Far West Federal Bank, S.B. v. Office of Thrift Supervision-Director

OVERVIEW

In 1989, Congress passed the Financial Institutions Reform, Recovery, and Enforcement Act (“FIRREA”), Pub.L. No. 101-73, 103 Stat. 183 (1989), in part to resolve the widespread financial problems of federally-chartered thrift institutions. FIRREA established stricter capital requirements for thrifts and stricter limits on the amount a thrift may loan to a single borrower. These stricter regulations superseded an earlier agreement (the “Conversion Agreement”) by the Federal Home Loan Bank Board (“FHLBB”) to afford Far West Federal Bank (“Far West”) more lenient treatment.

The principal question before us in this appeal is whether FIRREA’s abrogation of the Conversion Agreement entitled Far West’s investors to rescission of the agreement and restitution of their investment. The district court held that it did and ordered the FDIC to pay $26.6 million in restitution. We affirm.

BACKGROUND

Far West was a federally-chartered stock savings association based in Portland, Oregon. Beginning in the early 1980s, Far West suffered financial losses and, by 1986, had a negative net worth. The Federal Savings and Loan Insurance Corporation (“FSLIC”)the insurance arm of the…