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It would put a firewall around federally insured institutions, protecting taxpayers and helping contain the crisis as well as potential future ones.
Small and midsize lenders are in far less danger than they were during the 1980s and early 1990s, when about 1,600 federally insured institutions failed during a savings and loan crisis.
Small lenders are in far less danger than they were during the 1980s and early 1990s, when roughly 1,600 federally insured institutions failed during a savings and loan crisis.
They also own more than half, some $441 billion, of the second liens, home-equity loans or second mortgages guaranteed by federally insured institutions.
This must be acknowledged in advance, and paid for by the insured institutions.
For one thing, the good news wasn't across the board: only half of the insured institutions reported higher quarterly profits, year-over-year.
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The law allows for a penalty of up to $1 million for each violation of the mail, wire and bank fraud statutes for conduct "affecting" a federally insured financial institution.
Based on research conducted from March to November 2009, the report examines the conduct of the bank's primary regulator, the Office of Thrift Supervision, an independent arm of the Treasury that regulates savings associations, and the F.D.I.C., which insured the institution's deposits.
It allows the government to recover civil penalties of up to $1 million for each violation of the federal mail and wire fraud statutes when it affects a federally insured financial institution.
In a recent interview with The Wall Street Journal, Mr. Hensarling outlined a free-enterprise approach to bank regulation that sensibly supported "greater capital and liquidity standards" and better "ring-fencing, fire-walling — whatever metaphor you want to use — between an insured depository institution and a noninsured investment bank".
That is a broad reading of what constitutes "affecting," and arguably means that any mail or wire fraud at a company whose shares are owned by a federally insured financial institution could trigger liability for civil penalties under the Financial Institutions Reform, Recovery and Enforcement Act.
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Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com