"Music makes one feel so romantic - at least it
always gets on one's nerves - which is the same thing nowadays." - Oscar
When we want to get into a real debate, we bring up the question of
who's the best rock 'n roll band of the 20th century. People seem to
fall into either the Beatles' camp or the Rolling Stones' corner. The
debates can become heated. But there's no debate about which group had
the most impact on those of us who were 13 when John, Paul, George and
Ringo arrived on the scene. Digging back into some of our sleepiest
brain cells, we remember all the guys in our junior high school, growing
their bangs and splashing themselves between classes with English
Leather cologne that they kept in their lockers. Now we know why the
teachers kept the classroom windows open -- they would have
suffocated otherwise. Radio announcers remind us that it was 40 years
ago this week when we were glued to the TV screen on Feb. 9, 1964,
squealing when Ed Sullivan introduced the Fab Four. We baby boomers know
how lucky we are to have been a part of music history, even if we were
CSBS OBJECTS TO FCA PLANS
In a January 30 letter to the Farm Credit Administration, the Conference
of State Bank Supervisors stated its belief that it is inappropriate for
Farm Credit System institutions to provide farm management and trust
services. CSBS said such services "require a high level of specialty
knowledge, not only in agriculture, but also in business management and
trust services" and are tightly regulated and supervised on both the
state and federal levels.
CSBS told the FCA that 'it would not be prudent to merely allow FCS
institutions to begin conducting such activity without strict controls,
regulations, and consumer protection guidelines." The letter said there
is no need for a government-sponsored enterprise to provide services
that are already being provided by regulated and supervised financial
CSBS also expressed concern about the recent promotion of the "Farm Cash
Management Program," which reportedly utilizes an interest-bearing
"AgriBank Money Market Investment Account." CSBS expressed concern that
such accounts are being promoted as an alternative to financial
institution deposit accounts and could mislead consumers to believe that
the program constitutes a traditional bank-type interest bearing deposit
CSBS noted that many state-chartered banks are heavily involved in
agricultural lending, and that increased competition from
government-sponsored entities could put pressure on ag bank earnings,
creating a safety and soundness issue for these banks.
The comment letter was prompted by requests from several state bank
commissioners who are concerned about Farm Credit System's expansion of
HELEN HOWELL REPLACES CURRY ON FFIEC STATE LIAISON
Washington Department of Financial Institutions Director Helen Howell
will serve on the State Liaison Committee of the Federal Financial
Institutions Examination Council. FFIEC announced on Wednesday that
Howell replaced former Massachusetts Commissioner of Banks Thomas Curry,
who resigned as commissioner on Dec. 31, 2003, to serve as member of the
FDIC board. Howell's term will continue until Jan. 15, 2005. CSBS
Chairman-elect John Allison, Mississippi Commissioner of Banking and
Consumer Finance, chairs the FFIEC State Liaison Committee.
Howell was appointed by Governor Gary Locke as director of the
Washington State Department of Financial Institutions and a member of
his executive cabinet in July 2002. The department regulates Washington
financial service providers, including banks, credit unions, mortgage
brokers, consumer loan companies, and securities issuers and
CSBS REACCREDITS MICHIGAN, TEXAS, NORTH DAKOTA &
TENNESSEE BANKING DEPTS
The Conference of State Bank Supervisors is pleased to announce the
recent reaccreditations of four state banking departments: the Michigan
Office of Financial and Insurance Services, the Texas Department of
Banking, the North Dakota Department of Financial Institutions and the
Tennessee Department of Financial Institutions.
The Michigan Office of Financial and Insurance Services' bank regulatory
program received its fourth certificate of accreditation from CSBS on
December 31, certifying that the department maintains the highest
standards and practices in state banking supervision. The Office was
first accredited in 1986 and as of September 30, 2003 supervised 134
commercial banks, four non-deposit trust companies and five savings
banks with total commercial bank assets of $120.1 billion. Linda A.
Watters serves as Commissioner of the Michigan Office of Financial and
The Texas Department of Banking received its third certificate of
accreditation from CSBS on December 31. The Department was first
accredited in 1993 and as of September 30, 2003 supervised 336
commercial banks, 65 non-deposit trust companies and 27 foreign bank
agencies and representative offices with total commercial bank assets of
$60.8 billion. Randall S. James is the Texas Commissioner of
The North Dakota Department of Financial Institutions received its third
certificate of accreditation from CSBS on December 31. The Department
was first accredited in 1992, and as of September 30, 2003 supervised 88
commercial banks, three non-deposit trust companies and one state-run
bank with total commercial bank assets of $7.1 billion. Timothy J.
Karsky CEM, is Commissioner in North Dakota.
The Tennessee Department of Financial Institutions received its fourth
certificate of accreditation from CSBS on December 31. The Department
was first accredited in 1987, and as of September 30, 2003 supervised
158 commercial banks, 10 non-deposit trust companies and one savings
bank, with total commercial bank assets of $25.1 billion. Kevin P.
Lavender serves as Tennessee Commissioner of Financial Institutions.
CSBS President and CEO Neil Milner congratulated the four departments.
"Accreditation is an ongoing process that requires constant review of
all department functions. These banking departments have demonstrated
their ability to meet the challenges of the constantly changing banking
industry," he said.
THRESHOLD FOR FDIC'S MERIT EXAMS UP TO $1 BILLION
FDIC announced on Wednesday that is expanding the use of its
risk-focused, streamlined examination process, known as MERIT. When the
FDIC started using the program in April 2002, it used the exam
procedures only on eligible banks with satisfactory regulatory ratings
with assets of $250 million or less. FDIC has decided to expand the
program to well-rated eligible banks with assets of $1 billion or less.
