-CRA examinations, 1,177 compliance-only examinations,1

and fi ve CRA-only examinations) and 3,052 specialty examinations. 

All compliance/CRA examinations were also conducted within the 

time frames established by FDIC policy, including required follow-up 

examinations of problem institutions. The accompanying table compares 

the number of examinations conducted in 2004, 2005 and 2006 

by type. 

1Compliance-only examinations are conducted for most institutions at or near the mid-point between joint 

 compliance-CRA examinations under the Community Reinvestment Act of 1977, as amended by the 

 Gramm-Leach-Bliley Act of 1999. CRA examinations of fi nancial institutions with aggregate assets 

 of $250 million or less are subject to a CRA examination no more than once every fi ve years if they 

 receive a CRA rating of “Outstanding” and no more than once every four years if they receive a CRA 

 rating of “Satisfactory” on their most recent examination. 

2006 2005 2004

Safety and Soundness:

 State Nonmember Banks 2,184 2,198 2,276

 Savings Banks 201 199 236

 Savings Associations 2 1 0

 National Banks 0 0 0

 State Member Banks 1 1 3

Subtotal - Safety and Soundness Examinations 2,388 2,399 2,515

CRA/Compliance Examinations: 

 Compliance-Community Reinvestment Act 777 815 1,459

 Compliance-only 1,177 1,198 673

 CRA-only 5 7 4

Subtotal CRA/Compliance Examinations 1,959 2,020 2,136

Specialty Examinations: 

 Trust Departments 468 450 534

 Data Processing Facilities 2,584 2,708 2,570

Subtotal-Specialty Examinations 3,052 3,158 3,104

Total 7,399 7,577 7,755

FDIC Examinations 2004-2006

15
CAMELS

 rating of 4 or 5), compared to the same number of problem 

institutions with total assets of $6.6 billion on December 31, 2005. This 

constituted a 28.7 percent year-over-year increase in the total assets 

in problem institutions. During 2006, 38 institutions with aggregate 

assets of $4.7 billion were removed from the list of problem fi nancial 

institutions, while 38 institutions with aggregate assets of $7.8 billion 

were added to the list of problem fi nancial institutions. The FDIC is 

the primary federal regulator for 27 of the 51 problem institutions.

During 2006, the Corporation issued the following formal and informal 

corrective actions to address safety and soundness concerns: 29 Cease 

and Desist Orders; one Written Agreement; and 146 Memoranda of 

Understanding. Of these actions issued, eight Cease and Desist Orders, 

one Written Agreement and 21 Memoranda of Understanding were 

issued based on apparent violations of the Bank Secrecy Act.

As of December 31, 2006, four FDIC-supervised institutions were 

assigned a “4” rating for compliance; no institutions were assigned 

a “5” rating. All of the “4”- rated institutions were examined in 

2006, and Memoranda of Understanding are currently being fi nalized 

to address the FDIC’s examination fi ndings. In addition, the FDIC 

developed and began using new screening tools in 2006 to identify 

those FDIC-supervised institutions with mortgage lending disparities, 

based upon “higher rate” pricing information supplied by these 

institutions under the Home Mortgage Disclosure Act (HMDA), 

and to assess whether the disparities in loan pricing and denial rates 

resulted from discriminatory lending or refl ected other factors, such 

as creditworthiness, underwriting or other non-discriminatory criteria.3

Compliance examinations were scheduled for all of the institutions 

with identifi ed lending disparities to determine whether those 

disparities were the result of discriminatory lending. 

The FDIC’s Large Bank Program was established to address the unique 

challenges associated with supervising and insuring the deposits of large 

and complex institutions. A signifi cant share of the assets and insured 

deposits of the banking industry are today held in a small number of 

large institutions. The Program ensures a consistent approach to large 

2 The CAMELS composite rating represents the adequacy of Capital, the quality of Assets, the capability 

 of Management, the quality and level of Earnings, the adequacy of Liquidity, and the Sensitivity to market 

 risk, and ranges from “1” (strongest) to “5” (weakest).

3 The Federal Reserve Board began requiring covered institutions to report “higher rate” pricing information

 in their HMDA reports in 2004.

Large Complex 

Financial 

Institution 

Program

16
supervisory activities for large banks. In 2006, guidelines were developed 

to enhance the FDIC’s risk-monitoring program for large banks with 

assets greater than $50 billion. Monitoring and assessment activities 

also continued in 2006 to ensure internal and industry preparedness for 

the implementation of Basel II. Training on credit and operational risk 

was conducted for regional and interagency personnel, and numerous 

“supervisory working group” meetings were held with foreign regulatory 

authorities to address Basel II home-host and cross-border issues.

In 2006, an application for deposit insurance fi led by a very large retailer 

on behalf of a proposed Utah industrial loan company (ILC) generated 

signifi cant public interest. In April, the FDIC held three days of public 

hearings on the application. Nearly 70 representatives of fi nancial 

institutions, trade associations, advocacy groups, the retailer, and 

others made presentations at the hearing. In addition, the FDIC 

received written statements from 16 parties who did not request 

an opportunity to present during the hearings. 

As a result of that interest as well as congressional interest and reviews 

by the GAO and OIG, the FDIC initiated a comprehensive policy review 

of ILCs. On July 28, 2006, the Board imposed a moratorium extending 

through January 31, 2007, on the acceptance, approval, or denial of 

deposit insurance applications and change in control notices submitted 

by, or on behalf of, any ILC. The purpose of the moratorium was to 

permit the Corporation to evaluate industry developments; the various 

issues, facts and arguments raised regarding the ILC charter; whether 

there are emerging safety and soundness issues or policy issues 

involving ILCs or other risks to the insurance fund; and whether 

statutory, regulatory or policy changes should be made in the FDIC’s 

oversight of ILCs in order to protect the Deposit Insurance Fund or 

important congressional objectives.

The FDIC believes that public participation provides valuable insight 

into the issues presented by the recent trends and changes in the ILC 

industry. Accordingly, in order to obtain the public’s insights, the FDIC 

invited comments on the ILC industry during a 45-day period that ended 

on October 10, 2006. In its Request for Public Comment, the FDIC 

posed 12 questions that sought public input on various topics, including 

the current legal framework of ILCs as well as the possible benefi ts, 

risks and supervisory issues associated with ILCs. At year-end 2006, 

eight ILC-related applications for deposit insurance and two change 

in control notices were pending. 

Industrial 

Loan 

Companies

17
provision of these services.

Advisory Committee on Economic Inclusion 

This Committee was created to provide the FDIC with advice and 

recommendations on important initiatives focused on expanding 

access to banking services by underserved populations and also explore 

ways to encourage the banking industry to adopt suitable products and 

marketing strategies to compete with alternative high-cost providers. 

