Bank and Thrift Failures

The Government Could Do More to Pursue Fraud and Wrongdoing Gao ID: T-GGD-93-1 January 28, 1993

Fraud and wrongdoing played a big role in the bank and thrift crisis. Criminal referrals involving former directors, officers, and other principal officials have been filed in connection with nearly half of the failed institutions; negligence by these individuals was suspected in more than 75 percent of these banks and thrifts. GAO testified that the Justice Department, Federal Deposit Insurance Corporation (FDIC), and Resolution Trust Corporation (RTC) could be doing much more to address criminal fraud and civil wrongdoing. Justice has not adequately coordinated or managed the government's efforts to investigate and prosecute criminal fraud. In short, its reaction to this crisis has been "business as usual." FDIC and RTC have also failed to do all they could to pursue professional liability claims against former directors, officers, and other professionals at failed banks and thrifts. GAO makes a number of recommendations aimed at strengthening the federal response to fraud, negligence, and other wrongdoing in financial institutions. GAO also supports stronger oversight of the nation's financial institutions--a move that is critical to identifying unsafe and unsound practices before they threaten the viability of banks and thrifts.



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