Between January 2008 and March 2012, the Federal Deposit Insurance Corp. (FDIC) took over a staggering 427 banks. In the preceding five-year period, the agency shuttered only 10. The rate of bank failures dramatically peaked in 2010, and has been dropping off in each subsequent year. But the financial sector isn’t resting easy during this slow recovery. According to a new report issued by Cornerstone Research, 2013 has seen a precipitous increase in FDIC litigation against the directors and officers of failed financial institutions, even as new bank closures slow down and mortgage lending recovers. At press time, the agency had filed 19 suits in 2013 and was on pace to file 39 such lawsuits by year’s end, the greatest number in a single year since the financial crisis began.
Beyond a mere increase in the number of financial institutions targeted for litigation, there also has been a marked change in the FDIC’s approach to such cases. Emboldened by the $169 million verdict in the FDIC’s favor in litigation against three former officers of failed California bank IndyMac in December 2012, the agency is taking an aggressive position, going after the personal assets of directors and officers, and filing more lawsuits rather than settling claims.