Alliance for Economic Inclusion (AEI) 

The AEI was created to work with fi nancial institutions and other 

partners to bring those currently unbanked and underserved into the 

fi nancial mainstream. The AEI will focus on expanding banking services 

in all underserved markets, including low- and moderate-income 

neighborhoods, minority communities and rural areas. 

Affordable Small-Dollar Loan Guidelines 

A draft of the guidelines, targeted to the banking industry, was issued for 

public comment on December 4, 2006. The draft guidelines suggest ways 

the banking industry can make affordable short-term loan products more 

accessible to customers, helping to build long-term, profi table multipleaccount relationships. The guidelines focus on product development and 

underwriting, and include information on tools such as consumer fi nancial 

education and savings that may address longer term fi nancial issues. 

The FDIC expects to fi nalize the guidelines in early 2007.

Military Bank Initiative 

In late 2006, the FDIC began working closely with the banking industry 

to explore ways to make affordable short-term loan products more 

accessible to military personnel who frequently turn to high-cost providers

for their fi nancial services needs and to encourage individual and 

household savings by these borrowers. The FDIC established contact 

with the Association of Military Banks of America (AMBA) and more 

than 125 banks located near military bases. 

Nontraditional Mortgage Products 

In 2006, the FDIC became increasingly concerned with the expansion of 

nontraditional mortgage products and the potential risk posed by these 

products to the DIF. While these products, which are also referred to as 

“alternative” or “exotic” mortgage loans, have been available for many 

years, the number of institutions offering them has expanded rapidly in 

recent years. To address these concerns, the FDIC implemented certain 

18
risks associated with these loan products. The guidance covers three 

primary areas: loan terms and underwriting standards, portfolio and risk 

management practices, and consumer protection issues. 

Since the Gulf Coast hurricanes of 2005, the FDIC has worked with 

other federal and state regulatory agencies to address policy issues that

arose due to the severity and scale of those events. In 2006, the agencies 

issued examiner guidance that outlines examination procedures for 

assessing the fi nancial condition of institutions adversely affected 

by the hurricanes. Working through the Federal Financial Institutions 

Examination Council (FFIEC), the agencies also published and distributed 

to insured fi nancial institutions a booklet entitled Lessons Learned from 

Hurricane Katrina: Preparing Your Institution for a Catastrophic Event. 

This booklet compiles the experiences of bank offi cials in the aftermath 

of these hurricanes and offers insights to those who are responsible 

for devising and implementing an institution’s disaster recovery and 

business continuity plans.

In October 2006, the FDIC and NeighborWorks®

 America jointly 

released a new homeownership and fi nancial counseling guide called 

Navigating the Road to Housing Recovery in the Gulf Coast. The guide 

is designed for evacuees who are now beginning to receive federal and 

state fi nancial assistance to rebuild or relocate. It was a focal point of 

two conferences held in late 2006, the “Gulf Coast Housing Summit – 

Strategies for Redeveloping Communities and Rebuilding Lives,” jointly 

sponsored by the FDIC and NeighborWorks®

 America in New Orleans, LA,

and another housing conference sponsored by Back Bay Mission in 

Biloxi, MS. The FDIC, in cooperation with NeighborWorks® and an array 

of local partners, will schedule train-the-trainer sessions through early 

2007 to develop 300 potential homeownership counselors.

The FDIC has long recognized the importance of minority depository 

institutions in promoting the economic viability of minority and 

underserved communities. In August 2006, the FDIC hosted the fi rst 

“National Minority Depository Institution Conference” in Miami, FL, 

with attendance from more than 100 bankers; representatives from the

Offi ce of the Comptroller of the Currency, the Federal Reserve and the

Offi ce of Thrift Supervision; and several private-sector and industry trade

group representatives. The conference addressed topics of interest to 

the minority banking community, with particular emphasis on a shared 

commitment to expanding fi nancial services available to minority and 

underserved communities; developing coalitions to improve minority 

Hurricane 

Recovery 

Assistance

Minority 

Depository 

Institutions 

19
institutions face. A second national conference is planned for 2007. 

During 2006, an FDIC task force also assisted three minority institutions 

headquartered in New Orleans, LA, and severely impacted by Hurricane 

Katrina in improving their liquidity by securing $22 million in deposit 

pledges from Utah-based ILCs. The ILCs also provided $123,000 in 

direct cash donations to assist these institutions in meeting the housing 

and other needs of their employees. 

The FDIC has taken a leadership role in ensuring that the fi nancial 

sector – a critical part of the infrastructure of the United States – 

is prepared for a fi nancial emergency. As a member of the Financial 

and Banking Information Infrastructure Committee (FBIIC), the FDIC 

has sponsored a series of outreach meetings titled “Protecting the 

Financial Sector: A Public and Private Partnership.” During 2006, 

these Homeland Security meetings were held in 22 cities across the 

United States. These meetings provided members of the fi nancial 

sector with the opportunity to communicate with senior government 

offi cials, law enforcement personnel, emergency management 

personnel and private sector leaders about emergency preparedness. 

Homeland Security meetings are planned for 11 cities in 2007.

The FDIC chairs the FFIEC Bank Secrecy Act/Anti-Money Laundering 

(BSA/AML) Working Group. Under the auspices of the BSA/AML Working 

Group, the FDIC, the other federal banking agencies, and FinCEN 

updated the FFIEC BSA/AML Examination Manual in July 2006. The 

revised manual refl ects the ongoing commitment of the federal banking 

agencies and FinCEN to provide current and consistent guidance on 

risk-based policies, procedures, and processes for banking organizations 

to comply with the BSA and safeguarding operations from money 

laundering and terrorist fi nancing. Following the release of the manual, 

the FDIC coordinated and hosted four interagency conference calls 

for the banking industry and examination staff regarding changes to 

the manual. Over 1,500 examiners and 10,650 bankers and industry 

representatives participated in those outreach events. During 2006, 

the FDIC also participated in more than 145 additional industry outreach 

and regulatory training events nationwide relating to BSA/AML topics.

The FDIC continued to take a leadership role in consumer education 

initiatives related to identity theft with a public education campaign that 

included sponsoring identity theft symposia focusing on e-commerce. 

The symposia, held in San Francisco, CA, Mesa, AZ, and Miami Beach, FL,

Homeland 

Security 

Bank Secrecy 

Act

Cyber Fraud 

and Financial 

Crimes

20
Other major accomplishments during 2006 in combating identity theft 

included the following:

• Assisted fi nancial institutions in identifying and shutting down 

 approximately 900 “phishing” Web sites. The term “phishing”–

 as in fi shing for confi dential information – refers to a scam that 

 encompasses fraudulently obtaining and using an individual’s 

 personal or fi nancial information.

