WASHINGTON - Shareholders of Meritor Savings Bank, the largest U.S. savings bank ever seized, will clash with government lawyers in court Wednesday over legal responsibility for its downfall.
U.S. Claims Court Judge Loren Smith, presiding over a trial that began in October, will hear arguments on liability and ultimately could award as much as $1.5 billion in damages.
The shareholders contend that regulators let Meritor create an intangible asset known as "supervisory goodwill," which would count as cash for all regulatory purposes, to aide its takeover of a troubled thrift in 1982, then reneged on the deal when they forced Meritor to sell some of its most valuable branches to raise capital. State regulators closed Meritor in 1992.
The Justice Department says the 1982 agreement did not preclude regulators from ensuring that Meritor had enough "tangible capital" to protect federally insured deposits. Justice Department lawyers said regulators moved in because Meritor had lost more than $1 billion in the 12 years before its seizure.