Saturday, March 23, 2013
Government exists to serve the needs of the people, including protecting the public from unscrupulous behavior. And what the government does with taxpayer money — our money — is a public concern.
Unfortunately, that basic premise seems to be lost or forgotten on some government employees.
Perhaps that is what has been happening at the Federal Deposit Insurance Corp., a federal agency established to make sure that when people deposit money in a bank that the money will be there when they want to withdraw it.
The Los Angeles Times found the FDIC has purposely kept settlement deals quiet as required by deals made with bank’s lawyers.
The FDIC has collected $787 million in settlements to resolve civil claims related to bank failures from 2007 through 2012. Few of those settlements are known because the agency doesn’t always issue press releases.
Under the terms of the deals made between banks and FDIC, include a “no-press-release” clause. This requires FDIC officials to never mention the deal “except in response to a specific inquiry.”
Of course, it’s unlikely the FDIC is going to be asked about the deals since neither news agencies nor the public know there were deals.
It’s understandable that banks don’t want the public (costumers) to know they’ve had a financial fiasco. It’s embarrassing and it’s bad business.
When taxpayers (through the government) are involved those taxpayers have a right to know what is being done with their money. And in connection with the FDIC it is a lot of money.
Since 2007, more than 470 U.S. banks have failed, leaving taxpayers — the FDIC deposit insurance fund — with $92.5 billion in losses. The information was uncovered by The Times through a freedom of information request.
In those documents there were deals made to recoup some of that money that would have been front-page news across the country had deals not been made so FDIC officials would keep quiet.
Three years ago, the FDIC collected $54 million from Deutsche Bank in a settlement over unsound loans that contributed to a large California bank failure. The lousy loans in question contributed to the largest payout in FDIC history, $13 billion. The FDIC maintains it continues to follow the law.
“When a settlement agreement is reached, terms and conditions are publicly available, as federal law prohibits the FDIC from entering into confidential settlements with professionals of failed institutions,” FDIC spokesman Andrew Gray said in a statement.
Technically, he is correct. The agency will anwer questions.
It’s a sin of omission and clearly violates the spirit of the law. The practice is wrong and it should be stopped.