• Issued 342 special alerts of reported cases of counterfeit or 

 fraudulent bank checks.

• Released an online training tool entitled “Don’t Be an On-line 

 Victim: How to Guard Against Internet Thieves and Electronic 

 Scams” (available through the FDIC’s Web site and on CD-ROM).

• Participated in the President’s Identity Theft Task Force and fi ve 

 of its primary subgroups.

Increasing globalization and interdependence heighten the potential 

for fi nancial and economic instability to transcend national geographic 

boundaries. The promotion of sound, stable banking systems abroad is 

a key ingredient for greater global prosperity and stability which, in turn, 

will benefi t the U.S. fi nancial system and the banking public. The FDIC 

created the Offi ce of International Affairs in 2006 to coordinate the FDIC’s 

international activities with a focus on building strong relationships with 

foreign regulators and deposit insurers, other U.S. government entities 

and international organizations. The programs overseen by the offi ce 

provide training, expert consultation, and technical assistance to foreign 

deposit insurers, bank supervisory authorities and other foreign government agencies to support the development and maintenance of effective 

deposit insurance programs and stable, sound banking systems worldwide.

The FDIC investigates consumer complaints about FDIC-supervised 

institutions and answers inquiries from the public about consumer 

protection laws and banking practices. In 2006, the FDIC received 9,652 

written complaints, of which 3,442 were against state nonmember 

institutions. The Corporation responded to over 97 percent of these 

complaints within corporate timeliness standards. The FDIC also responded 

to 3,870 written and 4,188 telephone inquiries from consumers and 

members of the banking community about consumer protection issues. 

Offi ce of 

International 

Affairs

Consumer 

Complaints 

and Inquiries

21
Thrift Supervision, Offi ce of the Comptroller of the Currency, National 

Credit Union Administration, and the Federal Trade Commission. 

Discussions included best practices for investigating and responding 

to consumer complaints, banking practices, and fi nancial trends 

that have and will continue to challenge consumers in 2006 and 

beyond. 

An important part of the FDIC’s role in insuring deposits and protecting 

the rights of depositors is its responsibility to ensure that bankers 

and consumers have access to accurate information about the FDIC’s 

deposit insurance rules. The FDIC has an extensive deposit insurance 

education program consisting of seminars for bankers, electronic tools 

for estimating deposit insurance coverage, and written and electronic 

information targeting both bankers and consumers. The FDIC also 

responds directly to inquiries from bankers and the public about 

deposit insurance. During 2006, the FDIC responded to over 86,134, 

or 99 percent, of written and telephone inquiries from bankers and 

consumers about the FDIC’s deposit insurance program and insurance 

coverage issues within the time frames established by policy. This was 

an increase of approximately 34 percent over the number of inquiries 

received in 2005, in large part due to the enactment of new coverage 

limits as part of deposit insurance reform.

In 2006, the FDIC also completed development of Spanish-language 

versions of two of its most popular educational resources for consumers 

and bankers, a Spanish language version of EDIE (available on the 

FDIC’s Web site beginning in early 2007) and a 30-minute Spanishlanguage video for bank employees and customers (now available on 

the FDIC’s Web site) that provides an overview of the FDIC’s rules and 

requirements for deposit insurance coverage, with specifi c emphasis 

on the most common account ownership categories used by individuals 

and families. 

The FDIC continued publication of its quarterly consumer newsletter, 

FDIC Consumer News, which covers a wide range of fi nancial topics of 

interest to consumers. Three special age-based issues of FDIC Consumer 

News – for seniors, young adults and teens – were published during 

the year. The how-to fi nancial guide for seniors won an Achievement in 

Consumer Education Award from the National Association of Consumer 

Agency Administrators. Current and past issues of FDIC Consumer News

are available online at www.fdic.gov/consumernews. 

Deposit 

Insurance 

Education

22
in a computerbased instruction version. In 2006, the FDIC introduced 

the Russian language, large print and Braille versions of Money Smart. 

The large print and Braille versions are the fi rst fi nancial education program 

specifi cally targeted for individuals with visual impairments. Since its 

inception, over 864,000 individuals (including approximately 207,000 

in 2006) have participated in Money Smart classes and approximately 

128,000 of these participants have subsequently established new banking 

relationships. 

During 2006, the FDIC also undertook 370 community development, 

technical assistance and outreach activities. These activities were 

designed to promote: awareness of investment opportunities to 

fi nancial institutions, access to capital within communities, knowledgesharing among the public and private sector, and wealth building 

opportunities for families. Representatives throughout the fi nancial 

industry and their stakeholders collaborated with FDIC on a broad range 

of initiatives structured to meet local and regional needs for fi nancial 

products and services, credit, asset-building, affordable housing, small 

business and micro-enterprise development and fi nancial education.

The FDIC has the unique mission of protecting depositors of insured 

banks and savings associations. No depositor has ever experienced a loss 

on the insured amount of their deposit in an FDIC-insured institution due 

to a failure. Once an institution is closed by its chartering authority – the 

state for state-chartered institutions, the Offi ce of the Comptroller of the 

Currency (OCC) for national banks and the Offi ce of Thrift Supervision 

(OTS) for federal savings associations – the FDIC is responsible for 

resolving that failed bank or savings association. The FDIC gathers data 

about the troubled institution, estimates the potential loss to the insurance 

fund from various resolution alternatives, solicits and evaluates bids from 

potential acquirers, and recommends the least-costly resolution method 

to the FDIC’s Board of Directors.

For the second consecutive calendar year, there was no failure of an 

insured depository institution in 2006, further extending the longest 

period in the history of the FDIC during which no insured institution 

failed – a record 31 months. The Corporation’s remaining receivership 

management workload also continued to decline. The accompanying 

chart provides liquidation highlights and trends for the past three years.

Development

Receivership Management

Resolving 

Financial 

Institution 

Failures 

23
The FDIC must ensure that it has the tools and strategies necessary 

to fulfi ll its missions as deposit insurer and receiver for all insured banks 

and thrifts. As the banking industry has become more concentrated 

and as larger insured institutions have grown signifi cantly, the FDIC has 

undertaken a number of concrete steps to enhance its capabilities to 

manage the resolution of a large bank. Some of the initiatives involved 

in this ongoing process are contingency planning exercises, system and 

process improvements for determination of deposit insurance claims 

and management of failing bank assets, consultations with domestic and 

international regulators, improvements to the FDIC’s supervisory program 

for larger banks, and the designation of internal and external expertise to 

focus on larger bank issues. The Claims Administration System (CAS), 

described in the following section, is one of these initiatives. This effort 

will continue and evolve as the challenges change in the future. 

