BankUnited was the big one.
Florida's largest bank. Sponsor of the Florida Panthers' hockey arena. Fourteen billion dollars in assets at its peak.
But it failed for the same reasons that doomed much smaller banks: risky lending on the back of Florida's housing boom. Its collapse cost the FDIC $5.6 billion, by far the largest amount for any bank in Florida during the Great Recession. The BankUnited referenced in this story is the entity closed in May 2009, not the company currently operating as BankUnited Inc.
As this lender rose in power and prominence, its founder, Alfred Camner, was well-rewarded.
His pay tied to bank profits, Camner saw his annual earnings rise from $1 million in 2000 to $6 million six years later.
Both his daughter and his mother were employed by the bank at one time or another. His law firm — now known as Camner Lipsitz — received $34 million as the bank's general counsel from 1997 to 2007, according to Securities and Exchange Commission filings.
And as the American economy began to enter a tailspin in 2007, BankUnited bought stock back from shareholders at a time when it needed that money to survive.
These deals were not illegal, but experts say they raise questions about conflicts of interest at the bank.
But BankUnited's size did not save it from running smack into the same fate that befell smaller, less influential banks across Florida. When the housing market dipped, its borrowers stopped paying.
There was a time when BankUnited was considered conservative.
Founded by Camner in 1984, the bank had all the hallmarks of a successful institution. Few customers defaulted on their loans. The bank kept a stockpile of capital, and it produced steady profits year after year for investors.
Then came the boom.
BankUnited began to focus on complex mortgages that were the bane of the global financial system. Its specialty was "option ARMs" — adjustable-rate mortgages in which borrowers could choose the amount of interest they wanted to pay, even if it meant their loans might grow in size over time.
To make the loans easy to get, BankUnited reduced credit score requirements and waived the need for a borrower to document his or her income and assets, regulators found.
By March 2008, almost 90 percent of the bank's option ARMs had little or no information about the borrower's ability to repay, according to an FDIC report.
BankUnited used 4,000 mortgage brokers around the country to peddle this product, and it rewarded them for the quantity of loans made.
"Other criteria, such as credit quality and adherence to loan policy were secondary," the FDIC reported.
In 2003, BankUnited had $349 million in option ARMS on its books. Four years later, that number had swelled to $7.5 billion.
The mortgages were perfect for investors looking to buy homes and condos and quickly resell them at a profit as prices rose. But when prices fell and borrowers faced the prospect of much higher interest payments, the defaults flooded in.
BankUnited was hit hard. Its bad loans ramped up fast, from $43 to $384 million in the 12 months ending in December 2007.
As the market deteriorated, Camner and his exectuive team did not protect the bank's precious capital.
They accelerated a program to buy back the bank's stock, repurchasing 1.6 million shares for $35 million in 2007, according to a lawsuit filed by creditors
after the bank failed and its holding company filed for bankruptcy.
Known as a "stock buy-back" program, BankUnited essentially shielded some investors from future losses and artificially inflated the bank's stock at a time when it needed the money to keep from going under.
The bank also paid out more than $2 million in dividends in 2007 and issued $20 million in fresh debt — making the bank's financial situation more precarious.
"The stock repurchases drained capital from the holding company," the creditors said in federal court.
In a 2008 class-action lawsuit
, they accused BankUnited of disregarding its own policies about appraising properties and finding creditworthy borrowers. They also accused the bank's officers and directors of engaging in a scheme to defraud the market by repeatedly publishing false information.
Investors ultimately won the case, with the bank agreeing to pay $3 million from its insurance policy.
Six months after shuttering BankUnited, the FDIC sent a letter to its former directors and officers accusing them of engaging in an extremely liberal and aggressive lending mentality, one that, in essence, meant giving loans to any borrower with a pulse.
"Low-quality mortgages were extended without fully verifying borrowers' incomes, assets or creditworthiness," the suit said.
It also criticized BankUnited for hiring Camner's "underqualified and likely conflicted law firm" to provide review of loans issued by the bank.
Camner and other executives filed a counterclaim in bankruptcy court.
They said the FDIC owed them more than $125 million to settle old debts, in addition to real estate in New York City and a collection of artwork taken over by the federal government after the bank's collapse.
The lawsuit also demanded that the FDIC return $89,000 that belonged to a BankUnited political action committee that gave campaign donations to federal candidates.