Perhaps the long awaited punitive phase of the bailouts are about to begin, courtesy of this FDIC announcement:

The Federal Deposit Insurance Corp. has authorized more than 50 lawsuits against officers and directors of failed banks as the agency aims to recoup more than $1 billion in losses stemming from the credit crisis.

The lawsuits were authorized during closed sessions of the FDIC board and haven’t been made public. The agency, which has shuttered 294 lenders since the start of 2008, has held off court action while conducting settlement talks with executives whose actions may have led to bank collapses, Richard Osterman, the FDIC’s acting general counsel, said in an interview.

“We’re ready to go,” Osterman said. “We could walk into court tomorrow and file the lawsuits.”

Awesome — and overdue.

Next up for clawbacks: The various iBank execs who destroyed their own firms through their recklessness and risk-taking. Then, State Attorney Generals do criminal prosecution of bank execs, lawyers, process servicers, whose gross negligence or willful recklessness  led to illegal foreclosures.

A boy can dream . . .

Source:
FDIC May Seek More Than $1 Billion From Failed-Bank Executives
Phil Mattingly
Bloomberg, Oct. 8 2010
http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=a6g9Mv92t0pk

Category: Bailouts, Legal, Regulation

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

48 Responses to “Here Come the Clawbacks!”

  1. dan10400 says:

    It would be really interesting to know if any have settled prior to this announcement.

  2. b_thunder says:

    Best Y2011 investments: “correctional facilities management” companies and REITS with “prison RE exposure”?

  3. b_thunder says:

    although first we shall see how much of $6.8B the French will “claw back” from Kerviel

  4. FrancoisT says:

    Settlements should be off the table at this point.

    To be really punitive, the potential perps ought to know that FDIC is absolutely not in the mood to go soft on offenders, contrary to other (I was about to write “more corrupted and co-opted”) agencies of the gubmint.

    If they go this route, turn on the TV and grab the popcorn; should be really fun to watch!

  5. obsvr-1 says:

    Good to see that investigations will (may) prosecute those who violated the law, the FDIC, SEC, DOJ should go after everyone of the fraudsters, however $1B from 50 is a pittance compared to the colossal size of the crimes committed. Unfortunately jail time doesn’t seem to be a top priority.
    Hopefully there is still active investigations and pursuits of the BIG Offenders, just clawing back Joe Cassano’s ill-gotten gains out of AIG would likely scratch up $250M, the claw back of ill-gotten gain needs to start with the top offenders, then proceed down the list to the relatively small thiefs. Too bad they have already dropped the cases against Cassano.

  6. mad97123 says:

    I can already hear their defense.

    “We knew we were taking on too much risk, but we’re not paid to be right, we’re paid to make money! And boy did we make some money….”

  7. Darkness says:

    I’m dreaming they bring back pillory. Modern electronic pillory would be fine, and less messy. Let anyone post a comment and then provide a live feed of the bankster reading all the comments aloud.

    Then auction off all his/her possessions on ebay and issue them a large cardboard box and an alleyway to live in.

    See, I figure if you are going to dream, you should dream big.

  8. 1) Clawbacks are long overdue. It’s the only punishment these bastards will ever receive.

    2) Barry! It’s attorneys general

  9. realgm says:

    Is it really going to happen?

    I can’t wait to see some of these bastards losing all their money and going to jail.

    Will it happen? Am I dreaming?

  10. jus7tme says:

    One could hope that instead of trying to get clawbacks from all the small-time bank CEOs, someone, and it would have to be someone else than FDIC, would claw back some ill-gotten profits from the big-time bank CEOS and other officers.

    The obvious problem here is that FDIC can only sue banks that actually were allowed to fail.

  11. curbyourrisk says:

    Don’t hold your breath. This government has know understanding of what doing the right thing means.

  12. JohnnyVee says:

    The executives don’t pay money out of pocket. Their comapnies buy insurance for these types of lawsuits. Its’ like professional erros and omissions insurance. The money is really just comming from AIG, if at all.