The FDIC is taking advantage of the hiatus in resolution activity by 

modernizing the way it determines the insurance status of depositors 

in the event of failure by streamlining its business processes and 

modernizing the internal systems used to facilitate a deposit insurance 

determination through improved use of current technology. This 

includes development and implementation of a new insurance 

determination system called the Claims Administration System (CAS) 

to be implemented in 2008, which will provide an integrated solution 

that will meet the current and future deposit insurance determination 

needs of the FDIC. The new system will minimize the potential for FDIC 

losses, reduce any spillover effects that could lead to systemic risks, 

preserve franchise value, and produce deposit insurance results in 

a timely manner in order to quickly provide funds to claimants.

Total Resolved Banks 0 0 3

Assets of Resolved Banks $ 0.00 $ 0.00 $ 0.15

Total Resolved Savings Associations 0 0 1

Assets of Resolved Savings Associations $ 0.00 $ 0.00 $ 0.01

Net Collections from Assets in Liquidation■$ 0.17 $ 0.37 $ 0.38

Total Assets in Liquidation■$ 0.35 $ 0.44 $ 0.61

Total Dividends Paid ■$ 0.17 $ 0.44 $ 0.38

Savings Over Cost of Liquidation▼ $ 0 $ 0 $ 11.6 million

No failures in 2005 and 2006.

Includes activity from thrifts resolved by the former Federal Savings and Loan Insurance Corporation and the 

Resolution Trust Corporation. 

Least Cost Test Savings.

●

■

▼

Large Bank 

Contingency 

Planning

Claims 

Modernization 

Project

24
institution. Once a claim is deemed viable and costeffective to pursue, 

the FDIC initiates legal action against the appropriate parties. The FDIC 

strives to make a decision to close or pursue 80 percent of all potential 

claims within 18 months of the failure date.

During 2006, the FDIC recovered approximately $36.2 million from 

these professional liability suits. In addition, as part of the sentencing 

process for those convicted of criminal wrongdoing against failed 

institutions, the court may order a defendant to pay restitution 

to the receivership. The FDIC, working in conjunction with the 

U.S. Department of Justice, collected approximately $10.5 million 

in criminal restitution payments during the year. The FDIC’s caseload 

at the end of 2006 included investigations, lawsuits and ongoing 

settlement collections involving 13 claims and 95 other active collection 

matters, down from 127 at the beginning of 2006. At the end of 2006, 

there were 814 pending restitution orders, down from 995. This includes 

orders won by the former Resolution Trust Corporation for which the 

FDIC assumed responsibility on January 1, 1996.

Although the FDIC’s focus in recent years has shifted from resolving 

large numbers of failed institutions to addressing existing and emerging 

risks in insured depository institutions, the FDIC continues to protect 

depositors and other stakeholders of those institutions that fail. The 

FDIC’s ability to attract healthy institutions to assume deposits and 

purchase assets of failed banks and savings associations minimizes 

the disruption to customers and allows some assets to be returned 

to the private sector immediately. Assets remaining after resolution 

are liquidated by the FDIC in an orderly manner, and the proceeds are 

used to pay creditors, including depositors whose accounts exceeded 

the insured limit. During 2006, the FDIC paid dividends of 80.2 percent 

of the deposit amount exceeding the insured limit, which represents 

an increase of 2.3 percent from 2005.

The FDIC recognizes that it must effectively manage its human, fi nancial, 

and technological resources in order to successfully carry out its 

mission and meet the performance goals and targets set forth in its 

annual performance plan. The Corporation must align these strategic 

resources with its mission and goals and deploy them where they are 

most needed in order to enhance its operational effectiveness and 

Protecting 

Insured 

Depositors 

Effective Management of Strategic Resources

25
The FDIC’s employees are its most important resource. The intellectual 

capital supplied by FDIC employees is the single most important 

contributor to achieving the Corporation’s mission of maintaining public 

confi dence in our nation’s fi nancial system. As such, the FDIC strives 

to be the best employer within the fi nancial regulatory community and 

pursues human capital programs and strategies that will enable it to 

attract, develop and retain a highly skilled, diverse, and results-oriented 

workforce.

The FDIC has a human capital framework that guides its human 

capital activities. Using this framework as a guide, the Corporation 

continues to develop and maintain a workforce that is highly functional 

and cross-trained in multiple disciplines and stands ready to redirect 

its attention and efforts in response to changes in the banking industry 

or changes in workload priorities. 

Corporate Employee Program

Development and implementation of the new Corporate Employee 

Program (CEP) continued in 2006. The program emphasizes cross-training 

of employees at all levels to provide greater fl exibility to be able to 

respond to changes in workload as well as unexpected external events. 

During the past year, the primary focus was on the implementation of 

a new recruiting strategy for entry-level employees and refi nement of 

the fi rst-year training program under which new employees are exposed 

to each of the Corporation’s three major business lines. By the end of 

2006, almost 200 employees had begun the three-year career internship 

and training program that is the core component of the CEP and will 

in the future constitute the primary source of new employees for the 

Corporation’s business divisions. 

Employee Learning and Growth

The Corporation emphasizes continuous employee learning and growth.

During 2006, the Corporation fi nalized plans for the 2007 implementation 

of the new Professional Learning Account program that will give 

employees a greater role in planning their career development and 

provide substantially increased funding for external training. The 

Corporation also began to increase its emphasis on industry-recognized 

professional certifi cations and completed pilot tests of two new 

internally-developed certifi cate programs covering Bank Secrecy Act/

Anti-Money Laundering, and Resolutions and Receivership Claims. 

A career path for large complex bank specialists will be explored, and 

Human 

Capital 

Management

26
Succession Management

The FDIC will have the opportunity over the next decade to substantially 

reshape its workforce in conjunction with the projected retirements of 

a large number of employees from the “baby boom” generation. To 

proactively plan for and address these projected retirements, the FDIC 

developed two succession management programs in 2006: the Executive 

Talent Review and the Corporate Executive Development Program. 

These programs were designed to assess executive leadership strength, 

identify potential skill set shortages or gaps and then institute strategies 

for closing these gaps, including rigorous leadership development 

programs. In late 2006, the FDIC’s senior leadership conducted an 

initial “talent review” of all of its executive managers to determine 

where there may be gaps in the availability and skills of qualifi ed 

successors for key executive positions. This process identifi ed a number 

of “at risk” positions – those in which the incumbents were likely to leave 

in the near future with no or few obvious internal candidates available 

to replace them. In 2007, the Corporation will develop strategies to fi ll 

these potential succession gaps for positions with a high risk of loss in 

the near term. The talent review process will also be extended to assess 

potential succession in management gaps for supervisory and managerial 

positions as well as senior technical professionals. 

