Transcript

377:

Scenes From a Recession
Transcript

Originally aired 03.27.2009

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Full audio: http://tal.fm/377

Prologue.

Man 1

There is a mini-industry inside journalism right now, one of the few parts of the journalism business that's actually thriving, I think.

Ira Glass

A reporter's finding unusual signs of the recession all over the place. But that did not prepare me to hear about this side of the recession from a dentist, [UNINTELLIGIBLE], outside Washington, DC.

Man 2

The biggest thing I've been seeing is broken teeth. I spoke with a buddy of mine who's a dentist up in New York. He's like, man, everybody's cracking teeth. And I said, yeah, I know.

Really acutely I've seen it in the last three or four months. Nightly grinding, clenching. And typically what happens with clenching and grinding, it's transient. It'll come and go, be on and off. But in times of high stress, whether it's in a personal life or in, right now with the economy, everybody's under a lot more stress. You see a lot more people having jaw pain and broken teeth.

Ira Glass

On the day we interviewed Dr. [UNINTELLIGIBLE], of 10 patients, two had cracked teeth and one needed a night guard for grinding teeth in their sleep. As for around the country, urologists in New York and Cleveland have reported a rise in vasectomies.

Traffic delays dropped by 1/3 last year. Two women in Pennsylvania, in separate incidents, according to newspapers, robbed banks and then immediately went out with the money and bought cashier's checks with the money they had stolen, cashier's checks to pay their rent. Porn video sales are down 10% to 30%, depending on how you measure it.

And shark attacks, yes, shark attacks, are at their lowest point in five years, thanks to the recession. That figure according to the International Shark Attack File at the University of Florida. Fewer people on vacation apparently means fewer people getting bit by sharks.

Well, from WBEZ Chicago, it's This American Life, distributed by Public Radio International. I'm Ira Glass. Today on our program, scenes from the recession, including tips on what not to say to somebody who is working at a store that is being liquidated. And we go on a government raid, a government raid on a bad bank. Stay with us.

Act One. Is The Condo Half Empty, Or Is The Condo Half Full?

Ira Glass

Act 1, Is the Condo Half Empty, or is the Condo Half Full?

We've all heard about these suburbs in Florida and California and Las Vegas where lots of people took out subprime mortgages just before the housing bubble burst, suburbs where today you have entire neighborhoods where most of the houses are empty. But you hear less about how this is playing out in big cities. And in big cities, the boom and bust took a different form.

In Chicago, for instance, you don't see entire neighborhoods vacated, but you also see lots of empty apartment buildings, and half-empty ones, like 1633 W. Farwell in Chicago's Rogers Park neighborhood. Classic old courtyard building. Then at the end of the housing boom, it's being converted into condos, condos with granite countertops and beautiful stainless steel appliances.

Until the Chicago housing market collapsed in late 2007, leaving 19 of its 39 units empty.

Jon Miller

We had had an issue with a squatter in the building. We had a couple of those guys, and I thought it might have just been somebody trying to get back into the unit and camp out and sleep.

Ira Glass

This is Jon Miller, who lives in a first-floor unit, where for days he and his wife would hear this noise, this noise coming from this vacant apartment upstairs from theirs. Then, they'd be lying in bed, and they would hear the sound of crumbling rocks and drywall coming from inside the walls and ceiling. Until finally, the culprit actually came through a big hole in the utility closet and they spotted it, a cat. It was black and it was feral, and it ran back up the hole.

Jon Miller

So, I set a trap, which was just a small plate of tuna set 3/4 of the way over the edge of the countertop. And that way I knew, once he jumps up, he starts eating the tuna, he knocks the plate over, it breaks the plate, it wakes me up, I come out, and I've got him.

Ira Glass

Wait, and so then it's you and your wife running around your apartment here, trying to chase a feral cat.

Jon Miller

Yes. We were just digging out clothing, trying to get up under our dressers, trying to get him out from under the bed. And finally, I just was able to grab him.

Ira Glass

Were you frightened?

Jon Miller

By a cat? No.

Ira Glass

Did it bite you?

Jon Miller

Yeah, it scratched me pretty good. A pretty good deep one in the leg and a couple on my arm.

Ira Glass

So to review, the housing market collapsed in Chicago, and as a result, Jon got scratched by a feral cat. He and the other people in this building have done nothing wrong. They didn't take out crazy loans that they couldn't afford. They played by the rules. They've paid their mortgage payments. And yet, they find themselves in an increasingly difficult situation.

A month after Jon moved in, winter arrived in Chicago in earnest. And with two empty apartments above his, apartments that had no heat because the developer stopped renovations, pipes froze.

Jon Miller

And so, water poured out all over my kitchen floor and basically ruined my kitchen floor. It's wobbly and kind of warped. You can walk across it for yourself.

Ira Glass

Two other frozen pipes in the building damaged another guy's kitchen, and pretty much destroyed a ground-level apartment across the courtyard from Jon. Now, if Jon sounds unsurprisingly calm about all this, there are two reasons. One, he practices meditation regularly, which, by the way, he'll be glad to tell you about.

Jon Miller

It's changed my life forever for the better. It'll do the same for you. Swear to God it will.

Ira Glass

But also, he is in the real estate business. And what it means to be in the real estate business these days is that he is a mortgage broker who has seen his own income drop in half, and that has forced a kind of Zen attitude on him.

Jon has run some numbers to try to understand exactly what happened with the developer of this building, a small-time operator who moved to Chicago from Bosnia back in 1994, named Haso Meseljevic, who's currently unreachable, at least by us or anybody in 1633 Farwell. Though more about that in a bit.

Public records show that Meseljevic and his son took out a loan of $5.1 million to buy and rehab this building, and that by 2007, he still owed $2.9 million to the bank for the unsold units. Which means, Jon calculates, that Meseljevic was paying the bank at least $20,000 a month on that debt.

