WASHINGTON - Federal Deposit Insurance Corp. liquidators were criticized as cavalier and uncaring Tuesday at a Senate Governmental Affairs oversight subcommittee hearing.
Sen. William S. Cohen, R-Maine, said FDIC stands for "frustration, delay, incompetence, and coercion."
Disgruntled Purchaser Testifies
He cited a series of articles by the Scripps-Howard News Service that reported that the agency "has seized the homes and businesses of citizens who never missed a payment on their loan."
The subcommittee heard from Doug Hess of Tyler, Minn., who had purchased $18 million in loans from the FDIC only to discover they had already been paid off or weren't what the FDIC had represented.
When he tried to return them, the FDIC at first refused. When he complained to the FDIC chairman, the Senate, and the GAO, the FDIC decided to refund him twice what he had paid.
Bargain-Basement Asset Sales
Mr. Hess tried to inform the agency it was overpaying him, but the FDIC said it hadn't made a mistake and insisted on paying him anyway.
The Scripps-Howard series by reporters Andrew Schneider and Peter Brown also found evidence that the FDIC is selling off assets at cut-rate prices.
Data from 13 investors who had purchased more than 5,600 loans showed the investors paid 31 cents on the dollar and sold the same loans and property for an average of 88 cents - a 300% profit.
A Denver investor bought a nonperforming $98,000 mortgage for $1,700 and quickly collected $96,000 when he contacted the debtor, the series reported.
John Bovenzi, the FDIC's director of depositor and asset services, said he would work to make the agency more responsive to the borrowers and towns that are hit hard when banks fail.
But he insisted that the problems are not systematic.
"Overall the record shows that we have been successful in our disposition of assets and that isolated examples are not indicative of the FDIC as a whole," Mr. Bovenzi said.
He said the FDIC has averaged 95% of the appraised value on loan sales and 90% of the appraised value on real estate sales.