About UsMembershipCalendar of EventsProfessional DevelopmentLegislative AffairsRegulatory AffairsPublic RelationsForeign Bank SupervisionMortgage Licensing
Public Relations
 CSBS Examiner
  Examiner Archive
  Examiner Survey Results
 Press Releases
 Press Releases Archives
 Presentations & Speeches
 State Banking Dept. Financial Education Programs
 Stateside News & Views
            
February 5, 2010
In this issue...
- CSBS: Obama Small Business Lending Proposal  www.nfcc.orgEncouraging; Market Reaction Is Key
- State Regulators Adopt Policy Opposing Refund Anticipation Loans
- 'Volcker Rule' Gets Airing Before Senate Banking Committee
- Fed Official Says Policy Makers Should Analyze Past Failures
- FTC Proposes Ban On Up-Front Fees
- Bank Closings Continue
- Around The Agencies
- Upcoming Events
- Closing Comment
CSBS Website Links

CSBS Home
Calendar of Events
REGBYTES
Profile
Contact Us
SRR Home
NMLS Home

Upcoming Events
Model Examination Guidelines User School (Web-based), February and March sessions open for registration:  Developed by AARMR and CSBS, this school is designed to assist mortgage regulators and mortgage industry compliance personnel implement the examination procedures for the Guidance on Nontraditional Mortgage Product Risks (Guidance) and the Statement on Subprime Mortgage Lending (Statement).

Problem Bank School (condensed), March 15-16, 2010, Oklahoma City, OK:  This is a two-day customized training covering examination issues related to troubled institutions.

Residential Mortgage Examiner School, March 22-26, 2010, Philadelphia, PA:  In order to leave adequate time to complete the pre-residence session assignments, please register for this course no later than February 8, 2010.

Trust Forum, March 29-31, 2010, Atlanta, GA:  This annual program allows trust examiners to analyze and discuss information on recent and emerging issues relating to bank trust departments and trust companies.

Credit Examiner School AND Examiner-in-Charge School, June 7-11, 2010, San Jose, CA; Register by March 5 for the Credit Examiner School and by March 12 for the Examiner-in-Charge School in order to participate in the orientation conference calls.
February 5, 2010
"Today, there are three kinds of people:  the haves, the have-nots, and the have-not-paid-for-what-they-haves." - Earl Wilson

This week, the National Foundation for Credit Counseling (NFCC) issued a press release reporting the results of a poll on how people would react if they were in debt beyond what they could manage. The online poll had more than 11,000 responses, and it found that 38 percent would seek help from a legitimate credit counseling agency while 33 percent would talk directly to creditors, and five percent said they would file for bankruptcy. On the other hand, 10 percent said they would ignore their debt, while 14 percent said they would consider using a debt settlement company. While we are sympathetic to those who suddenly find themselves without a job or in financial distress due to other unexpected circumstances, we agree with the NFCC that ignoring debt is "the worst possible decision a consumer can make." Going to a debt settlement company may not be a good option either, as many of these firms charge fees up front and don't do much else. If we ran a bank, we would make sure our customer service representatives knew about NFCC and have this organization bookmarked on their computers. NFCC's vision is to create a national culture of financial responsibility. Check it out at www.nfcc.org.


CSBS: Obama Small Business Lending Proposal Encouraging; Market Reaction Is Key
President Barack Obama on Tuesday offered more information about his new initiative to provide $30 billion in funds to smaller banks that increase their small business lending. The program would be funded by the Troubled Asset Relief Program (TARP), but would be separate from it and would require Congressional action. Under the plan, as participating banks increase lending to small firms compared to 2009 levels, the dividend paid to Treasury on that capital investment would be reduced. The Administration said this approach would ensure that lenders have a strong incentive to increase total loans to small businesses and spur immediate activity by giving them credit for lending during 2010. 

CSBS Executive Vice President John Ryan said he was encouraged by this major policy shift to get money into the hands of community institutions that have stuck with small business during this crisis. Ryan noted that the program demonstrated why regulatory reform must support a diverse system of regional and community banks that spur local economic growth and job creation. Banks with less than $1 billion in assets would be eligible to receive capital investments of up to 5 percent of their risk-weighted assets, and banks with between $1 billion and $10 billion in assets would be eligible to receive up to 3 percent of their risk-weighted assets.  The dividend rate for a capital investment would begin at 5 percent, but could fall to 1 percent if a bank demonstrated increased small business lending relative to its baseline set in 2009. The White House issued a fact sheet on the Small Business Lending Fund.

