or Login to see your representatives.

Access Candidates' and Representatives' Biographies, Voting Records, Interest Group Ratings, Issue Positions, Public Statements, and Campaign Finances

Simply enter your zip code above to get to all of your candidates and representatives, or enter a name. Then, just click on the person you are interested in, and you can navigate to the categories of information we track for them.

Public Statements

Financial Services Committee Hearing Exposes Flaws within FDIC's Structured Transaction Program

Press Release

By:
Date:
Location: Washington, DC

The House Financial Services Subcommittee on Oversight held a hearing on the Federal Deposit Insurance Corporation's (FDIC) Structured Transaction Program. The Structured Transaction Program creates a partnership between the FDIC and private organizations for the disposal of assets once held by financial institutions now under receivership by the FDIC. The private sector partner is responsible for disposing of assets (i.e. collecting the outstanding loans) and they then take a percentage of the loans they collect as profit. Congressman Westmoreland has been looking into this program for the last year and a half when it was first brought to his attention by a constituent. The hearing exposed the flaws within the FDIC's Structured Transaction Program and brought up many of the concerns financial institutions and Members of Congress have with continuing the program.

"There are two overall issues that needed to be discussed," stated Westmoreland. "First, we needed to determine if this program is truly the best way to maximize the return on taxpayer money as the FDIC claims. Second, we needed to make sure the FDIC's partners are behaving in a proper and legal manner when attempting to collect these loans on behalf of the FDIC. Unfortunately, we found out that the answer to both of these questions is no."

During the hearing, Congressman Westmoreland had the opportunity to question Stuart Miller, the CEO of Lennar Corporation, the parent company of Rialto Capital Management. RialtoThe House Financial Services Subcommittee on Oversight held a hearing on the Federal Deposit Insurance Corporation's (FDIC) Structured Transaction Program. The Structured Transaction Program creates a partnership between the FDIC and private organizations for the disposal of assets once held by financial institutions now under receivership by the FDIC. The private sector partner is responsible for disposing of assets (i.e. collecting the outstanding loans) and they then take a percentage of the loans they collect as profit. Congressman Westmoreland has been looking into this program for the last year and a half when it was first brought to his attention by a constituent. The hearing exposed the flaws within the FDIC's Structured Transaction Program and brought up many of the concerns financial institutions and Members of Congress have with continuing the program.

"There are two overall issues that needed to be discussed," stated Westmoreland. "First, we needed to determine if this program is truly the best way to maximize the return on taxpayer money as the FDIC claims. Second, we needed to make sure the FDIC's partners are behaving in a proper and legal manner when attempting to collect these loans on behalf of the FDIC. Unfortunately, we found out that the answer to both of these questions is no."

During the hearing, Congressman Westmoreland had the opportunity to question Stuart Miller, the CEO of Lennar Corporation, the parent company of Rialto Capital Management. Rialto is one of the FDIC's partners. As of August 31, 2011, they have secured more than 5,500 hundred commercial and residential loans from the FDIC for a total down payment of $241 million. The total outstanding balance of these assets is more than $3 billion, meaning Rialto only put down 8 cents on the dollar to secure these loans. Further, the FDIC provided Rialto a $600 million, interest-free, non-recourse loan for participating in this deal. Rialto then serves as the FDIC's collection agent, so to speak, keeping a certain percentage of profits for themselves. In addition, Rialto receives management fees for their collection work based on the unpaid principle balance, not on what Rialto is successful in collecting from borrowers. Unfortunately, this arrangement often serves as an incentive to litigate and a disincentive to negotiate with borrowers.

"So, Rialto pays pennies on the dollar to secure these loans, get an interest-free, non-recourse loan from the government , and then also get a fee for "managing' these loans," stated Westmoreland. "In Georgia, that's what we call a sweetheart deal. And the only people benefiting from it are the FDIC's partners."

The second panel of the hearing featured testimony from Scott Leventhal, President of Tivoli Properties in Atlanta, and Ed Fogg, Owner of Fogg Construction. Both have had poor dealings with Rialto. Mr. Fogg's story was particularly troubling. After a year and a half of negotiating with Rialto, Rialto's final offer was a 1.5 year extension to his company's loan with what worked out to an APR of 38.376%, clearly a predatory loan. Mr. Fogg ultimately could not reach a deal with Rialto and declared bankruptcy on May 3rd. At the hearing, Rep. Westmoreland commended Mr. Leventhal and Mr. Fogg for their courage to stand up not only to their new lender, but also to a company they compete against in business.

"In order to avoid problems like this in the future, I will be introducing legislation soon to stop the FDIC from entering into these types of structured transactions," stated Westmoreland. "I will also be introducing legislation to give borrowers like Mr. Fogg and Mr. Leventhal the right of first refusal to buy their loans from the FDIC at the same, generous terms provided to Rialto. It became very clear in this hearing that these structured transactions breed corruption and are in no way the best use of taxpayer money. I want to thank Chairman Neugebauer and Congresswoman Jamie Herrara-Butler for their assistance with this hearing as well as all of the witnesses who testified." is one of the FDIC's partners. As of August 31, 2011, they have secured more than 5,500 hundred commercial and residential loans from the FDIC for a total down payment of $241 million. The total outstanding balance of these assets is more than $3 billion, meaning Rialto only put down 8 cents on the dollar to secure these loans. Further, the FDIC provided Rialto a $600 million, interest-free, non-recourse loan for participating in this deal. Rialto then serves as the FDIC's collection agent, so to speak, keeping a certain percentage of profits for themselves. In addition, Rialto receives management fees for their collection work based on the unpaid principle balance, not on what Rialto is successful in collecting from borrowers. Unfortunately, this arrangement often serves as an incentive to litigate and a disincentive to negotiate with borrowers.

"So, Rialto pays pennies on the dollar to secure these loans, get an interest-free, non-recourse loan from the government , and then also get a fee for "managing' these loans," stated Westmoreland. "In Georgia, that's what we call a sweetheart deal. And the only people benefiting from it are the FDIC's partners."

The second panel of the hearing featured testimony from Scott Leventhal, President of Tivoli Properties in Atlanta, and Ed Fogg, Owner of Fogg Construction. Both have had poor dealings with Rialto. Mr. Fogg's story was particularly troubling. After a year and a half of negotiating with Rialto, Rialto's final offer was a 1.5 year extension to his company's loan with what worked out to an APR of 38.376%, clearly a predatory loan. Mr. Fogg ultimately could not reach a deal with Rialto and declared bankruptcy on May 3rd. At the hearing, Rep. Westmoreland commended Mr. Leventhal and Mr. Fogg for their courage to stand up not only to their new lender, but also to a company they compete against in business.

"In order to avoid problems like this in the future, I will be introducing legislation soon to stop the FDIC from entering into these types of structured transactions," stated Westmoreland. "I will also be introducing legislation to give borrowers like Mr. Fogg and Mr. Leventhal the right of first refusal to buy their loans from the FDIC at the same, generous terms provided to Rialto. It became very clear in this hearing that these structured transactions breed corruption and are in no way the best use of taxpayer money. I want to thank Chairman Neugebauer and Congresswoman Jamie Herrara-Butler for their assistance with this hearing as well as all of the witnesses who testified."


Source:
Back to top