Nibbling on the Chancellor's Toesies: A Roguish Concurrence with Professor Baxter

Keith R. Fisher

Document Type

Article

Publication Title

Law and Contemporary Problems

Abstract

The Office of Thrift Supervision of the Department of the Treasury ("OTS"), successor to the now defunct Federal Home Loan Bank Board, regulator of thrift institutions and their holding companies, and the principal villain of this piece, has been at the forefront in advocating the broadest and most far-reaching standards of professional liability. These standards, which affect not only officers and directors but also accountants and attorneys, are not established in any case law. They are articulated principally in speeches given by OTS officials, especially those of its former Chief Counsel, Harris Weinstein. Nevertheless, a firm understanding of the agency's views is important to academics and practitioners alike in view of the escalation of administrative enforcement activity against lawyers and law firms. Mr. Weinstein has suggested that insiders of an insured depository institution ("IDI") and outside counsel to the institution owe a fiduciary duty to the federal government because of what is, in his view, the government's "unlimited" liability in the event of the IDI's failure. Whether one views this theory as a restatement of existing law-as OTS does-or, more accurately, as a radical departure from existing law, one is reminded of Selden's views on the nature of equity and the capacity for mischief inherent in the arbitraments of a "roguish" and unchecked authority. Hence, Professor Baxter's article rightly begins with Selden's metaphor of the "Chancellor's foot." One need not traverse the full length of that metaphorical extremity to realize that OTS's position is (pardon the pun) out on a limb. Introducing a fiduciary duty running from the private bar to the government represents the first bite of a complete devouring of our system of civil justice. Think of it as "nibbling on the Chancellor's toesies." If it sounds cute, think again, for the government has very sharp teeth! Professor Baxter's thesis is eminently sound, and its exposition is brilliantly argued. His major point is that OTS's roguish fiduciary musings would yield no more protection for the deposit insurance system than Congress has already provided in the Federal Deposit Insurance Act ("FDIA"), which imposes the obligation not to engage in "unsafe or unsound" banking practices. The corollary to Professor Baxter's argument is that divination (by regulatory rogues and other scoundrels) of some overarching fiduciary duty to the government, the breach of which duty gives rise to liability for administrative enforcement action, is contrary to the intent of Congress and would render superfluous a good portion of the statute that confers that very enforcement authority: section 8 of the FDIA.

First Page

45

Last Page

70

Publication Date

Winter 1993

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