Anatomy of a Banking Scandal
The Keystone Bank Failure-Harbinger of the 2008 Financial Crisis
Description:... In the early 1990s, the First National Bank of Keystone in West Virginia began buying and securitizing subprime mortgages from all over the country, and quickly grew from a tiny bank with just $17 million in assets to over $1.1 billion. For three years, it was listed as the most profitable large community bank in the country. It was all a fraud. All of the securitization deals the bank entered into lost money. To hide that fact, bank insiders started cooking the books, concealing that they were embezzling millions of dollars from the bank. This was all hidden from the bankâs attorneys and auditors, federal bank examiners, and even the board of directors of the bank. To keep the examiners at bay, the bank insiders did everything possible to avoid giving them access to documents they were entitled to see, documents they knew would sink their scheme. The head of the bank even went so far as to bury four large truckloads of documents in a ditch on her ranch. Robert S. Pasley explores the failure of the First National Bank of Keystone, the intrigue involved, and the lessons that could have been learnedâand still can be learnedâabout how banks operate, how federal banking regulators supervise financial institutions, how agencies interact with one another, and how such failures can be avoided in the future.
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