Bank Failure and the FDIC: A Survey of Legal Rights and Relationships of the Client and the Insolvent Bank

Generally, banks are safe and stable institutions, however, banks do fail and are failing at a dramatically increasing rate. The Federal Deposit Insurance Corporation (FDIC) supervised 138 bank failures throughout the United States in 1986 alone, as compared to ten in 1980. The result of these failures has been a mass of litigation due to the significant financial interests affected. The number of liquidation-related lawsuits in which the FDIC was involved grew from 4,000 in 1980 to over 20,000 in 1985. Consequently, a problem confronting attorneys with increasing frequency is the resulting rights and relationships of parties following a bank failure. This Comment will discuss the legal effects of bank insolvency on these parties and others, and will highlight currently litigated areas of the field.