The MERIT exam focuses on determining the adequacy of an institution's
internal controls and concentrates on internal and external audit
programs. Loan portfolios are still tested, but if an institution
maintains an effective internal asset review program, examiners will
significantly reduce the time spent reviewing individual credits. More
information may be found here.
AROUND THE STATES
Georgia: The Georgia legislature's House Banking Committee voted
this week to regulate payday lenders under the Georgia Industrial Loan
Act. If the bill becomes law, payday lenders will be required to obtain
a state license to do business and comply with a cap on interest rates
of 60 percent. The bill also seeks to prevent payday lenders from
specifically targeting military personnel. The bill the House Banking
Committee passed is a Substitute bill to the Senate Bill (157) passed in
the Senate in 2003 session and a carryover to 2004 session. Georgia
Industrial Loan Act is the small loan act under the supervision of the
Industrial Loan Division of the Insurance Commissioner's Office.
Kentucky: The Kentucky House of Representatives on Monday
advanced a banking reciprocity bill. The bill, HB 319 provides that "if
the laws of the home state of the out-of-state bank place more
restrictive terms or conditions on Kentucky banks seeking to acquire or
merge with a bank in the home state of the out-of-state bank, the
interstate merger may be allowed in Kentucky only under substantially
the same terms and conditions as applicable to Kentucky state banks in
the home state of the out-of-state bank." The vote on the bill was
AROUND THE AGENCIES
FinCEN: The Financial Crimes Enforcement Network issued an alert
on Tuesday about a letter sent to bank customers that says they must pay
$25,000 for the issuance of an anti-terrorist certificate before
transactions may continued to be conducted. The bogus letter appears to
come from FinCEN. FinCEN said other bogus letters claim that the FinCEN
is freezing assets and endorsing investment schemes. For information, click here.
FRB: The Federal Reserve Board has established a private-sector
working group to develop the idea of establishing a back up dormant bank
that could be used when necessary to clear and settle U.S. government
securities. The Fed established the Working Group on NewBank
Implementation on Jan. 30. The group is chaired by Michael Urkowitz,
senior adviser to Deloitte Consulting. Other members of the group
include senior representatives of the two major clearing banks -- J.P.
Morgan Chase and The Bank of New York -- the Fixed Income Clearing
Corporation, State Street Bank & Trust Co., UBS Investment Bank,
Fidelity Investments and Morgan Stanley & Co. The New York State
Banking Department and other federal regulators will participate as
observers and technical advisers. The announcement is posted here.
FTC: The Federal Trade Commission's settlement with First
Alliance Mortgage, headquartered in Irvine, Cal., will provide nearly
20,000 borrowers with a second compensation check, the agency said on
Monday. Borrowers previously received compensation for the loan
origination fees the company deceptively charged them in December 2002.
FTC said the total amount given to consumers will be $65 million. First
Alliance targeted the subprime market and made loans in 18 states and
the District of Columbia. More information is available here.
NCUA: The National Credit Union Administration issued three
opinion letters on Jan. 28 about the application of state laws on
federal credit unions. The first letter preempts the New Jersey
Homeownership Security Act of 2002 for federal credit unions. NCUA said
the law was "preempted because it purports to limit or affect the rates,
terms of repayment and other conditions of loans and lines of credit
that [federal credit unions] may offer to their members." The New Jersey
law was designed to curb predatory lending and requires the New Jersey
Department of Banking to conduct examinations of creditors and enforce
the law. NCUA said it has sole authority to take enforcement actions
against federal credit unions. In the second opinion letter, NCUA
preempted all state laws that attempt to limit or prohibit charges
related to debt cancellation or suspension agreements that federal
credit unions offer to their members. NCUA said state laws that
"prohibit or limit creditors from charging [debt cancellation agreement]
fees essentially bar them from entering into DCAs with borrowers." In
the third letter, NCUA said a federal credit union does not need to
obtain a state insurance license to offer debt cancellation agreements
because they are loan-related products that have been specifically
pre-approved as an exercise of a federal credit union's incidental
powers. For more information, go to http://www.ncua.gov.
THE WEEK AHEAD
(Note: The Feb. 5 Senate Banking Committee hearing on the OCC's
preemption and visitorial powers rule was postponed due to the discovery
of Ricin in the Senate Dirksen Building. It has not yet been
The Conference of State Bank Supervisors hosts an orientation meeting
for new state banking commissioners.
The Senate Banking Subcommittee on International Trade and Finance holds
a hearing on economic reconstruction in Iraq. - 1 p.m., 538 Dirksen
The House Committee on Financial Services convenes for a hearing to
receive the testimony of the Chairman of the Federal Reserve Board of
Governors on monetary policy and the state of the economy, - 10 a.m.,
2128 Rayburn Building.
The House Financial Services Subcommittee on Housing and Community
Opportunity holds a hearing on housing-related agency budgets for FY
2005. - 10 a.m., 2128 Rayburn Building.
CLOSING COMMENTS. . .
"Government's view of the economy could be summed up in a few short
phrases: If it moves, tax it. If it keeps moving, regulate it. And if it
stops moving, subsidize it." -- Former President Ronald Reagan
quipped in 1986. (Today marks Mr. Reagan's 93rd birthday.)
Mary White, Editor
Teresa Dean, Contributing Writer