Today, the Michigan Office of Financial and Insurance Regulation closed Warren Bank, headquartered in Warren, Michigan, and the FDIC was named as receiver.

A fundamental component in the commercial mortgage-backed securities ("CMBS") market is the lender's reliance that the loan is made to a "bankruptcy remote" special purpose entity ("SPE"). The loan documents and operating agreements relating to an SPE typically require that the SPE maintain separate existence and contain restrictions that limit the SPE's debt and ensure separateness.

Yesterday, the Minnesota Department of Commerce closed Riverview Community Bank, headquartered in Otsego, Minnesota, and the FDIC was named as receiver. As receiver, the FDIC entered into a purchase and assumption agreement with Central Bank, Stillwater, Minnesota, to assume all the deposits of Riverview Community Bank.

Yesterday, the OCC closed Flagship National Bank, headquartered in Bradenton, Florida, and the FDIC was named as receiver.

Yesterday, the Georgia Department of Banking & Finance closed American United Bank, headquartered in Lawrenceville, Georgia, and the FDIC was named as receiver.

Today, the House Judiciary Committee’s Subcommittee on Commercial and Administrative Law held a hearing to discuss the role of bankruptcy and antitrust law in financial regulatory reform, particularly with respect to institutions that may be regarded as “too big to fail,” as highlighted during the financial crisis.

Testifying before the Subcommittee were the following witnesses:

Panel I

Yesterday, the California Department of Financial Institutions closed San Joaquin Bank, headquartered in Bakersfield, California, and the FDIC was named as receiver.

When the Office of the Comptroller of the Currency placed the $1.9 billion asset-sized ANB Financial, National Association in receivership with the Federal Deposit Insurance Corporation (FDIC) on May 9, 2008, it was one of the largest bank insolvencies in recent years. In a matter of days, plaintiffs’ attorneys were actively seeking future clients. Attorneys ran newspaper advertisements soliciting former employees, depositors and shareholders of the failed Bentonville, Arkansas bank and its holding company.

A Florida bankruptcy court, on Oct. 13, 2009, issued a 182-page decision after a 13-day trial, among other things, avoiding on fraudulent transfer grounds (a) secured subsidiary guarantees of $500 million and (b) $420 million pre-bankruptcy payments. In re Tousa, Inc., et al., Case No. 08-10928; Adv. P. 08-1435 (S.D. Fla. Oct. 13, 2009). The decision is on appeal to the district court.  

Relevance  

A recent decision in the U.S. Bankruptcy Court for the Southern District of Florida, In re Tousa,[1] has received widespread attention for its near wholesale rejection of insolvency “savings clauses,” and the resulting order requiring lenders to disgorge hundreds of millions of dollars. The decision raises numerous practical problems for participants in the secondary loan and derivatives markets, and more generally for commercial lenders and borrowers.

Background