As we all know, there are enough regulations that all businesses are in violation. If a principal makes an enemy, as politicians do, he can get in trouble with the law. Violations usually may be remediated by selling out to a conglomerate favored by government with lawyers specializing in interpreting and jockeying the law, or by letting government organize the business’ bureaucracy.

In the news today, Blue Ridge Savings Bank got in trouble with the FDIC. It is understandable that a bank loaning more money than it can pay would owe its victims something for perpetrating fraud, unless the lenders don’t mind. However, in this and other cases, some of the prescriptions for vague maladies sound like government acting like a force majeure for management du jour.

The Crime:

Blue Ridge operated with inadequate reserves, committed unspecified violations of law and the actions of bank managers put deposits at risk, according to an order from the Federal Deposit Insurance Corp.

The Suspect:

Former U.S. Rep. Charles Taylor, a Brevard Republican, for years has been majority owner of the bank.

The Sanctioned Heist:

Banks in Blue Ridge’s situation frequently are either bought by another bank or go out of business, said Robert Bliss, F.M. Kirby Chair in Business Excellence at the Schools of Business at Wake Forest University.

What’s at Risk:

FDIC spokeswoman LaJuan Williams-Dickerson on Wednesday said account holders have nothing to worry about. Accounts are still insured up to $250,000. “Their money is as safe as in any bank that wasn’t issued a cease-desist or any other enforcement action,” she said.

The New Age Tripe:

The bank issued a statement saying, “The Board of Directors proactively, prior to issuance of the Order, implemented an action plan that was shared with the regulators and embraced by the management team to address the contents of that Order.”

The Goon-Employing Punishment:

The federal order requires the bank to take several steps to change practices and report them on a set schedule to the FDIC and the NC Banking Commission. By February, the bank must come up with a plan to train its board members in lending operations and compliance with the banking laws in North Carolina. Blue Ridge Savings was also required to hire an “independent third party” to assess its management and staffing needs and come up with a management plan.

One would hope a bank failing to meet FDIC requirements could just opt out of being a member. Instead, according to Wikipedia:

When the [capital ratio] drops below 6% the FDIC can change management and force the bank to take other corrective action. When the bank becomes critically undercapitalized the FDIC declares the bank insolvent and can take over management of the bank.

Similar action was taken against 108 banks in 2008.