Where were the bank regulators?

How culpable are Florida community bankers for loans that soured because of the real estate collapse?

One case involving Southwest Florida's oldest community bank may be a test of that question.

The Federal Deposit Insurance Corp. recently sued the former directors of Immokalee-based Florida Community Bank alleging negligence and seeking $62 million in damages from the failure of the bank in early 2010.

When it was shut down, Florida Community Bank was one of the biggest community banks on the Gulf Coast with $870 million in assets. It opened in 1923 as the Bank of the Everglades.

Specifically, the FDIC alleges Florida Community Bank CEO Stephen Price and the board of directors were negligent in making commercial real estate and land-development loans during the real estate boom that resulted in losses the FDIC says totaled at least $56.7 million. In addition, the FDIC alleges that Price authorized a personal loan to former Orion Bank CEO Jerry Williams that resulted in a loss of nearly $6 million (Naples-based Orion Bank failed in late 2009 and Williams awaits sentencing for bank fraud).

Regardless of whether you think Price and Florida Community Bank's directors should have authorized those loans, you've got to wonder: Where were the regulators? After all, regulators have unfettered access to loan documents that aren't available to the rest of us.

The FDIC's complaint says regulators warned Price about alleged imprudent lending practices starting as early as 2005. But it wasn't until late 2008 that the regulators issued a “cease and desist” order against the bank. And even then, in October 2008, Price approved a personal loan to cross-town rival banker Williams under the supposedly watchful eyes of regulators.

As it progresses through U.S. District Court, the case may become as much an indictment of regulators as the community bankers they were supposed to monitor.