Prompt Corrective Action Law: Title 12 of the US Code

[deminks]

http://www.economicpopulist.org/?q=content/bill-moyers-drops-bailout-bomb-obama

Bill Moyers drops bailout bomb on Obama

This evening, Bill Moyers interviewed William K. Black, the former senior regulator during the savings and loan crisis of the 1980s, who blew the whistle on the Keating Five (the U.S. Senators implicated in taking “gifts” from S&L bankster Charles Keating was convicted of racketeering and fraud in both state and federal court after his Lincoln Savings & Loan). Black is now an Associate Professor of Economics and Law at the University of Missouri, and the author of the recently released book, The Best Way to Rob a Bank is to Own One.

Black, who supported the presidential campaign of Barack Obama, excoriated both President Obama, and former President Bush, and their Treasury Secretaries Timothy Geithner and Hank Paulson, respectively, for deliberately and consciously violating the law. Specifically, the Prompt Corrective Action Law, passed after the savings and loan crisis, which mandates that severely undercapitalized banks be promptly put into receivership (i.e., nationalized).

(snip)

The Prompt Corrective Action Law is codified as Title 12 of the US Code, and as currently published by the US Government reflects the laws passed by Congress as of Jan. 3, 2007. Here are some parts of it.

TITLE 12 > CHAPTER 16 > § 1831o

§ 1831o. Prompt corrective action

(d) Provisions applicable to all institutions
(2) Management fees restricted
An insured depository institution shall pay no management fee to any person having control of that institution if, after making the payment, the institution would be undercapitalized.

SNIP

(3) Conservatorship, receivership, or other action required
(A) In general
The appropriate Federal banking agency shall, not later than 90 days after an insured depository institution becomes critically undercapitalized—
(i) appoint a receiver (or, with the concurrence of the Corporation, a conservator) for the institution; or
(ii) take such other action as the agency determines, with the concurrence of the Corporation, would better achieve the purpose of this section, after documenting why the action would better achieve that purpose.

(end snips)

Link to interview:

http://www.pbs.org/moyers/journal/04032009/watch.html

link to code:

http://www.law.cornell.edu/uscode/uscode12/usc_sec_12_00001831---o000-.html

Where are the indictments? Where are the receiverships?

No, Mr. President. With all due respect, Geithner is the only thing standing between the Banksters and the Pitchforks. And he is a fraud.

[midnight]

1. I wonder what will give first, the man or the pitch forks?

[lazer47]

2. Read the fine print,,

(ii) take such other action as the agency determines, with the concurrence of the Corporation, would better achieve the purpose of this section, after documenting why the action would better achieve that purpose.

[systemic risk]

4. Fine Print

And Sec(ii)seems to undermine the intent of the rest of the bill. And why include this clause "with the concurrence of the Corporation" !#@!

Still one could ask have Treasury's polices had a clear purpose? Documented why its policies would better achieve the intent of section 1830i? Vague hopes of unlocking credit by cleaning up the balance sheets can't be considered a reliable outcome when we don't know the full extent of banks'losses. There has been no attempt at discovery, except the stress tests, which will not be made public. Worse, the stress test results are going to be used, not to remove, but to prop up zombie banks. Under the current approach it's hard to see how even the broadly written sec (ii) is being followed. The banks are in charge and gaming the system.

Treasury's private/public investment policy will do exactly what? The banks don't have to sell toxic assets unless they feel the price is right. And since this plan was announced, Citi and BAC are buying up sub prime mortgages.

Gaming the system

http://seekingalpha.com/article/128261-are-the-big-banks-gaming-the-taxpayer

http://seekingalpha.com/article/129275-let-the-tarp-games-begin

[deminks]

3. Executive compensation restricted - here's a good one

(4) Senior executive officers’ compensation restricted
(A) In general
The insured depository institution shall not do any of the following without the prior written approval of the appropriate Federal banking agency:
(i) Pay any bonus to any senior executive officer.
(ii) Provide compensation to any senior executive officer at a rate exceeding that officer’s average rate of compensation (excluding bonuses, stock options, and profit-sharing) during the 12 calendar months preceding the calendar month in which the institution became undercapitalized.