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Report: FDIC Making More Non-Public Settlements with Banks

FDIC*UPDATED to include a statement from FDIC spokesman David Barr.*

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FDIC may be sweeping some of its settled cases under the rug to keep the spotlight off of bank mistakes, according to a report from The Los Angeles Times.

The Times obtained more than 1,600 pages of FDIC settlements from 2007 through 2013 addressing a variety of behaviors (ranging from reckless lending to inflated appraisals).

According to the report, many of these settlements went unannounced, sparing the institutions from negative attention. These no-press-release arrangements sometimes help FDIC close deals with defendants in the least costly manner possible.

FDIC spokesman David Barr told The Times that the agency only announces settlements in failed-bank suits when damage payments and media interest merit an announcement. He also commented that FDIC attorneys make it clear to defendants that while their cases may not be publicized, they cannot legally be kept secret.

However, The Times found several settlements with larger payments from prominent lenders, including agreements with Quicken Loans (for $6.5 million) and Residential Capital (for $7.5 million) over loans sold to IndyMac.

Barr released the following statement to theMReport.com:

The FDIC brings actions against professionals who have acted negligently and contributed to the failure of an insured institution. These suits maximize recoveries for creditors of the failed bank receivership, including uninsured depositors and the deposit insurance fund. Pursuing a settlement agreement in many cases avoids costly and protracted litigation and result in greater recoveries.

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. We are reevaluating the optimal method to continue to provide settlement information in a manner that may enhance accessibility for the public. Given the attention, our intention is to provide all settlement documents in a central location on our website and update it as additional settlements are reached, similar to the existing self-initiated process of disclosing all [director and officer] suits authorized by the Board and tracking them on a monthly basis. This will also complement our existing process of publishing all final enforcement orders on our website on a monthly basis.

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