Information technology (IT) resources are one of the most valuable 

assets available to the FDIC in fulfi lling its corporate mission. The FDIC 

operates a nationwide computing network and maintains approximately 

270 application systems through which employees perform their duties. 

IT Transformation

For the past several years, the Corporation has been engaged in a major 

effort to transform and improve its IT program. In 2006, the IT program 

continued to evolve as it continued to implement key elements of 

its transformation plan. The Corporation adopted the Rational Unifi ed 

Process® as its new system development life cycle methodology and 

customized it to meet the FDIC’s unique IT project environment.

E-Exam Programs

In 2006, the FDIC also implemented an e-Exam Policy, including related 

security procedures, for use in conducting examination activities at 

institutions utilizing an electronic exchange of documents/data with the 

FDIC. A signifi cant component of the e-Exam Policy involves the fl exibility 

to increase the amount of examination work conducted off-site. Factors 

Information 

Technology 

Management

27
electronically.

E-Government

The FDIC continued to collect quality and timely information in 2006 

with the use of FDICconnect, the secure Web site that facilitates 

electronic communication with FDIC-insured institutions. In 2006, 

over 400,000 transactions were completed by fi nancial institutions 

using FDICconnect.

Central Data Repository

The Federal Financial Institutions Examination Council (FFIEC), which 

includes the FDIC, won a 2006 award from Government Computer 

News for outstanding and innovative use of IT in government for the 

successful launch of the new Central Data Repository (CDR) to collect 

Call Report data using XBRL (eXtensible Business Reporting Language). 

The CDR project was also awarded the Chief Information Offi cer’s Top 

100 award for its outstanding work using XBRL for fi nancial reporting.

Enhanced Information Security Program

The FDIC’s information security program seeks to proactively assure 

the integrity, confi dentiality and availability of corporate information 

requiring an ongoing commitment by employees throughout the 

organization. In 2006, the information security program continued 

its ongoing cycle for assessing risks, developing and implementing 

effective security procedures and monitoring the effectiveness 

of those procedures.

The FDIC continued to enhance its IT Privacy Program in 2006 with 

an emphasis on protecting personally identifi able information (PII) 

from unauthorized use, access, disclosure or sharing, and protecting 

associated information systems from unauthorized access, modifi cation, 

disruption or destruction. Initiatives undertaken during the year included 

the following: 

• Developing an overarching privacy directive. 

• Developing a strategy for the protection of PII processed, stored, 

 transmitted or accessed by FDIC contractors, and ensuring 

 appropriate assessment of the security of data. 

• Continuing the review and remediation of PII in FDIC application 

 systems. 

Corporate 

Privacy 

Program 

28
• Continuing to participate in the Offi ce of Management and Budget 

 Privacy Work Group. 

During 2006, the FDIC continued work on its Emergency Preparedness 

Program, and made improvements to the Emergency Response Plan 

(ERP) and Business Continuity Plan (BCP). Completed initiatives included 

the development of a computer-based instruction module on emergency 

preparedness for all FDIC personnel to be activated in early 2007; 

expansion and improvement of FDIC alternate site facilities; expansion 

of FDIC emergency notifi cation systems to all regional and area 

offi ces; revision of both the ERP and BCP; and participation in the 

Federal government’s Forward Challenge simulation exercise. Other 

accomplishments included the conduct of additional classroom training 

on emergency preparedness for employees, contractors and fl oor 

marshals; shelter-in-place and evacuation drills; and tabletop exercises 

at all headquarters and regional offi ce locations. Disaster recovery 

testing of FDIC’s key information technology resources was also 

performed.

Emergency 

Preparedness 

Program

29
 

 4,000

 3,500

 3,000

 2,500

 2,000

 1,500

 1,000

 500

 0

1960 1970 1980 1990 2000

 FDIC-DIF Insured Deposits (estimated 1960-2006)●

Dollars in billions

2006

• All amounts are year-end except 2006 is at 9/30/06.

 Prior to 2006, amounts represent the sum of separate BIF and SAIF amounts.

 Source: Commercial Bank Call Reports and Thrift Financial Reports.

Resolution Fund (FRF), which fulfi lls the obligations of the former 

Federal Savings and Loan Insurance Corporation (FSLIC) and the former 

Resolution Trust Corporation (RTC). (See the accompanying tables on 

FDIC-DIF Insured Deposits and DIF Insurance Fund Reserve Ratios.) 

For the year 2006, DIF’s comprehensive income totaled $1.6 billion 

compared to $1.1 billion in 2005, a year-over-year increase of 44 percent. 

Excluding the recognition of exit fees earned of $345 million (a one-time 

adjustment), comprehensive income rose by $133 million from a year ago. 

This year-over-year increase is primarily due to a decrease in the unrealized 

loss on available-for-sale (AFS) securities of $348 million, which was 

offset by decreases in both interest earned on U.S. Treasury obligations 

of $101 million and the negative provision for loss of $108 million. 

30
increase in the market yields of the AFS securities. However, the 

lower unrealized loss was partially offset by a decrease in interest 

revenue on U.S. Treasury obligations that resulted from lower 

infl ation compensation on Treasury Infl ation-Protected Securities.

1.45

1.40

1.35

1.30

1.25

1.20

1.15

1.00

0

 DIF Insurance Fund Reserve Ratios (Fund Balances as a Percent of Insured Deposits)

Prior to 2006, amounts represent the sum of separate BIF and SAIF amounts.

3/03 6/03 9/03 12/03 3/04 6/04 9/04 12/04 3/05 6/05 9/05 12/05 3/06 6/06 9/06 

31
over the past fi ve years, and 2006 was no exception. Corporate Operating 

Budget expenses totaled $973 million in 2006, including $961 million for 

ongoing operations and $12 million for receivership funding. During the 

fi ve-year period from 2002 through 2006, the FDIC’s annual Corporate 

Operating Budget expenses declined from $1,189 million to $973 million, 

a reduction of $216 million, or 18 percent, despite the effects of 

infl ation on the FDIC’s costs. That reduction was primarily attributable 

to signifi cant reductions in staffi ng as well as a steady reduction in 

resolutions and receivership activities resulting from the historically 

low number of bank failures.

The FDIC has engaged in a continuing effort to realign staffi ng to refl ect 

reduced workload requirements as it has moved past the banking and 

thrift crisis. Total FDIC staffi ng fell from 6,167 at the beginning of 2002 

to 4,476 at year-end 2006, a 27 percent reduction over fi ve years. As 

a result, spending for salaries and benefi ts decreased by 15 percent, 

from $737 million in 2002 to $626 million in 2006, despite an increase 

of 17.7 percent in the salaries of individual employees during this 

period. 

