An interested reader emailed me and offered a couple of thoughts about the United Western Bank/OCC litigation that was the subject of last night's post. First, he focused on the fact that the OCC's "statement of facts" (which the plaintiff has moved to strike) makes much of the fact that the bank "voluntarily" stipulated to the entry of a Cease and Desist Order against the bank, and that the stipulation contains "findings of fact" that concluded that the bank engaged in unsafe and unsound practices and violations of law. My correspondent found that disingenuous, inasmuch as the third recital to the stipulation provides that the bank does not admit or deny any statements or conclusions in the C&D other than two that relate to jurisdiction. This is typical of many consent orders entered into with the federal banking agencies. The bank does not agree that the stipulations of fact or the conclusions drafted by the OCC are correct. My correspondent thinks that the OCC is attempting to construe such "voluntary consent" into a consent that conditions exist that justify the appointment of a receiver. If so, that will have a negative impact on the willingness of banks to sign such agreements in the future.
I agree that there apears to be an attempt to use the bank's consent to the entry of the C&D as an argument that the facts and conclusions contained in the order, such as that the bank is in an unsafe and unsound condition, are somehow "true" and incontestable. I doubt whether that suggestion will have an impact on the judge. As to the willingness of banks to sign such stipulations in the future, it's too early to tell. However, a few more banks in the future might be inclined to fight a C&D rather than stipulate. As my correspondent also wryly observes, if Maxine Waters has her way, the era of consent orders may be coming to an end in any event. If that's the case, the administrative law judges are going to be awfully busy.
My correspondent also opined that the OCC's motion displays a clear bias against private equity investors. Although he didn't clarify the specific provisions of the motion that supported this contention, I assume they were the provisions that discussed the OCC's rejection of the conditions precedent imposed by the potential investors, including the waiver of certain restrictions of the C&D and other "unacceptable supervisory concessions." To me, this bias has been obvious in not only the OCC, but in the FDIC and the FRB, for the last several years. We've discussed this issue previously. The requests for supervisory concessions were normal (and sane) protections that any knowledgeable private equity group would impose before they infused hundreds of millions of dollars into a bank that had "issues."
PE legend Wilbur Ross told the American Banker last week (paid subscription required) that he's had it with the "Big Three." He's now focused on investing in European banks. From my discussions with private equity investors recently, others are following his lead overseas, even to Eastern Europe. It's a heck of a state of affairs when the Ukraine looks rosier than Utah, but there you have it.






