“Shock and Awe”: When Banking Agencies Unleash Their Regulatory Weapons
July 02, 2008
In the wake of the savings and loan crisis in the 1980s, the U.S. Congress amended the Federal Deposit Insurance Act to give the federal banking agencies an imposing arsenal of supervisory and enforcement weapons to deal with depository institutions – and also, notably, their parent companies and their respective affiliates – that pose potential safety and soundness risks to the Federal Deposit Insurance Corporation Deposit Insurance Fund. These provisions primarily target supervisory resolution of capital, managerial and operational deficiencies. The recent mortgage meltdown, adverse macroeconomic conditions, and increase in the number of troubled banks and bank failures have caused the appropriate federal banking agencies to pull these regulatory weapons out of mothballs and aim them at both Banks and their Holding Companies.
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