Federal and state regulators walking to Midwest Bank in Elmwood Park to close it down in 2010. | Scott Olson/Getty Images
The Melrose Park-based Midwest Banc Holdings — the publicly traded banking institution founded in 1959 — may have went out of business in 2011, but apparently some of its employees are still paying for their connection to the failed institution.
Recently, 18 former officers and directors of Elmwood Park-based Midwest Bank & Trust, a subsidiary of Midwest Banc Holdings, settled with the Federal Deposit Insurance Corporation (FDIC) for $26.5 million in relation to a 2013 lawsuit that alleged the group’s “negligence in lending to risky borrowers contributed to losses at the failed institution,” according to an Aug. 5 Chicago Tribune report.
The Elmwood Park institution, the Tribune reports, lent more than $3 billion and was among the first community banks the federal government bailed out in the wake of the 2008 financial crisis.
Midwest Banc was put into receivership by the FDIC in May 2010 before eventually filing Chapter 11 bankruptcy, according to a Bloomberg company overview.
“Previously, the company, through its subsidiary, provided a range of retail and commercial banking products and services to individual and corporate customers in Chicago,” Bloomberg reports.
According to an Aug. 4 Crain’s report, “In its April 2013 lawsuit against Midwest Bank’s officers and directors, the FDIC sought to recover $128 million in losses it said were caused by six improperly made loans and an unusually large investment in preferred shares of mortgage giants Fannie Mae and Freddie Mac.”
Those shares, Crain’s notes, were wiped out after Fannie and Freddie were nationalized in 2008, “causing about $66 million in losses for Midwest Bank, the FDIC claimed in its lawsuit.” Crain’s also notes that the Melrose Park institution was “one of the only publicly traded local banks to collapse in the wave of bank failures following the housing bust.”
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