New Ruling Could Reverse Penn Square Bank Claims

By Wolfe, Lou Anne | THE JOURNAL RECORD, June 3, 1986 | Go to article overview

New Ruling Could Reverse Penn Square Bank Claims


Wolfe, Lou Anne, THE JOURNAL RECORD


Some $1 million in deposit insurance claims on letters of credit against the receivership of Penn Square Bank in O klahoma City could be reversed as a result of a recent U.S. Supreme Court ruling, according to Larry Bates, attorney for the Federal Deposit Insurance Corp.

The claims had been granted by U.S. district and appelate courts.

The U.S. Supreme Court ruled last week that standby letters of credit backed by promissory notes are not equivalent to insured deposits by the FDIC.

That decision overturned an order by the 10th Circuit U.S. Court of Appeals that the FDIC pay $145,100 to Philadelphia Gear Corp. on a claim against the FDIC deposit insurance fund based on lettersof credit.

A standby letter of credit is a guarantee by a bank to make good on a loan agreement made between two parties if one of the parties defaults.

"There may be about $1 million of deposit insurance claims based on letters of credit granted by the court," said Bates, attorney for the FDIC's Washington office. "Hopefully, those will be reversed. The beneficiaries of those letters of credit would still have their claim against the Penn Square receivership estate."

Bates said the $145,100 deposit insurance claim by Philadelphia Gear Corp. is the first to be ruled on out of five or six lawsuits claiming letters of credit were insurable deposits. About $1 million in claims of that sort had been approved by the U.S. District Court in Oklahoma City, he said.

"We've appealed every case that the district court said was insurable," Bates added. He said he expects the remainder of cases to be taken care of in district and appellate courts, as a result of Tuesday's Supreme Court ruling.

Yet to be decided, however, is whether standby letters of credit constitute a provable claim against the Penn Square receivership estate, attorneys say.

If such claims are accepted by the court, the creditors would be issued receivership certificates like any other uninsured depositors, said Paul Heafy, chief liquidator in the FDIC's Oklahoma City office.

At least two schools of thought prevail on the status of letters of credit, according to Oklahoma lawyers familiar with the area.

Some argue that, like deposits, letters of credit retain the same status after an institution is closed.

Others point out that when a bank reaches the point of insolvency, it operates under a new set of rules. A standby letter of credit is a contingent liability - a guarantee of payment by the bank in case a party defaults on a loan, and often needs never to be drawn upon. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

New Ruling Could Reverse Penn Square Bank Claims
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.