FDIC probes 50 bank failures

The Federal Deposit Insurance Corp. is conducting about 50 criminal investigations of former executives, directors and employees at U.S. banks that have failed since the start of the financial crisis.

The agency responsible for dealing with bank failures is stepping up its effort to punish alleged recklessness, fraud and other criminal behavior, The Wall Street Journal reported late Tuesday.

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The effort would be similar to what the government did in the wake of the savings and loan crisis of the late 1980s and early 1990s.

More than 300 banks and savings institutions have failed since the start of 2008, but just a few of those failures have led to criminal charges being filed against bank officials.

Fred Gibson, the deputy inspector general at the FDIC, which works with the Federal Bureau of Investigation to investigate crime at financial institutions, told the Journal that the probes involve failed banks of all sizes in cities across the country.

The FDIC is also ramping up civil claims to recover money from former bankers at busted lenders. He declined to identify any of the people or banks under investigation.

"We anticipate results from our investigations," Gibson told the Journal. He would not predict when a particular case might reach a stage at which disclosure of specifics would be appropriate.

Pressure is high on regulators to identify and prosecute bankers for any wrongdoing that contributed to the largest number of bank failures in nearly 20 years. The September 2008 collapse of Washington Mutual was the biggest ever, with seven times the value of the assets that Continental Illinois Corp. had when it failed in 1984.

So far this year, 146 banks have failed, the Journal said. The current epidemic of failures has deepened the nation's lending drought and left the industry's survivors with more muscle to squeeze customers.

The S&L crisis of the 1980s and 1990s killed more than 1,800 institutions. From 1990 to 1995, federal officials prosecuted about 1,850 bank insiders, the Journal said. More than 1,000 officers, directors and other officials went to prison, and federal agencies collected $4.5 billion in professional-liabili​ty claims.

In the current mess, no high-profile banker has been criminally charged in connection with a financial institution's demise, as Charles Keating was for fraud after American Continental Corp. failed in 1989. He served four years in prison and became synonymous with the S&L crisis.