So, back in October 2007, Jon bought the last unit sold in this building, right as the market was turning.

Jon Miller

But then right after I closed, November, December, January rolled by, and I don't think he closed any units within those three months. And I more or less would guess that's what put him under.

You know, when you're trying to carry a $20,000 expense month-to-month and you're not a very well-known, highly capitalized developer like some of these guys are, it's just not having a sale in three or four months is enough to put you under. So that's essentially my guess as to what happened.

Ira Glass

Even before the housing crisis and the recession, residents say this is a developer who seemed to cut corners and do the bare minimum. His business seemed perpetually strapped for cash, even though he and his family drove around in a yellow Hummer. And this right here is where the ugliness of the recessions intersects with the normal, everyday seediness of a lot of real estate development in a particularly toxic way.

Residents had all kinds of problems they couldn't get him to fix, problems that go way, way beyond the normal kinds of final details you need a builder to repair when you move into a place.

Peter Benedetto

Shortly after staying here, we started seeing things like this column here separated from the ceiling and collapsed into the ground.

Ira Glass

Jen and Peter Benedetto have a ground-floor unit that is jammed with musical gear and DJ equipment and the stuff that he uses to publish a quarterly journal of goth art. They show me how the floor is sinking away from the walls and the walls are separating from the ceiling of the unit, because there's nothing underneath the thin floor boards. There's no concrete slab, just dirt.

Jen Benedetto

Right here is one of the worst spots, where the walls are separating from the ceiling. And it changes daily. You can see it getting worse every single day.

Ira Glass

Also when they moved in, the whole condo smelled like sewage. When they would drain the bathtub, little bubbles of sewage gas would come up in the toilet. At first, the developer told them that he had no money to fix this. He told him that he was using all of the money that they had paid for their condo to rehab the other units in the building.

But then Jen and Peter but a big handmade sign in the window facing the street, saying that their apartment smelled like sewage and the developer wouldn't fix it, which is the kind of thing that could keep somebody from buying a condo unit in the building, so the developer decided to send out some relatives to fix this.

Peter Benedetto

First of all, they come in and they say, well, you're going to have to show us how these bubbles come up the toilet. So I fill up the bathtub and I pull the plug out, and the minute I let the water out, he's like, nothing's happening, nothing's happening. And he's getting all excited that he's disproving us. And then I'm like, just give it a second.

And then, sure enough, the bubbles start coming up. And then he starts laughing. He calls his friend, come look at this. And he's all excited and happy. And I'm like, what's so funny? He's like, I've never seen this before.

So then they take the toilet off, and then the guy that he called in starts laughing again. And I'm like, you guys, what's so funny? And he's like, oh, you bought a place without even concrete under the floor. They gave you dirt. Ha, ha, ha.

Jen Benedetto

Ho, ho.

Peter Benedetto

I never would have bought this place.

Jen Benedetto

Dirt, dirt, you live on dirt. Ho, ho, ho, ho.

Peter Benedetto

So there's not even concrete under our floor, which is why we're sinking in like that.

Jen Benedetto

It's loose dirt. It's not even packed.

We also had, because of the sewage backup we had maggots, fly eggs in the sewage. And in the spring, we have flies procreating in our plumbing and inhabiting our--

Peter Benedetto

Yeah, I've never seen so many flies. We had fly traps up and they were just covered in flies. It was really nasty.

Jen Benedetto

Hundreds, hundreds of dead flies hanging on fly tape in our bathroom.

Ira Glass

Remember, this is a condo building with granite countertops and brand new hardwood floors. But Jen and Peter say that, underneath the surface, everything's fake. When they brought out an independent plumber about the sewage smell, this plumber informed them that the entire building's plumbing needed to be redone.

Part of the problem is that so much building and condo conversion was going on during the boom that the city of Chicago did not have enough inspectors to keep up. And two residents in this building told me stories about the developer making cosmetic changes the day the inspector finally did show up and then ripping out the changes once he left.

And in the months after they moved in, residents went to the developer with a list of pretty urgent repairs, but by the spring of 2008, the developer stopped returning their phone calls. Then things deteriorated further.

In June, the electric company posted notices that the power was going to be shut off because of the developer's nonpayment of bills, then the water company did the same, then the garbage collection service. The insurance coverage for the building lapsed in July. And none of this, I learned, is unusual.

Brian White

So this-- do you want me to start? OK. So this is a foreclosure. Boarded-up windows, boarded-up basement, boarded-up front door, empty, like, get it, foreclosure. So here's another one. It's a two-flat. And here's another one. This is a for-sale-by-owner going into foreclosure.

Ira Glass

Brian White, the executive director of a community group that deals with housing issues, called Lakeside Community Development Corporation, takes me on a driving tour of the neighborhood. Before the housing bubble, Rogers Park was 80% renters, a shabby neighborhood where students and seniors and young families could get an affordable place.

Then developers threw a lot of money in, hoping that it would be the next gentrified neighborhood of Chicago's north side. A survey that Brian's group did back in 2006 showed that 15% of the housing stock, about 1,000 units, were being turned into condos, all at the same time. And it didn't work, partly because the developers were building for higher income people who simply did not want to move to corners like this one, at Touhy and Rogers.

Brian White

So, this building that we're looking at right here, this is a project that's been sitting empty for three years. It was advertised as an 18-unit unit luxury condo property.

Ira Glass

I noticed the air quotes around the word luxury.

Brian White

Well, I mean, this is what I was going to say is one of the challenges. Right across the street from this building is another building. Seven of the nine units are in foreclosure. Directly next to that is a garage where they park ice cream trucks. It's a very beat-up building. Merely down the block from that are some two-flats that are pretty old.

