Judge makes costly liability ruling against FDIC

Northwestern Financial Review, Sep 15-Sep 30, 2002

A federal judge has ruled that the Federal Deposit Insurance Corp., is liable for the failure of Meritor Savings Bank of Philadelphia a decade ago. The cost to the FDIC could exceed $1 billion. A lawsuit filed by Meritor shareholders two years ago stated that in 1982 the FDIC reneged on a deal to let the bank create an intangible asset known as "supervisory goodwill" that would count as cash for all regulatory purposes and make shares of Meritor more attractive to investors.

The suit claims that in 1988 regulators forced Meritor to sell some of its most valuable branches to raise capital. In 1992, regulators closed the bank. An FDIC spokesman said the agency is considering an appeal.