WASHINGTON -- Bankers are looking to the House Judiciary Committee to save them from a Senate-passed measure that would give banking agencies more time to sue officers and directors of failed institutions.
The measure would allow the Federal Deposit Insurance Corp. or the Resolution Trust Corp. To sue officers and directors of banks and thrifts after state statutes of limitations expire, if one of the agencies had been appointed receiver within five years of the time of expiration.
The measure, an amendment to the interstate branching bill, was sponsored by Sen. Howard Metzenbaum, D-Ohio.
Case Law Cited
Recent federal court decisions have barred the agencies from bringing claims against directors and officers in instances where state statutes of limitation had expired, even if they expired before an institution failed.
Sen. Metzenbaum was concerned that in such cases the agencies would never get a chance to bring suit against officers and directors whose actions helped bring about the demise of an insured institution.
One House Republican aide predicted that the House and Senate would ultimately decide to give the agencies more time only for cases involving gross or intentional misconduct.
Prediction About Negligence
"I don't think we'll cover simple negligence," the aide said.
The House Judiciary Committee has already met to discuss the issue, and one source familiar with the deliberations said the panel will try to soften the Senate language.
Because the case involves litigation, the House and Senate judiciary committees share jurisdiction with the banking panels.
In a letter urging the House Banking Committee to support the amendment, Acting FDIC Chairman Andrew C. Hove wrote that the 1989 thrift bailout law states that the time that agencies can sue begins only once the agencies are appointed receiver.
Congressional Intentions Cited
"Congress has strongly and repeatedly directed the FDIC and RTC to file suits against culpable financial institution officers," Mr. Hove wrote. "However, Congress' actions will be rendered meaningless if the courts continue to look to the state statutes of limitation."
The purpose of the provision is simply to clarify the statute of limitations in the bailout law, according to Mr. Hove.
But calling it a "clarification" is a misstatement, according to David H. Baris, executive director of the American Association of Bank Directors.
"The word 'clarification' is an effort by the government to soften the appearance of this legislation," Mr. Baris said. "It just takes an edge off the retroactive impact of this."
Ex-Post Facto Effect
According to Mr. Baris, the amendment would allow the FDIC and the RTC to "sweep aside the 50 state statutes of limitation on a retroactive basis and ... override 20 state constitutional provisions," effectively resuscitating claims that had expired years ago.
Many of the claims that agencies would investigate may involve bank directors and officers who delegated too much loan approval authority or approved loans incorrectly.
"These cases have very little to do with crooks," Mr. Baris said. "Most have to do with loans approved years ago. Most directors have very little or no memory of these loans, and that's exactly what the statute of limitation is supposed to be guarding against.
The measure unconstitutionally deprives bank directors of due process, Mr. Baris argued.