FDIC's $905M Demand From Colonial Bancgroup Nixed

By Richard Vanderford (September 1, 2010, 7:32 PM EDT) -- A bankruptcy judge has rejected the Federal Deposit Insurance Corp.'s claim that it is owed $905 million from Colonial Bancgroup Inc., the bankrupt holding company that controlled the failed Colonial Bank.

Bancgroup made no promises that it would shore up Colonial Bank's capital reserves before it collapsed, Judge Dwight H. Williams of the U.S. Bankruptcy Court for the Middle District of Alabama ruled Tuesday.

The FDIC, as Colonial Bank's receiver, had argued that a memorandum of understanding between Bancgroup and the Federal Reserve made the holding company responsible for some of the bank's capital shortfalls.

Judge Williams found that the agreement...

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