"Ideas are like rabbits.
You get a couple, learn how to handle them, and pretty soon you have a
dozen." - John Steinbeck
Back in the '80s, we remember Sears was first thinking about getting
more into financial services. We used to talk about "buying your stocks
where you buy your socks." Through the years, we've often had
discussions with bankers about what new services they'd like to offer.
This question always provoked the "hmmm look" as bankers scratched their
heads trying to come up with ideas. A few banks started selling coffee
(or giving it away), and we even heard of one that had a gas pump. But
this week, the Credit Union Journal tells us that a Michigan credit
union (through a CUSO) has opened a car lot to sell vehicles on which
the leases have expired. We thought that was a novel idea, although we
aren't sure whether the banking-powers-that-be in Washington might deem
it to be a no-no mixing of banking and commerce. But for the life of us,
we can't figure out why banks can't offer some value-added services. As
we finish up our business at the drive-in facility, we'd love to run our
car through a car wash. What if a bank partnered with a fast-food outlet
and we could grab a burger with our deposit slip. What about offering
manicures in the lobby? Or haircuts and shoe shines? Or a photographer
to capture our smiling faces? The possibilities are seemingly endless.
The FDIC says it will look at applications on a case-by-case basis. Come
to think of it, we could use a good manicure.
AGENCIES ISSUE GUIDANCE ON
HOW TO HANDLE SECURITY BREACHES
The federal banking regulators issued joint guidance on Friday to help
financial institutions understand their responsibilities under the
Gramm-Leach-Bliley Act to respond appropriately when there is an
incident involving unauthorized access to or use of customer information
that could result in substantial harm or inconvenience to a customer.
The final guidance gives financial institutions greater flexibility in
designing a response program than the agencies had originally proposed.
Under the guidance, some of the required elements of a bank's program
include: assessing the scope of the incident, notifying the primary
federal regulator, notifying law enforcement when criminal violations
are involved, containing the situation and notifying customers when
warranted. The agencies publishing the guidance were FDIC, the Federal
Reserve, the Office of Thrift Supervision and the Office of the
Comptroller of the Currency. For more information, click here...
BANKING AGENCIES ISSUE Q
&A ON APPRAISER INDEPENDENCE
Federal financial regulators issued joint guidance on Tuesday on
appraisal independence through a series of questions and answers. The
document provides clarification of existing standards in such areas as
selecting an appraiser, ordering an appraisal, accepting a transferred
appraisal and reviewing appraisals. For example, one of the questions
asks if a staff appraiser or an appraisal company affiliated with the
bank can be considered independent since the regulated institution
compensates them? The regulators said yes, if the appraiser is
independent of the lending, investment and collections functions and not
involved in the approval of the transaction. The document was published
by FDIC, the Federal Reserve, the Office of Thrift Supervision, the
Office of the Comptroller of the Currency and the National Credit Union
Administration. To access the guidance, click here...
FDIC OMBUDSMAN'S REPORT
LOOKS AT CONVERSIONS
The most common reason banks switch their charters is to align holding
company banks under one regulator, according a report published by
FDIC's Ombudsman's Office on Monday. The office contacts banks that have
recently converted their charters each quarter and asks them why. During
2004, the office discovered the charter conversion reasons of 69 banks
with 34 converting to charters regulated by FDIC and the states and 35
converting from FDIC to other regulators. Some of the other reasons for
converting to FDIC were: regulation by FDIC was "less expensive" and
more "banker friendly." The report found FDIC was viewed as more helpful
with local market knowledge and more lenient on market share increases
and Bank Secrecy Act compliance. Some of the other reasons given for
switching from FDIC as a regulator were: thrift charters allowed more
flexibility for expanding and branching within a mutual holding company;
federal charters involved less regulation; and other regulators were
"service oriented" and "communicate more effectively." The report may be
TAYLOR TO LEAVE TREASURY;
WHITE HOUSE NOMINATES ADAMS TO SUCCEED HIM
John B. Taylor, who has served as Treasury Undersecretary for
International Affairs since the spring of 2001, announced plans to step
down on April 22 to return to Stanford University.
Treasury Secretary John Snow commended Taylor's participation in the
Administration's efforts to fight terror and spread freedom around the
world. "John was part of the creation of an international coalition to
freeze terrorist assets in the weeks following September 11, 2001. He
played a key role in the successful creation of a new currency in Iraq .
He also helped shepherd international agreements to reduce Iraq's debt
by 80 percent and led efforts to establish an historic new economic
engagement with the Broader Middle East and North African
Snow's full statement may be found at: http://www.treasury.gov/press/releases/js2329.htm.
President Bush said he will nominate Timothy D. Adams to succeed Taylor.
Adams, 43, recently served as policy advisor for the Bush-Cheney 2004
campaign. He previously served as Chief of Staff at the Department of
the Treasury. Prior to joining the Administration, he co-founded and
served as managing director of The G7 Group, a Washington, D.C. based
consulting firm. Adams also served as deputy associate director of the
Office of Policy Development at the White House during President George
H. W. Bush's Administration. He received his bachelor's degree and two
master's degrees from the University of Kentucky.
Also this week, the White House said President Bush plans to designate
Arnold Havens as acting deputy Treasury secretary. Havens has been
Treasury general counsel since December 2003.
STATE REVENUES UP
State tax revenues rose 7.8 percent between the fourth quarter of 2003
and 2004, which was the strongest fourth quarter growth since 1991,
according to a report released by The Nelson A. Rockefeller Institute of
Government. The growth was boosted 4.9 percent by inflation and .05
percent by new tax law changes creating a real net gain of 2.3 percent.