If you're a consumer who has a luxury dollar to spend, chances are you're not going to be spending it at this particular intersection. And so, there's just a pattern of developers coming in and buying up buildings and all trying to market them as these luxury developments in a neighborhood that really is not a luxury neighborhood, and the building has failed. And now it's just--

Ira Glass

Boarded up on the ground floor.

Brian White

Boarded up on the ground floor, broken windows, a little bit of graffiti. And it's not--

Ira Glass

The city of Chicago and groups like Brian's tried to convince developers to include some moderately priced units in the mix. And there were government subsidies available to help them do that. But Brian says, understandably, people wanted to make a killing.

Some had taken the money out of the stock market and put it into real estate during the boom, figuring that it was going to be more lucrative. And as a result, every block or two in Rogers Park today, we drive by uninhabited or barely habited buildings, with signs advertising brand new condos with depressingly similar lists of super deluxe amenities. Yes, granite counters, stainless steel appliances.

Brian White

But it's the sexy on the outside, crappy on the inside kind of rehab work that also the associations are now struggling with. They bought for the granite countertops and the stainless steel. Nobody bothered to check and see if the wiring and the plumbing was done properly, or if the foundation was intact. But that's pretty common.

Ira Glass

At the corner of Seeley and Birchwood, the sign advertises all the usual amenities, plus one more, a 42-inch plasma TV with each unit.

Brian White

I don't know. One of the things I've seen here as I walk around the neighborhood at nighttime, you can sometimes see when buildings-- you see the foreclosed buildings or the struggling buildings, because you'll have, like, a building where half the building is completely dark. And then there'll be, like, one unit where the light's on and there's a big plasma screen TV. And that's kind of the symbol of the lonely person. He's got his plasma screen TV. He has no neighbors, but he's got his plasma screen, and he's there.

Ira Glass

But what difference does it make if I'm living in this building and I've got no neighbors and I'm just going to have to wait three or four years before anybody else moves in?

Brian White

You're going to be dealing with things like frozen water pipes. You're going to be dealing with things like mold from moisture. If there's heat left on and there's moisture in the apartment, it will start to spread mold. You're going to be dealing with things like vermin.

And then the other one, and the biggest one, is the difficulty raising the kind of cash to pay the water bill, the gas bill, the insurance costs, pay for the garbage to be hauled away. If there's no money coming in, you can't sustain those costs.

And we have buildings now where you've got an individual unit owner who's paid the water bill, for example. Well, water bill on one building we were dealing with on the south side, she had a $3,000 water bill that she had to pay out of her own pocket to keep the water on, because there were no other unit owners to pay assessments to pay the water bill.

Ira Glass

Wait, it was one person in a building with how much water? How many units?

Brian White

She had a eight-unit building. The other units were all in foreclosure, and the developer had never paid the water bill. So she was stuck paying the water bill for the entire building.

Ira Glass

And in fact, most of that is starting to happen at 1633 W. Farwell. There's nobody to fix the building's roof, which they'd been told was brand-new when they moved in, but which leaks, ruining drywall in some units. One estimate put the repair job at $56,000. There's no money to redo the building's plumbing. There's no money to put in a buzzer and intercom system, or to pay the liens on the building from contractors who were never paid. Those liens total at least $175,000.

Because this is a condo building, the way it's supposed to work is that all the condo owners pay each month into a maintenance and repair fund. But there's a catch. In Illinois, until 75% of the units are sold, that fund is controlled by the developer, the guy who disappeared. In this case, supposedly back to Bosnia. And all that money seems to be gone, too.

Brian says this is not unusual. It is so not unusual that a move is underway to change the laws to make it easier for condo owners to control that money. Brian's take on all this, by the way, is very different from the real estate guy who lives at 1633 Farwell, Jon Miller. Brian says that lots of developers have vanished.

Brian White

Well, some of them are still around, but a lot of them have disappeared.

Ira Glass

And when people have fled, are you thinking that they fled and they're bankrupt and they've got nothing, or they fled and they're walking away with huge piles of money and defaulting on their buildings and just hoping nobody catches them?

Brian White

The latter. They walked away with big piles of money. We have people who bought properties with mortgages, took cash out from the mortgage by refinancing, or in some cases, took cash out at closing, and then went and bought property in other countries, where they are now wealthy people in those countries because they've left these foreclosures here.

Ira Glass

I tried to get the developer-- again, his name is Haso Meseljevic-- to come on the air and tell his side of the story. He never answered at the phone number listed for him. His son, Samel Meseljevic, who was his business partner in developing this particular building, is the one who said in a quick phone conversation that his father has moved back to Bosnia.

I repeatedly tried to get Samel to agree to a real conversation about what happened on tape. He invited me to his house, gave me his address, and then didn't show up. When I tried to reschedule, he insisted that the next morning he was going to be going out of the country for a week, though he didn't seem to leave Chicago. And I say that because he picked up his phone the next afternoon when I called.

One time that I raised the possibility of an interview, Samel simply hung up on me. The lawyer working for him and his dad, whose name is Hugh Howard, and who has a downtown office in Chicago on Monroe Street, didn't return calls. And once, when somebody in his office accidentally picked up the phone when I called and identified myself, that person hung up on me as well.

Woman 1

All right, we are all here, so there are St. Patty's Day beers in the fridge and cupcakes for later.

Ira Glass

In a top-floor apartment, the five elected officers of the condo association, and a black-and-white cat named Checkers, are at the condo association's regular meeting. If this meeting is typical, I think it is safe to say that a year of trying to fix all the problems in this half-empty building is taking some very nice, very responsible people, and driving them all slowly crazy.