Cost Reductions 

Realized 

through Staff 

Reductions

 

 

$ Millions 

 1,500

 1,000

 500

 0

 2002 2003 2004 2005 2006 

 $1,189 1,008 1,004 990 973 

 5,430 5,311 5,078 4,514 4,476 

 FDIC Staffing and Operating Expenses 2002-2006

7,000

6,000

5,000

4,000

3,000

2,000

1,000

0

Staff

•

• • • • •

Operating Expenses

Staff

32
interest earned on the funds has increased signifi cantly. As a result, 

the FDIC’s annual spending has dramatically declined as a percentage 

of interest revenue on the DIF and the FRF. The aggregate interest 

revenue of the DIF and FRF grew to $2,392 million in 2006, while 

combined operating and investment budget spending fell to 42 percent 

of interest revenue, down from 52 percent in 2002.

Although its staffi ng realignment was essentially completed in 2006, 

the FDIC will continue to emphasize control of spending in 2007 and 

future years. In December 2006, the Board of Directors approved 

a 2007 Corporate Operating Budget of approximately $1.107 billion, 

including $1.032 billion for ongoing operations. The approved 2007 

budget is 4.6 percent higher than the 2006 Corporate Operating 

Budget. This limited budget increase was required for negotiated 

employee pay increases and included funding for a number of major 

new initiatives, including additional staff for compliance examinations 

and other supervision functions, as well as increased funding for 

employee training, enhanced IT security and privacy programs, and 

completion of system changes required to support the implementation 

of deposit insurance reform. 

Stewardship

2007 Corporate 

Operating 

Budget

33

 

 

$ Millions 

 3,000

 2,000

 1,000

 0

 Total Interest Revenue vs. Operating and Investment Budget Spending

Total Interest Revenue•

Total Budget Spending

•Includes interest revenue from DIF, BIF, SAIF, and FRF funds

 2002 2003 2004 2005 2006 

 $ 2,303 2,095 2,148 2,440 2,392 

 $ 1,190 1,035 1,112 1,052 998 
disciplined process for reviewing proposed new investment projects 

and managing the construction and implementation of approved 

projects. Most of the projects in the current investment portfolio are 

major IT system initiatives. Proposed IT projects are carefully reviewed 

to ensure that they are consistent with the Corporation’s enterprise 

architecture. The project approval and monitoring processes also 

enable the FDIC to be aware of risks to the major capital investment 

projects and facilitate appropriate, timely intervention to address these 

risks throughout the development process. An investment portfolio 

performance review is provided to the FDIC’s Board of Directors 

quarterly.

The Corporation undertook signifi cant capital investments during the 

2003-2006 period, including construction of a major expansion of its 

Virginia Square facility and the implementation of 11 major new IT 

systems. Investment spending totaled $222 million during this period, 

peaking at $108 million in 2004. Spending for investment projects in 

2006 totaled approximately $25 million. During 2006, the Corporation 

completed both the New Financial Environment (NFE) and Virginia 

Square Phase II investment projects. 

34
 Balance Sheet at December 31, condensed 

 D o l l a r s i n T h o u s a n d s 

 2006 2005

Assets

 Cash and cash equivalents $ 2,953,995 $ 3,209,444

Cash and other assets: Restricted for SAIF-member exit fees 

 (Includes cash and cash equivalents of $20.9 million at December 31, 2005) 0 341,656

Investment in U.S. Treasury obligations, net: 

 Held-to-maturity securities 37,184,214 34,253,237

 Available-for-sale securities 8,958,566 9,987,223

 Interest receivable on investments and other assets, net 747,715 737,566

 Receivables from resolutions, net 538,991 533,474

 Property and equipment, net 376,790 378,064

 Total Assets $ 50,760,271 $ 49,440,664

 Liabilities 

 Accounts payable and other liabilities $ 154,283 $ 296,540

Postretirement benefit liability 129,906 0

 Contingent liabilities for: 

 Anticipated failure of insured institutions 110,775 5,366

 Litigation losses 200,000 200,500

 SAIF-member exit fees and investment proceeds held in escrow 0 341,656

 Total Liabilities 594,964 844,062

 Commitments and off-balance-sheet exposure 

 Fund Balance

 Accumulated net income 49,929,226 48,190,062

 Unrealized gain on available-for-sale securities, net 233,822 406,540

 Unrealized postretirement benefit gain 2,259 0

 Total Fund Balance 50,165,307 48,596,602

 Total Liabilities and Fund Balance $ 50,760,271 $ 49,440,664

35
Statement of Income and Fund Balance for the Years Ended December 31, condensed

 D o l l a r s i n T h o u s a n d s 

 2006 2005

Revenue

 Interest on U.S. Treasury obligations $ 2,240,723 $ 2,341,505

 Exit fees earned 345,295 0

 Assessments 31,945 60,884

 Other revenue 25,565 18,073

 Total Revenue 2,643,528 2,420,462

Expenses and Losses

 Operating expenses 950,618 965,652

 Provision for insurance losses (52,097) (160,170)

 Insurance and other expenses 5,843 3,821

 Total Expenses and Losses 904,364 809,303

 Net Income 1,739,164 1,611,159

 Unrealized loss on available-for-sale securities, net (172,718) (521,350)

 Unrealized postretirement benefit gain 2,259 0

 Comprehensive Income 1,568,705 1,089,809

 Fund Balance - Beginning 48,596,602 47,506,793

 Fund Balance - Ending $ 50,165,307 $ 48,596,602

36
 Statement of Cash Flows for the Years Ended December 31, condensed 

 D o l l a r s i n T h o u s a n d s 

 2006 2005

Operating Activities

 Net Income: $ 1,739,164 $ 1,611,159

 Adjustments to reconcile net income to net cash provided by operating activities: 

 Amortization of U.S. Treasury obligations 599,274 834,118

 Treasury inflation-protected securities (TIPS) inflation adjustment (109,394) (345,023)

 Depreciation on property and equipment 52,919 56,006

Provision for insurance losses (52,097) (160,170)

Terminations/adjustments of work-in-process accounts 433 178

Exit fees earned (345,295) 0

 Change in Operating Assets and Liabilities:

 Decrease/(Increase) in unamortized premium 

 and discount of U.S. Treasury obligations (restricted) 1,359 (6,565)

 (Increase) /Decrease in interest receivable and other assets (14,635) 5,590

 Decrease in receivables from resolutions 147,258 348,173

(Decrease)/Increase in accounts payable and other liabilities (166,822) 27,145

 Increase in postretirement benefit liability 129,906 0

 (Decrease) in contingent liabilities for litigation losses 0 (182)

