FDIC banks on lawsuits to recover money

Saturday, Jun. 18th 2011 4:24 PM

Banks don’t like it when the Federal Deposit Insurance Corporation takes them over, but the FDIC doesn’t like it either — particularly when they must absorb all the failed institution’s losses. In order to recoup some of this money, the FDIC may sue up to 109 former executives of failed banks, reports Christine Ricciardi of Housing Wire. The agency has named 109 executives subject to investigation and a possible personal liability lawsuit. The parameters of a possible lawsuit are broad: FDIC needs to prove “gross or simple negligence” on the part of former bank officers, directors, accountants, appraisers or brokers.

FDIC has already sued two lenders, including Glenwood, Illinois-based Heritage Bank. The lawsuit, filed in the U.S. District Court of Chicago, contends that Heritage made irresponsible commercial real estate loans and that executives gave themselves bonuses as the bank imploded. (Sounds like almost every single bank in the country during the housing boom.) These sweeping investigations are good news for FDIC, but trouble for former executives of the 17 Illinois banks that failed in 2010.

Posted on Saturday, Jun. 18th 2011 4:24 PM | by Share of Cost | in Share of Cost | Comments Off on FDIC banks on lawsuits to recover money