State banking director says oversight helps keep system secure

Some free advice can be expensive – especially if you’re still digging out from those tips you got about Internet start-up stocks.

Other advice can be actually helpful – as perhaps when you’re talking to someone who’s not on commission.

Scott Jarvis is director of the state Department of Financial Institutions in Olympia. The agency he heads oversees 82 state-chartered banks, plus credit unions, mortgage brokers, payday loans and sales of securities and investments.

Speaking last week, he said he’s concerned that the current stampede of legislation will lead to more federal control and less of a role for state regulators “when the states have been at the forefront of regulation.”

That oversight, he said, should bolster confidence among people of the state.

Within the DFI, Brad Williamson is the director of banks. He said Washington Mutual was “by far the greatest source of complaints we had,” with those complaints centering around the servicing of mortgages.

As WaMu began acquiring new banks, Williamson said, “they couldn’t merge their systems. There were horror stories over the last decade. They had real challenges.

Today, Washington Mutual is gone. Part of the legacy it leaves – along with worried depositors and disappointed shareholders – is a perception that other institutions are similarly troubled.

“You hear what happens in Nevada and California, it’s a perception,” Jarvis said. “Then you see a gas line in the South. Then you put world events into play. Doubt is a scary thing.”

But perspective helps, especially about the safety of banks and the protections offered by the Federal Deposit Insurance Corp.

“The FDIC has never lost a dime,” Jarvis said, “and banks do have a way to provide coverage above (the limits). People need to talk to their bankers. You’ve got to educate yourself. Start with the DFI Web site (www.dfi.wa.gov).”

Meanwhile, he wants the public to know that his agency is watching closely for any irregularities at state banks.

“On a quarterly basis, we have a pretty good idea,” he said. “We partner with the FDIC. Are we as healthy as we were a year ago? No. But I don’t want to leave the impression there’s a problem out there.”

“Some of the discipline that left, has returned,” said Williamson. “It’s true you can’t get a no-income-verification loan, but that’s a good thing. People were forgetting the fundamentals of lending. Are there folks who can’t get a mortgage? Yes.”

Which may serve as the result of a lesson learned by lenders.

The overwhelming majority of banks in the state remain well capitalized, Williamson said.

Still, said Jarvis, “There has been a measurable increase in the number of state banks we are paying close attention to. Having said that – our banks continue to remain as a group safe, sound and open for business.”

One bank on the Kitsap Peninsula, he said, has had serious challenges with its loan portfolio.

“We’re guardedly optimistic,” he said.

“They’re working diligently to turn things around,” said Williamson.

“We get busy when the national economy suffers,” Jarvis said. “We are busy.”

But not afraid.

“Chicken Little is not here,” he said. “The sky is not falling. Your deposits are safe. Don’t be panicked when you hear that earnings are down. This isn’t 1930. Most banks are doing just fine.”

The department, Jarvis said, has begun hiring additional examiners – and recruiting might be made more difficult as federal regulators also begin recruiting. Soon he expects to reach out to retired examiners, offering them a chance to return to the fray.

And along with cautioning against fear, he said he expects to see a new crop of scams aimed at that fear.

“When people get nervous, the scams come out,” he said. “My advice: Verify, call regulators, check Web sites, talk to someone you trust, ask for references.”

Use common sense, he said.

“Don’t make a move until you know why you’re doing it.”