M&I Bank is at risk of failing before its foreign buyout goes through. That’s because the bank was the largest supporter of the campaign of Wisconsin’s new governor, Scott Walker, who recently and very controversially suspended the constitution in order to pass a union-busting bill. Wisconsin banks are not allowed to make political contributions directly, but bank executives sent a bundled donation to the campaign to make sure the contributions could be attributed to the bank. But this strategy of trying to buy government policies that are more favorable to the bank than to its customers seems to be backfiring. With unions and union members withdrawing their funds and picketers urging all customers to follow suit, there is a run on the bank, which has prompted branches to close early on some days. It is estimated that the unions themselves are owners of 10 percent of the bank’s deposits, and union members and sympathizers (such as family members) probably account for another 20 percent of deposits, more than enough to force the bank to close its doors permanently if it were all withdrawn. M&I Bank is one of the zombie banks that received a TARP bailout to no avail. It probably should have been closed by regulators last year, and surely would have been by now if it did not have an agreement to be bought out.
One Wisconsin lawmaker complained yesterday that the police were not properly protecting the bank from protesters, but the bank and police have disputed that account, and there are no reports of protesters threatening bank customers or workers.
The FDIC continues to file lawsuits against bank executives it believes helped to cause bank failures. The latest complaint was filed against three WaMu executives, claiming that the executives ignored warnings from the bank’s risk managers that the bank’s future was being put in jeopardy. The three executives were paid billions of dollars while the bank was collapsing.