Occupy Wall Street’s New Bank Under FDIC Enforcement Action

Occupy Wall Street has deposited donated funds in New York-based Amalgamated Bank but the FDIC has a bulls eye on the bank’s executives. At the end of August the federal regulator issued a scathing enforcement action calling for a third party review of the banks management and issuing a directive for the bank to lower its leverage ratios to 7 percent within a year. But that’s not all the FDIC is unhappy about. It appears some creative accounting for non performing loans are an issue.

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 banks 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 14th 2010 issued jointly by the FDIC and the New York State Department of Banking that have not been previously collected or charged off.”

It’s no wonder some of the banks executives have jumped ship in the last six months. According to people who have worked for the bank there has been mass exodus of bank executives recently that includes the president. There is also the issue of board member Bruce Raynor who had to resign from his garment union leadership position after allegations of misconduct regarding his union expense reports.

CNBC’s John Carney reported last week that Occupy Wall Street raised $75k in about a week via small individual donations of up to $85 a person. Today we learned that total has grown to $300k. Except it’s odd that the Bank protestors, who inspired an international protest on Saturday, choose to put their money in a community bank that appears to be executing some of the fraud they are speaking out against.

I am still awaiting a call back from an Amalgamated Bank press person. Stay tuned as this story develops.

UPDATE 4pm: An outside press person for Amalgamated confirmed Patrick O’Sullivan, who ran the asset management group, left also this summer. You know before the enforcement action was made public.

UPDATE 5pm: An Amalgamated outside press person points out Wilbur Ross and Ron Burkle investment funds have verbally committed to invest $50 million each in the bank’s common stock. The FDIC and other common shareholders will have to approve this but if it goes through that could help solve their leverage ratio problems. According to Ralph Hutchinson the bigger issue though is the likelihood the bank will have to restate bank call reports. These are the financial loan level operating reports FDIC-backed banks are required to file.


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  1. Thanks for using the time and effort to write something so interesting.

  2. “… it’s odd that the Bank protestors, who inspired an international protest on Saturday, choose to put their money in a community bank that appears to be executing some of the fraud they are speaking out against.” Exactly why would this be odd Terry. They are committed leaderless(in many cases unemployed professionals) protesters not seasoned financial investigative journalists. When this information is made public then the public can act on it. Thanks for making this info public. It may well factor into our conversations with the bank officials.

    • Darryl – The FDIC enforcement action against the bank was made public two months ago. It is on the FDIC website for anyone to read. The OWS protest organizers made public statements that they choose to deposit the donated money in a ‘community bank’. I would hope if they are protesting bank abuse they would do a quick search and see if the bank they choose to associate the group with had any enforcement actions against it.

      • Hi Teri, I appreciate your work btw. I would say that you are completely correct if we were a structured organization with the resources and opportunity to function as such. Since I’ve been involved many things are happening on the fly and many early financial decisions have been made in that vein. A clear challenge we face is having to make decisions without ample time or resources or team members to complete significant tasks let alone carry out thorough research. This is the case largely because things are changing so rapidly… and oh yeah, we’re operating from a park bench in the middle of a couple 1000 ppl at any one time. Additionally, there’s a pretty small number of people proposing these financial ideas and our group’s skills, knowledge and abilities ebbs and flows as members come and go. In light of the FDIC investigation we should be considering other alternatives; but each of our team members is so overwhelmed with the tasks we’ve taken on there simply isn’t anyone to do it at this very moment. Besides can you suggest a single bank that hasn’t had any regulatory issues, or should we just avoid the one’s with issues that are recognized in our current social meme? I’m not defending Amalgamated, I have no allegiance there, but don’t most of us continue to use the very banks that have abused us for years? I’m not trying to be snarky just trying to convey that what is normally considered simple, under these circumstances, just isn’t. If you have ideas suggestions that may be helpful I’d gladly respond and share them when appropriate.

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