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FDIC sues former NFL star

By David McMillin · Bankrate.com
Friday, April 13, 2012
Posted: 3 pm ET

While Jim McMahon was a standout for the Chicago Bears in the 1980s, the former NFL quarterback did not go on to have such a strong career in the banking industry. The Chicago Sun-Times recently reported the FDIC is currently suing McMahon for his role in the 2010 failure of Chicago-based Broadway Bank.

Broadway Bank, like many other financial institutions, made some high-risk loans that came back to bite the bank and the FDIC's insurance funds when those loans weren't repaid. In McMahon's case, the lawsuit spells out that the Super Bowl-winning quarterback didn't display such exemplary leadership skills when he served on Broadway's Board of Directors. From approving a loan that lost the bank $19.5 million to missing important meetings, the lawsuit throws him in with many other executives at banks whose carelessness allegedly contributed to the economic slowdown, created hassle for account holders and cost the FDIC's Deposit Insurance Fund a lot of money.

This isn't the first lawsuit the FDIC has filed, either. According to Philip Shiskin at Reuters, the FDIC has filed 22 lawsuits over the past 18 months "targeting personal finances of former executives, their insurance policies, and sometimes their spouses' assets, in an attempt to claw back some of the money."

Still, if you think about the number of banks that failed over the past few years, 22 seems small in the grand scheme of collecting some of these funds. More than 400 banks have shuttered their doors since 2008, and I'm guessing there are more executives who should be held responsible for poor decision-making. Shiskin highlights that some critics argue that the FDIC has failed to make the extra effort to recoup some of the costs of these failures, citing the $95 million WaMu settlement. The FDIC initially stated that it was seeking up to $900 million in the damages from the most well-known bank failure of the past few years.

What do you think? Should the FDIC be more aggressive in holding banking executives accountable for their role in a financial failure?

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66 Comments
_aleph_
June 11, 2012 at 4:29 pm

wow, i need a typing course...
_aleph_

_aleph_
June 11, 2012 at 4:29 pm

Don't get onto Mark, he's only part wrong. The blame can certainly be spread among bankers and regulators, but there is always the idiot who was willing to take our a quarter million dollar loand, even though he only made %15.00/hr. Out of the millions of bad loans, there are millions who need to shoulder some blame.
_aleph_

Louis
June 09, 2012 at 3:45 pm

Why would anyone sane put an ex-NFL quarterback in a position to approve multi-million dollar loans? Am I the only one who could foresee a disaster? It would be like giving a lighter to a 4-year-old boy and then suing his parents for the damage that results.

gee tee
June 07, 2012 at 1:21 pm

FDIC and the DOJ should go after the executives that neglected their fiduciary responsiblities in making loans and investment decisions; particularly when they certified to the government and investors that sound oversight practices were in force. The IRS will sieze the assets of officers when they fail to pay payroll taxes; in essence they borrow or steal the government's money to run their businesses or enhance their lifestyles. Why should executives and board members not endure consequences for their lack of responsible stewardship -- the rest if us certainly have.

CRA Guy
June 01, 2012 at 1:46 pm

Mark
You may have worked for a Bank, but I challenge you to produce the quote in CRA regs, where it requires banks to make bad loans. Quite the contrary it does state very clearly in those regs-(which you obviously have not read, and of course don't let fact or written proof and documentation get in the way of your point, in attempting to make loans to low and moderate income individuals, institutions still have to address safety and soundness of a transaction and NOT make bad loans. Your comment is more conservative Kool-aid stratagy based on the Nazis premise that if you repeat something enough, regardless of the veracity, people will believe. Trying lying... I'm sorry speaking about something which you know or can support with written rand documentable regulatory written policy. Oh I'm sorry ....You do read ... Yes ??

Mark
June 01, 2012 at 1:49 am

Having worked at a small community bank for a number of years, I always find it sad when the media helps bait the public's appetite for blood; someone has to be blamed; the banking industry makes a lot of money; let's blame them. It is almost laughable that on one hand, the regulators find it necessary to tell the banks they have to make certain loans to create reinvestment in the community (hence the Community Reinvestment Act), then when those began going bad, they blame the banks for making such bad decisions! Banks are one of the most highly regulated industries in the world! Every decision that comes out of Washington DC carries a price tag, and the consumer always pays the bill.

One of the main problems with the mess a few years ago was some very large financial institutions were trading "derivatives" essentially good debt and a little bad debt in a bundle to investors. When these bad loans started blowing up, investors freaked and pulled back. It was like musical chairs and who ever was holding the bag when the music stopped basically got to eat it. For all the pomp and circumstance the media and politicians made over passing a solution with the Dodd-Frank Act, they removed essentially any regulation governing "derivatives"... the straw that broke the camel's back. The politicians are throwing the citizens money away with millions everyday, yet, where is the cry to regulate what they are doing... to use some commons sense. Washington is too busy spending money and pointing fingers.