Mr Cooper Group Inc (COOP)

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ANYONE does this case below help or hinder WAMU??

Posted by: HDOGTX Member Level Date: Thursday, September 02, 2010 3:40:05 PM
In reply to: Founder77 who wrote msg# 1417 Post # of 1467 Send a link via email Share on Facebook Tweet this post
Here From yesterday: FDIC loses closely watched Colonial Bank case

www.reuters.com/article/idCNN0113397620100901?rpc=44

The Colonial BancGroup, Inc.
CBCGQ.PK
$0.02
+0.01+81.74%
1:22pm CDT
Wed Sep 1, 2010 4:20pm EDT

* FDIC loses claim stemming from "enforcement action"

* Decision closely watched by other bank companies

By Tom Hals

WILMINGTON, Del., Sept 1 (Reuters) - The Federal Deposit Insurance Corp is not entitled to $900 million it demanded from the parent company of the failed Colonial Bank, in a court ruling closely watched by other holding companies of failed banks.

The federal bank regulator demanded the money which it said represented the capital shortfall at Colonial Bank when it was seized in the biggest bank failure of 2009.

The case could potentially impact other bank holding companies which have filed for bankruptcy after their lending business was taken over by regulators.

The Colonial case stems from a memorandum of understanding in 2008 between the bank and regulators in which the bank agreed to try to increase its capital. The FDIC pursued a claim for $905 million, which it estimated was the gap between Colonial's required capital and what it actually had when it failed.

Montgomery, Alabama-based Colonial BancGroup Inc (CBCGQ.PK), the holding company, argued that the memorandum of understanding did not represent a commitment, and Judge Dwight Williams of Alabama's Middle District Bankruptcy Court agreed.

In addition to once being one of the top 50 U.S. banks, Colonial has been caught in a fraud investigation involving multibillion dollar losses.

The former chairman of Taylor, Bean & Whitaker Mortgage Corp was charged in June in a fraud scheme that involved selling fake mortgages to Colonial and trying to use the bank to obtain federal bank rescue funds.

The Colonial-FDIC case was being closely watched by lawyers representing other bank holding companies that wound up in bankruptcy after regulators seized their lending operations. The FDIC is analyzing the opinion to determine if it will appeal, according to a spokesman.

The FDIC, which has said it expected the Colonial failure to cost it $2.8 billion, had argued that the memorandum represented a commitment, giving the agency a claim.

Even if the bank did make such a commitment, Williams said the claim would not apply because the bank was no longer operating when it filed for Chapter 11.

Such memorandums and other "enforcement actions" have typically preceded bank seizures. U.S. regulators have seized more than 250 banks over the past two years.

In the Colonial case, the FDIC's claim would have overwhelmed the parent company's assets, which consist of around $40 million cash and a disputed tax refund of around $250 million.

The case is In re The Colonial BancGroup Inc, U.S. Bankruptcy Court for the Middle District of Alabama, Case No. 09-32303. (Reporting by Tom Hals; Editing by Richard Chang)

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