NPR.

This is the indicator from Planet Money. I'm Whalen Wong.

And I'm Daryl Amboids.

There is more turmoil this week for the financial system. And that has put the spotlight on the

people our government hires to spot red flags at banks and make sure problems get fixed

before they blow up into something bigger. We are talking about bank examiners.

So, down the show, we will examine the work of bank examiners, what they do, what happens

when they're not around, and why we might be running out of them.

To understand how important bank examiners are, you only have to look at what happened

40 years ago with one group of financial institutions called Savings and Loans.

And there was this government office in Arkansas, and it was responsible for supervising

Savings and Loans in five states. In 1983, this office was relocated to Texas and a bunch

of employees quit.

This left the office with just two bank examiners covering nearly 500 Savings and Loans.

It became this kind of natural experiment of what happens when there's suddenly no bank

supervision. Kia Haslitt is managing editor at Bank Director, an industry magazine.

It was still on the bankers themselves to follow the rules.

So this is like maybe a teacher leading the classroom, and the class still actually knows

what they're supposed to do.

But knowing what you're supposed to do doesn't mean that you will do it.

Yes. And according to a research paper by two Federal Reserve economists, what ensued

was basically the bank equivalent of throwing spitballs and drawing butts on the chalkboard.

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