NCJ Number
115846
Journal
Georgetown Law Journal Volume: 76 Issue: 5 Dated: (June 1988) Pages: 1845-1866
Date Published
1988
Length
22 pages
Annotation
The conflict of interest inherent in the Federal Savings and Loan Insurance Corporation's (FSLIC's) acting as both the creditor and the adjudicator of claims during receivership not only violates the constitutional rights of creditors, but undermines the purpose of the FSLIC's establishment.
Abstract
In 1934, Congress created the FSLIC to stabilize the Nation's savings and loan industry. As part of its daily operations, the FSLIC oversees savings and loan institutions and assures that thrifts comply with the Federal regulations specified by the Federal Home Loan Bank Board (FHLBB). Once the FHLBB declares a thrift insolvent, it appoints the FSLIC to be the receiver, and the FSLIC takes control of the assets and liabilities of the failed thrift. The FSLIC then will either continue to run the failed thrift in the hope of stabilizing it, merge or consolidate it with another thrift, or liquidate it. Upon liquidation, the FSLIC, as an insurer, reimburses depositors up to the insured amount. Congress did not intend that the FSLIC have adjudicatory power over claims during an FSLIC receivership. Regardless of whether Congress gave the FSLIC such power, the FSLIC is not an 'independent' adjudicator as required by the Constitution, because it lacks Article III salary and tenure protections, and it is not subject to sufficient control by an Article III court. The conflict of interest presented by the FSLIC acting as both receiver and adjudicator denies litigants their fifth amendment due process rights. This note proposes a legislative solution to assure a speedy resolution of claims and a fair hearing before an 'independent' tribunal during the FSLIC receivership. 152 footnotes.