January 23, 2004

"You're never too old to become younger." - Mae West

In all the political hubbub of the past week, we almost overlooked the fact that Popeye the Sailor Man turned 75 last Saturday. Those of us who grew up watching Popeye cartoons delight in memories of his last-minute rescues of his sweetheart, Olive Oyl, from the grips of the master masher Brutus (sometimes called Bluto). He would send the hairy brute to smithereens after downing a can of spinach to fuel his anchor-tattooed forearms. "That's all I can stands, and I can't stands no more," he would swear before taking action. Born in Chesterville, Ill., the creation of cartoonist Elzie Segar, Popeye and his cartoon pals (Wimpy and Olive Oyl) were modeled after real people in Chesterville. The lovable old mariner starred in some 600 animated cartoons, now the property of King Features Syndicate, Inc., which is planning a year-long series of events to mark Popeye's 75th. "Well blow me down," he might say, adding "I yam what I yam and that's all that I yam, I'm Popeye the Sailor Man" (toot toot).

HOUSE SUBCOMMITTE WILL DELVE INTO OCC's PREEMPTION DECISION

The Office of the Comptroller of the Currency's recently-issued rules preempting many state laws for national banks and their subsidiaries and restrict the authority of state agencies to examine or take action against national banks will be the topic of the day on Wednesday, Jan. 28, when Rep. Sue Kelly (R-N.Y.). Kelly, who chairs the House Financial Services Subcommittee on Oversight and Investigations, convenes a hearing on the OCC plan. New York State Superintendent of Banks Diana L. Taylor will testify on behalf of the Conference of State Bank Supervisors.

"This hearing will require the OCC to publicly justify its decision to finalize these rules prior to congressional review," said Kelly.

Kelly, who is vice chairman of the House Financial Services Committee, said she was disappointed that the rules were finalized without congressional review. She said the hearings will give "all stakeholders the opportunity to share their input on the new rules so that we can ensure that this significant change to banking regulation does not undermine protections for consumers."

CSBS President and CEO Neil Milner commended Vice Chairman Kelly for acting so promptly to hold this hearing on the OCC rules, which CSBS staunchly opposes. "This issue certainly deserves congressional oversight," said Milner, who added that a single appointed regulator should not be allowed to restructure and infringe on state regulators' ability to protect consumers at the state level.

Rep. Kelly's press release announcing the hearing may be found here.

SPITZER LAWSUIT CHALLENGES OCC PREEMPTION

New York Attorney General Eliot Spitzer filed a lawsuit on Tuesday that challenges the Office of the Comptroller of the Currency's new preemption rules. Spitzer sued a subsidiary of a national bank for illegally threatening to foreclose on a New York homeowner. The case involves a 1974 mortgage loan issued by Mechanics Exchange Savings Bank. The loan was assigned several times and has been held since 1995 by First Horizon Home Loan Corporation, a Texas-based subsidiary of First Tennessee Bank, a national bank. The consumer made all 300 payments by automatic debit and mistakenly continued to pay the mortgage. The customer was contacted in May 2003 and informed that due to a mistake in 1974, he should have paid $16 more per month, Spitzer said. The bank extended the mortgage date and required additional payments and threatened to foreclose when the customer refused to make additional payments. Spitzer said his office had attempted to resolve the matter with First Horizon, but bank "officials said they could not discuss the matter because the OCC had issued a directive advising its officials not to talk to state attorneys general." For more information about the case, click here.

CSBS HITS THE ROAD TO TESTIFY ON OCC PREEMPTION IMPACT ON STATES

Representatives of the Conference of State Bank Supervisors took part this week in two state legislative hearings on predatory lending and the impact of the Office of the Comptroller of the Currency's recently announce federal preemption on the ability of state banking regulators and attorneys general to protect citizens at the state level. The Tennessee Senate Banking Committee and Commerce Committee held hearings, with Tennessee Commissioner of Financial Institutions Kevin Lavender as the key witness. CSBS Senior Vice President Montrice Yakimov and CSBS General Counsel Buz Gorman also testified on behalf of CSBS. CSBS President and CEO Neil Milner was in Helena, Mont., this week, testifying on the same subject before the Montana legislature. Newspaper coverage of the hearings in Tennessee may be found here.

PROPOSAL WOULD RAISE CRA SMALL BANK THRESHOLD

More small banks would get relief from the compliance burden of the Community Reinvestment Act under a joint proposal issued for comment this week by the FDIC, Federal Reserve, OCC and OTS. The proposal would define a small bank for CRA examination purposes as a bank with assets of less than $500 million. Currently, small banks are defined as those with less than $250 million in assets that are independent or affiliated with a holding company that has total assets of less than $1 billion. The proposal would make it clear that certain discriminatory, illegal or abusive credit practices would count as factors against a bank in its CRA evaluation. The proposal also would require CRA disclosure statements to contain the number and amount of bank's small business and small farm loans by census tract. Currently, such loans are disclosed in the aggregate. The proposal is expected to be issued by the Federal Reserve, the Office of Thrift Supervision and the Office of the Comptroller of the Currency. Comments will be due within 60 days after the proposal is published in the Federal Register, which is expected shortly. For more information, click here.

