The Wall Street Journal - Fran Sweet was an early victim of the subprime-mortgage fiasco. Now, the Downers Grove, Ill., retiree feels victimized again -- this time by Uncle Sam.
In 2001, Ms. Sweet says she put her life savings of nearly $600,000 into accounts at Superior Bank of Hinsdale, Ill. About a month later, the Federal Deposit Insurance Corp. seized Superior because of alleged improper financial and accounting practices related to its subprime business. Much of her money, along with deposits of hundreds of other Superior customers, was frozen because it exceeded the $100,000 limit on FDIC insurance at the time. Since then, the FDIC has been making periodic payments to such depositors to cover some of their losses.
Earlier this year, FDIC officials told Ms. Sweet her payments had been interrupted, she says. The reason: The agency needed any available Superior-related funds to pay off a $90 million lawsuit settlement with Beal Bank. The Plano, Texas, bank had accused the FDIC of misleading it about the quality of a portfolio of Superior mortgages bought from the agency for $340 million. Beal alleged some of the loans were made with fraudulent appraisals or inaccurate information about a borrower's income. Many of the loans were made after the FDIC took over Superior. The lawsuit was the subject of a page-one article in The Wall Street Journal last year.
The FDIC didn't acknowledge wrongdoing in the Beal suit and has said it acted in good faith in its dealings with the bank. An FDIC spokesman says Superior-related funds had to be used to pay the Beal settlement because the litigation is related to the collapsed bank's loans. The spokesman didn't say when payments to depositors might resume. The FDIC has repaid about 70% of Superior's uninsured deposits, about average in such cases. Some of the $340 million from the initial Beal transaction went to depositors, he added. Still, given the cost of the Beal settlement, some observers estimate it could be years before payments resume to Superior's depositors, still owed over $16 million, according to FDIC records. At least one Superior depositor has died waiting for her money.http://online.wsj.com/article/SB124079290213557875.html?mg=com-wsj
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