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Whether the process is just winding down for the year or
the process is actually winding down for good, the bank closure rate has
recently fallen off dramatically. The FDIC has not taken over any banks for
three weeks straight, with no bank closure at all so far during the month of
December. And there were only five bank closures in November, after eleven in
With 90 bank failures so far in 2011, the total number of
failed banks since January 1, 2008 stands at 412. The monthly high water mark
during that four year period occured in July 2009, when the FDIC took control
of 24 banks. More recently, the monthly numbers of bank failures has been well
below the monthly high. But even if the rate of bank failures has more recently
been down from those higher levels, the overall 2011 bank failure levels remain
well above 2008 levels, when only 25 banks failed.
More than half of the bank failures so far this year have
been concentrated in just four states, Georgia (which has had 23) and Florida
(12), Illinois (9) and Colorado (6). The number of 2011 closures Colorado is a
little bit unexpected, as during the preceding three years between 2008 and
2010, the state had a total of only three bank failures. The other three
states, by contrast, have pretty much led the way throughout the current bank failure
wave. Since 2008, Georgia has had a total of 74 bank failures; Florida has had
57; and Illinois has had 43. Bank closures in those three states, plus
California (38) represent more than half (209) of the 412 bank failures between
January 1, 2008 and today.
The number of lawsuits that the FDIC has filed so far
against the former directors and officers of failed banks as part of the
current bank failure wave currently stands at 17 (about which refer here,
scroll down). The FDIC has maintained its very deliberate pace in initiating
new lawsuits. However, this past week the agency did update the page on its
website on which it discloses the number of lawsuits that has been authorized.
According to the FDIC's site, as
of December 8, 2011, the FDIC has authorized suits in connection with 41 failed
institutions against 373 individuals for D&O liability for damage claims of
at least $7.6 billion. These figures representing the authorized lawsuits
contrast starkly with number of lawsuits that the agency has actually filed: So
far, the agency has filed only 17 lawsuits against 135 former directors and
officers of 16 failed financial institutions. Given the discrepancy between the
number of suits authorized and the number of suits filed, there clearly are
many more suits in the pipeline, with even more lawsuits likely to be
authorized in the months ahead.
The FDIC's website also mentions that that two of the 17
lawsuits it has filed so far already have settled. One of the two settlements
occurred in the lawsuit the FDIC filed in connection with the failed First
National Bank of Nevada. As discussed here,
the FDIC and the defendants in that case settled for a stipulated judgment, the
individual defendants' assignment to the FDIC of their rights under the bank's
D&O insurance policy, a release of claims and the FDIC's covenant not to
execute the judgment against the individuals. The other of the other of the two
settlements was entered in the lawsuits the FDIC had filed on connection with
the failed Corn Belt Bank and Trust. In May 2011, the parties advised the court
that they had settled the case, but the court file does not reflect the details
of the settlement.
Though only two settlements have been announced, there
circulating that the FDIC has settled the
lawsuit that the agency filed against three former directors and officers
of failed Washington Mutual bank and their wives. Indeed, in an October 27,
2011 order in the case (here),
Western District of Washington Marsha Pechman stayed all pending deadlines in
the case, after noting that the parties had advised the court that the case had
settled. (She gave the parties 60 days to complete their settlement and to file
their settlement papers with the court.)
The amount of the purported WaMu settlement has not yet
been disclosed, but there are a number of relevant data points that may suggest
the likely settlement range. The recently
announced $208.5 million settlement of the WaMu securities class action
lawsuit included a $105 million settlement contribution on behalf of the
individual director and officer defendants, to be funded entirely by D&O
In the settlement papers filed in connection with the
WaMu securities class action settlement, it was disclosed that the $105 million
in insurance proceeds were to be drawn from a D&O insurance tower
(including both traditional and Excess Side A insurance) of $250 million. The
$105 million contribution toward the WaMu securities class action settlement
materially reduced the amount of insurance remaining in the tower, and it is
likely the defense costs in the various actions pending against the former WaMu
officers and directors further depleted the amount of insurance remaining.
The amount of the any settlement in the WaMu FDIC lawsuit
remains to be seen and it also remains to be seen whether and to what extent
the individuals might contribute toward the settlement out of their own assets.
But the amount of insurance remaining is at this point likely to be under $100
million, so in the absence of any significant contribution from the individuals
the amount of any cash settlement in the WaMu case is likely to be below $100
million. Given that the collapse of Washington Mutual was the largest bank
failure in U.S. history, it will be interesting to see the amount of any
settlement that ultimately does emerge.
The American Civil War Viewed from Other
Shores: As detailed in Amanda Foreman's massive book A
World on Fire: Britain's Crucial Role in the American Civil War, many individual
Britons were so taken up with the apparently romantic appeal of the Confederacy
that they enlisted in the Confederate Army. Many were convinced that the South
would win its independence, and one Englishman was so certain that he converted
"his entire savings into Confederate currency, while it was still cheap to
The British sympathies for the Southern Cause had many
sources, but one of the most important was economic, as a significant part of
the British mill industry was dependent on the import of cotton from the
Southern States. But despite this obvious financial pull toward the
Confederacy, the British Government remained officially neutral, in part
because the government did not want to be drawn into the war, on either side.
As the war progressed and the appalling numbers of casualties began to
accumulate, a vocal peace party began to form in England, in the interests of
stopping the carnage. Most of the supporters of this position believed (without
any particular evidence) that the Confederacy would have to abandon slavery
anyway, after the war ended.
It took two developments, both of which were agonizingly
long in coming, for British sentiment to begin running in favor of the North
and of the Union. The first was Lincoln's Emancipation Proclamation, which
allowed Northern supporters to contend that the purpose of the war was to end
slavery. The real problem the supporters of the North faced was that for the
first two years of the war, the North looked incapable of winning. Finally, after
the tide finally turned at Gettysburg, the increasing likelihood of a Northern
victory allowed the British political elites to begin to envision the
possibility of a re-united country after the war concluded.
What Foreman does particularly well in this interesting
and detailed book is to tell the tale of the battle for the hearts and minds of
the British people while the actual war went forward back in the States. The
British government's official position may have been one of neutrality but it
seems as if no one in Britain was personally neutral. After the surrender at
Appomattox and shock of Lincoln's assassination, the Britons rediscovered their
natural affinities for their American cousins, and the groundwork was laid for
a relationship that has ever since been described as "special."
I heartily recommend this book, which the New York
Times selected as one of the Ten
Best Books of 2011.
other items of interest from the world of directors & officers liability,
with occasional commentary, at the D&O Diary, a blog by Kevin LaCroix.
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