http://www.thestreet.com/_yahoo/story/10624514/1/fdic-disowns-geithner-embarrassment.html
By Dan Freed
WASHINGTON, D.C. (TheStreet) -- The Treasury Department, not the Federal Deposit Insurance Corp., should be held responsible for a public relations gaffe last month in which the FDIC closed a Chicago bank just hours after it received an award from Treasury Secretary Tim Geithner, according to FDIC spokesman David Barr.
Park National Bank of Chicago received $50 million in tax credits to encourage investment in poor communities at an Oct. 30 ceremony attended by Geithner. Hours later, though, it was seized along with eight other banks around the country that formed part of a holding company called FBOP Corp. and sold to U.S. Bancorp (USB).
One financial services executive, who did not want to be on the record for fear of running afoul of regulators, accused the FDIC of timing the closure as it did in a deliberate effort to embarrass Geithner.
FDIC Chairman Sheila Bair has tangled with Geithner before over issues such as her approval of Wells Fargo (WFC)'s acquisition of Wachovia after the failed bank had initially struck a deal with Citigroup (C), according to a Bloomberg News report last year. The report said Geithner tried to push Bair out of office.
FDIC Spokesman Barr says questions over the issue should be directed to John Dugan, the Comptroller of the Currency, which is a bureau within the Treasury Department. Barr says Dugan sits on the FDIC's board and could have warned Geithner of the impending closure, since the FDIC took bids on FBOP Bank October 20 -- 10 days before the bank was closed.
"Why aren't you asking John Dugan's people why they didn't call up their own boss, since they're a bureau within the Treasury Department and the FDIC is an independent regulatory agency?," Barr told TheStreet.com.
However, in a follow-up e-mail, Barr noted that there are "statutory firewalls..that insulate the Treasury officials from knowing about impending failures." Asked why this firewall did not apply to Dugan, Barr wrote "ask them (the OCC) how it works."
A spokesman for the Office of the Comptroller of the Currency declined to comment.
Though Park National was relatively healthy, it was shuttered because it could not cover the losses of other banks in the FBOP holding company.
In addition to the usual real estate loans gone bad that have dogged virtually every institution from Bank of America (BAC) to Goldman Sachs (GS), the FBOP banks had big losses on preferred shares of Fannie Mae (FNM) and Freddie Mac (FRE), according to a report in the Wall Street Journal last week.
Treasury spokespeople did not respond to calls or e-mail messages
--Written by Dan Freed in New York.
