Banking Law

You know this fight is going to be a long charge uphill into withering machine gun fire. On the other hand, as someone who was intimately involved in successful litigation many, many years ago against the OTS and FDIC, when every one on our clients' side of the table decided to sue only after reaching the point where they all made like Howard Beale and started reaching for firearms, I have to wish them well.

United Western Bancorp has challenged regulators' seizure of its chief subsidiary, United Western Bank, in a lawsuit filed Friday in U.S. District Court in Washington, D.C.

United Western Bancorp has challenged regulators' seizure of its chief subsidiary, United Western Bank, in a lawsuit filed Friday in U.S. District Court in Washington, D.C.

The Denver-based holding company insists federal regulators prematurely pulled the plug on the bank in January, saying the company had been in frequent communication with regulators about progress it was making on capital-formation efforts.

"We are trying to reverse this situation" by asking the court to remove the Federal Deposit Insurance Corp. as receiver and to return control of the bank to United Western, said Michael McCloskey, United Western's executive vice president and chief operating officer.

"We believe the government acted in an arbitrary and capricious fashion and lacked any basis in applicable law," McCloskey said.

Of course, the terms "arbitrary and capricious" and "without any basis in law" are terms of art. They constitute the high bar over which United Western and the other plaintiffs must vault in order to triumph over the bureaucrats. Mr. McCloskey's been well educated in "applicable law" in this area. Even to people without a legal education, however, the burden of proving that the OTS so acted will be difficult to bear.

Naturally, the OTS claims that it had ample grounds to request the appointment of a receiver and the FDIC is imitating Marcel Marceau, as it usually does in the face of "pending litigation." What else is new?

Although a complaint is about as far from a statement of objective fact-finding as anything emanating nightly from the bloviators on MSNBC or Fox News, the complaint in this case is well written (as you would expect, given the pedigree of the lawyers involved). The first goal of any complaint is to survive a motion to dismiss, and I think the plaintiffs' counsel does as good a job as I've seen in this area, where the law tilts heavily in favor of the regulatory agencies (as it must, or the system would grind to a halt). At least we Sith, who toil for the Dark Side of the Force, find it entertaining. Unscrambling eggs, as one commenter described what unraveling the receivership and subsequent assisted sale of United Western would entail, is a brain teaser that intrigues bank law nerds. Nevertheless, I assume that plaintiffs' counsel are charging by the hour, and not on a contingency basis.

Even if the plaintiffs eventually prevail in this card game where the legal deck is stacked against them, the FDIC will merely blame the resultant mess on those (by then) dead and gone dweebs at the OTS. They either acted too slowly (IndyMac, BankUnited, pick-your-fried-thrift) or, in this case, too quickly. "Boy, are we glad those "maroons" are out of business!" Head-shaking and tut-tutting will be wide spread.

No lessons will be learned. No one will be left standing to punish. The hive will endure.