They are in an impossible legal limbo. The bank was scheduled to finally foreclose on the developer's 19 units in March, and then the bank pushed it to April. And they'll probably push it back again and again. Banks don't want to take these properties onto their books, and they put it off as long as possible.

And it is only when the bank finally does foreclose that, from a legal perspective, these units will finally have an owner. The owner will be the bank, and the building will be 100% sold, which means that this group will finally be a real condo association and will finally have the power to address their problems in the way that any normal condo association does.

They can make residents pay monthly fees and use those fees to do maintenance and repairs. And then the issue for them will be, will the bank, as owner of 19 units, kick in its share of the maintenance and repair fees like all the other owners? Often it doesn't.

As you might imagine, the repairs, the legal complications, the money problems, the meetings, the worry of owning property in a half-empty building that is deteriorating and not insured, has taken its toll on everybody here, stressed them out. Of course, they could walk away.

Jen and Peter, the couple with the sewage smell and the sinking floor, pay exactly the same to live here that they used to pay in rent, $1,100 a month. If they defaulted on their mortgage and moved out now, all they would lose is the $3,000 down that they paid back when they bought. Jen would have bad credit for seven years, since her name is on the mortgage, but Peter wouldn't.

But for now, they're staying put. They've all been organizing and fighting for over a year now, and it's sort of become their identity. They see themselves as the responsible ones. In a world of irresponsible developers and bankers, they're the people who won't renege on their obligations. It's now a point of pride.

Karen Webber lives in a top-floor unit.

Karen Webber

To me it's a very black-and-white situation, because I signed a contract, I have an ability to pay, and as long as there are blood in my veins I will do my part to honor my word.

Ira Glass

On the other hand, Maria Hadden, who runs the condo association, says she sometimes wonders if it really matters if she defaults. So she'd lose maybe $10,000 that she's put into her place, have bad credit for seven years. She could stop paying her mortgage for a few months, save up her cash, and then when she got kicked out, rent a nice place, cheap.

Ira Glass

Does it matter to you, your credit score?

Maria Hadden

No.

Ira Glass

So you could basically be out of here, wash your hands of this. Instead of paying $1,800-something a month, you could be paying, like, $1,000 and have an incredibly beautiful apartment somewhere nearby.

Maria Hadden

Uh-huh, yeah. That's true.

Ira Glass

So it doesn't really-- I don't understand how it makes so much sense to stay.

Maria Hadden

What would happen if everybody left?

Ira Glass

Then you all would be happier.

Maria Hadden

If I leave and foreclose, and then Jon leaves, and Jim and Rick leave, then the people that are left are left even more up a creek than they were before.

Ira Glass

Right, then they're carrying the cost of the roof and they're carrying the cost of the buzzer system.

Maria Hadden

Yeah, it becomes impossible. It's kind of like we're in this together. We're all going to do this or we're not going to do this at all, because it's not going to work unless we all do it. So it's kind of like staying here.

Ira Glass

Lately, the developer's family has tried to move some renters into the vacant units, to raise a little money, possibly to stall the bank from foreclosing. True to form, one woman moved here from England in the middle of a Chicago winter to find her unit had no heat or hot water. Another renter, somebody on a Section 8 public housing voucher, was put into a unit which didn't even have a toilet.

Coming up, real-life secret agents who work for the government and are out on the front lines to save our economy. That's in a minute, from Chicago Public Radio and Public Radio International, when our program continues.

Act Two. Unbreaking The Bank.

Ira Glass

It's This American Life, I'm Ira Glass. Each week on our show, we choose a theme and bring you different kinds of stories on that theme. Today's show, scenes from the recession. We've arrived at act two of our show.

Act two, Unbreaking the Bank.

In an office park in Irvine, California, in a conference room with fluorescent lights, wheelie chairs, a whiteboard, something totally unrecession-like is taking place, new employee orientation.

Woman 2

OK, can I get everybody's attention again, please?

Ira Glass

32 new employees arranged in three long rows. These are the FDIC's newest recruits. The FDIC, the Federal Deposit Insurance Corporation, not only insures the money that you and I keep in the bank, it's also the agency that closes down banks when they fail.

Since banks fail almost every weekend now-- yes, a bank fails every weekend; and in fact, most weekends, lately it's two banks-- the FDIC needs help. These people here are only 32 of 600 people the agency is hiring for this regional office, 600 new agents to train about bank failures, 600 new computer accounts.

Man 3

Log in, and then on the left-hand side, type in no fear and hit ENTER.

Ira Glass

Got that? No fear, then ENTER. The FDIC's mission is to ensure stability in the banking system. What that means, actually, when a bank fails, is something pretty dramatic. The government rolls in unannounced, shuts the bank down, and takes it over as a way to protect our deposits. The whole thing is planned like a SWAT team, if SWAT teams had accountants in them.

And then reason that they do it this way is that if the public found out that the bank was failing before the government actually stepped in, people might pull their deposits out and cause a run on the bank. Also, if the people working at the bank knew that the government was going to be seizing the bank, they might steal, they might destroy paperwork.

The government believes that this is the best way to protect depositors, you and me. This is Tom Murray, one of the FDIC bosses here.

Tom Murray

So, some of you may go to a bank closing this weekend. Don't tell your significant other where you're going or what you're doing. Don't talk in a conversation that can be overheard. Don't check in at the hotel and say, oh, well, I'm here for this event. You are on a secret mission.

Ira Glass

Today we take you on that secret mission, when the FDIC takes over. Chana Jaffe-Walt talked to all kinds of people involved in one bank failure, a place called the Bank of Clark County in southwest Washington State.

Chana Joffe

Long before most of the Bank of Clark County employees knew their bank was dead, the FDIC was planning its demise. They'd been having meetings, contacting other banks in the region, trying to find one that would take over the Bank of Clark County's assets after it failed. All of these negotiations were top secret.

