Increased FDIC Lawsuits a Step in the Right Direction, But Too Little Too Late?

LAPF Investments
April 1, 2011
Thomas A. Dubbs

In October 2010, the United States' Federal Deposit Insurance Corporation (FDIC), an independent agency of the federal government that insures deposits in banks and thrift institutions, began authorizing litigation against directors and executives of failed financial institutions. The FDIC acts for failed banks in the US as a trustee or administrator in bankruptcy. The goal is both to hold accountable those managers who helped cause the international financial crisis, and to recover billions of dollars in losses. As of April 2011, the FDIC plans to pursue more than 100 suits against 187 individuals with the possibility of hundreds of additional suits in the future. If the FDIC's pursuit of claims in the previous Savings and Loan crisis of the 1980s can be used as a benchmark, as many as one quarter of bank failures will lead to litigation.

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