 Increase in exit fees and investment proceeds held in escrow 3,639 28,556

 Net Cash Provided by Operating Activities 1,985,709 2,398,985

 Investing Activities

 Provided by:

 Maturity of U.S. Treasury obligations, held-to-maturity 5,955,000 8,220,000

 Maturity of U.S. Treasury obligations, available-for-sale 845,000 1,830,000 

 Used by:

 Purchase of property and equipment (11,721) (47,197)

 Purchase of U.S. Treasury obligations, held-to-maturity (9,050,372) (11,693,984)

 Net Cash Used by Investing Activities (2,262,093) (1,691,181)

Net (Decrease)/Increase in Cash and Cash Equivalents (276,384) 707,804

 Cash and Cash Equivalents - Beginning 3,230,379 2,522,575

Unrestricted Cash and Cash Equivalents - Ending 2,953,995 3,209,444

 Restricted Cash and Cash Equivalents - Ending 0 20,935

Cash and Cash Equivalents - Ending $ 2,953,995 $ 3,230,379

37
 Balance Sheet at December 31, condensed

 D o l l a r s i n T h o u s a n d s 

 2006 2005

 Assets

 Cash and cash equivalents $ 3,616,466 $ 3,602,703

 Receivables from thrift resolutions and other assets, net 36,730 38,746

Receivables from U.S. Treasury for goodwill judgments 251,827 0

 Total Assets $ 3,905,023 $ 3,641,449 

 Liabilities 

 Accounts payable and other liabilities $ 5,497 $ 7,799

 Contingent liabilities for litigation losses and other 279,327 257,503

Total Liabilities 284,824 265,302

 Resolution Equity

 Contributed capital 127,453,996 127,007,441

 Accumulated deficit (123,833,797) (123,631,294)

Total Resolution Equity 3,620,199 3,376,147

 Total Liabilities and Resolution Equity $ 3,905,023 $ 3,641,449

38
 Statement of Income and Accumulated Deficit 

 for the Years Ended December 31, condensed

 D o l l a r s i n T h o u s a n d s 

 2006 2005

Revenue

 Interest on U.S. Treasury obligations $ 151,648 $ 98,260

 Other revenue 17,650 24,176

 Total Revenue 169,298 122,436

 Expenses and Losses

 Operating expenses 12,002 24,626

 Provision for losses (19,257) (16,112)

 Goodwill/Guarini litigation expenses 411,056 975,598

 Recovery of tax benefits (34,783) (45,946)

 Other expenses 2,783 10,333

 Total Expenses and Losses 371,801 948,499

 Net (Loss) (202,503) (826,063)

Accumulated Deficit - Beginning (123,631,294) (122,805,231)

Accumulated Deficit - Ending $ (123,833,797) $ (123,631,294)

39
 Statement of Cash Flows for the Years Ended December 31, condensed

 D o l l a r s i n T h o u s a n d s 

 2006 2005

 Operating Activities

 Net (Loss) $ (202,503) $ (826,063)

 Adjustments to reconcile net (loss) to net cash (used by) operating activities: 

 Provision for losses (19,257) (16,112)

 Change in Assets and Liabilities:

 Decrease in receivables from thrift resolutions and other assets 21,273 59,630

 (Decrease)/Increase in accounts payable and other liabilities (2,302) 2,196

 Increase in contingent liabilities for litigation losses and other 21,824 257,104

 Net Cash (Used by) Operating Activities (180,965) (523,245)

 Financing Activities 

 Provided by:

 U.S.Treasury payments for goodwill litigation 194,728 624,564

Net Cash Provided by Financing Activities 194,728 624,564

 Net Increase in Cash and Cash Equivalents 13,763 101,319

 Cash and Cash Equivalents - Beginning 3,602,703 3,501,384

 Cash and Cash Equivalents - Ending $ 3,616,466 $ 3,602,703

40
To the Board of Directors

The Federal Deposit Insurance Corporation

We audited the Federal Deposit Insurance Corporation’s (FDIC) balance sheets as of December 31, 2006 

and 2005, for the two funds administered by FDIC (the Deposit Insurance Fund (DIF) and the FSLIC 

Resolution Fund (FRF)), the related statements of income and fund balance (accumulated defi cit), 

and the statements of cash fl ows for the years then ended, and in our report dated January 31, 2007, 

we expressed an unqualifi ed opinion on those statements.

In that report, we stated that we found the following:

• the fi nancial statements of each fund are presented fairly, in all material respects, in conformity 

 with U.S. generally accepted accounting principles;

• FDIC had effective internal control over fi nancial reporting and compliance with laws and 

 regulations for each fund; and

• no reportable noncompliance with the laws and regulations we tested.

In addition, we referred the reader to note 1 of the DIF’s fi nancial statements that discussed the 

enactment, on February 8, 2006, of the Federal Deposit Insurance Reform Act of 2005 (the Act). 

The Act called for the merger of the Bank Insurance Fund (BIF) and Savings Association Insurance 

Fund (SAIF) into a single deposit insurance fund. In accordance with the Act, on March 31, 2006, 

FDIC established the DIF with the merger of the BIF and SAIF. As further discussed in note 2 to 

DIF’s fi nancial statements, the merger resulted in a new reporting entity. The fi nancial results of the 

newly formed DIF were retrospectively applied as though they had been combined at the beginning 

of the reporting year as well as for prior periods presented for comparative purposes.

In our opinion, the information set forth in the accompanying condensed fi nancial statements is presented 

fairly, in all material respects, in relation to the fi nancial statements from which it has been derived.

As discussed in our January 31, 2007 report, in our prior year audit, we reported on weaknesses in 

FDIC’s information system controls that increased the risk of unauthorized modifi cation and disclosure 

of critical FDIC fi nancial and sensitive personnel information, disruption of critical operations, and 

loss of assets. During 2006, FDIC corrected many of these weaknesses and implemented mitigating 

controls. These actions enabled us to conclude that the remaining issues, along with other control 

defi ciencies identifi ed during our 2006 audits, do not constitute a signifi cant defi ciency.

We performed our work in accordance with U.S. generally accepted government auditing standards.

David M. Walker

Comptroller General of the United States

January 31, 2007

41
42

Federal Deposit Insurance Corporation

550 17th Street, NW Washington, DC 20429 Deputy to the Chairman and Chief Financial Offi cer

February 8, 2007

Mr. David M. Walker

Comptroller General of the United States

U.S. Government Accountability Offi ce

441 G Street, NW

Washington, DC 20548

Re: FDIC Management Response on the GAO 2006 Financial Statements Audit Report

Dear Mr. Walker:

Thank you for the opportunity to comment on the U.S. Government Accountability Offi ce’s 

(GAO) draft audit report titled, Financial Audit: Federal Deposit Insurance Corporation Funds’ 

2006 and 2005 Financial Statements, GAO-07-371. The report presents GAO’s opinions on the 

calendar year 2006 and 2005 fi nancial statements of the Deposit Insurance Fund (DIF) and the 

Federal Savings and Loan Insurance Corporation Resolution Fund (FRF). The report also presents 

GAO’s opinion on the effectiveness of FDIC’s internal controls as of December 31, 2006, and 

GAO’s evaluation of FDIC’s compliance with selected laws and regulations.

