Is FDIC Negligent or Fleecing Americans in the LIBOR Scandal

USA, December 1, 2014 (Newswire.com) - by Val Sklarov of

BoutiqueBankLaw.com

Is FDIC suppose to protect the American public or fleece us ?

Val Sklarov

Is FDIC Negligent or Fleecing Americans in the LIBOR Scandal

As the LIBOR scandal continues to heat up and new facts are uncovered, it appears to some that FDIC is becoming as much a victim as the perpetrator of deception and is benefiting from it.

About 4 to 5 years ago the real estate crisis was just beginning to develop and banks started to fail prompting FDIC to take over many of the failed banks. The failed banks had huge real estate mortgage portfolios tied to LIBOR index and the FDIC needed to figure out what to do with them. They figured out quite a scheme. The FDIC proceeded to dispose of the assets of the failed banks to successor banks and entered in to an agreement with these new banks called Shared Loss Agreement. This agreement allow’s FDIC to benefit financially on any recovery of assets managed and sold of by the successor banks.

So the successor banks managed performing loans while foreclosing on non-performing loans. Most if not all mortgages have a default provision in them much like the credit cards that if the borrower fails to perform under the terms of the loan, then the lender has a right to invoke a much higher interest rate as punishment. The default rate is always the same index as the loan. So if your loan rate is the LIBOR index, then the default rate is also tied to LIBOR plus an extra 4% to 8% added as the penalty.

Over the next several years the successor banks have filed thousands of foreclosure cases against borrowers who had LIBOR based mortgages, obtained judgments against these borrowers using the default rate and shared recovery proceeds with the FDIC. Nothing seems abnormal about this scenario and the general public probably is thinking that it’s a good thing because FDIC needs to recover billions of dollars when it bailed out the failed banks as any financial recovery is in the publics best interest.

Everything on the surface seemed fine until March of 2014 when FDIC decided to file a huge lawsuit on behalf of the failed banks against The Panel Banks alleging that the LIBOR rate was manipulated and rigged, similar to insider trading and caused collapse of some 50 banks across the country. The FDIC in its suit is claiming that The Panel Banks were conspiring to manipulate and rig the LIBOR rate for a very long time and that The Panel Banks knew of this or should have known as early as 2008 when news first started to break.

Herein is the problem that FDIC is now facing. On one hand, it's suing The Panel Banks for rigging the LIBOR rate but on the other hand, it's benefiting from its Shared Loss Agreements with successor banks who are obtaining judgments against foreclosed borrowers still using the LIBOR rate. The Shared Loss Agreements between FDIC and successor banks state that the successor banks will follow all laws. What clearly FDIC failed to do is to instruct the successor banks to rewrite the mortgages indexing them to LIBOR and instead to index them to prime, fix rate, treasuries or whatever. The FDIC has in its authority and ability to instruct the successor banks but instead did nothing. The FDIC also has in its authority to instruct all the banks nationwide to allow the banks borrowers to rewrite the mortgage and to index the interest rate to any other index. If FDIC knew of this scandal for years, why has it done nothing and continues to do nothing in its obligation to serve the publics interest.

So who's interests does the FDIC represent as it sits idle and watches its Shared Loss Agreements reap in billions while its suing The Panel Banks trying to collect billions more but the American borrower gets fleeced by the agency that is supposed to serve the public. Double standard, negligence or incompetence? Maybe once FDIC collects billions from its law suit against The Panel Banks, all LIBOR borrowers nationwide will  choose between an invitation to FDIC headquarters for free lunch or the tour of The White House plus some cheese and crackers.

These days Mr. Val Sklarov is president of BoutiqueBankLaw.com, an attorney referral agency that seeks out clients that have or had LIBOR based mortgages or were wrongfully defauled by a bank and are in need of a contingency fee attorney. He can be reached at Val@BoutiqueBankLaw.com