Magazine article American Banker

Ruling Weakens OTS' Power over Thrift Buyers

Magazine article American Banker

Ruling Weakens OTS' Power over Thrift Buyers

Article excerpt

A federal appeals court last week made it harder for the Office of Thrift Supervision to enforce capital infusion agreements made by buyers of troubled thrifts .

The U.S. Court of Appeals for the District of Columbia said July 11 that the agency cannot compel compliance unless it shows that the buyer has been "unjustly enriched."

The decision takes Robert D. Rapaport off the hook for a $1.9 million capital deficiency that caused Great Life Savings Association of Sunrise, Fla., to fail in 1990.

Before 1990, regulators required every purchaser of a thrift to guarantee that the institution would always be fully capitalized - even if that meant providing a fresh infusion of cash.

OTS officials declined to comment on the decision, other than to say any decision that imperils its ability to recoup funds increases the burden on the taxpayer.

In a related case, the same court ruled that the OTS could freeze - but not seize - the assets of New Jersey's Cityfed Financial Corp., even though regulators took over its thrift unit in 1989.

The judges said Cityfed, as the holding company, made a commitment to infuse capital as needed into City Federal Savings Bank of New Jersey. It violated that contract when it refused to use any of its $12.9 million in assets to plug a $118 million regulatory capital shortfall at the thrift.

The court rejected the company's argument that the OTS lost jurisdiction once City Federal failed. Rather, it said the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 gives the OTS broad powers to attack holding companies and thrifts. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.