The report found that all three major sources of tax revenue showed
strong growth with the largest gains - 27
percent - recorded by corporate income tax. Personal income
tax revenue rose by 8.8 percent, and sales tax revenue increased 6
percent. The report also found that revenue growth was strongest in the
far West at 12.1 percent and weakest in the Great Lakes states at 2.9
percent. Employment grew in all but two states. Thirty-one states had
employment growth of 1 percent or more, up from 24 states in the third
quarter. Additional information about the report is posted here...
ROSENFELD CONFIRMED FOR
The Senate last week unanimously confirmed Ronald A. Rosenfeld as a
director of the Federal Housing Finance Board for a term that will end
on Feb. 27, 2009. Rosenfeld has served as chairman of the board since
his recess appointment by President Bush on Dec. 15, 2004. Previously,
Rosenfeld was president of the Government National Mortgage Association,
known as Ginnie Mae. From 1995-1998, he was the secretary of commerce
for the state of Oklahoma. The announcement is posted on the FHFB Web site.
AROUND THE STATES
Wisconsin: Patricia D. Struck, administrator of the Wisconsin
Department of Financial Institutions Division of Securities, warned
Wisconsin investors about the most common ploys to con them out of
hundreds of millions of dollars. The North American Securities
Administrators Association listed the top 10 tricks of con artists. Some
of the ploys include: Ponzi schemes where early investors are paid with
money from later investors; unlicensed individuals selling securities;
investment products that not have been registered through stringent
state requirements; and promissory notes that are promises worth less
than the paper on which they are printed. Senior citizens are often the
targets of investment fraud, and the pitches usually involve
triple-digit returns and risk-free guarantees. The advisory may be found online...
AROUND THE AGENCIES
FDIC: Banks may be missing opportunities to lend to creditworthy
Hispanics because of information gaps created by language and cultural
differences, FDIC said. The agency's FYI publication looked at Hispanic
information gaps identified in several studies. Hispanics often think
their credit and job histories have to be perfect to qualify for a
mortgage. The report said Hispanic focus groups in Mobile, Ala., and Las
Vegas found that most participants did not know how to establish a
credit history. Another study identified unfamiliarity with the U.S.
credit system and lack of a credit history as two of the greatest
barriers to immigrant homeownership. The publication outlined some of
the numerous and often free resources available to bankers to reach out
to prospective Hispanic homeowners. For more information about the
FDIC's report, click here...
FDIC/FinCEN: The FDIC and the Financial Crimes Enforcement
Network (FinCEN) are co-sponsoring a symposium to discuss anti-money
laundering and anti-terrorist financing. On Wednesday, April 6, in
Austin, Texas. Keynote speakers will be Michael J. Zamorski, FDIC
director of supervision and consumer protection, and William J. Fox,
FinCEN director. Three panels of experts from the banking industry,
federal and state government and law enforcement will discuss current
challenges in combating money laundering and terrorist financing. The
contact for further information or registration is Cindy Scott, special
assistant to the FDIC's Regional Director in Dallas, CScott@fdic.gov, (972) 761-2033.
FRB: The Federal Reserve signaled to Citigroup that it might need
to slow down on its merger and acquisition activities and concentrate on
securities-related compliance issues. The Federal Reserve delivered this
message in approving the company's acquisition of First American Bank
SSB, Bryan, Texas. Citigroup, with assets of approximately $1.48
trillion, is the largest insured depository institution in the United
States. First American Bank, with about $3.5 billion in assets, is the
18th largest institution in Texas. In the approval letter, the Federal
Reserve said it is monitoring investigations of Citigroup's
securities-related activities. The Federal Reserve said it expects
Citigroup's senior management and board to concentrate on compliance
issues. The agency added: "it is important that management's attention
not be diverted from these efforts by the demand that mergers and
acquisitions place on management resources." For more information about
the Board's action, click here...
FTC: The Federal Trade Commission shut down AmeriDebt, Inc.'s
debt management operation as part of a settlement that charged the
company with deceiving consumers into paying at least $170 million in
hidden fees. FTC alleged that the company misrepresented that it was a
nonprofit credit counseling organization that would teach consumers how
to manage their finances for no up-front fee. The settlement requires
AmeriDebt to transfer all current clients' accounts to a third party and
bars the company from participating in any aspect of the credit
counseling business in the future. FTC said that rather than operating
for charitable purposes as advertised, AmeriDebt was funneling profits
to affiliated for-profit entities, including DebtWorks and Andris Pukke.
Notice about the FTC's action is posted here...
OTS: The Office of Thrift Supervision is looking for ideas on how
it can reduce the compliance burden on bank collection requirements.
Specifically, OTS is looking for input on its flood hazard determination
form. The effort is part of the requirements of the Paperwork Reduction
Act. Comments are due by May 23. The announcement may be found at: http://www.ots.treas.gov/docs/7/73257.pdf.
EDITORS NOTE: For a
more detailed review of regulatory activity, refer to the Regulatory
Newsbytes section of our Web site.
THE WEEK AHEAD
March 28-April 4
Congress continues in recess all week.
March 28-April 4
The Conference of State Bank Supervisors is working all week.
CLOSING COMMENTS. . .
The FDIC has announced plans to hold a public hearing May 24 on a
petition filed by the Financial Services Roundtable seeking FDIC action
to preempt host-state laws for state banks that have interstate
FDIC Chairman Don Powell, quoted in the March 24 American Banker article
as to whether national preemption is a negative for state-chartered
banks: "Someone thinks it is or they wouldn't have petitioned us. They
want choice. I love choice."
Mary White, Editor
Teresa Dean, Contributing Writer