FDIC has authorized lawsuits against more than 50 executives, directors of failed banksBy AP
Friday, October 8, 2010
FDIC targets failed bank execs with legal action
WASHINGTON — Federal regulators have authorized legal action against more than 50 executives and directors of collapsed U.S. banks as they seek to recover about $1 billion in losses.
A spokesman for the Federal Deposit Insurance Corp. said Friday that the regulator’s board has approved possible lawsuits over the course of recent months. FDIC attorneys are in settlement talks with the executives. Spokesman David Barr didn’t say how many banks are involved.
The $1 billion represents losses from failed banks that the agency maintains were due to negligence or misconduct by the executives or directors. A total 287 banks have been shuttered in the U.S. since July 2008.
The authorization of the lawsuits was reported earlier Friday by Bloomberg News.
The FDIC in July sued four former executives of failed IndyMac Bank and is seeking $300 million in damages. The collapse of California-based IndyMac two years ago was one of the biggest bank failures in U.S. history. It cost the federal deposit insurance fund an estimated $12.7 billion.
The FDIC alleges in the suit that the former executives negligently approved loans to homebuilders that had a scant chance of being repaid. The four have denied the allegations.
So far this year, 129 failed banks have been shut down and seized by the FDIC. They have cost the deposit insurance fund around $20 billion.
In 2009, 140 banks failed. That’s the highest annual tally since 1992, the height of the savings and loan crisis.
The pace has accelerated as banks are losing more money on loans made for commercial property and development. Many companies have shut down in the recession, vacating shopping malls and office buildings financed by the loans. That has brought delinquent loan payments and defaults by commercial developers.
The insurance fund fell into the red last year, and its deficit stood at $20.7 billion as of June 30.
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