Financial Stories You Might Have Missed – And a Note of Irony

Exporting lawyers

A New Class of Exports – Class Action Goes International

Countries export when they have a surplus.  Japan produces cars.  France produces wine. America, well, America produces lawyers. In the last 12 years the number of countries that allow class actions (or some form of group litigation) has jumped from 3 to 25.  Unsurprisingly major U.S. law firms have been instrumental in the spread and exploitation of the change.  While legislatures are beginning to gradually limit the scope of class actions here in the U.S., American law firms are finding greener pastures (or at least deeper pockets) abroad.  In January three U.S. firms won a $47 million settlement in a Dutch securities class action suit.  The three firms pocketed over $9 million for their efforts. The largest fines and settlements are generally the result of class action suits and as group litigation spreads, expect international law firms to take the class action show on the road.  Not sure how this helps America’s balance of trade issues.

U.S. class action lawyers spread their wings

Credit Unions Step up to the Plate

The not-for-profit cooperative financial institutions known as credit unions are anxious to join the big leagues, or at least the minor leagues of corporate lending.  Legally restricted to holding no more than 12.25% of corporate loan assets in their portfolio, credit unions have long been viewed as simply personal lenders providing car and home loans.  However Senator Mark Udall has introduced legislation called the Small Business Lending Enhancement Act that will increase that amount to 27.5% of a credit unions portfolio.  While it will not put them in direct competition with banks it is thought the change will allow small businessmen seeking loans for sole proprietorships or small partnerships to go their credit union when they fall below the lending guidelines of their banks.  In theory this could add some risk to credit union portfolios over time because of the higher concentrations, however the feeling is that they deserve a chance at bat.

On Capitol Hill, Battle Over Small-Business Loans Grows Fierce

Fed credit union

Irony?

This week I had the opportunity to present at the Federal Reserve in Boston. Couldn’t help notice they had a retail branch in the office. It appears that our bank regulators keep their personal money with…gasp…a credit union—regulated by the National Credit Union Administration—not the Fed. Now, to be fair, credit unions can be sometimes be cheaper for basic home and car loans because they are a cooperative, but even the fed employees get a chuckle out of the irony.

WHITE HOT DEVELOPMENTS by Michael White
FDIC Files Suit Against D&Os of Failed Georgia Bank – Deja Vu All Over Again

Michael White

Michael White

Last Friday, the FDIC filed yet another suit against the former directors and officers of a failed bank, this time Omni Bank in Georgia. If it seems like you have seen this headline before. . . you have.  In fact, it was two weeks ago in Richard Magrann-Wells’ space above, just with a different bank.  This is the seventh failed bank in Georgia to be  the subject of litigation by the FDIC.  It also brings the total number of all suits filed by the FDIC since January 1, 2012 to nine and the total since last August to 17. And it doesn’t appear to be slowing down.  Based on the statistical chart below that can be found on the FDIC website, the FDIC seems to be picking up steam as 2012 moves on, with March being one of its most active months in the last year.

While the FDIC has authorized suits so far in connection with 54 failed institutions, there have been approximately 400 failed banks in the U.S since January 2008.  So odds are there are likely more suits to come, which continues to mean more bad news for underwriters of management and professional liability insurance lines  for for banks.  This is especially so as insurance proceeds are often a primary target of the FDIC.

Authorized D&O
Defendants
Damage Claims
($ millions)
Authorized in 2009 11 $366.00
Authorized in 2010 98 $2,122.90
Authorized in 2011 264 $5,109.90
January 2012 18 $85.80
February 2012 36 $136.00
March 2012 42 $179.30
Total 469 $7,999.90

Source: FDIC Website

About Richard Magrann-Wells

Richard is a Executive Vice President with Willis Towers Watson’s Financial Institutions Group based in Los Angel…
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