Another bank closed its doors today. Guaranty Bank, based in Glendale, Wisconsin, is no more. At precisely 5:00 pm, regulators closed the bank. With 119 branches in 5 states, only 12 will reopen in the morning. The rest are gone for good.
Guaranty Bank’s woes began shortly after the real estate market crashed in 2008. Within a year of the crash, the bank was hurting. For several years, the bank was on the government’s watch list.
Things became so bleak that in March, the Office of the Comptroller of the Currency issued a “prompt corrective action directive.” The bank was ordered to immediately shore up its finances or risk getting shut down.
Just a few weeks ago, Guaranty Bank CEO Doug Levy told reporters that the bank was in good shape.
“Nothing is new or alarming or a surprise to us. Basically, these are things that the OCC believes that we need to be doing in order to turn around the bank. We’re still at work in terms of returning the bank to the proper capital levels. And things are going well for us. Despite our capital levels continuing to be low, we actually had positive net income in eight out of the last 11 months, and we’re projecting to be profitable this fiscal year. So we keep executing on our plan, but we continue to be under a regulatory order.”
Bank presidents are good at spinning yarns and tall tales. Just a few months ago we watched former Wells Fargo CEO John Stumpf tell Congress and millions of viewers how much Wells Fargo cares for its customers. No one was buying that and today everyone knows that Doug Levy is full of it too.
Luckily for Guaranty Bank customers, the FDIC arranged for another bank, First Citizens Bank, to take over the bank’s accounts. No customers will lose their money although tens of thousands will be inconvenienced.
Of Guaranty’s 119 branches, 107 of those are located in grocery stores. For people who bank there, those branches will not reopen. The choices for those folks are to drive many miles to one of the 12 remaining branches, find an existing First Citizens Bank branch or begin handling banking needs by mail and electronic funds transfers.
The real victims of the FDIC closure of Guaranty Bank (called Best Bank in Georgia and Michigan) are the bank’s hundreds of dedicated employees. At 4:00 pm today, most were thinking about the weekend, now hundreds are suddenly scrambling for jobs.
Why did Guaranty go under? The easy answer is to simply blame the economy and foreclosure crisis. That is what Levy said in March, although we think his answer is both misleading and convenient. The foreclosure crisis happened a decade ago and most banks have either long ago gone out of business or diligently worked their way back to profitably.
Feds Say Guaranty Bank Engaged in Unsafe Business Practices
According to a statement released today by the Office of the Comptroller of Currency (“OCC”), “The [agency] acted after finding that the bank had experienced substantial dissipation of assets or earnings due to unsafe or unsound practices”.
If the feds are right, someone in the bank was making very poor decisions… bad decisions that apparently went on for years.
Whistleblower Awards for Bank Fraud or Misconduct
In 1989, Congress passed the Financial Institutions Reform, Recovery and Enforcement Act – FIRREA for short. When originally passed, Congress hoped the law would be used to prosecute small town bankers who frequently used the bank as their own personal piggy bank. Bad loans were rampant causing many small savings and loan banks to simply fold.
To understand the vital role played by bank whistleblowers, its helpful to understand two other laws.
Congress created the Federal Deposit Insurance Company (FDIC) in 1933 during the Great Depression. The hope was to protect customers and encourage them to save money. Hoping to stem “runs on the bank,” the FDIC today guaranties deposits of up to $250,000.
After the savings and loan crisis of the 1980’s, Congress also passed a second law called the Financial Institutions Anti Fraud Enforcement Act (FIAFEA). That law allows bank workers and others with inside information about bank misconduct to claim an award for their information.
Did Levy or someone at the bank cause Guaranty Bank to fail? We may never know.
We do know, however, that whistleblowers are great sources of information. Under FIRREA and FIAFEA, those with inside information can receive a whistleblower award of up to $1.6 million. Awards are available whether the wrongdoer was the bank itself or an individual bank employee.
Whistleblowers – True American Heroes
America needs more whistleblowers. They are superheroes. Could an early intervention by a whistleblower have saved Guaranty and hundreds of jobs? No one knows. We do know that whistleblowers play a vital role in keeping banks honest.
In 2014, I was privileged to represent several bank whistleblowers against Bank of America. In that year alone, our financial services whistleblowers walked away with over $100 million in award monies. It is probably too late for people with inside information about wrongdoing at Guaranty Bank to claim an award. There are plenty of opportunities to address bank fraud in other banks, however.
If you are interested in learning more about becoming a whistleblower, call us. All inquiries are kept strictly confidential and subject to the attorney – client privilege. You also don’t have to worry about paying us unless we win and collect an award for you.
For more information, contact attorney Brian Mahany at or by phone at . You can also visit our FIRREA information page.
MahanyLaw – America’s Bank Misconduct Lawyers – “We Sue Banks“