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FDIC Enforcement Decisions and Orders

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   [5227] In the Matter of the Greene County Bank, Strafford, Mo., Docket No. FDIC-93-160b (9-22-95)

   FDIC denies motion for stay pending judicial review of a cease and desist order. (This order was terminated by order of the FDIC dated 2-8-00; see ¶16,253)

   [.1] Practice and Procedure—Stay
   Under Section 8(h)(3) of the FDI Act, grant of a stay pending judicial review of any FDIC order is an extraordinary action committed to the agency's discretion.

   [.2] Practice and Procedure—Stay
   Petition for a stay pending judicial review must satisfy four criteria: (1) likelihood that the petitioner will prevail on the merits of the appeal; (2) that the petitioner will suffer irreparable injury in the absence of a stay; (3) that other interested persons will suffer no harm if a stay is granted; and (4) that a stay will not harm the public interest.

   [.3] Cease and Desist Orders—FDIC Authority to Issue
   Section 8(b) of the FDI Act, 12 U.S.C. § 1818(b), does not require proof of an unsafe and unsound practice, but only a violation of an agreement between the bank and the FDIC.

   [.4] Practice and Procedure—Stay
   Absence of stay of cease and desist order will not cause irreparable harm to bank because the order merely requires the bank to comply with memorandum of understanding, which by definition reflects the bank's voluntary undertaking.

   [.5] Practice and Procedure—Stay
   Bank cannot show that there will be no harm to the FDIC from stay of cease and desist order because the status quo presents significant risk of loss to the bank.

   [.6] Practice and Procedure—Stay
   Public interest does not support bank's motion for stay of cease and desist order because if bank does not comply with prior memorandum of understanding, as required by the order, there is a significant risk of harm.

In the Matter of

THE GREENE COUNTY BANK
STRAFFORD,MISSOURI
(Insured State Nonmember Bank)
DECISION AND ORDER DENYING REQUEST FOR STAY
FDIC-93-160b

   On September 5, 1995, the Board of Directors ("Board") of the Federal Deposit Insurance Corporation ("FDIC") received a Motion for Stay Pending Judicial Review pending a final determination of The Greene County Bank, Strafford, Missouri's ("Bank"), petition for judicial review of the Board's Decision and Order ("Decision and Order") imposing a cease and desist order on the Bank.
   The Decision and Order was issued on August 1, 1995, pursuant to the Board's authority under section 8(b) of the Federal Deposit Insurance Act. ("FDI Act"), 12 U.S.C. § 1818(b), after a full hearing on the merits of the case. The Board found that the Bank had violated a Memorandum of Understanding ("MOU") and engaged in unsafe and unsound practices in connection with futures market activities.

   [.1] Section 8(h)(3) of the FDI Act, 12 U.S.C. § 1818(h)(3), specifically provides that the commencement of proceedings for judicial review shall not, unless specifically ordered by the court, operate as a stay of any order issued by the appropriate federal banking agency. Thus, the grant of a stay is an {{10-31-00 p.A-2728}}extraordinary action committed to the discretion of the FDIC. See 12 C.F.R. § 308.41.

   [.2] The FDIC has previously held that petitions for a stay pending judicial review must satisfy four criteria to be granted: (1) a likelihood that the petitioner will prevail on the merits of the appeal; (2) that the petitioner will suffer irreparable injury in the absence of a stay; (3) that other interested persons will suffer no harm if a stay is granted; and (4) that a stay will not harm the public interest. E.g., In the Matter of Ronald J. Grubb, Bank of Hydro, Hydro, Oklahoma, FDIC-88-282k, FDIC-89-111e, 2 P-H FDIC Enf. Dec. & Ord. ¶ 8021 (1992). The Bank's submission does not satisfy any of the criteria.

   [.3] The Bank believes it will prevail on appeal because the evidence does not show an unsafe and unsound practice posing an abnormal risk to the Bank's financial stability. However, 12 U.S.C. § 1818(b) does not require proof of an unsafe and unsound practice, but only a violation of an agreement between the Bank and the FDIC. Even a Recommended Decision of the Administrative Law Judge found that the Bank did not fully comply with the MOU. Moreover, the Board did find that the prior approval and documentation deficiencies did constitute an unsafe and unsound practice exposing the Bank to an abnormal risk of loss.1 Therefore, the Bank's submission fails to persuade the FDIC that the Bank is likely to prevail on appeal.

   [.4] The Bank alleges irreparable harm in that "it will have to comply with a cease and desist order it does not deserve and that the record does not support." This allegation does not meet the burden of showing irreparable injury. The cease and desist order merely required the Bank to comply with the MOU, and the MOU, by definition reflects the Bank's voluntary undertaking. In effect, the Bank is merely being required to do something which it has already agreed to do. Moreover, the speculative possibility of further litigation over compliance with the cease and desist order does not rise to the level of irreparable injury.2

   [.5] The Bank also argues that there will be no harm to the FDIC from a stay because the status quo has produced no loss. However, the FDIC disagrees. The Board's decision has identified areas in which the Bank's noncompliance with the MOU is significant and poses a risk of harm to the Bank. Accordingly, it necessarily concluded in issuing a cease and desist order that the status quo presented a risk that should be avoided because of the possibility of loss. Therefore, the Bank cannot show that there will be no harm to the FDIC from a stay.

   [.6] Finally, the Bank argues that the public interest supports a stay because the Bank is well-capitalized, there is no risk of failure, and the MOU remains in place. The flaw in this argument is that the Bank is not in compliance with the MOU and, as just stated, the noncompliance involves issues of documentation and prior approval that present a significant risk of harm.

   A thorough review of the Bank's submission reveals a lack of factual or legal basis for a stay. Accordingly, it is hereby ORDERED and DECREED that the Motion for Stay Pending Judicial Review of the Decision and Order is DENIED.
   Dated at Washington, D.C., this 22nd day of September, 1995.
   Pursuant to delegated authority, upon the advice and recommendation of the General Counsel.


1 The Bank misperceives the thrust of the Board's findings in the cease and desist order. The Board did not conclude that interest rate risk exposure threatened the Bank. Rather, the Board concluded that the Bank's prior approval and documentation deficiencies in implementing its futures transactions posed a threat of harm.

2 The Bank also alleges that the FDIC examiners of the Kansas City Regional Office are engaged in an attempt to oust the Bank's management, and a stay will avoid this possibility. However, as the Bank notes, the Board adopted a limited order rather than the more onerous one proposed by FDIC Enforcement Counsel. This order provides no basis for an attempt to oust management at this time. Further, any effort to oust the Bank's management would have to be justified by specific charges and evidence.

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