God bless the institution of the US federal district court. When we last looked in on the litigation between Denver's United Western Bank and the OTS, the OTS had filed a motion to dismiss the complaint filed by the bank, alleging that, because the former board of directors of the bank had not formally approved the filing of the complaint, the court lacked subject matter jurisdiction to hear the lawsuit. In late June, the judge told the OTS that the lack of a formal board resolution on the issue was not a fatal defect and denied the OTS' motion to dismiss. The following is one of my favorite passages from the court's opinion: While the statute fully authorizes OTS to decapitate the bank, it also grants the severed head one final request — to ask to be reattached. It is no defense that the head did not put it in writing. You have to love the wisdom of the founders, who put federal district court judges beyond the reach of every day interference from the other two branches of government. While a rogue federal district court judge can constitute an unholy terror, more often they act as the first line of defense against the abuses of government power. The court dismissed all plaintiffs other than the bank and all defendants other than the OTS and its director, so the focus now will be solely on the actions of the OTS and its legal justification for placing the bank into a FDIC receivership. As I've pointed out previously, surviving a motion dismiss is only the first step in the bank's quest for "justice." However, in this case, it's a very important one. As I also previously stated, I hope "we get a chance to look inside the mind of the OTS as to why it really took this bank down while a recapitalization effort was in the works." That trip through the looking glass may be an interesting journey. In the end, even if the bank "wins," the conundrum will be "win what?" The bank's deposits and most of its assets were sold to another bank, which has integrated those assets and liabilities into its own organization. One wag said that any remedy that seeks to restore the bank to its owners would be like "unscrambling an egg." Well, let the unscrambling process unfold! We'll be watching with interest.
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