And then the time came. Thursday, January 15, 2009, the operation begins. 80 FDIC agents pull into Vancouver, Washington. Their rental cars are generic. Their arrival times staggered. One by one, the agents check into the hotel, each quietly offering a fake name to the guy at the desk.

9:00 PM, the FDIC calls the CEO of another bank nearby, Umpqua Bank. Your bank, they tell him, has been selected to take over the Bank of Clark County. You can't tell anyone. Come to a meeting tomorrow at noon. The FDIC will tell you everything you need to know.

And so, Friday morning, the Bank of Clark County employees get up, go to work, turn on the lights and go about their day. And Ric Carey, a vice president from Umpqua Bank, sits down with the FDIC and begins to plan.

Ric Carey

We actually met with the FDIC beginning at about 12:30 on Friday, and they were in a hotel, under a different name. We made sure that there was no one from outside of our two organizations there.

Chana Joffe

Does it feel like a spy movie?

Ric Carey

It almost does. They know what they're doing. They've done this before. Quite a production.

Todd Zalk

My name is Todd Zalk, Bank of Clark County, the best community business bank, because we've changed the game in business banking. And we were winning. Often, when I would go to a networking meeting or event, I would introduce myself that way.

Chana Joffe

Todd Zalk is what you call a team player, total bank loyalist to the end, beyond the end. Four weeks after the failure, Todd's still wearing his Bank of Clark County name tag. still passing out his bank business cards, always with a warm handshake, constant eye contact, inserting your name whenever possible.

Friday, as Ric Carey snuck into the nondescript FDIC secret location, Todd was playing for the team.

Todd Zalk

Most of the day I had spent out meeting with businesses. I had a couple networking events, and then I came back to the bank, and--

Chana Joffe

Wait, so you were still bringing business in that Friday.

Todd Zalk

I actually was. I had people that wanted to open accounts. In fact, Chana, in the fourth quarter, I opened over 55 accounts for Bank of Clark County.

Chana Joffe

Todd and his coworkers had no idea the bank was about to be taken over. He knew they were going through a rough time. Just last week the CEO had called a staff meeting about it. But the CEO was clear. Things were under control.

Todd Zalk

He used this analogy that we were the ship, and we've gone through a storm and that we were a little bit tattered, but we were still weathering it well, and that we maybe were taking on a little bit of water. And we were looking for someone to maybe buy the bank, and had a few buyers that were very interested. And within the next 60 days, we should know who the new face of the bank would be. So that's what I had thought.

Chana Joffe

Many, many Bank of Clark County employees told me about the ship meeting. Mostly it made sense to them. The CEO said they were doing OK, they were doing OK. But in fact, things had been changing at the bank since 2005. That's when they went big into commercial and real estate loans.

They were a young bank. They felt they had to be aggressive. And sometimes that meant making loans other banks wouldn't have made, loans that ended up killing them. Washington State regulators audit every bank several times a year, and they noted the Bank of Clark County's declining health.

Its capital reserves were getting low, so low the bank was in danger of not being able to cover its debts and obligations. And then, you know the story, housing prices dropped, developers couldn't make payments. The story finally ends Friday, January 16, 5:01 PM.

Two FDIC agents and a Washington State regulator enter the Bank of Clark County. Casual, head straight for the CEO's office. There, behind closed doors, they deliver the news. They tell him his bank is under-capitalized. It has failed.

5:03 PM, an agent positioned by the CEO's office door types this news into a BlackBerry. It's received by everyone on the FDIC takeover team. 5:05 PM, FDIC agents begin closing in on the bank. A few are already inside, quietly and discreetly securing the cash in the vaults.

Todd Zalk, oblivious to all this, heads back into the office after a long day of work.

Todd Zalk

I could tell that the mood at the bank seemed odd. And I thought, well, hmmm, I wonder if they found a buyer, and kind of people have heard, because I was gone most of the day. And so, I went in and asked, and they said that there was going to be a meeting at 6 o'clock and that there might be an announcement as to who the buyer might be or what that would look like.

Chana Joffe

Todd hung around, said hello to some customers, did some banking.

Todd Zalk

By this time, it was quarter to 6:00, and I went up to someone that was an executive or senior vice president of the bank. And I said, how are you doing? And they said, oh, I'm doing all right. And I could tell something was going on and they didn't want to say.

And we looked across to the other side of the bank, and there was two employees adjusting pictures on the wall. And he looked over at that, and I saw his gaze go over to the wall, and so I looked over at the wall. He kind of laughed and he said, wow, he says, that reminds me of adjusting the chairs on the Titanic before it sank.

And that really told me something was going down. People started to gather, and there was just this real sense of this isn't good and we're not sure what it is, but it's not good.

Well, then it was probably very close, just a minute or two after 6 o'clock, and Mike Worthy, our CEO, came out, and he stood up and said, well, I've used the analogy that we were a ship that was taking on some water and we needed to pull up next to a bigger ship and see if they wouldn't take us on and our crew, and we thought we had a few buyers for that. But now the biggest ship that sails the seas has come alongside us and they are going to be taking us over, and that is essentially the federal government. I would like to introduce the State of Washington regulators.

And he sat down, and the State of Washington stood up and said, we are now taking possession of the bank, of all of its assets, and we are turning them over to the receivership of the FDIC.

Chana Joffe

6:03 PM, down the street from the bank, where he's been told by the FDIC to wait in his car, Ric Carey with Umpqua Bank hears his phone vibrate.

Ric Carey

At that point in time, a signal was given to myself, and basically--

Chana Joffe

What kind of a signal?

Ric Carey

It was an email.

Chana Joffe

What did the message say when you got it on your BlackBerry?

