Inside the FDIC

Chapter 6

“Is This the Moron Who Closed Meritor?”

The savings-and-loan (S&L) crisis cost taxpayers $125 billion. As a result, there was little sympathy for the owners of insolvent banks and S&Ls. However, not all of the owners of failed S&Ls felt they had been irresponsible. Not all of them felt their banks had been mismanaged. In fact, there were some who felt that it was the federal government that had acted irresponsibly. They believed they had a contract with the government and the only reason their banks had been closed was that the government broke that contract. Some of these owners decided to fight back. They did something that isn't for the faint of heart—they sued the federal government.

Gary Hindes was one of those owners and had never imagined that he would find himself in such a position. Hindes started out as an investigative reporter for a small daily newspaper. After a subsequent stint as the assistant to the Speaker of Delaware's House of Representatives, he joined Paine, Webber, Jackson & Curtis, an old-line, white-shoe brokerage firm in Philadelphia.

As a new stockbroker, Hindes began investing in the stocks of bankrupt and distressed companies such as the old Pennsylvania Railroad, International Harvester, and Chrysler. Hindes bought their bonds at deep discounts to their face value, and in many cases was able to sell them at higher prices or cash them in for full value when the bonds matured. His client list grew along with his success and came to include ...