On Friday, the five federal financial regulatory agencies and the Conference of State Bank Supervisors issued a joint statement in support of banks engaging in prudent lending to creditworthy small business borrowers.  According to the statement, the regulators are working with the industry and supervisory staff to ensure that supervisory policies and actions do not inadvertently curtail the availability of credit to sound small business borrowers. The statement noted that small business lending increased slightly at institutions with total assets of less than $1 billion but declined over 4% at institutions with assets greater than $100 billion between June 30, 2008 and June 30, 2009. See statement

Meanwhile, the Obama Administration also released details of a program to use $1 billion in TARP funds to invest in Community Development Financial Institutions that target more than 60 percent of their small business lending and other economic development activities to underserved communities. Under the program, these CDFIs could receive capital investments at a dividend rate of 2 percent, compared to the 5 percent rate that was offered under the Capital Purchase Program. More information about the CDFI proposal may be accessed here


State Regulators Adopt Policy Opposing Refund Anticipation Loans
CSBS and the American Council of State Savings Supervisors (ACSSS) this week released a policy statement opposing high-rate Refund Anticipation Loans (RALs), loans made against the amount of a consumer's anticipated income tax refund. These products often include fees to be paid to the tax preparer and extremely high interest rates for the financial institution. RALs tend to be targeted to low-income borrowers who may qualify for the Earned Income Tax Credit (EITC), which is a tax credit for low-to-moderate income individuals.

North Carolina Commissioner of Banks and CSBS Chairman Joseph A. Smith Jr. indicated that RALs may no longer serve a public interest.  "Electronic tax filing and direct deposit of income tax refunds in as short as two weeks have largely made RALs unnecessary," Smith stated.  "For those consumers that consider obtaining a RAL, I would encourage them to investigate alternatives," Smith continued.  "Many consumers don't realize they can obtain their tax refund very quickly if they file their return electronically and sign up to receive their return via direct deposit."

The CSBS-ACSSS Policy Position on High-Rate Refund Anticipation Loans can be viewed here


'Volcker Rule' Gets Airing Before Senate Banking Committee
Curbing the activities of commercial banks will provide fair and open competition and protect essential financial services, said former Federal Reserve Chairman Paul Volcker, who chairs President Obama's Economic Recovery Advisory Board. Speaking at a hearing before the Senate Banking Committee, Volcker defended Obama's recent proposal to prohibit banks - or financial institutions that contain banks - from owning, investing in, or sponsoring a hedge fund, a private equity fund, or any proprietary trading operation unrelated to serving its customers. Volcker said the plans must be viewed within the overall context of reform and ending the too big to fail problem. He said there are thousands of hedge funds, private equity funds and other private institutions that should be allowed to trade, innovate and invest and to fail. He admitted that there should be a strong international consensus on this approach particularly among the "few nations hosting large multi-national banks and active financial markets."  Volcker's oral statement is available


Fed Official Says Policy Makers Should Analyze Past Failures
Substantially expanding regulatory oversight of the largest and most systemically significant financial institutions will not be enough to prevent another crisis, said Federal Reserve Governor Kevin Warsh. Speaking to the New York Association for Business Economics, Warsh said previous public policy failures need to be recognized and addressed.  For example, he said, Fannie Mae and Freddie Mac were given license and direction to take excessive risks, were given conflicting missions and governed by competing masters. Warsh also called on policy makers to focus more on "what constitutes effective prudential supervision, rather than be diverted to the less consequential discussion as to who should perform it." He called for a new resolution authority to include well understood bankruptcy protocols as much as possible. "A system must be designed so that market discipline works -- not to the exclusion of regulatory discipline -- but in support of it," Warsh said.  He said such a system will require more financial disclosures with greater understanding of asset quality and funding sources; will need to encourage robust competition and avoid giving select incumbents permanent funding advantages; and will need to mandate stronger capital and liquidity buffers, more effective boards and more rigorous risk-management practices. See comments


FTC Proposes Ban On Up-Front Fees
The Federal Trade Commission issued a proposal on Thursday to prevent companies that provide  foreclosure rescue and mortgage modification services from charging up-front fees for these services. FTC said the rule aims to stop fraudulent companies that charge a fee in advance for mortgage negotiation work that is never performed. The proposal generally exempts entities that own or service mortgage loans. Under the proposal, a covered company could not be paid until it had a documented offer from a mortgage lender or servicer that lives up to the promises it made. The proposal would bar providers from telling consumers to stop communicating with their lenders or mortgage servicers, and from misleading them about key facts, such as the likelihood of getting the results they want. The plan also would require providers to tell consumers that they are for-profit businesses; the total amount consumers will have to pay; that neither the government nor the consumers' lenders have approved their services; and that there is no guarantee that lenders will agree to change their loans. The deadline for comments is March 29.  More information


Bank Closings Continue
Regulators closed six banks last Friday, which will cost the Deposit Insurance Fund an estimated $1.9 billion and brings the total closings for the year to 15.

