December 14, 2007

“Veni, Vedi, Visa: I Came, I Saw, I Did a Little Shopping.”

Interesting that the Senate Banking Committee this week held a hearing on “Shopping Smart and Avoiding Scams: Financial Literacy during the Holiday Season.” From the start of the shopping season (which comes earlier and earlier every year) data on retail sales is nonstop. Polls report how much more people plan to spend this year over last. The pressure to spend is unavoidable, and the overly-laden shopping carts come rolling out of stores everywhere. Suddenly we remember back to when we were youngsters, when our Santa list could have only one or two items, which almost always showed up under the tree. We also remember getting oranges and walnuts and peppermint sticks in our stockings, and we knew better than to complain. Those were the good old days to those who lived them, and these are tomorrow’s memories for today’s children.

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COUNTDOWN: 18 days to launch of Nationwide Mortgage Licensing System (NMLS)

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CSBS Supports Assistance Hotline

New York Superintendent of Banks Richard C. Neiman joined other financial regulators and advocacy groups in voicing support for a bill that would establish a toll-free hotline for consumer complaints or inquiries at a hearing Wednesday before the House Financial Services Subcommittee on Financial Institutions and Consumer Credit. Subcommittee Chairwoman Carolyn Maloney (D-N.Y.), chief sponsor of the “Financial Consumer Hotline Act of 2007,” commented that such a plan would cut down on the confusion and put consumers in quicker contact with the appropriate regulator.

"State bank regulators strongly believe that any national hotline number linking the federal regulatory agencies includes the capability to refer consumer inquiries to the states, and I am pleased that your proposal provides for this feature." Neiman said. Additionally, he suggested three additional provisions to the bill, including a state-to-federal referral as well as the federal-to-state mechanism; trend and case monitoring; and model forms, intake processes and operating guidelines. Testimony from Wednesday’s hearing may be found by clicking here.

FDIC Publishes State Economic Profiles

FDIC recently released its state profile reports for the third-quarter of 2007. FDIC reports on all 50 states, Puerto Rico and the Virgin Islands providing information on bank asset quality, capital earnings, liquidity, and loan concentrations. For banks in Ohio, the report found that the median past due and nonaccrual loans grew to 2.22 percent in the third quarter of 2007, up from 2.03 percent a year earlier. The median return on assets was 0.67 percent in third quarter of 2007, down from 0.77 percent in the third quarter of 2006. For banks in California, the median past-due and nonaccrual loans was 0.54 percent in the third-quarter of 2007, compared to 0.27 percent a year earlier. During the same time frame, return on assets fell to 0.83 percent from 1.2 percent. Banks in Florida saw a sharp rise in the median past-due and nonaccrual loans, which climbed to 1.43 percent in third quarter of 2007 from 0.42 percent a year earlier. The return on assets for Florida banks was 0.56 percent in the third quarter of 2007, down from 0.99 percent a year earlier. In Texas, past-due and nonaccrual loans rose modestly to 1.45 percent in the third quarter of 2007 from 1.35 percent in the third quarter of 2006. During the same time period, Texas banks’ return on assets stayed steady at 1.29 percent. The profiles are may be accessed online.

FFIEC Issues Pandemic Guidance

The Federal Financial Institutions Examination Council (FFIEC) issued guidance on Wednesday for financial institutions to use in establishing their continuity plans to minimize the potential adverse effects of a pandemic. This guidance expands upon the contents of the interagency advisory on influenza pandemic preparedness issued in March 2006. Experts believe the most significant challenge may be the staffing shortages that could occur in a pandemic outbreak. Business continuity plan should include: a preventive program to reduce the likelihood an institution’s operation will be significantly affected by a pandemic event; a documented strategy that provides for scaling pandemic efforts commensurate with the particular stages of a pandemic outbreak; a comprehensive framework of facilities, systems, or procedures to continue critical operations if large numbers of staff members are unavailable for prolonged periods; a testing program to ensure the institution’s pandemic planning practices and capabilities are effective and will allow critical operations to continue; and an oversight program to ensure ongoing review and updates to the pandemic plan. More Information

FTC Sues Payment Processor

The Federal Trade Commission and seven state attorneys general this week charged a payment processor with violating federal and state laws when it debited, or attempted to debit funds from consumers’ bank accounts on behalf of numerous fraudulent telemarketers and Internet-based merchants.

FTC and the attorneys general of Illinois, Iowa, Nevada, North Carolina, North Dakota, Ohio, and Vermont alleged that Your Money Access, LLC processed more than $200 million in debits and attempted debits to consumers’ bank accounts with more than $69 million of the attempted debits returned or rejected by consumers or their banks. The schemes were designed to extract money from consumer bank accounts by inducing consumers, through misrepresentations and omissions in connection with the marketing of products or services, to provide the merchant with the consumer’s personal bank account information. The merchants then transmitted the bank account information to Your Money Access for processing the debits to the consumers’ bank accounts. Your Money Access did business as Netchex Corp., Universal Payment Solutions, Check Recovery Systems, Nterglobal Payment Solutions, Subscription Services, Ltd., YMA Company, LLC, Derrelle Janey, and Tarzenea Dixon. 

