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Response to Demeter (Original post)

Sun Feb 26, 2012, 08:18 AM

78. Bankers escape big penalties in FDIC failed bank cases

http://www.reuters.com/article/2012/02/23/us-insight-bankers-idUSTRE81M1S420120223?feedType=RSS&feedName=businessNews&utm_source=dlvr.it&utm_medium=twitter&dlvrit=56943

Like many banks engulfed by the mortgage crisis, First National Bank of Nevada specialized in risky home loans that didn't require borrowers to prove their incomes. When the housing bubble burst, First National got crushed in 2008 under the weight of bad loans that it could no longer resell to investors.

Last year, the Federal Deposit Insurance Corporation sued two former senior executives of the defunct bank for alleged negligence and breach of fiduciary duty, hoping to recover nearly $200 million in losses that it tied directly to those executives' decisions. The two men denied wrongdoing and settled for $40 million.

But they didn't pay a dime.

Instead, the federal agency - which is better known as a regulator that seizes control of failing banks and provides deposit insurance for consumers than for its prosecutorial endeavors - is still fighting in court to collect that money from Catlin Group Ltd., a Lloyd's insurance syndicate. Catlin provided an equivalent of malpractice insurance to First National's executives, but the insurer denied liability for the executives' alleged mistakes.

The case illustrates complex legal maneuvering as the FDIC steps up efforts to pick through the detritus of the financial crisis, and to recoup at least some of the nearly $87 billion costs to its deposit insurance fund from the collapse of about 400 federally insured banks between 2008 and late 2011. The First National Bank failure cost the fund $900 million....MORE

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