FDIC reaching settlements on the QT

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WASHINGTON, March 11 (UPI) -- Settlements made with a U.S. banking regulator over alleged wrongdoing have been handled with a new avoid-publicity clause, released agreements show.

The Los Angeles Times reported Monday that the Federal Deposit Insurance Corp. has been using a "no press release" option that has helped secure settlements over allegations of behavior that may have contributed to a bank's failure.

When IndyMac Bank, for example, failed in 2008, it cost the FDIC $13 billion to cover its losses. That was the largest FDIC bailout in its history, the Times said.

In the aftermath, the FDIC pursued the world's largest bank, Deutsche Bank, for selling IndyMac a pile of risky mortgages through a subsidiary, MortgageIT, which contributed to IndyMac's downfall.

The FDIC, collected $54 million from Deutsche Bank, settling out of court. This assures Deutsche Bank of not having to admit wrongdoing. It assures the bank of smaller legal fees and avoids a huge settlement that might result from a trial.

But the Times said the settlement included something new: A "no press release" clause in which the FDIC agreed not to publicize the settlement unless specifically asked about it.

"In the old days, the regulators made it a point to embarrass everyone, to call attention to their role in bank failures," former bank examiner Richard Newsom told the Times.

Newsom said the new policy was perhaps a step in which the FDIC also avoids publicity, given the agency did not want the public to know "how little they are setting for."

"Transparency is always better, and serves as a deterrent to future misconduct," said Lauren Saunders, managing attorney at the National Consumer Law Center in Washington.

In a hearing in Washington last week, Sen. Elizabeth Warren, D-Ma., pointedly expressed her disappointment with regulators who repeatedly failed to take bankers to trial and demand jail sentences for those who are guilty.