Eight Years After Bank's Seizure, a Depositor Waits

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.
[Fran Sweet]

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

A Swiss Bank Is Set to Open Its Secret Files

In the hush-hush world of Swiss banking, the unthinkable is happening: secrets are spilling into the open.

UBS, the largest bank in Switzerland, agreed on Wednesday to divulge the names of well-heeled Americans whom the authorities suspect of using offshore accounts at the bank to evade taxes. The bank admitted conspiring to defraud the Internal Revenue Service and agreed to pay $780 million to settle a sweeping federal investigation into its activities.

It is unclear how many of its clients’ names UBS will divulge. Federal prosecutors have been examining about 19,000 accounts at the bank, but UBS ultimately may disclose the identities of only a few hundred customers.

But to some, turning over any names at all heralds the end of the secret Swiss bank account, whose traditions date to the Middle Ages.

“The Swiss are saying that this is the end of Swiss banking as they knew it,” said Jack Blum, an offshore tax specialist. “Nobody will trust the security of the Swiss bank account.”

As part of the settlement, UBS agreed to cooperate with a broad summons issued by the Justice Department to turn over the names. Under the terms of a so-called deferred prosecution agreement, the bank and its executives could be indicted if UBS didn’t identify the customers.

UBS has said it is closing the offshore accounts of its American clients. But under the deal with the United States authorities, the bank must provide periodic written evidence of that to prosecutors. UBS earned $200 million annually from the business.

Prosecutors suspect that from late 2002 to 2007, UBS helped American clients illegally hide $20 billion, letting them evade $300 million a year in taxes. http://www.nytimes.com/2009/02/19/business/worldbusiness/19ubs.html

Bankers get bailouts before borrowers

By GRETCHEN MORGENSON
Published: July 20, 2008

THE credit crisis has exposed and worsened a dangerous and deepening divide in this country between a vast number of average borrowers and a fairly elite slice of corporations, banks and executives enriched by the mortgage mania.

Borrowers who are in trouble on their mortgages have seen their government move slowly — or not all — to help them. But banks and the executives who ran them are quickly deemed worthy of taxpayer bailouts.

On the ground, this translates into millions of troubled borrowers, left to work through their problems with understaffed, sometimes adversarial loan servicing companies. If they get nowhere, they lose their homes.

Taxpayers, meanwhile, are asked to stand by with money to inject into Fannie Mae and Freddie Mac, the government-sponsored mortgage finance giants, should they need propping up if loan losses balloon.

The message in this disconnect couldn’t be clearer. Borrowers should shoulder the consequences of signing loan documents they didn’t understand, but with punishing terms that quickly made the loans unaffordable. But for executives and directors of the big companies who financed these loans, who grew wealthy while the getting was good, the taxpayer is coming to the rescue.

“The banks are too big to fail and the man in the street is too small to bail,” said John C. Bogle, the founder of the Vanguard Group, the mutual funds giant, who is a philosopher of finance.

Mr. Bogle is working on his seventh book, titled “Enough,” which is scheduled to be published in November. He said he was disturbed by the extreme speculation that spread into the entire economy during the housing boom and that now threatens both consumers and investorshttp://www.nytimes.com/2008/07/20/business/economy/20gret.html?ex=1374206400&en=c623c7b6d1904b15&ei=5124&partner=permalink&exprod=permalink