Viewpoint: Regulatory Blitz for Subprime Players?

By Delston, Ross | American Banker, November 9, 2007 | Go to article overview

Viewpoint: Regulatory Blitz for Subprime Players?


Delston, Ross, American Banker


The recent failures of NetBank and Miami Valley Bank - two in one week - brings back many memories of my time at the FDIC during the last banking crisis in the United States in the late '80s and early '90s.

Those were the bad old days when bank failures were routine, the deposit insurance fund was itself becoming insolvent, and then-FDIC Chairman Bill Seidman was a celebrity. In those days once a bank was closed, everyone and everything that ever touched it entered a new realm; let's call it the land of bad things.

What do I mean by that?

* Members of bank boards of directors were routinely investigated by the FDIC and sued for negligence - successfully, more often than not. Perhaps bank directors had not realized when they signed on to what they considered a prestigious position that they were putting their assets on the line. In fact, the joke in those days was that the FDIC had a new name for bank directors - "defendants."

* Accounting firms were treated similarly, particularly after giving a clean bill of health to a sick institution. And law firms were not exempt - very large settlements were reached with some very large law firms.

* Directors and senior officers were also routinely subjected to administrative enforcement actions by the banking regulators, resulting not only in civil money penalties of up to $1 million per day, but sometimes in outright bans from further employment in any bank. In rare cases, usually involving financial crimes such as fraud, insider abuse, or money laundering, referrals were made by regulators to the Justice Department for prosecution.

* And after the enactment in 1989 of FIRREA - the Financial Institutions Reform, Recovery, and Enforcement Act - bad things could also happen to vendors or independent contractors, including lawyers, accountants, and appraisers. Such firms, if considered an "institution-affiliated party," could be subject to civil money penalties if they knowingly participated in an unsafe or unsound practice that caused more than a minimal financial loss to the failed bank. Such parties could also be barred from having any further participation in a bank's affairs.

You would be surprised at how easy it was in those days for the regulators to find such practices unsafe or unsound. And a "minimal" financial loss? Let's just say that's a pretty minimal standard.

* Anyone who had previously had a contract with the failed bank - lessors, vendors, service providers, employees - was subject to the FDIC's so-called superpowers, that is, the agency's ability to void a contract at will, with compensation, of course, but without any possibility of punitive damages.

* Though depositors with less than $100,000 in a failed bank were quickly paid off, general unsecured creditors, including excess depositors (those with more than $100,000 in a bank at the time of its failure), were not so fortunate. …

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

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
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

(Einhorn 25)

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

Note: primary sources have slightly different requirements for citation. Please see these guidelines for more information.

Cited article

Viewpoint: Regulatory Blitz for Subprime Players?
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?

Help
Full screen
Items saved from this article
  • Highlights & Notes
  • Citations
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.”

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA 8, MLA 7, 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." (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

    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.

    Buy instant access to save your work.

    Already a member? Log in now.

    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.