FDIC was created in 1933 in response to the thousands of bank failures that occurred in the 1920s and early 1930s. FDIC’s mission is to maintain the stability and public confidence in the U.S. financial system by insuring depositor accounts in banks and thrifts, examining and supervising financial institutions, and managing receiverships. Currently, FDIC insures individual accounts at insured institutions for up to $100,000 per depositor and up to $250,000 for certain retirement accounts. FDIC says that since the start of its insurance coverage in January 1934, depositors have not lost any insured funds to a bank failure. Today, FDIC’s obligations are considerable—as of September 2006, 8,743 insured U.S. institutions held $6.47 trillion in domestic deposits, of which an estimated 63.2 percent, or $4.09 trillion, were insured. To protect depositors, FDIC held insurance reserves of $50 billion, as of September 2006. FDIC directly supervises about 5,237 banks and thrifts, more than half of the institutions in a banking system jointly overseen by four federal regulators. By assets, however, FDIC-supervised institutions account for only 18.1 percent of the industry. Banks and thrifts can receive charters from the states or from the federal government; state-chartered banks may elect to join the Federal Reserve System. FDIC’s role as the primary federal regulator is for banks chartered by the states that are not members of the Federal Reserve System. In addition, FDIC is the back-up supervisor for insured banks and thrift institutions that are either state-chartered institutions or are under the direct supervision of one of the other federal banking regulators. FDIC receives no congressional appropriations; it receives funds from premiums that banks and thrift institutions pay for deposit insurance coverage and from earnings on investments in U.S. Treasury securities. FDIC’s five board members (known as directors) manage the agency. FDIC’s chairman manages and directs the daily executive and administrative operations of the agency. The chairman also has the general powers and duties that the chief executive officer for a private corporation usually has, even though FDIC is a federal government agency. Executive and senior FDIC staff report to the chairman directly or indirectly through the Deputy to the Chairman and Chief Operating Officer, or the Deputy to the Chairman and Chief Financial Officer; no other board director has similar authority or responsibility within the agency. The President appoints three of the members, two of whom he designates as the board’s chairman and vice chairman. The other two members, the Comptroller of the Currency and the Director of the Office of Thrift Supervision, serve as ex-officio board members. The three members directly appointed to FDIC’s board are often referred to as inside board directors, while the other two are referred to as outside board directors. FDIC operates principally through three divisions: the Division of Supervision and Consumer Protection, which supervises insured institutions and is responsible for promoting compliance with consumer protection, fair lending, community reinvestment, civil rights, and other laws; the Division of Insurance and Research, which assesses risks to the insurance fund, manages FDIC’s risk-related premium system, conducts banking research, publishes banking data and statistics, analyzes policy alternatives, and advises the board of directors and others in the agency; and the Division of Resolutions and Receiverships, which handles closure and liquidation of failed institutions. Other divisions include the Division of Administration, the Division of Finance, the Legal Division, and the Division of Information Technology (see fig. 1). FDIC currently employs about 4,500 people throughout 6 regional offices, 2 area offices, and 85 field offices that are geographically dispersed, with centralized operations in Washington, D.C. Following the resolution of the banking crisis of the 1980s and early 1990s, FDIC significantly reduced its workforce—down by about 80 percent, from a peak of about 23,000 employees in 1991 to about 4,500 employees as of June 2006. This trend is illustrated in figure 2. A significant portion of the reductions were staff in FDIC absorbed from the former Resolution Trust Corporation (RTC). FDIC’s downsizing generally reduced jobs across the agency, and some occupational categories experienced sizeable reductions in staff. For example, the attorney workforce decreased by 83 percent, from 1,452 attorneys in 1992 to 249 attorneys in 2005. The composition of FDIC’s examination staff also experienced significant change. Although there was a 35 percent decrease in the number of examiners (from 3,305 in 1992 to 2,157 in 2005), the percentage of FDIC’s workforce devoted to examinations increased, from 15 percent in 1992 to 47 percent for 2005. Like other federal banking regulators, FDIC is generally required to conduct full-scope, on-site examinations of institutions it directly supervises at least annually, although it can extend the interval to 18 months for certain small institutions. FDIC’s downsizing activities also resulted in a loss of institutional knowledge and expertise, and FDIC will have to replace a significant percentage