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THE KANSAS CITY STAR

THE KANSAS CITY STAR

Lead Editorial Opinion

March 23, 1999

To see the March 22, 1998 editorial, click here

Federal Malpractice

Because of deposit insurance, it's important that bankers maintain a healthy fear of regulators. The loans they approve, after all, are government- insured--and taxpayer- backed--deposits. But who regulates the regulators?

For southwest Missouri banker Glen Garrett, the answer to that question remains unclear. Garrett spent $2 million of his own money fighting a case by the Federal Deposit Insurance Corp., which hounded him relentlessly for eight years over what amounted to a technical violation resulting in no loss to his bank.

Garrett's lawyer, Stephens Woodrough, suggests the case should prompt congressional hearings. That makes sense. The FDIC acted with complete lack of perspective. Last March, an agency spokesman even told a Star reporter that it mattered little whether Garrett's methods resulted in lost bank money. Excuse us, but if banks never incurred losses from inappropriate risks, the FDIC would be out of a job.

Garrett's practices admittedly were informal. He built his own bank building with his own hands, equipment and hired help. But that was no boondoggle, even though he had no bids or contracts. The building was later valued at $300,000 more than its construction cost.

Investigators focused on six loans Garrett approved, the proceeds of which repaid loans he made personally to the borrowers. All six were repaid with interest. Investigators said Garrett should have notified his bank board that he had a personal interest in those loans.

'This, said Garrett's lawyer, was in the end the FDIC's only complaint. Garrett paid no fine and admitted no wrongdoing. For its part, the FDIC denies any misconduct and claims to be pleased with the result.

At a congressional hearing lawmakers should begin by directing the FDIC to determine how much public money it spent hounding a small-town banker for no apparent reason. Then they should ask the agency to explain whether or not those losses matter.

 

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Last revised: June 1, 2012.