  13. rktbrkr says:

    Stan O’Neal should be drawn & quartered for what he did

  14. rktbrkr says:

    BOA announces Countrywide foreclosure freeze (pun intended)

    http://www.inman.com/news/2010/10/8/bofa-halts-foreclosure-sales-in-all-50-states

    will Angelo get clawed?

  15. Marc P says:

    I will believe it when I see it. When it comes to Goldman we have seen a few simple steps:

    The government begins a lawsuit against Goldman for only one of its many transgressions.

    The lawsuit is settled for $550 million.

    Goldman pays the $550 million out of the billions of dollars it received from the government.

    The government announces that it will do no further investigation of Goldman.

    There are no proceedings against any individual.

  16. gordo365 says:

    Did Larry Summers quit Obama team because he is going to be a defendant? Or because he is philosophically opposed to this type of unsavory use of taxpayer money?

  17. AHodge says:

    any big guys?
    any rescued companies? their defence will now be it didnt cost you anything, geithner says so?
    looks like a
    “Mills of the Gods grind slowly, but they grind exceeding fine”
    but actually we should be so lucky.
    still, a little something from the agency that mostly knows what it is doing.

  18. rktbrkr says:

    (BOA)“We will stop foreclosure sales until our assessment has been satisfactorily completed,” the Charlotte, North Carolina- based company said today in a statement. “Our ongoing assessment shows the basis for foreclosure decisions is accurate.”

    “the basis” for foreclosure decisions is “accurate” is not the same as saying the foreclosures were legal and adequately documented. Reading between the lines I’d guess the “basis” for the decision to foreclose was the failure to pay and that is just the first step.

  19. ab initio says:

    Lets see if and when they happen whether its just a slap on the wrist for the few token execs or something meaningful.

  20. franklin411 says:

    Former CHiPs star Larry “Officer Jon” Wilcox charged with stock fraud in a pump and dump scheme…Ha!

    http://www.latimes.com/business/la-fi-chips-sec-20101008,0,3330645.story

  21. formerlawyer says:

    To jus7tme:

    I am not so certain that the executives of the bigger banks or at least the ones where the assets were bought are scott free. I would expect the FDIC to reserve the right to go after those executives and as the article sets out they received warning letters.

    Now criminal complaints – that is another matter. White-collar crime and fraud squads are notoriously underfunded. So who has the balls?

  22. Mannwich says:

    Yeah, right, call me when they go after ANY of the big boys in the Wall Street criminal cartel. How is that Dick Fuld hasn’t even been indicted at this point?

  23. dsawy says:

    $1 Billion? *One* billion? WTF is it with these clowns? Goldman gets slapped for $550 mil (0.55 B) and now $1B for “losses.” We all know both of these numbers are far too low to make an impression upon the banksters.

    When is the government going to hire someone who can count into double digits? Has no one in any of these agencies finished watching Sesame Street yet?

  24. “…aims to recoup more than $1 billion…”

    sounds impressive..at first blush…

    but, really, RtheyFK?, only a Billion?

    they act like there wasn’t 1200+ , of those, in last year’s Budget Deficit, alone..

    or, ~20 000+ in the, total(?), “Banker Giveaway”-special that was hosted in D.C. ..

    the FDIC, still a Con..

  25. Lariat1 says:

    Up in my neck of the woods, http://www.poughkeepsiejournal.com/article/20101008/NEWS05/101008006/Fishkill-man-admits-defrauding-TARP–agrees-to-repay–11.2-million

    And he is expected to earn leniency by cooperating with authorities.

  26. DuchessGateau says:

    jus7tme is right. The insolvent big banks have been gobbling up the insolvent small and medium-sized banks, who were shut down by the FDIC. Meanwhile the govt is covering for the HUGELY insolvent big banks. Banks granted subprime mortgages to people who they knew would not be able to pay, and now they are foreclosing. The big banks will REAP, REAP, REAP from the economic losers. I’m sure there are many ways to do this, and they have planned it in detail. It’s the follow-through. I have the sickening suspicion that BofA is freezing foreclosures because they are awaiting passage of the foreclosure bill, which must be chock full of more advantages for large banks. Will anyone really be surprised if it takes away property rights from homeowners?

