Steve Randy Waldman
@interfluidity.com
Under black-letter law, the Obama Administration was supposed to promptly take undercapitalized banks into receivership. They considered it. They did not. www.federalreservehistory.org/essays/fdicia
Text: The prompt corrective action provision requires federal banking agencies to take progressively severe, corrective, supervisory actions as an insured depository institution's capital declines. The agencies must assign individual institutions to one of five capital categories – well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, or critically undercapitalized – as determined by selected capital measures. When a bank falls into any of the last three capital categories, its primary federal regulator must take certain mandatory supervisory actions and may supplement these with discretionary actions. Banks that become critically undercapitalized must be placed in conservatorship or receivership within ninety days unless they restore their capital or their federal regulator and the FDIC believe other actions are warranted. These prompt corrective action provisions are among the most important features of the FDICIA (Spong 2000). In essence, these provisions require the FDIC and other federal banking supervisors to intervene earlier and more vigorously when a bank gets into financial trouble, with the ultimate goal of minimizing the losses of all involved parties.
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