Government Starts to Sue Banksters

The FDIC lost $4 billion when it closed BankUnited in June and took on its toxic assets. Now it’s demanding that 15 former officers and directors of the failed bank pay up.

In a scathing letter, the Federal Deposit Insurance Corp. accuses former Chairman Alfred Camner, former Chief Executive Ramiro Ortiz and 13 others of “negligence, gross negligence and/or breach of fiduciary duties related to certain residential loans.”

The FDIC letter focuses on BankUnited’s fatal attraction to Option ARMs, the risky mortgages that gave boom-time borrowers three choices each month: Make a full payment of principal and interest, make a minimum payment that results in the loan balance growing, or pay some amount in between. As South Florida home prices plummeted and jobless rates soared, Option ARMs have gone bad in droves.

In a  letter that’s now part of the BankUnited bankruptcy court file, the FDIC lambastes the bankers for their “loose lending policies” and demands civil damages. Among other things, the FDIC accuses the bankers of:

• “Encouraging an extremely liberal and aggressive lending mentality to ‘make the loan as long as the borrower has a pulse.’
• “Engaging in reckless, high-risk, and limited-scrutiny lending to fuel the bank’s aggressive and rapid growth — in direct contradiction to public representations of the bank’s conservative lending and strict underwriting policies.
• “Approving and putting in place a compensation structure that drove the bank’s directors and officers to pursue recklessly risky lending and business practices.”

The FDIC says those practices caused $227 million in loan losses in addition to the $4 billion hit the FDIC took.

In a statement to the South Florida Business Journal, Camner called the FDIC letter “a ‘kitchen sink’ series of vague criticisms about actions taken by the management and board of BankUnited. The assertions are nothing more than unfounded speculation and present no legitimate claim of wrongdoing.”

New owners took over BankUnited, which still operates under its old name. It’s the seventh-largest bank in Palm Beach County, where it holds $1.9 billion in deposits, according to the FDIC

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