Ric Carey

Oh, just, it's time.

Chana Joffe

It's time.

Ric Carey

Yeah, it's time. Come in.

Chana Joffe

6:05, Ric gets out of the car and starts walking toward the bank. Inside, a woman from the FDIC takes the stage.

Todd Zalk

She said, within the next 10 minutes there will be 80 FDIC employees coming into the bank. And I looked out there, and it was dark, so I couldn't really see, and then all these people, mostly in suits and professional clothing with attorney-type briefcases, started entering the bank, just flooding into the bank.

And I was so awestruck at them coming in and so many of them coming into the bank that I turned around and looked over there and just kept watching them, and they just continued to come. I mean, 80? I mean, our bank had, like, 100 employees.

And at this time, it was dark outside, and a flash flashed out in the parking lot. The flash was The Columbian newspaper taking a picture for Saturday morning's front page news that the bank had failed.

All of this happened, Chana, in just a matter of minutes. So, things are going through my mind like I just lost almost $25,000 worth of stock I bought four months ago in Bank of Clark County, in my bank. I mean, I'm investing in my bank. And most of the employees were shareholders.

And so, for me, there was a sense of, gosh, I think I just lost all my stock. And I looked around the bank. I saw some people crying. I saw some people with just a white face, blank stare on their face, just in shock. Some people had their hand on their face, just were like, I can't believe this, like, oh my gosh.

Chana Joffe

6:10 PM, Ric Carey from Umpqua Bank is introduced to the confused employees of the bank he now owns. They have a whole bunch of questions running through their heads. First among them, do we get to keep our jobs? Ric can't answer that. Umpqua will only need about 1/3 of the Clark County staff, people who actually deal with customers in the branches.

Most of the support staff and administration will be let go. But it's too soon to let each person know whether he or she has a job. Ric is put in charge of supervising a full-on manual hand count of all the bank's cash. A couple of his staff grab the cash and begin to count. The Bank of Clark County people watch Umpqua. The FDIC watches them both.

This takes three hours. Meanwhile, Bank of Clark County staff come up to Ric to introduce themselves, tell him how important they are at the bank. They're worried for their jobs. And Ric has other things on his mind.

He bought the bank from the FDIC for a pretty good price, and he only has to take the good parts, the insured deposits and the actual branch buildings. The FDIC will keep all the bad stuff, the problem loans. But there's still a lot to think about.

Ric Carey

You know, I have to be open in three days. What do I want that store to look like? I remember that one of the first things we did that evening was contact their plants provider and make sure that they were arranged to have 25 large plants taken out of the facility. We have a very clean operating environment at Umpqua, and plants aren't part of our MO, and so those were to be removed immediately.

And we were looking at signage. So I basically was making a note of what signs that we needed to change, replace, how quickly we wanted to do that. We wanted to make it look like Umpqua as quickly as possible.

Chana Joffe

Meanwhile, FDIC agents have already secured the vaults and the cash. They've grabbed a couple hard drives. Now they need to inventory the entire bank. Every account needs to be transferred to Umpqua. The bank has to open its doors Tuesday morning. Monday was Martin Luther King Day, bank holiday.

To get all this done, the FDIC needs the Bank of Clark County staff to help them, to show them where the files are, who the customers are, how to get to the bathroom. And so, at 6:15 PM, the FDIC makes an announcement: we need you all to sign in on this sheet of paper, everyone. As of right now, for the weekend, you're all temporary employees of the FDIC. We're going to need you to stay late tonight, work through the weekend. You will be paid for your time. We'll feed you. We need your help.

Ken Moody was vice president of information systems at the Bank of Clark County.

Ken Moody

Again, most of us were planning on leaving at the end of the day. And so, after that announcement was made, we had phone calls to make, call our families. My daughter had a seventh birthday that we were going to go to.

Chana Joffe

Take your time.

Ken Moody

Sorry. I didn't anticipate being this emotional about it. Kind of silly.

Chana Joffe

6:20 PM, agents take over offices, storage rooms, hallways, any space available. They tape handmade signs to the doors, written on 8.5 x 11 sheets of printer paper, saying things like, audit, security, investigations. It's a little chaotic.

The FDIC moves room to room. They go through files, transfer accounts, they change the website, they check the safe deposit boxes, make sure everything that's supposed to be in there is in there. They go through desk drawers. They toss out bank letterhead.

Once agents have scanned a room for all critical information, they place a green dot on its door frame. Then they take all that paperwork, all the hard drives, all the files, and the FDIC has to reconstruct the bank's entire balance sheet. It has to know what it's selling to Umpqua, what's actually there.

Any account with a balance up to $250,000 is fully insured by the FDIC. If the bank doesn't have the money to cover the balance, the government will pay it out. But some people have more than $250,000, and there are business accounts and loans, and it gets complicated.

Some is covered, some is not. The FDIC now sorts all that out.

Ken Moody

Things started happening very quickly and with what seemed to be a lot of precision.

Chana Joffe

6:25 PM, in the IT department, three agents approach Ken Moody, the IT guy. They hand him a thumb drive. Please plug this in, they say. It has all the software to change your computer systems over to Umpqua Bank.

Ken Moody

That was kind of a fascinating part about it. So it was almost like, on one hand, it's very sad, you have the death of a loved one. But at the same time, it was like watching an autopsy being performed by a really skillful surgeon. They just came in and just sliced and diced and broke the bank up into different pieces and threw them into different buckets and did it with great efficiency.

Chana Joffe

An autopsy of the work that you'd been doing.

Ken Moody

Yeah. Well, yeah, an autopsy of everything that we'd been creating over the last 10 years.