FTC STUDY SAYS IDENTITY THEFT TOP FRAUD

Identity theft continued to be the No. 1 fraud complaint received by the Federal Trade Commission, the agency said on Thursday. Identity theft was the subject of more than half a million complaints and represented 42 percent of all fraud complaints in 2003, up from 40 percent in 2002.

Other top categories of consumer fraud complaints in 2003 are as follows:

- Internet Auctions - 15 percent 
- Shop-at-Home/Catalog Sales - 9 percent

- Internet Services and Computer Complaints - 6 percent
- Prizes, Sweepstakes and Lotteries - 5 percent
- Foreign Money Offers - 4 percent
- Advance Fee Loans and Credit Protection - 4 percent
- Telephone Services - 3 percent
- Business Opportunities and Work-at-Home Plans - 2 percent
- Magazine Buyers Clubs - 1 percent
- Office Supplies and Services - 1 percent

FTC said the median loss for victims of fraud was $228, while the median loss for victims of Internet-related fraud was $195. The major metropolitan areas with the highest per capita rates of consumer fraud were Washington, D.C.; Seattle/Bellevue/Everett, Wash.; and San Diego. More info...

AROUND THE STATES

Missouri: State bank commissioner Eric McClure announced this week that Dean McCracken has been named chief examiner. Dean is a long-time CSBS instructor and serves on the Conference of State Bank Supervisors' Curricula Committee.

AROUND THE AGENCIES

FBI: The Federal Bureau of Investigation was able to obtain more than 2,000 financial institution fraud convictions in fiscal year 2003, according to a report released on Tuesday. The FBI said its financial institutions investigations resulted in $3.8 billion in restitution orders and $35.6 million in fines. The FBI also seized $7.7 million in assets, forfeited $3.5 million and posted recoveries of $15.1 million in financial institution fraud matters. The agency noted that in recent years external fraud schemes have replaced bank insider abuse as the dominant financial institution crime. Between April 1, 1996, and Sept. 30, 2003, the FBI received 268,536 Suspicious Activity Reports for check fraud, check kiting and counterfeit negotiable instruments, which created losses of about $8 billion. The report also noted that criminal activity is becoming more complex and loan frauds have expanded to groups of people who are involved in the loan process.

FDIC/FRB/OCC/OTS: Federal banking regulators are seeking comments on how they can reduce the regulatory burden on banks in the area of consumer protection rules. The action by FDIC, the Federal Reserve, the Office of the Comptroller of the Currency and the Office of Thrift Supervision is the second in a series of requests for comments as part of the review under the Economic Growth and Regulatory Paperwork Reduction Act. The agencies said they wanted to know how consumer protection rules may be outdated, unnecessary or unduly burdensome. The comment deadline is April 20. Read more...

FDIC: For a state-by-state look at conditions of banks and the economy, pay a visit to the Federal Deposit Insurance Corporation's Web site. A review of the state profile reports found that community banks in South Carolina achieved solid growth as of June 30, 2003, although at a slower pace than previous years. In Kentucky, banks experienced a moderate decrease in profitability at mid-year with return on assets declining to 0.94 percent as of June 2003. The picture was mixed for the 179 institutions headquartered in Colorado. The report noted that larger metro banks have been more successful in developing other sources of non-interest income and have more actively realized securities gains than small metro banks. In Missouri, FDIC noted a dramatic increase in the use of borrowings, primarily Federal Home Loan Bank advances. Between June 1998 and June 2003, the proportion of community institutions with borrowings that made up at least 10 percent of total funds increased from 9.6 percent to 19.4 percent. The profiles may be found here.

THE WEEK AHEAD

January 28
The House Financial Services Committee's Subcommittee on Oversight and Investigations will hold a hearing entitled "Congressional Review of OCC Preemption." New York State Superintendent of Banks Diana L. Taylor will testify on behalf of CSBS. - 10 a.m., 2128 Rayburn Building.

January 29
The Senate Banking Committee will hold a hearing entitled "Understanding the (Mutual) Fund Industry from the Investor's Perspective" - 10 a.m., 538 Dirksen Building.

CLOSING COMMENTS. . .

"Well, first of all, let me say this. I wanted to say to Governor Dean, don't be hard on yourself about hooting and hollering. If I had spent the money you did and got 18 percent, I'd still be in Iowa hooting and hollering." -  Quip from the Reverend Al Sharpton, referring to former Vermont Governor Howard Dean's post-Iowa war cry. Rev. Sharpton's comment came during Thursday night's Democratic Presidential Candidates' debate in New Hampshire.

CSBS EXAMINER
Mary White, Editor
Teresa Dean, Contributing Writer