FDIC Administers a Slap on the Wrist to WaMu Executives

FDIC is settling its lawsuit against three executives of the failed Washington Mutual -- for $64 Million, only $400,000 to come out of personal pocketbooks & the rest from the D&O policy.  

Washington Mutual represents the largest bank failure in U.S. history.  CEO Kerry Killinger, COO Stephen Rotella and Chief Lending Officer David Schneider apparently masterminded WaMu's operations which have been described as a "mortgage time bomb" contributing substantially to the subprime crisis.  FDIC initially sued the executives and their wives (who allegedly engaged in hiding assets) for $900 Million.

Here's the real question:  Has the FDIC forgotten everything it knew about D&O liability following the financial crisis of the 1980s?  FDIC used to know how to win at these lawsuits.  FDIC's total professional liability collections exceeded $5 billion from 1986 to 1996.

And here's another question:  Why don't more judges and government officials express the same degree of outrage we see from U.S. District Judge Jed Rakoff who last month struck down the proposed $285 Million settlement between Citigroup and the SEC?

(ag) Dec. 14, 2011, in Bank Directors, FDIC, Subprime/Predatory Lending