FDIC Ready To Sue Executives From Failed Banks

The Federal Deposit Insurance Corporation is poised to sue over 50 executives from failed banks, Bloomberg News reports.

The potential lawsuits would help the FDIC recover more than $1 billion it lost during the credit crisis, which has forced the FDIC to take over 294 lenders since 2008. So far the FDIC, which, according to Bloomberg, doesn't sue unless it believes the defendant is able to pay up, has only filed one lawsuit related to the credit crisis, against IndyMac executives in July.

After sending heads-up letters to potential targets of litigation, the FDIC has bared its claws. "We could walk into court tomorrow and file the lawsuits," FDIC general counsel Richard Osterman told Bloomberg. During the savings-and-loan crisis of the 1980s, the FDIC sued executives from more than 24 percent of the banks that failed.

The credit crisis of 2008, precipitated in part by a housing market collapse, eroded companies' ability to do business. The FDIC, which insures bank deposits, had its hands full as banks buckled in response to runs on their deposits. The failure of Washington Mutual was the largest in U.S. history. As the crisis has largely subsided, the FDIC now seeks to recover some of its losses.

Court victories for the agency would force bank executives to pay some portion of the compensation they received from their banks. Government regulators, endowed with new powers by the July financial reform legislation, are currently drafting rules for curbing executive pay, which regulators say in the past has inspired excessive risk-taking.

Comments

[smallmouthbass]

04:36 PM on 10/12/2010

I wonder if they will sue Alex G. (D-Ill who wants Obamas old senate seat) for all the loans (close to $100 million) to known gansters and underworld figures from his families failed S&L that got government bailout money?

Or will he get a pass on this?

Somehow I think the latter...

Ya'll have a nice day......


SMB

[hrpmap]

04:25 PM on 10/12/2010

And the trial lawyers will collect how much of that? This will more than likely be a bonanza for attorneys, but little for Americans. At least that has been the way these kind of things have worked in the past.

[Hoosierbrad]

05:10 PM on 10/10/2010

Peel them until they squeal!

[HukaShakaHukaHuka]

04:05 PM on 10/10/2010

FDIC is one of the Banking industry regulators under which the current real estate debacle happened. They did nothing but watch the bubble grow over a decade and burst. Now they are claiming they will go after the same bankers who under their watch took unnecessary risks. Their bank deposit insurance fund had $50 billion (yes billion) in 2007, not it is that much in red.

So who really failed to do their duty, FDIC ‘The Regulator’ or the greedy bankers?

[W Santiago]

10:34 PM on 10/10/2010

I cannot seem to find any regulatory powers of the FDIC other than in the case of criminal activity. Since risky investments may be unwise, the FDIC could only advise, not regulate the business of any bank taking those risks. The FDIC is basically an insurance company like it's name implies -Federal Deposit Insurance Company. Unless I missed something. Could you link it?

[HukaShakaHukaHuka]

11:21 PM on 10/10/2010

FDIC has several functions. Those are Consumer Protection, Bank Examination and Regulation, Deposit Insurance and Asset Sales of liquidated Banks. It says right on top of their web page. Banking is a regulated industry, so if banks take excessive risk, FDIC can slap warnings and even cease and desist orders. They in rare cases remove bankers and ban them from the industry, but to do this they have to go through litigation and courts are the ones imposing these conditions. This is why they are going to take them to court now. In other words if they had done their regulation part of job properly homeowners would not be standing with our hats extended for bankers mercy.

[James Fisher]

03:29 PM on 10/10/2010

are they stopping with the ones that failed or are they going after all that acted irresponsible. I think we need to go after the ones we bailed out also

[bad robot]

08:28 AM on 10/12/2010

Exactly...Part of the terms for a bail-out should have been required MINIMUM WAGE salary for execs...

[bikerdude]

01:55 PM on 10/10/2010

Now you're talking....Peel off the corporate skin and expose the perps. This is how you do it...

[nopilikia]

12:46 PM on 10/10/2010

A billion is peanuts to what these banksters took the American people for. But then......a billion here.....maybe a billion there........pretty soon it might add up to some real money to help Main St.

[LynnTTT]

11:47 AM on 10/10/2010

Oh for God's sake. Why not just send them a letter warning them and giving the address and contact info for a good Cayman islands bank. Just do it

[Trapster]

07:58 AM on 10/10/2010

Don't flinch!
How many of us believe that this will come to fruition? That they will go to a real jail or prison? That they will not be offered a plea-bargain? That they WILL BE AN EXAMPLE to the rest of the banksters? That they will join the ranks of the unemployed for what they did? I hope someone publishes names and outcomes of all these cases.
I am skeptical, but still hopeful that this is the beginning of the repair to the diseased Capitalism lying in the heart of America's soul.

[layman]

01:02 AM on 10/10/2010

When you're ready to sue, don't talk; just sue.

[CyberPunk]

11:46 PM on 10/09/2010

...an we still havn't fixed it an no one is in jail for it!!

http://www.businessweek.com/bwdaily/dnflash/content/jan2008/db20080128_934507.htm

[ibsteve2u]

11:10 PM on 10/09/2010

Huh...these are the boyz that help America's top 1% hide their income to ensure that the latter don't pay the taxes they're always complaining about paying, and I'm thinking that they probably save the best tricks for themselves.

Might be a bit of a trick recovering any money, let alone discovering how much they benefited from using their banks to loot the futures of so very many Americans.

[mstock57]

10:55 PM on 10/09/2010

Go get em.

[Philosopher-king]

09:47 PM on 10/09/2010

I am sorry to say Monetarists of the world, this is the only way to loosen up our free market system. Human nature is not enough when trying to build a thriving economic system. The bailout was necessary because policy-makers painted themselves in a corner and allowed the butchering of the financial system. Those who think greed is good are about to get a rude awakening. If you want to talk about fuzzy math, try fuzzy calculus. A true free market system is not for the benefit of a few. On the contrary, it is for the benefit of all. Once the US Government realizes its very power is threatened, many executives are going to jail. The last thing we need is a break down of the capitalist system into a modern day dark age. Look out my fellow Americans!

[GenosseJoe]

09:08 PM on 10/09/2010

Should I hold my breath to wait for the indictment of Fannie Mae board of directors?

Rahm Emanuel will look great in a stripped suit.