Subsequent litigation established that the institution had always been in full capital compliance, a fact to which the FDIC stipulated in 2011, after 21 years of legal challenges by Franklin's shareholders.
Also, the FDIC refused to open its books to a bankruptcy judge and never demonstrated that the seizure resulted in a loss to the American taxpayers.
It is widely believed that Franklin's assets, which had a book value of more than $380 million when seized, were ultimately sold by the government to private investors at a significant profit.
In 1981, a new business plan was developed for the thrift with the help of economics professor Wayne Angell who would go on to become a Federal Reserve Board governor, and its assets grew from $200 million to $11 billion.
The thrift bought a large amount of mortgage-backed securities and had dealings in financial futures and interest rate swaps as part of a sophisticated risk hedging program that would come to be regarded in following years as state of the art.
He found there was no basis in fact or law for the seizure, that it was arbitrary and capricious, and that, "there has been no allegation or even hint of illegal or unethical conduct by Franklin's management or directors.
The record reveals the owners diverting millions of dollars into their pockets through large salaries, bonuses and dividends, notwithstanding the losses being incurred by the association.
In fact, the record reveals a financial institution both unable and unwilling to comply with the director's requirements relating to safety and soundness concerns."
But, following a jury trial, the government lost on all 19 separate claims that the Federal District Court Judge had not dismissed as a matter of law.