Chana Joffe

At the Bank of Clark County, everyone I talked to said this one thing about the FDIC that stuck with me, something you don't often hear about a government agency, that it did a really good job, that the agents were kind, courteous, and efficient. In fact, everything is ordered, structured. Everything, even how and when to grieve.

Here's Lisa Stapleton. She was an assistant loan officer with the bank.

Lisa Stapleton

So many of the people who came in from the FDIC got to where they were because they were part of a bank that failed. And they were all like, you know what? We've been where you are, and we understand, and it's going to be fine. So they were really nice.

Chana Joffe

The Bank of Clark County had 100 employees and assets of $446 million, which, if you're not used to bank numbers, is a really small bank. But it took 80 FDIC agents, about 50 Bank of Clark County employees, and 100 Umpqua employees working around the clock for three days to take it over and have it reopened for business.

Most of the largest banks in trouble right now, Citibank, Bank of America, are about 6,000 times the size of Bank of Clark County, not to mention much, much more complicated. So the Secretary of Treasury's latest plan to save the banks does everything it can to avoid using this process on those big banks.

When you do this to a little bank, it's called receivership. When you do it to a big bank, people start to throw around the word nationalization. Every week, FDIC agents get more experience taking over banks. In the 10 weeks since they took over the Bank of Clark County, 18 more banks have failed, bringing us to a grand total of 20 failures since the start of this year, before this weekend, that is, when most likely they'll add a few more to that list.

Ira Glass

Chana Joffe-Walt in Seattle. She's a regular contributor to the Planet Money podcast, which you can hear at npr.org/money.

Act Three. Short-circuit City

Ira Glass

Act three, Short-Circuit City.

Among the big chain stores that have gone out of business in this recession, Circuit City, the second biggest electronics store in the country, shutting down after 60 years. Earlier this month, the Chicago Tribune described the atmosphere in a Chicago Circuit City outlet the week before it shut down as funereal. Quote, "employees, wearing sullen faces, who, when asked if a display model Sony VAIO laptop missing nine keys is still $623.99, answer with a mechanical, leave me the hell alone, 'yep.'"

It's not as if they object to helping, but they're also texting while ringing up customers at the checkout line. Because, really, what are they going to do? Fire them? The day after that was published in the paper, the reporter who wrote that story-- his name is Kevin Pang-- got an email from one of that store's employees.

Jonathan Mullens

First, let me say that I enjoyed your article.

Ira Glass

That's Jonathan Mullens. We invited him here to read his email.

Jonathan Mullens

Second, there's a better-than-average chance that I am the leave-me-the-hell-alone-yep guy from your article. Let me tell you why the morale in the store is the way that it is.

At this point, we all want it to be over with. I cannot name a single person here who wishes this hell to continue. Our attitude is a direct result of the customers who have come into the store during this liquidation. Many of them are rude and complain to us about everything. Why does this cost so much? Why isn't this discounted more? That's all I get off? How much are you hiding in the back? I can get it cheaper at Best Buy.

If I hear that last one again, I might choke the person that says it. I now view Circuit City as a sickly old relative who you just want to die so the suffering can stop and you don't have to deal with it anymore. Again, I enjoyed your article and found the humor in it. We are not bad people here. We are just tired and beaten.

Ira Glass

34,000 people lost their jobs in the liquidation. Some of them had worked at Circuit City for years. In January, when the stores began selling off their last merchandise, the website Gizmodo invited Circuit City employees to write in and describe what it was like in the trenches of liquidation. Gizmodo published their emails in a story called, "Their Final Words as Grunts of Circuit City."

And what you're going to hear now are excerpts from those dispatches, along with other emails that we solicited from Circuit City employees in stores around the country, Peoria, North Carolina, Florida, Pennsylvania. The way that it worked is that special liquidation companies came in to run the stores during the last few weeks, to sell off the final merchandise, as much of it as possible, because the more money they brought in the door, the more they could pay off creditors and, not incidentally, the more profit the liquidation companies got to keep themselves. Which explains why one of the very first things they did in most stores was raise prices.

Man 4

The day after we learned we were closing, a liquidator showed up at our store in Peoria. His name was Chip. He worked for one of the liquidation companies, which meant he was in charge of our store now. One of my coworkers would only refer to Chip as The A-hole, but to me he seemed like a decent enough guy.

Then he gave us the new rules. First, on Sunday, most of our prices were being raised-- yes, I said raised-- to MSRP, manufacturer's suggested retail price. Most items would start off at 10% off MSRP. Also, we no longer accepted checks, the price guarantee was gone, all sales were final, and we would no longer take the Circuit City credit card.

Man 5

We had a huge influx of customers who'd been waiting for us to go under so that they could get the store closing prices, only to discover that the prices were now higher than they were before. The amazing thing is that it worked. People were buying things at a higher price than they would have before liquidation. In the first three days of liquidation, we'd made more money than we had in a week.

Man 4

When the doors opened on the first day of liquidation, it was obvious that we were severely understaffed. When customers complained that they couldn't find help, I explained that we weren't staffed for the rush because we'd only found out we were going out of business the day before. That's why you're going out of business, one woman sneered. You don't plan ahead.

"That's why you're going out of business" became the customers' mantra. It never came after something intelligent like, "the one-price promise was one of the stupidest campaigns in the history of retail, and that's why you're going out of business." Or, "two years ago, your company laid off 3,400 seasoned employees for making too much money and replaced them with young and inexperienced people, and that's why you're going out of business."

Man 6

I was working loss prevention at the door one evening, and a guy came in and said, hey, has anyone found a wallet? I think I left it at the cart. I haven't heard anything. Let me ask over the walkie. No, I'm sorry, we haven't found a wallet.

He made a disgusted face and walked away, then turned and yelled, no wonder you guys are going out of business. I yelled back, yes, sir, 34,000 people are losing their jobs because you lost your wallet. Thanks for clarifying.

