Approximately $90 billion in losses have been incurred by the FDIC Deposit Insurance Fund (DIF) due to bank failures that occurred between January 2008 and September 2013. With a further $5 billion in DIF losses projected through the end of 2017, the FDIC is taking action to recover these DIF losses. The FDIC has filed 79 professional liability lawsuits so far against former directors and officers (D&O) of banks that failed within the 2008 through 2013 time period.
Considering both lawsuits and settlements, D&O from nearly 150 of the 487 banks that failed between January 2008 and September 2013 have faced or are facing attempted recoveries by the FDIC. The number of D&O who will face forthcoming FDIC lawsuits is expected to increase. A central issue in many of these cases will be the extent to which the ultimate cause of bank failure can be attributed to unforeseen economic deterioration rather than negligent conduct by bank D&O.
In this NERA paper, Senior Vice President Christopher Laursen examines the economics of bank failures between 2008 and 2013 and implications for associated litigation. In particular, Mr. Laursen warns of the potential danger of overreliance on misleading summary statistics and simplistic data groupings when attempting to quantify and distinguish among different contributing causes of bank failure.
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