U.S. top court rejects banks over FDIC lawsuit

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By Lawrence Hurley | WASHINGTON

WASHINGTON The U.S. Supreme Court on Monday
declined to hear a bid by banks to avoid a Federal Deposit
Insurance Corp lawsuit over the 2009 collapse of Alabama’s
Colonial BancGroup Inc.

The justices left in place a May 2016 ruling by the New
York-based 2nd U.S. Circuit Court of Appeals that found that the
FDIC did not wait too long to sue Credit Suisse Group
AG, First Horizon National Corp, Royal Bank of
Scotland Group Plc, Wells Fargo & Co and seven
other banks for selling or underwriting toxic mortgage
securities that Colonial bought.

Colonial, based in Montgomery, Alabama, went into FDIC
receivership in August 2009 after struggling from losses tied to
mortgage securities and an aggressive foray into Florida.

Three years later, the FDIC sued the 11 banks, stating that
they violated federal securities law by selling $388 million in
toxic debt to Colonial in 2007. It said the lawsuit was timely
because it had three years from the start of the receivership to
sue.

A lower court judge threw out the case, accepting the banks’
argument that the clock ran out in 2010, three years after
Colonial bought its securities. But in the reversal, the appeals
court found that the U.S. Congress intended that an “extender
statute” giving the FDIC more time to pursue some legal claims
covered the Colonial case.



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