Bankers gone wild, and we're stuck with the bill
Eighty-seven banks have failed this year.
For a rare look at the kind of shenanigans that go on after the teller window closes at some of these esteemed financial institutions, you'll enjoy these court revelations from a multimillion-dollar FDIC suit against the top brass of a small Illinois bank that went under in July 2009.
News of the demise of Mutual Bank of Harvey, Ill., might not have traveled beyond the county line had the nine bank directors and officers, including their general counsel, not engaged in the types of alleged behavior the FDIC says cost taxpayers a total of $127 million.
The FDIC claims the top brass wasted $1.3 million in corporate assets for the following:
* A lavish $250,000 wedding at the Chicago Sheraton for the son of one of the bank's directors, complete with a chauffeured Rolls-Royce;
* $495,000 paid to the bank president to cover his wife's legal fees in a Medicaid fraud case;
* $250,000 for home renovations; and
* A $300,000 board meeting in Monte Carlo.
OK, I'll give on that last one. Monte Carlo vs. Harvey, Ill.? No contest!
Oh, yes, and then there's that small matter of $10.5 million in dividends the bank paid, primarily to the president's family in 2007 and 2008, despite financials that showed the bank was in trouble as early as 2006.
The FDIC wants it back.
Ironically, it wasn't this type of money management that got Mutual Bank in trouble in the first place.
Instead, it was its rather casual lending procedures on 12 large loans.
In one instance, it even made a sizable loan to a borrower who was in jail awaiting trial for the alleged murder of his daughter-in-law without discussing with him how he planned to repay his loan from the slammer.
According to American Banker, the failure of the bank, which once had $1.6 billion in assets, will likely cost the Deposit Insurance Fund $775 million.
Banks are doing a lot of carping these days about their unfair treatment in the media.
I'd be more sympathetic if they would refrain from giving us so much to work with.
Although bank failures are down year over year, here's what to do if your bank fails.