Occupy Wall Street’s Bank Under FDIC Scrutiny
Senior Editor, CNBC.com
The bank used by the Occupy Wall Street protesters is under orders from federal banking regulators to fix how it books delinquent loans, according to investigative reporter Teri Buhl.
Amalgamated Bank is a national bank based in New York. A branch near the Occupy Wall Street encampment in lower Manhattan’s financial district proclaims the bank’s support for the protests. It was formed in 1923 by the Amalgamated Clothing Worker of America union, and remains the only union-owned bank in the United States.
The bank has become the main financial home for donations received by the Occupy Wall Street protests. Reportedly, those donations now amount to around $300,000.
But it has come under scrutiny from the FDIC because of the way it treats delinquent loans, according to Buhl.
According to the FDIC enforcement action, the bank isn’t charging off its nonperforming loans that are more than 90 days delinquent. Instead, it appears the bank’s been issuing new loans (through a restructuring) to pay off the delinquent loans and not booking the delinquent loans as a charge off.
This is important to the bank’s bottom line because they are required to book a charge off, which would affect the bank's earnings, their loan loss reserves or their capital levels.
Ralph Hutchinson, a former federal regulator who now consults on bank fraud says, “They are masking the strength of the bank. The FDIC goes ballistic when they see banks do this. Essentially they are falsifying financials which could be considered fraud.”
The FDIC gave the bank 60 days to start booking loss charge-offs and are not allowed to extend credit to borrowers over 90 days delinquent unless they can prove there is a viable workout plan.
The enforcement action states: “The bank shall eliminate from its books, by charge-off or collection, all assets or portions of assets classified 'Loss' in the report of examination dated June 14, 2010, issued jointly by the FDIC and the New York State Department of Banking that have not been previously collected or charged off.”
Buhl goes on to say that there has been an exodus of executives in recent months.
If the FDIC does decide it needs to take stronger action against Amalgamated, you can be sure it will become a hot-button issue. Think about what people would say if the federal government tried to takeover Occupy Wall Street’s bank.
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