The Federal Reserve Takes Enforcement Action Against Farmington State Bank
The Federal Reserve (Fed) has taken enforcement action against Farmington State Bank, which is based in Washington, and its parent company, FBH Corporation. This action follows unannounced changes to the bank\’s business plan. Formerly known as Moonstone Bank, the bank has close ties to FTX\’s trading division, Alameda Research.
Controlled Liquidation of Operations
In a statement on Aug. 17, the Fed clarified that this action is intended to ensure a controlled liquidation of the bank\’s operations. The move is vital to protecting the bank\’s depositors and the wider Deposit Insurance Fund. In addition, Farmington and FBH are now expressly prohibited from distributing dividends or capital, reducing cash assets, or pursuing certain projects without the prior approval of supervisory authorities.
Bank of Eastern Oregon to Acquire Assets
In acknowledgment of the Fed\’s actions, Farmington State Bank issued a statement expressing its approval. The bank statement also revealed, “All essential regulatory approvals related to deposit absorption and asset acquisition have been secured by Bank of Eastern Oregon from Farmington State Bank. The transaction is expected to be completed by August 31, 2023.”
Congressional Concerns and the Banking Sector
A noteworthy background to this development is the spotlight it has received in Congress. Not long ago, Sens. Elizabeth Warren of Massachusetts and Tina Smith of Minnesota wrote letters to the Federal Reserve. Their primary concern was to obtain comprehensive details of how Alameda acquired Moonstone Bank.
The congressional speeches underscored an important note, noting that “although the banking sector has been largely unaffected by the recent cryptocurrency market downturn, the fall of FTX indicates a deeper penetration of crypto into the banking space than regulators might realize.”
Fed’s Collaboration with Regulatory Agencies
To show their dedication to overseeing and maintaining the stability of the financial system, the Fed has teamed up with the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) to underscore the commitments of banks regarding safety measures and highlight the risks inherent in crypto.