  27. wngoju says:

    “a boy can dream” … :-)

  28. Lugnut says:

    Hey Barry really think it’ll happen?

    Go short the Insurance Carriers that hold the D&O policies (Directors and Officers) for the banks…..

    ; )

  29. ACS says:

    My cynical side asks if Team Obama will do anything that might interfere with the bosses ability to give six figure speeches after leaving office?

  30. Robespierre says:

    @Mark Wolfinger Says:

    “2) Barry! It’s attorneys general”

    Dang, I wish our SEC, AG, FBI police was as fast and efficient as the grammar police in this blog :^) jk

  31. Don’t get too excited. You can sue everybody and his brother, but it won’t put our Humpty Dumpty economy back together again. It might make you feel good, but good feelings are a luxury we might soon be unable to afford.

    But I’d go short residential real estate and long commodities the more the politicians jump on the foreclosure scam bandwagon.

    Do people not get that if you don’t allow foreclosures, you will destroy what little semblance of a residential real estate market there now is? And that we all will be stuck with the bill? In our TBTF world, a few more bombs dropped on bank balance sheets, as would happen if a significant number of foreclosures were barred, would put us in Tarp II. Which would simply mean more money printing. Which would mean an even weaker dollar. Which would mean $5/gal gas, amongst other things. Populist stupidity has consequences.

  32. Robespierre says:

    @The Curmudgeon Says:

    “Do people not get that if you don’t allow foreclosures, you will destroy what little semblance of a residential real estate market there now is?”

    And let them procced based on fraud will destroy what little semblance there is of the rule of LAW.

    “Populist stupidity has consequences.”

    And living in a country where laws are enforced selectively is the epitome of stupidity and has worst consequences.

  33. KidDynamite says:

    I saw this story and something about it immediately struck me as ironically circular.

    If the FDIC fines bank CEOs and Ex-CEO’s, the banks themselves usually pay the fines… that, of course, means the banks end up with less capital on hand, and are thus, wait for it…. more likely to need FDIC bailouts in the future!!!

    Would people rather see the FDIC assess a $100MM fine that the bank pays on behalf of the CEO, or a $1mm fine that the CEO pays himself? I’m not sure – maybe the latter?

  34. AG Sage says:

    Halting foreclosures is perfect for the banks. Mark to make believe just a little bit longer. Pretend everything is afloat. They aren’t even pretending this is painful for them.

  35. KD: Excellent point. Follow the money. It always leads back to the taxpayer.

    To Robespierre:

    “And let them procced based on fraud will destroy what little semblance there is of the rule of LAW.”

    So, you think a fraudulent notarization is worth a house? Either houses are getting really cheap, or fraudulent notarizations are really, really horrible.

    “And living in a country where laws are enforced selectively is the epitome of stupidity and has worst consequences.”

    Every country everywhere selectively enforces its laws. Did you exceed the speed limit on your way to work this morning? Have you ever rolled through a stop sign?

  36. Mannwich says:

    @KD: Great gig, this bank “CEO” thing, isn’t it? I really can’t see any downside to it, not in our current environment and culture.

  37. Mannwich says:

    @Curm: Now you’re being a little disingenuous. Some laws are clearly more important consquentially than others. You know that.

  38. Exactly my point manny. Notarization law is one of lesser importance. Always has been. Until now, and it becomes an excuse for derailing a bunch of otherwise legitimate foreclosures.

