WASHINGTON — The Federal Reserve Board made history Friday by invoking special powers to shut down a Colorado bank, stepping into a role normally reserved for state regulators.
The central bank appointed the Federal Deposit Insurance Corp. the receiver for the $1.38 billion-asset Community Banks of Colorado in Greenwood. The FDIC then sold the bank’s operations to Bank Midwest NA in Kansas City, Mo.
The move, which followed three routine failures in the Southeast earlier in the evening, was peculiar on multiple fronts.
The Fed, the federal regulator for hundreds of state-chartered banks in the U.S., before Friday had never used its authority to close a bank. Under prompt corrective action rules established at the end of the savings and loan crisis, the central bank has the power to put one of its so-called state member banks in receivership after it becomes "critically undercapitalized." The Fed has 90 days to act after the bank reaches that status.
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