This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

FDIC Files 266 Failed Bank Lawsuits, Seeks $6.8B

Stocks in this article: JPM MBFI FCAL RF

WASHINGTON ( TheStreet) -- The Federal Deposit Insurance Corp. has now authorized 266 lawsuits resulting from 30 bank and thrift failures, seeking $6.8 billion in damages.

The agency said it has three years to place tort claims and six years to pursue breach-of-contract claims against officers and directors, after a failed bank is shuttered. Some of the lawsuits include "direct claims against insurance carriers such as fidelity bond carriers and title insurance companies."

The 266 lawsuits may seem to be a very small number considering that 383 banks and thrifts have failed since the beginning of 2008, but the FDIC only pursues professional liability lawsuits if they are determined to be "both meritorious and cost-effective," after an investigation that can take as long as 18 months after a bank is shut down.

The FDIC also seeks to settle the claims before going to court.

Kevin Petrasic, a partner partner in the Paul Hastings Global Banking practice in Washington, said that in the aftermath of a banking crisis, "There is always an element of finger-pointing," and that "a significant degree of blame rests across the board, including with an overall culture that, in retrospect, was out of control."

Petrasic added that "ultimately, it will be very hard to effectively determine and pursue an appropriate cause of action and accountability due to these complexities."

As of Aug. 4, the agency had authorized suits against 266 directors and officers of 30 failed institutions, and had also authorized "16 fidelity bond, attorney malpractice, and appraiser malpractice lawsuits." There were also 172 residential malpractice and mortgage fraud lawsuits pending, some of which the agency inherited from failed banks.

D&O filings by the FDIC include lawsuits against former directors and officers of IndyMac Bank of Pasadena, Calif., which failed in July 2008, and was operated under FDIC conservatorship until the agency sold the institution to a group of investors that included J.C. Flowers and Paulson & Co. for $13.9 billion in January 2009. The institution is now known as OneWest Bank.

A D&O lawsuit was also filed against officers of Heritage Community Bank of Glenwood, Ill., which failed in February 2009, and was acquired by MB Financial (MBFI) of Chicago. MB Financial was recently featured in TheStreet's updated story on 10 Midwest bank stocks .

Other FDIC lawsuits have been placed against former officers and directors of 1st Centennial Bank of Redlands Calif., which was shuttered by state regulators in January 2009 and purchased from the FDIC by First California Financial (FCAL) of Camarillo; Integrity Bank of Alpharetta, Ga., which failed in August 2008 and was purchased from the FDIC by Regions Financial (RF); and Washington Mutual, which was closed by the Office of Thrift Supervision in September 2008 and purchased from the FDIC by JPMorgan Chase (JPM).

1 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs