American Association of Bank Directors Announces Report of Task Force on Asset Freezes of Bank Directors and Officers
The American Association of Bank Directors (“AABD”) announced today that its AABD Task Force on Asset Freezes has issued the “Report on the Use of Federal Financial Institution Asset Freeze Authority.”
Beginning in 1989 and through amendments in the early 1990’s, the Federal banking statutes authorized the federal banking agencies to freeze the personal assets of bank and savings institution directors and other insiders either by requesting a federal court to freeze the assets following a showing that the facts warrant it, or simply doing it themselves through the issuance of a temporary order to cease and desist.
The Task Force Report found that the administrative “do-it-yourself” asset freeze authority is excessive and unneeded by the federal banking agencies. The Task Force urges that Congress require the agencies to seek relief solely in a civil court.
“Although the asset freeze authority of the federal banking agencies is infrequently used, it can have a devastating effect on the target of the asset freeze, often causing the target to capitulate to the agency’s demands without having a full opportunity to defend himself,” said Arthur Leibold, Chairman of the Task Force. “It is time for the Congress to revisit the authority that it granted the federal banking agencies almost 14 years ago during the S&L crisis and decide in a calmer environment that the “do-it-yourself” authority of the agencies no longer serves a legitimate supervisory purpose that cannot be met by making their case in court.”
“AABD accepts the findings of the Report of the AABD Task Force on Asset Freezes,” said David Baris, Executive Director of AABD. “AABD also urges the Comptroller of the Currency, FDIC, and the Office of Thrift Supervision to adopt administratively the position of the Federal Reserve Board that it will not use the administrative “do-it-yourself” authority to freeze the personal assets of bank directors and other insiders since it has the authority to go to a federal court to seek such asset freeze.”
Each of the federal banking agencies (Federal Reserve Board, Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency and the Office of Thrift Supervision) provided AABD a list of each instance, from January 1989 to mid-2001, where the agency indicated it used its temporary cease and desist authority to freeze the use of personal assets without prior independent judicial review, rather than seeking a prejudgment attachment from a court of law. Each agency has also provided a list of each instance where the agency indicated it sought an order from a federal court to freeze assets. A representative from each of the agencies has advised AABD recently that the position of each agency as to the use of asset freeze authority is not changed from that stated in its mid-2001 response.
The Task Force has three members, each of whom has served as General Counsel or Chief Counsel to a federal banking agency. They are Arthur Leibold, Chairman of the Task Force, who served as General Counsel to the Federal Home Loan Bank Board, the predecessor to the Office of Thrift Supervision, from 1969-1972; Neal L. Petersen, who served as General Counsel to the Board of Governors, Federal Reserve System from 1979-1982; and Brian W. Smith, who was Chief Counsel to the Comptroller of the Currency from 1982-1984. The biography of each of the Task Force members can be found by clicking on their name.
Founded in 1989, the non-profit American Association of Bank Directors is the only trade group in the United States solely devoted to bank directors and their information, education, and advocacy needs. The Institute for Bank Director Education was established in 1993 as the educational arm of AABD. Its purpose is to act as a clearinghouse for education programs designed for bank and savings institution directors that support the nationally recognized Director Certification Program.
Copies of the Report of the AABD Task Force on Asset Freezes are available to members of AABD and members of the press without charge, and are available for purchase by other parties.
Copies of a predecessor report in 1994 of the AABD Constitutional Rights Task Force are also available from AABD. One of the papers in that Report was entitled “Constitutional Limits on Asset Freeze Orders and Administrative Adjudication of Monetary Penalties, by John K. Villa and Eric M. Braun.