First National Bank of Georgia, Marshall Bank, N.A. - The Office of the Comptroller of the Currency closed two national banks -- First National Bank of Georgia, Carrollton, Ga., and Marshall Bank, N.A., Hallock, Minn. FDIC arranged for Community & Southern Bank, Carrollton, Ga., to purchase all of the deposits for a premium of 1.25 percent and all of the assets of First National. First National had about $832.6 million in assets and $757.9 million in deposits. FDIC arranged for United Valley Bank, Cavalier, N.D., to purchase all of the deposits for a premium of 7.35 percent and all the assets of Marshall Bank, N.A.  Marshall Bank had around $59.9 million in assets and $54.7 million in deposits.

Florida Community Bank - The Florida Office of Financial Regulation closed Florida Community Bank, Immokalee, Fla., and FDIC arranged a purchase of all the deposits for a premium of 0.4 percent and $499.1 million of the assets by Premier American Bank, National Association, Miami. Florida Community Bank had approximately $875.5 million in assets and $795.5 million in deposits.

Community Bank and Trust - The Georgia Department of Banking and Finance closed Community Bank and Trust, Cornelia, Ga., and FDIC arranged a purchase by SCBT, N.A., Orangeburg, S.C., for all the deposits and assets. Community Bank and Trust had about $1.21 billion in assets and $1.11 billion in deposits.

First Regional Bank - The California Department of Financial Institutions closed First Regional Bank, Los Angeles, and FDIC arranged a purchase of all the deposits and $2.17 billion of the assets by First-Citizens Bank & Trust Co. Raleigh, N.C. First Regional Bank had around $2.18 billion in assets and $1.87 billion in deposits.

Marine Bank - The Washington Department of Financial Institutions closed American Marine Bank, Bainbridge Island, Wash., and FDIC arranged a purchase of all the deposits for a 1 percent premium and all the assets by Columbia State Bank, Tacoma, Wash. American Marine Bank had approximately $373.2 million in assets and $308.5 million in deposits.


Around The Agencies
Federal Reserve: The Federal Reserve on Monday launched a Web site to help new bank directors learn how they may work to ensure the safety and soundness of their institutions. The Web site -- BankDirectorsDesktop.org -- also provides a refresher course for experienced board members.  The Fed designed the Web site for directors of community banks. It features online training and other resources to help directors better understand the issues and challenges associated with serving on a bank's board. More information

FHFA: Since the establishment of the conservatorships, Fannie Mae has experienced losses of $111 billion and Freddie Mac has had losses of $63 billion, Acting Federal Housing Finance Agency Director Edward J. DeMarco told congressional leaders. In a letter to Senate Banking Committee Chairman Christopher Dodd (D-Conn.), Ranking Minority Member Richard Shelby (R-Ala.), House Financial Services Committee Chairman Barney Frank (D-Mass.) and Ranking Member Spencer Bachus (R-Ala.), DeMarco said Fannie Mae has drawn $59.5 billion from the federal government, while Freddie Mac has drawn $50.7 billion. DeMarco said that Fannie Mae and Freddie Mac will continue to act as agents for Treasury Department in adopting the Making Home Affordable loan modification program as one of the goals of the conservatorship and required by the Emergency Economic Stabilization Act of 2008. DeMarco said the conservatorships of Fannie Mae and Freddie Mac cannot be a long-term solution. See letter


Upcoming Events
February 9-11 - The Nationwide Mortgage Licensing  System (NMLS) will conduct the second annual NMLS User Conference & Training  Program. - Rancho Bernardo Inn, San Diego.

February 10 - The House Financial Services Committee will hold a hearing on unwinding emergency Federal Reserve liquidity programs. - 10 a.m., 2128 Rayburn House Office Building.

February 10 - The House Budget Committee holds a hearing on the Treasury Department budget. - 10 a.m., 210 Cannon House Office Building.

February 10 - The Senate Banking Subcommittee on Security and International Trade and Finance will hold a hearing to discuss equipping financial regulators with the tools necessary to monitor systemic risk. - 9:30 a.m., 538 Dirksen Senate Office Building.

February 11 -   The House Financial Services Committee and the House Small Business Committee will hold a joint hearing titled ?Condition of Small Business and Commercial Real Estate Lending in Local Markets.? - 10 a.m., 2128, Rayburn House Office Building.

February 11 - The Senate Permanent Subcommittee on Investigations will hold a hearing to discuss a report on alleged money laundering incidents involving certain African politicians and American banks. - 342 Dirksen Senate Office Building.


Closing Comment
"I tell you sure as I am sitting here, that if banking institutions are protected by the taxpayer and they are given free rein to speculate, I may not live long enough to see the crisis, but my soul is going to come back and haunt you." - Former Federal Reserve Chairman Paul Volcker said in response to questions from Sen. Mike Johanns (R-Neb.) about the necessity of the proposed "Volcker Rule" during Tuesday's Senate Banking Committee hearing.


Mary White, Editor
Teresa Dean, Contributing Writer


 

Terms of UsePrivacy Policy
CSBS 1155 Connecticut Ave NW, 5th Floor, Washington, DC 20036-4306 Tel. 202.296.2840 Fax. 202.296.1928