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27 Cease-and-Desist Orders Issued

27 Cease-and-Desist Orders IssuedRecent regulatory actions

June 15, 2009

By staff

The Obama administration has plans to overhaul the U.S. regulatory system — including forcing mortgage originators to maintain at least some interest in securitized loans. Meanwhile, 27 federally regulated financial institutions recently faced cease-and-desist orders.

In an op-ed piece published in the Washington Post today, Treasury Secretary Timothy Geithner and President Obama’s economic advisor Lawrence Summers wrote that the current financial crisis is the product of basic failures in financial supervision and regulation. Regulatory gaps and outdated policies has lagged the growth of financial markets.

The administration plans to unveil a regulatory overhaul plan this week in an effort to create a regulatory regime that is more stable, flexible and effective. The proposed regulatory system would raise capital and liquidity requirements for all institutions — though the largest and most interconnected firms would face even more stringent requirements. It would also increase disclosure on asset- and mortgage-backed securities, reduce reliance on credit rating agencies and force originators to maintain some liability in securitized loans.

In addition a stronger framework will be create for consumer and investor protection, and a simpler process will be established to manage the receivership of systemic institutions.

But Republicans have their own plan that they say will stop rewarding failure, prevent taxpayer liability for bad Wall Street bets while some creditors and counterparties of failed firms are made whole, and restore market discipline. The GOP plans to oppose a systemic regulator to oversee jumbo institutions.

“Republicans support scaling back the fed’s authorities so that it can focus on conducting monetary policy and unwinding the trillions of dollars in obligations it has amassed during the financial crisis,” an overview of the Republican’s plan distributed by Canfield and Associates said. “When combined with the Obama administration’s reckless ‘borrow-and-spend’ fiscal policy, the vast expansion of the fed’s balance sheet in recent months arguably represents a far more significant source of ‘systemic risk’ to our nation’s economy than the failure of any specific financial institution.”

The Federal Deposit Insurance Corporation reported that it processed 57 regulatory during April — including 24 cease-and-desist orders, five removal and prohibitions, 17 civil money penalties and seven orders terminating orders to cease and desist.

Among the recipients of recent FDIC’s cease-and-desist orders was Colonial BancGroup Inc., which said it entered a Stipulation and Consent agreeing to the issuance of the order to cease and desist with the FDIC and the Alabama State Banking Department. The order calls for increased capital levels, a reduction in bad assets and a reduced concentration of credit.

A group of investors led by Taylor, Bean & Whitaker plans to make a $300 million equity investment in Colonial in exchange for a 75 percent interest in the Montgomery, Ala.-based firm.

The FDIC also issued cease-and-desist orders against the following institutions.

Company Location Date Order No.
Affinity Bank Ventura, Calif. April 22 FDIC-09-086b
Appalachian Community Bank Ellijay, Ga. April 24 FDIC-09-010b
Badger State Bank Cassville, Wis. April 30 FDIC-09-077b
Bank of Lincolnwood Lincolnwood, Ill. April 21 FDIC-09-135b
Butler Bank Lowell, Mass. April 17 FDIC-09-148b
Carson River Community Bank Carson City, Nev. April 3 FDIC-09-067b
Coastal Community Bank Panama City Beach, Fla. April 22 FDIC-09-062b
Community Capital Bank Jonesboro, Ga. April 16 FDIC-09-019b
First Mariner Bank Baltimore April 22 FDIC-07-285b
Georgia Heritage Bank Dallas April 24 FDIC-09-013b
Great Basin Bank of Nevada Elko, Nev. April 15 FDIC-09-095b
Independence Bank Newport Beach, Calif. April 24 FDIC-09-162b
Marine Bank Wauwatosa, Wis. April 14 FDIC-09-43b
Mirae Bank Los Angeles April 27 FDIC-09-172b
New Resource Bank San Francisco April 28 FDIC-09-103b
New Frontier Bank Greeley, Colo. April 6 FDIC-09-146b
Plaza Bank Irvine, Calif. April 29 FDIC-09-175b
Riverview Community Bank Otsego, Minn. April 7 FDIC-09-064b
Rocky Mountain Bank & Trust Florence Florence, Colo. April 2 FDIC-09-065b
Security Bank of Bibb County Macon, Ga. April 17 FDIC-09-124b
Security Bank of Gwinnett County Suwanee, Ga. April 17 FDIC-08-411b
Security Bank of Jones County Gray, Ga. April 17 FDIC-09-124b
Security Bank of North Metro Woodstock, Ga. April 17 FDIC-09-116b
West Suburban Bank Lombard, Ill. April 23 FDIC-08-384b

The FDIC said it issued removal-and-prohibition orders against the following individuals.

