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View Diary: LA Times: FDIC Covertly Settled “Scores” Of Bank Fraud Cases Since 2007 (113 comments)

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  •  FDIC is supposed to break them up (47+ / 0-)

    and put them under new management.  They're also supposed to pursue prosecution of criminal activity. Those are the penalties for breaking the law.

    It's been done before, there's a reason these procedures were put into law - because they flush the bad guys out of the system and prevent future abuse.

    This time around, all the crooks have been left in place, the system remains broken.

    It is an old strategy of tyrants to delude their victims into fighting their battles for them. FDR

    by Betty Pinson on Tue Mar 12, 2013 at 06:47:17 AM PDT

    [ Parent ]

    •  Not to mention (19+ / 0-)

      that the fines were much less than what they made in their crooked dealings. Hardly dissuasive for committing fraud in the future.

      The enumeration in the Constitution, of certain rights, shall not be construed to deny or disparage others retained by the people. - 9th Amendment

      by TracieLynn on Tue Mar 12, 2013 at 07:46:50 AM PDT

      [ Parent ]

    •  And ban the bad actors (17+ / 0-)

      from the banking industry, like Neil Bush.

      The banks have a stranglehold on the political process. Mike Whitney

      by dfarrah on Tue Mar 12, 2013 at 08:28:23 AM PDT

      [ Parent ]

    •  FDIC does not have as much power (2+ / 0-)
      Recommended by:
      PianoGuy, Expat Okie

      as you are attributing it to. The FDIC has to go through a process before it can take a bank over. The process is based on the capital levels of the bank sinking below acceptable levels. Corrective warning letters go out. If no improvement is made in a certain time limit the FDIC has the authority to take the bank over to preserve as much as the deposits as they possibly can.

      They become the receiver. They also of course have the power to levy fines and refer criminal cases to the Justice department. They also have the power to "remove" cases from state courts to federal courts. They have the power to go after the assets of the banks that cannot be sold to other banks which usually means going after  borrowers who mistakenly think that once the Bank went into insolvency they could stop paying. They can be sued and they can sue. Here is an example:
      Here is a situation where they did win big but have yet to get the judgement paid

      The FDIC's biggest settlement so far targeted Washington Mutual. The FDIC sued several former executives, accusing them     of gross negligence in pursuing high-risk lending that eventually caused the bank to lose billions of dollars and collapse in 2008. The FDIC sought $900 million in damages, but     last December settled for $95 million, most of it covered out of insurance, with several executives contributing less than $500,000 between them.
      The LA time report is looking pretty shoddy  because it makes it seem like they were not even trying. Yet here is what happens when they do go to court.
      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.

      There is the issue of budgets. If you have a treasury head that is not interested in banks getting soft-shoed, you can bet that the FDIC would be reined in just by it's annual budget. They did what they could with what they had.

      One point that has not been covered is how the fines were determined. Was it a formula based on the size of the deposits that were in danger? We don't know that, nor does anybody else. The FDIC response was relatively pitiful as apparently it doesn't seem to understand that not only the secrecy is bothering people but the size of the fines. That needs more explanation before assumptions can be made.

      Litigation is expensive. Many departments in the govt rely on the either outside legal help or sometimes the solicitor general or the Justice department.

      One key issue to note that many people don't know. Each department bills each other for services rendered way above market rate. That also eats into their budget. Some of the things that go in internally are beyond belief. You have to read The Special Inspector of Tarp Neil Barofsky's book "Bailout" to get a handle on what hurdles anyone with good intentions have to clear EACH time a incident occurs. Opposition can come internally or externally and sometimes from the most unexpected sources.

      Lets lay this one where it belongs. Right in the lap of Tim Geithner and Eric Holder and possibly President Obama himself. I seriously doubt that any of these power players would NOT have protected their backsides by getting authorization before they would move. They didn't get to where they were without knowing how to fight politically.

      Finally, Many have conflated this with the regulators that Elizabeth Warren was questioning . None of those regulators were from the FDIC. In Fact they were from the  Federal Reserve and Office of the Comptroller of the Currency.

      It's very easy and theatrical to lay blame on each dept under the treasury. Instead, any of the problems that came out of the treasury that were identified as easy treatment of the banks can be traced right to Geithner's Office and then the Justice Dept. It won't get any better under Lew either. They could not afford to replace Geithner with anyone that had the interests of the country as a priority.

      •  Please see this comment above: (2+ / 1-)
        Recommended by:
        jm214, radical simplicity
        Hidden by:
        Dburn

        (comment above)

        5,490+ FBI investigations.
        1,700+ criminal referrals by 1992.
        1,100+ prosecutions.
         839 convictions.

        Of course that was under an administration when the rule of law still had some effect every now and then.  George H.W. Bush oversaw the S&L crisis and that was the result.

        Don't try to peddle this bullshit that the FDIC could do little or nothing about financial fraud that collapsed the global economy and involved many more bad actors and much more fraudulent activity, including egregious activity among Goldman Sachs, a major source Obama contributions.

        Please look at the New York Times comparison.

        "The law is meant to be my servant and not my master, still less my torturer and my murderer." -- James Baldwin. July 11, 1966.

        by YucatanMan on Tue Mar 12, 2013 at 06:26:33 PM PDT

        [ Parent ]

        •  HR for calling Me a liar (0+ / 0-)
          1980s, the Bush I administration put hundreds of S&L officers and board members in jail.  Hundreds.  
          I notice even in your comment you didn't specifically call out the FDIC. The S&L had a agency formed that Bill Black led that had far more leeway than the FDIC.

          The FDIC  required a Cooperative DOJ and President for criminal referrals. The FDIC does NOT HAVE THE POWER to do anything regarding criminal matters  but refer cases to the DOJ on criminal matters.

          Don't try to peddle this bullshit that the FDIC could do little or nothing about financial fraud that collapsed the global economy and involved many more bad actors and much more fraudulent activity, including egregious activity among Goldman Sachs, a major source Obama contributions.
          Do not call me a liar.  It is fact.  You will have to READ all of my comments on this to understand why they had their arms tied by the Treasury department.

          You rank right up there in putting out the most simplistic and uninformed commentary and using it as a basis for personal attack on me and  the  RESEARCHED comments I put out. I didn't rely on rags like the NYTs. I gave links to the powers that the FDIC as they exist  20 years after the S&L Crisis.

          Do NOT assume  you know everything. In fact do not assume you know anything.

          I have been on here 9 years and have never wrote a single complimentary comment on the GOVT as a whole.
          This is an agency in the govt with limited zero powers to exist. They were hamstrung by a corrupt DOJ, Treasury Sec who they answered too, and quite possibly the White House too.

          No agency in the federal Govt can bring criminal indictments without either the  US Attorney Office (IRS) or the Department of Justice. Both the Manhattan US attorney  (Called the Office in better times) and the DOJ brought shame on themselves and quite possibly broke the law themselves.  If not that, then their oaths.

          Finally, if you don't recognize a hit job in the press , you really need to think. You could have asked me why this differed. No, you made an ASS-sumption that I was pimping for the FDIC.

          That tells me you didn't read the comments and you have zero understanding of how govt is set-up. Go take a basic civics class and learn to research before you attack.

          I have found it's useless to argue with the uniformed. I do try. But,  if you call me a liar again, I'll HR you again.  

    •  The crooks are inside the government also. n/t (1+ / 0-)
      Recommended by:
      YucatanMan

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