  39. Mannwich says:

    I will agree that there’s no way the Feds will let the real estate market grind to a halt though. If anything they’re going to go the other way with it, as we’ve seen. They’re all-in and then some on the reflation game. I watched Bill Gross on Bloomie a bit ago. The QE-4-eva train has left the station and not coming back. Another bubble is being blown right in front of our very eyes. Remember, the American public has a short memory and will likely eventually jump aboard this bubble as well when they start feeling like they’re being left out of the free money get rich quick game. That’s when it will all end in tears….AGAIN. And then we’ll just do it all over again until some other force stops this cycle.

  40. Mannwich says:

    Point taken, Curm. I’m with you though and think this is just a sideshow. If anything really thinks this little hiccup relatively speaking is going to stop them in their tracks on their reflation efforts, they are kidding themselves. We’re going to be seeing $100 oil again soon, me-thinks, and food price inflation (and inflation in other things we need like health care, educaton, etc.), which is OK because that doesn’t count according the Fed.

  41. Mannwich says:

    And as long as worker bee salaries don’t go up, there is no inflation, according to the Fed. It’s all in our imagination.

  42. Inflation in everything but wages might actually cure the employment problem, as the real wage rate declines. Of course, it means a lower standard of living, but that’s coming anyway.

  43. philipat says:

    It certainly COULD be done and SarbOx would greatly assist against the “I didn’t know that” part of the defense.

    However, as you say, dream on…………………………………………….

  44. hammerandtong2001 says:

    Right on cue:

    http://online.wsj.com/article/SB10001424052748704696304575538131744705958.html

    “There is absolutely no connection whatsoever between [this bill] and the recent foreclosure-documentation problems,” Mr. Aderholt said, adding that “the fears about this bill have resulted from misunderstanding.”

    Well, shut my mouth.

    How did a bill written with the expressed purpose of permitting “not-in-person” notarizations and other automated signatory processes for foreclosures (and other proceedings) manage to get passed overwhelmingly by the US House of Representatives and unanimously (?!?!) by the US Senate when numerous courts have ruled that such processes are improper (at minimum) and possibly illegal?

    And lo and behold — the bill, which must have taken months and months to slither its way through the various government offices, departments, meeting halls and back rooms, manages to appear — RIGHT ON CUE — on the President’s desk for veto. Right in the middle of a news cycle about banks stopping foreclosure porceedings for this PRECISE reason and on the very day that Bank of America announces they are halting foreclosures for procedural review…?

    Ahhh, the mysterious ways of Washington.

    .

  45. jus7tme says:

    Formerlawyer,

    >>I am not so certain that the executives of the bigger banks or at least the ones where the assets were bought are scott free
    >>I would expect the FDIC to reserve the right to go after those executives and as the article sets out they received warning letters.

    I hope you are right but as an example a quick web search did not indicate that Citibank had received a corrective action letter . But perhaps someone else than FDIC can do something? I wish SEC was run by an elected prosecutor. That’s the only way to go, All these appointed-by-the-executive-branch commissions ( SEC, FTC, FCC etc are useless because they are inevitably stocked with industry cronies).

  46. jus7tme says:

    formerlawyer,

    >>I am not so certain that the executives of the bigger banks or at least the ones where the assets were bought are scott free. I would expect the FDIC to reserve the right to go after those executives and as the article sets out they received warning letters.

    I sure hope you are right. But as an example, a quick web search did not indicate that Citibank had received a corrective action letter . But perhaps someone else than FDIC can do something? I wish SEC was run by an elected prosecutor. That’s the only way to go, All these appointed-by-the-executive-branch commissions ( SEC, FTC, FCC etc) are useless because they are inevitably stocked with industry cronies).

    [reposted to fix typos]

  47. emailcraigs says:

    Here comes the latest dog and pony show….the one where the big, bad, regulator huffs and puffs while all the little piglets lay back fat and full and comfortable…giggling all the while. THEN, the best part….the mighty and informed populace of these United States settles back on its haunches and once again sleeps easily, if yet fitfully, knowing that all is right with capitalism. Meanwhile, the piglets return to their trough, and the stealthy regulators once again start pouring the slop of taxpayer funds, as the piglets devour it more greedily than before.