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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
MTH
May 02, 2012 at 11:50 am

RSS- You are wrong. Banks aren't forced to make any loans in accordance with the CRA. They are required to not dismiss applications from people in so-called redlined districts and to give them the same consideration that they would to any one from the "good" neighborhood who applies for loans. They are also required to document all processes they used in coming tot heir decision to apporve/decline a loan. This is a typical right wing talking point when advancing the anti-regulation agenda. Plus, the kind of loans that Broadway Bank made under McMahon were probably not subject to CRA anyways.

Randall Norris
May 02, 2012 at 1:10 am

Going after the little fish as usual. The one per centers on Wall Street are the guilty parties, but after contributing so heavily to both Obama and Mc Cain they will never see the inside of a jail. What is needed is a tall tree and a short rope, but all that will happen is bigger bonuses. LOL RIF

Randall Norris
May 02, 2012 at 1:09 am

Once again they are going after the little fish. Go after the big fish on Wall Street, the one per centers who contributed so heavily to both Mc Cain and Obama. What is really needed in this situation is a tall tree and a short rope, but not only will that not happen, none of these guys will ever be charged with anything. They'll just keep getting bonuses LOL RIF

John Holmes
May 01, 2012 at 1:23 pm

Can the FDIC, sue all the subprime lenders, Alan Greenspan,Tim Geitner, Lawrence Summers, they were the captians at the helm, this is a political move, pick a famous athelete in Chicago, and let the real crooks who blew Billions go free. No, give them a job at the White House.....HMMMMMMMM! Don't con us!

RSS
April 30, 2012 at 6:34 am

Banks are often forced to loan to people/companies that normally wouldn't qualify for credit under the community reinvestment act and other laws passed by Congress that put bad loans on the books. Mortgage lending through Freddie Mac and Fannie Mae is another example of poor government policies that manipulated the banks into supporting the housing industry. Perhaps, banks need to return to the days when borrowers actually had to have 5-10% equity in the property they wished to buy.

paul hardy
April 28, 2012 at 1:08 am

Does that hippie McMahon care? That's what directors and ommissions insurance is for.

James h
April 27, 2012 at 9:02 pm

When will the federal government be sued for recklessly loaning Solyndra 500 mil?

PatTheRat
April 27, 2012 at 4:51 pm

Glad they nabbed him, but why just go after the Republican bankers? Get them all! If the Democrats try to protect their own, then throw them all out!

C R Cathey
April 27, 2012 at 11:31 am

When will the U S Government be sued for its role in forcing banks to make loans that lost the banks money?

dr woo
April 26, 2012 at 6:37 pm

rip their eyes out