EDUCATION CENTER

FDIC too slow to sue officers and directors at failed banks, critics say
As the chief undertaker of the Great Recession, the Federal Deposit Insurance Corp. has briskly shuttered 345 failed banks since 2008, at a cost to the government insurance fund of about $76Â billion.

But the regulator has sued only a handful of officers and directors to recover some of that money, despite a pattern of risky behavior by executives at many failed banks described by the agency's own watchdog in a recent analysis.

To date, the FDIC has sued officers and directors at only five of the 345 banks that have collapsed since 2008, or about 2 percent. The 39 former executives named in the civil lawsuits are fighting the FDIC's accusations of negligence and mismanagement. And time is running out for the FDIC to file lawsuits in some of the early bank failures because of a three-year statute of limitations.

At this pace, critics say, the FDIC is falling short of what banking regulators did a generation ago in the U.S. savings-and-loan crisis, when they sued officers and directors at about one-quarter of the more than 1,000 institutions that failed.

"In all areas, the FDIC has been far later and far weaker in terms of enforcement than during the S&L crisis" said William Black, a University of Missouri-Kansas City law professor who was a top lawyer at the Office of Thrift Supervision and its predecessor when U.S. savings-and-loan thrifts were collapsing in the late 1980s and early 1990s.

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