Gov’t. Says FDIC Isn’t Backed By U.S. CONGRESS


Editor’s Advisor                  Contacts:         Pamela Whitney –  202.747.4440

July 6, 2010

FDIC Signs on Bank Counters

Insuring Deposits Up To $250,000

Really Backed By The US Congress?

WHO:            Tom Buchanan, partner Winston & Strawn LLP (Wash, DC)

Frank Slattery, Jr. and shareholders of Meritor Savings Bank (PSFS)

WHAT:            En Banc hearing at US Court of Appeals/Fed. Circuit Thursday, July 8th, 11:00 a.m., Rm. 201

WHY:            To determine if the FDIC is a NAFI or backed by the US Congress as stated on all FDIC bank counter-top tent cards across America.

THE CASE:

The 18 year-old case is about the fabled Philadelphia Saving Fund Society, which was once the oldest and largest savings association in the country.  In the 1980s, it changed its name to Meritor.  In 1992, the FDIC asked Pennsylvania’s Department of Banking to shut it down and padlock its doors.  Those decisions are at the epicenter of this case in which both the trial court and the court of appeals have found that FDIC’s actions, including the events that triggered seizure of this storied franchise, constituted a breach of contract for which the government must now pay $276 million. Tom Buchanan represents Frank P. Slattery Jr., who was a principal shareholder of Meritor and its predecessor, PSFS.   After losing at the court of appeals, the government petitioned for a rehearing en banc of the defendant.   The en banc court is not considering issues of liability or damages but rather whether the trial court had jurisdiction over this case in the first place.  If the government were to succeed, the plaintiffs will have to start the case all over again in another court, some 18 years after the case was first filed.  But if the case is re-filed, the potential looms that the award may grow exponentially, from the $276 million awarded in the current proceedings, to possibly more than $1 billion. First, the trial court hinted that a $700 million award was appropriate — but that the court was bound by precedent that would not be applicable in a different judicial district.  Second, a new suit would have to be brought against the FDIC rather than the United States.  While this may appear to be a technical change, the prohibition against prejudgment interest against the United States may well not apply.

WHAT MAKES THIS RELEVANT TODAY — PARTICULARLY TO BANK DEPOSITORS?

1.  In order to find the FDIC a NAFI, the government is arguing that Congress has no obligation to honor its promises to back deposits with the full faith and credit of the United States.  Indeed, government lawyers call that language “rhetoric.”  Won’t the American public be surprised to learn that the US Congress does not back their FDIC insured funds as Congress has promised repeatedly?

2.   The government is arguing that the FDIC is a NAFI (Non-appropriated Funds Instrumentality — similar to a military commissary), and does not receive funding from the US Treasury, i.e., Congress.  The FDIC receives its funding by charging banks fees.  If the court rules that the FDIC is a NAFI, and if the en banc court finds that appropriated funds may not be used to pay judgments against NAFI’s, then any judgment in any subsequent action will have to be borne not by Treasury dollars, but by the banks regulated by the FDIC!  In other words, the FDIC could be found to be in breach, but it would be entitled to recover the judgment by bank assessments, most likely passed along to depositors i.e., customers.

Attach:  1.  Article   2. Timeline.  3. 01/22/10 US Court of Appeals 207-5063,-5064,-5089

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About Legal News To Use

A media and public relations arm of Whitney Corporate Relations with over 25 years experience working with Fortune 50 corporations, lobbyists and the legal community on internal and external communications, governmental and crisis relations.
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19 Responses to Gov’t. Says FDIC Isn’t Backed By U.S. CONGRESS

  1. Frank G says:

    Stay the course Mr. Slattery. While the wheels of justice are known to grind slowly, they are grinding and right will prevail. This issue should well be the “poster boy of the century” for government run amuck and out of control.

    We pray that justice be served.

  2. Mary Ann Marchesa says:

    Thank you for being their for us stockholders. I don’t pretend to understand everything that is happening but I know you have our best interest at heart. Although only have 400 shares I pray you will be successful. Again thank you for being their.

    • Thank you for your kind words. Just know that there is a whole team led by Tom Buchanan and Eric Bloom at the Winston & Strawn law firm working very hard for Mr. and Mrs. Slattery, and each and every shareholder like you. Feel free to pass this along to your fellow shareholders. Warmest regards,

    • You have the absolute best and brightest team working very hard on you and your fellow shareholder’s behalf. I’ll get back to you on what you and other shareholders can do to help. Stay tuned.

    • You and your fellow shareholders have the best and the brightest working very hard on this case. We may need the help of all of you, too. Stay Tuned!

  3. earl gammon says:

    mr ..mrs ..slattery. i want to thank you for your help its been a long haul . im close to 80. i would like to see justice done. win or loose.thank you .earl gammon im the father of 12. maybe my grand children will benifit….thanks again

  4. inder goel says:

    Please keep up the GOOD work and faith, we will win in the end. It was our hard earned money.

  5. The goverment should stop playing with it’s citizens money. Pay the debt now. That is what all of us has understood for decades. FDIC means an account $250,000 or less cannot fail because it is insured by the full faith and confidence of the U. S. government. I am now 87 years of age and have believed FDIC means as I have stated for more than 65 years.

    • Sadly, it doesn’t. The FDIC gets its monies from charging its member banks fees. It is a stand alone Federal agency, and does not receive any money from the US Treasury allocated by the US Congress. And the FDIC is $21B in the hole. It will have to charge its banks more fees, which are most likely going to be passed on to its small and large bank depositors in new and or increased fees for banking services for its customers.

  6. Choirboy says:

    First of all, I think it was PHILADELPHIA Savings Fund Society, not FEDERAL Savings Fund Society . . . whatever, I have been following this case for years and it’s just incredible the lengths to which the government will go to deny justice. Thanks for calling this to people’s attention on your site. Another place people might want to check out is http://www.meritorpsfs.com. It tells the whole history and believe me, when you read what happened to PSFS (and a lot of other S&Ls), you will be truly outraged.

  7. Tim Fallon says:

    It seems sad to think that the Government’s case comes down to “Spin”. That we should not and can not depend upon the FDIC signage posted on my banks stating FDIC is “Backed by the full faith and credit of the United States Government” is beyond my simple American beliefs. If the Government prevails in this hearing, does this mean we should follow up with consumer protection and truth in advertising corrective actions?

  8. John A. Rohana says:

    I am a subscriber to the initial PSFS IPO in ????1982{I think} and although I hold only 150 shares of PSFS,I have been purchasing ,and hold a substantial # of Meritor shares.
    So one can see that I have been invovled since the beginning and are looking for justice from the so called DOJ immediately.
    Let us hope that 7/8/10 is the day!!!!!

  9. This is really unbelivable. I cannot believe in this article.

  10. I cannot believe this is true!

  11. mbt shoes says:

    Great journey and experience!

  12. Thank you for your great

    content.

  13. doriso3 says:

    the FDIC ,under the present circumstances has sought out from the us treasury a standby agreement to be backed up with a 500 billion dollar loan ,if necessary. The fdic cannot continue to sustain all of the losses that will be forthcoming this year and may be required to go beyond the additional alleged “insurance support “from the banks. Congress under those circumstances as well as the US Treasury will be required to support the potential losses which under the FDIC guarantees will exceed a trillion dollars.

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