(CN) – The Federal Deposit Insurance Corp. will have to clarify why it refuses to pay golden parachute bonuses to former officers of failed Washington Mutual Bank, a federal judge ruled.
WMI Liquidating Trust, receiver for Washington Mutual, sued the FDIC last year in the District of Columbia for refusing to approve “golden parachute payments” to former officers and employees of the failed bank.
Golden parachutes are large payments made to executives when a company is taken over and the executive’s job is lost due to the merger. Federal laws prohibit golden parachute payments when the insured depository institution is troubled or insolvent.
Washington Mutual filed for bankruptcy and was placed in receivership in 2008, becoming the biggest bank failure in U.S. history. JPMorgan Chase bought it for $1.9 billion in September 2008, in a deal brokered by the federal government. WaMu had $310 billion in assets when it collapsed.
The WMI Liquidating Trust has been resolving claims from WaMu’s creditors, including former employees and executives who want severance and other benefits. Federal regulations require WMI to seek approval for the payments from the FDIC.
When the FDIC denied WMI’s proposed settlements, it called the settlements golden parachute payments issued a blanket denial.
WMI sued, claiming the payments “do not run afoul of the text or spirit” of golden parachute regulations and that honoring the settlements would prevent litigation costs.
Tampa Bay website:
Seven years ago, Renee Abuton realized she was juggling too much — student loans, car payments, mortgage payments and homeowners association fees.
Abuton, then a single parent, declared bankruptcy and let the mortgage company repossess her Pasco County home. Once the company had the property, she figured, it would start paying the HOA fees.
Although Abuton had been locked out in 2008, the lender didn’t take title to the house until several years later. In the meantime, while the house remained in her name, she was responsible for all HOA fees that accrued.
A few weeks ago, Abuton got a bill for 80 months’ worth of delinquent fees — a total of $28,000.
“When you’re struggling to go from week to week and you get something like that, it’s a bit overwhelming,” Abuton, 52, said.
In February, federal prosecutors began a 90-day examination to determine whether to bring cases against individuals for their role in the 2008 financial crisis.
The deadline for that inquiry passed last month, with the Justice Department failing to hold any individuals accountable for their crimes. Instead, the DOJ announced that it would allow five megabanks to plead guilty to felony fraud charges related to rigging of the foreign currency exchange market — but would not prosecute a single individual for wrongdoing.
I recently expressed frustration following this announcement against the five banks. Given that I’ve spent my career advocating against harsh penalties and mandatory minimums suffered by many in the African American and Latino communities, I find these sweetheart deals unjust and outrageous.
At the very moment these banks were given a slap on the wrist, hundreds of offenders were being sentenced to lengthy prison terms in our nation’s courts, many for modest crimes with far less impact than the fraud perpetrated by these financial institutions.
But there was one difference. These mothers, fathers, brothers, sisters, daughters, and sons do not have big banks to hide behind. They spend years behind bars, often going long stretches without seeing friends or family members. They fall victim to abuse in our correctional institutions. And they lose one of our most basic and sacred rights as citizens of this nation — the right to vote. When they emerge from prison, they face challenges to rehabilitation, to reestablishing their place in society and to putting themselves on the path to garner gainful employment. Many of these individuals were targeted for prosecution, and it has been documented that people of color often receive longer and more severe prison terms than whites convicted of similar crimes. Once the government makes the decision to prosecute, it’s often to the fullest extent of the law — unless, of course, you head up a megabank.
From Richard Bowen website:
In May, Robert Reich, former Labor Secretary, listed restoration of Glass-Stegall as a key Presidential candidacy criterion. Reich was in Iowa for the Raising Wages/Working Families Summit – the first of a national series – where he was the featured speaker.
The reinstatement of Glass–Steagall is steadily gathering public support. A bipartisan group of senators and congressman are proposing the “21st Century Glass-Steagall Act” in an effort to curb the power of big banks by reinstating a Depression-era rule that separated commercial and investment banking. Some believe that Glass-Steagall is the essential first step in dealing with the crises in employment, wages, and living standards in the United States.
Enacted during the Great Depression, the Glass-Steagall Act prevented commercial deposit banks, which are insured by taxpayer money through the Federal Deposit Insurance Corp (FDIC), from engaging in insurance and risky investment activities.
The 1999 repeal of Glass-Steagall, which permitted the merger resulting in Citigroup, allowed banks to expand rapidly in size, to the point where the top 0.2 percent of banks controlled nearly 70 percent of all banking assets. The 2008 financial crisis didn’t stop the biggest banks from continuing to grow even though lawmakers from both political sides have criticized these banks as being too big to fail (TBTF), and too big for jail and prosecution.