Man 7

I really don't know where all the anger comes from. I'm sorry I can't sell you a GPS for 70% off. I'm sorry we don't have any Wiis. I'm sorry I can't sell you that flat screen TV for $300. I'm sorry I can't take your check or Circuit City credit card as a payment. I'm sorry. I was simply a car stereo installer. I'm doing the best I can to help you. If my best isn't enough, I'm sorry.

Man 8

The best way to describe a liquidation sale is what I call anti-retail. In regular retail, the more you sell and the better you do, the more likely you are to keep your job. In anti-retail, the more you sell and the better you do, the faster you lose your job.

Man 9

Store morale really started falling when we began emptying whole sections and roping them off with yellow caution tape, like at a CSI crime scene. But the mood hit an all-time low when we had to put up the big 10-days-to-close sign. At least then we could finally answer the customer's number-one question, when is your last day? with, I'll be fired on Sunday, March 8.

Man 10

Only a few weeks into liquidation, XM Radio cut the signal to our store. Without music the place was eerily quiet. Then Canteen Vending pulled the soda and candy machines out of the break room. One of the drivers told me that the company was afraid they wouldn't get their money. I'm not sure what that means since you have to put money in the machine before it gives you something. I asked the driver what we were supposed to do now for soda, and he just shrugged his shoulders as he strapped the machine down for transport.

Man 11

Recruiters stopped by the store to advertise jobs. There had been at least two Amway-like sales companies and three auto parts stores. A coworker told me that he had an interview with one of these stores, and that they pay just slightly more than minimum wage. Of course, the armed services had made their presence felt, too. Anytime one of the younger kids sees someone in the store in full military dress, it's suddenly time for their break.

Man 12

Our liquidation manager puts on a good front of being nice, asking how our job applications are coming, and greeting us energetically when he sees us. But he, just like everyone else, is looking out for himself. Early in the liquidation process, he hinted that we would be allowed to stash things, hide stuff that we wanted to buy in the warehouse, until the last day, when we'd receive the best possible discount.

Customers also tried stashing things under our shelving to come back and dig up later. We searched weekly, often turning up new merchandise to put right back out for sale. The liquidation manager promised to look the other way for our stashed items, but a month later he reneged on the deal. Incidentally, about a week before we closed, the newspaper reported that the liquidator, while working at our sister store, was arrested and charged with stealing merchandise.

Man 13

With two days left, we were down to 17 laptop computers, 33 CDs, eight cameras, and a few printers. Basically, everything in the store that wasn't nailed down, and some things that were, had or would be sold, including a case of tampons for the vending machine in the women's restroom and a 12-foot circular rug covered in Circuit City logos. One of our associates was vacuuming when a customer walked up and offered to buy the vacuum right out of his hands. He was told to come back on the last day.

Man 14

The employees were actually in a great mood. We realized we made it to the end, and it was kind of a badge of honor to stick it out. The liquidator bought us lunch and the customers were well-behaved and courteous. The cashiers set up a tip jar at the register, and it was pretty full by the end of the day. Too bad they didn't think of it sooner.

Man 15

At 4:46 on March 8, the next-to-to-last cash register was closed. The only cashier still working was Brenda, the same person who had rung up Peoria's very first transaction when the store opened in 1994. Brenda was one of the six people from our store, and one of 3,400 nationwide, who got terminated two years ago when the CEO, Phil Schoonover, got the bright idea that some of our experienced staff made too much money. But she'd gotten permission from our manager to be there at the end.

At 5:10, Brenda rang up our last sale, a single USB printer cable, originally priced at $33.99, sold for $2.16 including tax. Someone who watches way too much ER called out, call it, time of death, 5:11 PM.

Man 16

Another associate and I read the closing instructions. We went through the store and cut off most of the breakers for power. We cleaned up, clocked out for the last time, and went home. The next day, the store managers would make the final cash deposit and ship off any remaining merchandise. They'd turn off all the lights, lock the door, and mail the last key off to corporate.

Man 17

Companies often motivate associates by telling them how one person can make a difference. The closing of Circuit City shows how far from reality that truly is.

Man 18

We busted our butts to make Circuit City store number 3167 a success, but in the grand scheme of things, it didn't matter. It was like the corporate executives took us for a ride, then dropped us off in the middle of nowhere. Every bit of hard work that I did, every extended warranty that I sold, if I hadn't done any of that, I'd still be in the same position I am today. I'm out of a job, and there wasn't anything we could do about it.

Ira Glass

Those were all former Circuit City employees. Only one of the five, James Armitage in Florida, has found another job. Allen in North Carolina, the car stereo installer, is planning to go to school this summer to become either a nurse or an electrician. People always need nurses and electricity, he wrote us. John Gallagher, Chris Evans, and Jonathan Mullens are still looking.

[RAP SONG] Starting lineup. D. Baxter, B. Smith, J. Milligan, baby. 4506, yeah. Where you go to get your gifts in time? Circuit City up, Best Buy down. You want gifts? Then you better come around. Circuit City up, Best Buy down.

Well, this song was actually written and performed by employees of Circuit City store number 4506 in North Little Rock, Arkansas. Our program was produced today by Robyn Semien and me, with Alex Blumberg, Jane Feltes, Sarah Koenig, Lisa Pollak, Alissa Shipp and Nancy Updike. Our senior producer is Julie Snyder. Production help from Andy Dixon. Seth Lind is our production manager. Music help from Jessica Hopper.

Credits.

Jen Benedetto

Dirt, dirt, you live on dirt. Ho, ho, ho, ho.

Ira Glass

I'm Ira Glass, back next week with more stories of This American Life.

Announcer

PRI, Public Radio International.