If you want to know what it is like for regulators to close your bank, be sure to read the first person account of the closing of Jennings State Bank of Spring Grove and Stillwater, Minn. The state Commerce Department closed the bank on Oct. 2. Paul Jennings, who ran the bank with his brothers, Steven and David, writes about the experience for an essay that appears in the November 1 edition of NorthWestern Financial Review. Here is an excerpt:
A week before they closed us down, FDIC started asking about our fidelity bonds and our insurance policies, which they said the acquiring bank was asking for. It seemed strange that any buyer would be interested in those policies but we provided what was requested. Then the night we were closed the resolution team “interviewed” (interrogated) bank employees with special attention to the management team. They informed us it was “standard practice” for the FDIC to make a claim against the failed bank’s policies if they could find any way at all to allege a basis. They said if we had a problem with that to talk to the on-site ombudsman. This person was apparently put there as window dressing because the first question we asked her she refused to answer.
We felt we had done the right things during two years under C&D. We said, “This is our government and they are asking us to do these things. Can we do them? Yes.” We could have walked away at any time. It was hard hanging in there and keeping things together as long as we did. Toward the end we thought, at least we will be able to walk out with our reputations intact.
Now it appears we may need to gear up to defend ourselves against a purely frivolous claim by our government aimed at exacting money from our insurance carriers. Not only is this abusive, but it is a terrible way for our federal government to be conducting itself against its own citizens. Bankers need to start speaking out publicly about these types of unjust abuses or they will certainly continue unchecked. They probably also need to make a much less naïve assessment than we did of how much it is actually in their own best interest to cooperate with any agency of the U.S. government.
NorthWestern Financial Review will continue to follow the Jennings’ story as it unfolds.