First American National Bank-Eastern, Trustee v. Federal Deposit Insurance Corporation, Joseph C. Snyder, Jr., of the Estate of Beulah Snyder Rose

LIVELY, Circuit Judge.

The question for decision is whether a bank that has issued subordinated debentures may create priority for the debenture holders over depositors and other creditors of the bank by establishing a sinking fund to provide for redemption of the debentures. Construing a Tennessee statute which authorizes banks to raise capital by issuing capital notes and debentures, the district court held that the debenture holders, rather than the depositors and general creditors of the now-insolvent issuing bank, were entitled to the assets constituting the sinking fund. We conclude that…