Summary

In January 1992, the Office of Thrift Supervision closed CrossLand Savings, FSB, in Brooklyn, New York, and named the Federal Deposit Insurance Corporation (FDIC) receiver for the failed bank. The FDIC Board of Directors decided to delay final resolution of CrossLand--because it found the bids it had received to be more costly than interim FDIC control--by arranging to run it under a conservatorship for an interim period and then offer it again to the private sector. This report examines FDIC's resolution actions concerning CrossLand and discusses whether its decision to delay final resolution met the requirement that FDIC resolve a failed bank in a way that results in the least cost to the insurance fund.

GAO found that: (1) FDIC violated FDICIA requirements by failing to document its resolution on the failed bank; (2) it could not determine the FDIC basis for assuming interim control of the bank; (3) FDIC made several assumptions in its cost evaluation for interim control of the bank that made the cost estimate for the interim control option more uncertain than those for other options; (4) the FDIC assumption that recoveries on some assets would be greater by placing those assets under conservatorship raised questions about FDIC ability and capacity to efficiently manage and dispose of such assets; (5) FDIC did not have adequate empirical data to back up many of its cost assumptions; and (6) FDIC did no analysis to determine the uncertainty inherent in its cost evaluation.