Bank and Thrift Failures:

FDIC and RTC Could Do More to Pursue Professional Liability Claims

T-GGD-92-42: Published: Jun 2, 1992. Publicly Released: Jun 2, 1992.

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GAO discussed the Federal Deposit Insurance Corporation's (FDIC) and the Resolution Trust Corporation's (RTC) efforts to purse civil professional liability claims arising from bank and thrift failures. GAO noted that: (1) RTC and FDIC officials estimate that possible fraud or negligence was present in more than three-fourths of failed banks and thrifts; (2) since 1989, FDIC and RTC have recovered nearly $1 billion from professional liability claims and settlements, and officials estimate that 95 percent of those recoveries came from insurance companies; (3) as of March 1992, FDIC had filed 41 claims against about 20 percent of the banks that failed in fiscal year 1988, while RTC had claims pending against about 41 percent of the 218 thrifts that failed from January through April 1989; (4) FDIC and RTC do not always file claims in cases of suspected wrongdoing when the particular activity might not meet the legal or evidentiary standard or when pursuing the claim might not be cost-effective; and (5) other factors within RTC and FDIC control have hampered their litigation efforts, such as inadequate staffing resulting in cases passing the statute of limitations, inadequate procedures to identify assets that could be recovered through potential claims, and inadequate management information to oversee the professional liability program. GAO believes that RTC and FDIC need to improve management of the professional liability program.

Status Legend:

More Info
  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Recommendations for Executive Action

    Recommendation: FDIC and RTC should work together to plan for the future of the professional liability program. This planning needs to address how FDIC will assume responsibility for the RTC professional liability cases.

    Agency Affected: Federal Deposit Insurance Corporation

    Status: Closed - Not Implemented

    Comments: RTC was closed on December 31, 1995.

    Recommendation: FDIC and RTC should work together to plan for the future of the professional liability program. This planning needs to address how FDIC will assume responsibility for the RTC professional liability cases.

    Agency Affected: Resolution Trust Corporation

    Status: Closed - Implemented

    Comments: RTC and FDIC merged on January 1, 1996.

    Recommendation: RTC and FDIC should develop: (1) realistic staffing plans; (2) programs to ensure adequate asset tracing, and (3) improved management information for effective program oversight.

    Agency Affected: Resolution Trust Corporation

    Status: Closed - Not Implemented

    Comments: This recommendation is linked to better FDIC/RTC transition planning. The status will be tracked under recommendation 1.

    Recommendation: RTC and FDIC should develop: (1) realistic staffing plans; (2) programs to ensure adequate asset tracing, and (3) improved management information for effective program oversight.

    Agency Affected: Federal Deposit Insurance Corporation

    Status: Closed - Not Implemented

    Comments: This recommendation is linked to better FDIC/RTC transition planning and will be tracked under recommendation 1.

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