Individual Company Location Date Order No.
Charles A. Graham Peoples Bank of Alabama Cullman, Ala. April 27 FDIC-08-245e
Louise Jennings Firstbank of Puerto Rico Santurce, P.R. April 3 FDIC-09-028e
Mescila C. Lawson Bank of Brewton Brewton, Ala. April 27 FDIC-04-126e
Tonia B. Milner Branch Banking and Trust Co. Winston-Salem, N.C. April 3 FDIC-08-028e
Rexach Vazquez Westernbank Puerto Rico Mayaguez, P.R. April 3 FDIC-08-396e

Civil money penalties were issued by the FDIC against the following institutions.

Company Location Date Amount Order No.
Alpine Bank Glenwood Springs, Colo. April 15 $12,925 FDIC-08-322k
American Riviera Bank Santa Barbara, Calif. April 24 $440 FDIC-09-071k
Beneficial Mutual Savings Bank Philadelphia April 28 $2,900 FDIC-09-165k
Citizens Business Bank Ontario, Calif. April 8 $16,200 FDIC-09-100k
Citizens First Bank Wartburg, Tenn. April 29 $16,535 FDIC-09-134k
Farmers Deposit Bank of Middleburg Inc. Middleburg, Ky. April 1 $2,695 FDIC-08-184k
Farmers and Merchants State Bank of Pierz Pierz, Minn. April 10 $2,000 FDIC-09-089k
First Mariner Bank Baltimore April 22 $50,000 FDIC-07-285b
First State Bank Monticello, Ill. April 7 $4,850 FDIC-08-281k
First United Bank (against Zeke Eldo Tettleton) Farmerville, La. April 14 $5,000 FDIC-07-054k
First United Bank (against William H. Maxwell) Farmerville, La. April 14 $5,000 FDIC-07-355k
GE Money Bank Salt Lake City Feb. 25 $13,046 FDIC-09-033OA
The Necedah Bank Necedah, Wis. April 7 $1,650 FDIC-08-252k
The Peoples Bank Mount Washington, Ky. April 7 $1,250 FDIC-08-307k
Slovak Savings Bank Pittsburgh April 22 $5,000 FDIC-09-031k
State Bank of Ashland Ashland, Ill. April 7 $3,400 FDIC-09-001k
West Bank West Des Moines, Iowa April 23 $18,920 FDIC-09-090k

Cease-and-desist orders against the following banks were terminated by the FDIC.

Company Location Date Order No.
American Metro Bank Chicago Aug. 1, 2008 FDIC-07-114b
Cape Fear Bank Wilmington, N.C. April 23 FDIC-09-005b
Farmers State Bank Schell City, Mo. April 29 FDIC-06-229b
FirstBank Financial Services McDonough, Ga. April 30 FDIC-08-165b
New Frontier Bank Greeley, Colo. April 13 FDIC-08-320b
New Frontier Bank Greeley, Colo. April 20 FDIC-09-146b
Orange Community Bank Orange, Calif. April 27 FDIC-07-120b

The Federal Reserve Board and the State of Alabama State Banking Department issued a cease-and-desist order (Docket No. 09-062-B-HC.) against Nexity Financial Corp., in Birmingham, Ala., on June 9. Neighborhood Community Bank in Newnan, Ga., faced a May 27 prompt corrective action directive (Docket No. 09-058-PCA-SM.)

The fed also entered written agreements with the following banks. Written agreements often require the banks to conserve capital, improve lending procedures and replace management.

Company Location Regulator Date Docket No.
FIRST COMMERCE COMMUNITY BANKSHARES INC. Douglasville, Ga. Federal Reserve Bank of Atlanta and the Banking Commissioner of the State of Georgia June 1 09-060-WA/RB-HCe
SEB Bancorp Inc. Marietta, Ga. Federal Reserve Bank of Atlanta and the Banking Commissioner of the State of Georgia June 8 No. 09-072-WA/RB-HC
Sterling Bank Lantana, Fla. Federal Reserve Bank of Atlanta, State of Florida Office of Financial Regulation June 5 Docket No. 09-055-WA/RB-SM
OFR Administrative File No. 062-Fl-4/09
Tradition Bancshares Inc., Tradition Bank Houston Federal Reserve Bank of Dallas, Texas Department of Banking June 1 09-067-WA/RB-HC
W Holding Compnay Inc. Mayaguez, P.R. Federal Reserve Bank of New York May 27 09-061-WA/RB-HC

On June 5, the fed terminated an April 21, 2006, written agreement with Bank of New York, while a June 30, 2005, written agreement with First Citizens Bank of Butte, in Butte, Mont., was terminated on May 28.

An adjudicated decision and order issue by the FDIC against interState Net Bank prohibits further participation by Hal J. Shaffer — who also faced a $50,000 civil money penalty. (order numbers FDIC-06-201e and FDIC-06-202k)

The Office of the Comptroller of the Currency issued a cease-and-desist order (EA-EC-2009-16) against Citizens National Bank of Springfield, in Springfield, Mo., on April 7.

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