of its current, highly experienced executive and management staff due to projected retirements over the next 5 years. An estimated 8 to 16 percent of FDIC’s remaining permanent workforce is projected to retire over the next 5 years. In some FDIC divisions, projected retirements are almost double these percentages. FDIC’s board of directors has a mix of knowledge and skills that contribute diverse perspectives in the board’s decision making, and the board relies on communication with deputies and senior management within FDIC to provide timely and useful information for effective and informed decision making. The board has also established standing committees to conduct certain oversight functions, such as monitoring the implementation of audit report recommendations, to help manage the agency. Further, FDIC’s board of directors has the ability to broadly delegate its authority to allow the agency to operate efficiently. These delegations are extensive and have been reviewed periodically to ensure they are appropriate for FDIC’s current size and structure, and the current banking environment. The literature we reviewed on best practices for boards of directors states that the composition of the board should be tailored to meet the needs of the organization, but there should also be a mix of knowledge and skills. FDIC’s board of directors reflects a mix of knowledge, perspectives, and political affiliations; for example, FDIC’s board includes the directors of the Office of the Comptroller of the Currency and Office of Thrift Supervision as well as a director with experience in state bank supervision. Further, after February 28, 1993, no more than three of the members of the board of directors could be members of the same political party. According to FDIC board members, each director provides a different perspective that contributes to board diversity. Additionally, officials told us that the presence of the outside directors on the board helps to represent the views of their respective agencies during joint rule making. Senior FDIC officials and board directors agreed that the board functions best with a full complement of directors. Vacancies on the board could result in the board not benefiting from the perspectives of a full complement of directors. Board members told us that without a full complement, there would be fewer ideas and opinions during board deliberations. For example, one board member stated that the possible absence of a member with state bank supervisory experience might affect discussions on state banks. However, FDIC board members told us that board vacancies would not negatively affect the daily operation of the agency. According to our standards for internal control, effective communications should occur in a broad sense with information flowing down, across, and up the organization. The literature we reviewed related to best practices for boards of directors suggests that boards need quality and timely information to help them obtain a thorough understanding of important issues. The literature states that board members should receive information through formal channels, such as management reports and committee meetings, and informal channels, such as phone or e-mail discussions. FDIC directors told us that board members are fully aware of and familiar with operations at the agency, frequently communicating and interacting with senior management and staff on a broad range of issues. For example, board directors told us they have regular meetings with various division managers to discuss agency issues. We also observed a November 2006 board meeting, where it appeared from the board members’ few questions and supportive comments to the FDIC staff that the board members were informed of the staff’s recommendations. Directors explained that there is a free flow of information between directors and FDIC senior management and staff as well as between directors and the board chairman. Each director also has a deputy who assists him or her in carrying out his or her duties and responsibilities. With the assistance of their deputies, outside (ex-officio) directors are able to remain engaged in pertinent issues at FDIC. The deputies also assist directors in examining diverse policy issues of concern to the agency, either initiated by the director, or at the request of the chairperson. Also, FDIC management provides the bulk of information that directors receive to make decisions. For example, FDIC management provides briefings to board directors on various issues as well as detailed briefing books in advance of FDIC board meetings so that directors may ask questions or request more information to prepare to provide input and make decisions at board meetings. In one May 2006 board meeting, we observed FDIC staff making brief presentations to the board highlighting various trends and factors that they considered in developing recommended action or inaction for several agenda items. We also reviewed board meeting agendas that outlined substantive issues considered by the board of directors. In one example, the Director of the Division of Supervision and Consumer Protection provided a detailed written overview of a notice of proposed rule making informing board members weeks before the official board meeting.