We are pleased to accept GAO’s unqualifi ed opinions on the DIF and the FRF fi nancial statements 

and to note that there were no material weaknesses identifi ed during the 2006 audits. The GAO 

reported that the funds’ fi nancial statements were presented fairly, in all material respects, in 

conformity with U.S. generally accepted accounting principles; FDIC had effective internal 

control over fi nancial reporting and compliance with laws and regulations for each fund; and 

there were no instances of noncompliance with laws and regulations that were tested.

In addition, we appreciate that GAO recognized the improvements that FDIC made over the 

past year to its information systems environment. We believe that our sustained commitment to 

enhancing information systems controls adequately addressed the concerns that GAO highlighted 

in the prior year report, thus enabling GAO to conclude that the remaining issues related to such 

controls do not constitute a signifi cant defi ciency. Our goal is to maintain an effective information 

security program going forward. Accordingly, we will work diligently to resolve any control 

issues that GAO identifi ed during its 2006 audits, as well as any that may arise in the future.

We look forward to continuing our cooperative working relationship with the GAO in the coming 

year. Our collaborative efforts and open communication at all levels of our organizations should 

ensure continued success. If you have any questions or concerns, please do not hesitate to contact 

me.

Sincerely,

Steven O. App

Deputy to the Chairman and Chief Financial Offi cer
 Deputy to the Chairman 

 and Chief Financial Officer

Steven O. App

Deputy to the Chairman

Alice C. Goodman

 General Counsel

Douglas H. Jones*

Acting General Counsel

Deputy to the Chairman 

 and Chief Operating Officer

John F. Bovenzi

 Division of Finance

Frederick S. Selby

Director

 

 Division of Supervision 

 and Consumer Protection

Sandra L. Thompson

Director

 

 Division of Insurance 

 and Research

Arthur J. Murton

Director 

 Office of 

 Legislative Affairs

Eric J. Spitler

Director 

 Legal 

 Division 

Douglas H. Jones*

Acting General Counsel

 Office of the 

 Ombudsman

Cottrell L. Webster

Ombudsman

 Office of Diversity and 

 Economic Opportunity

D. Michael Collins

Director

 Corporate 

 University

Steven B. Mosier

Acting Chief Learning Officer

 Division of Information 

 Technology

Michael E. Bartell

Director

 Division of 

 Administration

Arleas Upton Kea

Director

 Division of Resolutions 

 and Receiverships

Mitchell L. Glassman

Director

 Office of International

 Affairs

 Fred S. Carns

Director

 

 Office of Enterprise 

 Risk Management

James H. Angel, Jr.

Director 

 Chief of Staff

Jesse O. Villarreal, Jr.

 

 Office of Public Affairs

Andrew B. Stirling

 Acting Director 

 Chief Information Officer 

 and Chief Privacy Officer

Michael E. Bartell

 

 Office of 

 Inspector General

Jon T. Rymer

 Inspector General

 Vice Chairman

Martin J. Gruenberg

 John C. Dugan 

 John M. Reich

 Office of the Chairman

Sheila C. Bair

 Chairman

*Sara A. Kelsey became General Counsel on January 7, 2007.

43
on the FDIC’s Internet home page. This includes the FDIC’s Electronic 

Deposit Insurance Estimator (EDIE), which estimates an individual’s 

deposit insurance coverage; the Institution Directory – fi nancial profi les 

of FDIC-insured institutions; Community Reinvestment Act evaluations 

and ratings for institutions supervised by the FDIC; Call Reports – banks’ 

reports of condition and income; and Money Smart, a training program 

to help individuals outside the fi nancial mainstream enhance their money 

management skills and create positive banking relationships. Readers also 

can access a variety of consumer pamphlets, FDIC press releases, speeches 

and other updates on the agency’s activities, as well as corporate databases 

and customized reports of FDIC and banking industry information. 

The FDIC Call Center in Washington, DC, is the primary telephone point of 

contact for general questions from the banking community, the public and 

FDIC employees. The Call Center directly, or in concert with other FDIC 

subject-matter experts, responds to questions about deposit insurance 

and other consumer issues and concerns, as well as questions about 

FDIC programs and activities. The Call Center also makes referrals to other 

federal and state agencies as needed. Hours of operation are 8:00 a.m. to 

8:00 p.m. Eastern Time. Information is also available in Spanish. Recorded 

information about deposit insurance and other topics is available 24 hours 

a day at the same telephone number.

FDIC publications, press releases, speeches and congressional testimony, 

directives to fi nancial institutions, policy manuals and other documents 

are available on request or by subscription through the Public Information 

Center. These documents include the Quarterly Banking Profi le, FDIC 

Consumer News and a variety of deposit insurance and consumer 

pamphlets.

The Offi ce of the Ombudsman (OO) is an independent, neutral and 

confi dential resource and liaison for the banking industry and the general 

public. The OO responds to inquiries about the FDIC in a fair, impartial 

and timely manner. It researches questions and complaints primarily from 

bankers. The OO also recommends ways to improve FDIC operations, 

regulations and customer service.

FDIC Call Center 

877-275-3342 

(877-ASK FDIC)

703-562-2222

Hearing Impaired: 

800-925-4618

Public Information Center • 3501 Fairfax Drive • Room E-1002 • Arlington, VA 22226

877-275-3342 

(877-ASK FDIC) 

703-562-2200

Fax:

703-562-2296 

publicinfo@fdic.gov

Offi ce of the Ombudsman • 3501 Fairfax Drive • Room E-2022 • Arlington, VA 22226

877-275-3342 

(877-ASK FDIC) 

Fax:

703-562-6057

ombudsman@fdic.gov

44
Memphis Area Office

5100 Poplar Avenue

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 (901) 685-1603

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, g

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Alabama Virginia

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 (312) 382-7500

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, 

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Boston Area Office

 15 Braintree Hill Office Park

 Suite 100

 Braintree, Massachusetts 02184

 (781) 794-5500

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 San Francisco Regional Office

 25 Ecker Street

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 (415) 546-0160

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45
Cover Photograph and Book Design: FDIC/DOA/CSB/Graphic Design Unit

46
Bank Statistical Data

Current Economic and Bank Analysis

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Bank Examinations

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www.fdic.gov