cyu
25th March 2009, 19:55
What kind of lending at Bank of America doubled last year as credit markets froze? The kind that goes to bank directors.
Excerpts from http://www.mcclatchydc.com/251/story/64551.html (http://www.mcclatchydc.com/251/story/64551.html)
Banks nationwide hold $41 billion in loans to directors, top executives and other insiders, a portfolio that experts say should be stripped of secrecy.
Insider lending to directors is particularly troublesome because it could cloud the judgment of people charged with overseeing bank management...
At Bank of America, those loans more than doubled last year, to $624.2 million — the biggest dollar jump in the country. The largest of them likely went to three directors or their companies. The surge came during the third quarter as credit markets froze...
Banks don't have to explain increased insider lending. They don't have to disclose individual loan amounts or terms for any insiders, including executives. Directors and their businesses, often the largest insider borrowers, are completely shielded. Directors must approve insider loans greater than $500,000, so they sometimes vote on loans for each other or the executives they oversee...
Most publicly traded companies were banned from making insider loans in 2002, part of the regulatory rush following the collapse of Enron and other accounting scandals.
But banks were excluded from the ban...
The loans were blamed for bank problems during the nation's S&L crisis. Lawrence and others have linked insider lending to bank failures. In December, the chairman of a large Irish bank resigned after revelations he had $109 million of secretive insider loans. In January, the government seized the Dublin bank.
Excerpts from http://www.mcclatchydc.com/251/story/64551.html (http://www.mcclatchydc.com/251/story/64551.html)
Banks nationwide hold $41 billion in loans to directors, top executives and other insiders, a portfolio that experts say should be stripped of secrecy.
Insider lending to directors is particularly troublesome because it could cloud the judgment of people charged with overseeing bank management...
At Bank of America, those loans more than doubled last year, to $624.2 million — the biggest dollar jump in the country. The largest of them likely went to three directors or their companies. The surge came during the third quarter as credit markets froze...
Banks don't have to explain increased insider lending. They don't have to disclose individual loan amounts or terms for any insiders, including executives. Directors and their businesses, often the largest insider borrowers, are completely shielded. Directors must approve insider loans greater than $500,000, so they sometimes vote on loans for each other or the executives they oversee...
Most publicly traded companies were banned from making insider loans in 2002, part of the regulatory rush following the collapse of Enron and other accounting scandals.
But banks were excluded from the ban...
The loans were blamed for bank problems during the nation's S&L crisis. Lawrence and others have linked insider lending to bank failures. In December, the chairman of a large Irish bank resigned after revelations he had $109 million of secretive insider loans. In January, the government seized the Dublin bank.