FTC and the attorneys general are seeking a permanent ban on further violations, monetary relief, including consumer redress and the disgorgement of ill-gotten gains, and civil penalties under applicable state claims. More Information

House Judiciary Committee Approves Mortgage Bankruptcy Bill

The House Judiciary Committee on Wednesday approved the "Emergency Homeownership and Mortgage Equity Protection Act of 2007" (H.R. 3609) that would allow bankruptcy judges to lower mortgage interest rates and cram down loan balances in Chapter 13 proceedings. The bill was advanced by a mostly partisan vote of 17-15. The legislation's scope was narrowed to cover only subprime or nontraditional mortgage loans originated between Jan. 1, 2000 and the bill's enactment date that are in foreclosure or at least 60 days in arrears. The bill has incurred strong opposition from banking industry trade groups. More Information

Around The States

California: California Governor Arnold Schwarzenegger announced on Dec. 7 a new fund to help homeowners who are facing foreclosure keep their homes. The fund – OneCalifornia Foundation – will provide bridge loans to assist homeowners who do not qualify for other assistance. OneCalifornia Foundation founders Kat Taylor and Tom Steyer contributed the initial donation of $1 million to the OneCalifornia Foundation Bridge Loan Fund, which will be administered by the foundation in Oakland. The governor noted that Oakland has the tenth highest foreclosure rate in the nation. Under the foundation's terms, homeowners eligible for loan assistance must reside in Oakland, have stable incomes and live in their homes. Eligible homeowners also must attend financial planning classes and develop long-term savings and financial plans in addition to meeting other requirements. The governor called on other “community foundations all over the state to follow this fantastic example from the OneCalifornia Foundation in Oakland and join our efforts." More Information

New Jersey: New Jersey recently announced a public-private alliance to education and assist New Jersey homeowners. The New Jersey Home Ownership Preservation Effort is a voluntary alliance that includes the Department of Banking and Insurance, the Department of Community Affairs, the New Jersey Housing and Mortgage Finance Agency, the U. S. Department of Housing and Urban Development, NeighborWorks America, the New Jersey Bankers Association, the New Jersey Credit Union League, the New Jersey League of Community Bankers and the New Jersey Mortgage Bankers Association. Assistance includes programs from various financial institutions representing more than $433 million in available mortgage refinancing. The goal of the alliance is to enhance home ownership preservation by raising consumer awareness of available mortgage products and funding, providing increased access to credit and loan counseling for those who need it, and providing temporary assistance to consumers who are in immediate danger of foreclosure. The refinance program will offer fixed-rate loans, closing cost assistance, credit counseling and other services. More information about HOPE is available on the New Jersey Department of Banking and Insurance Web site.

Around The Agencies

FDIC: The FDIC is seeking input from bankers and the public on possible revisions to its strategic plan. The agency is in the process of updating its current strategic plan for 2005-2010 for one that will cover the period of 2008 through 2013. The strategic plan provides the long-term goals and objectives for FDIC's three major program areas – insurance, supervision and receivership management. The agency explained that long-term goals are achieved through specific annual performance goals and targets that are documented each year in the corporation’s annual performance plan. FDIC set a deadline of Jan. 4 for receiving comments and suggestions on the plan. More Information

FinCEN: More than 18,000 people have subscribed to the free e-mail subscription management service offered by the Financial Crimes Enforcement Network’ during the past year. FinCEN said of the 25 topics to which users may subscribe, the most popular are Bank Secrecy Act guidance (12,538 subscriptions), Suspicious Activity Report information (12,236 subscriptions) and advisories/bulletins/rulings/fact sheets (12,223 subscriptions). Subscribers may opt to have FinCEN updates sent immediately, daily, weekly or monthly to their e-mail accounts or directly to a wireless device. In the past year, FinCEN has sent 709,577 e-mails alerting users to these various announcements, such as guidance to financial institutions on the increasing money laundering threat involving illicit Iranian activity. Access the subscription form.

FOMC: The Federal Open Market Committee decided on Tuesday to lower its target rate for the fund funds rate by 25 basis points to 4.25 percent. In lowering the rate again, the committee said that incoming information suggested that economic growth was slowing due to the intensification of the housing correction and some softening in business and consumer spending. The panel also noted increased strains in the financial markets in recent weeks and said its action should help promote moderate growth over time.  On the inflation front, the committee said readings on core inflation have improved modestly this year, but elevated energy and commodity prices, among other factors, may put upward pressure on inflation. One member of the committee voted against the 25 basis point decrease. Boston Federal Reserve Bank President Eric S. Rosengren preferred lowering the target for the federal funds rate by 50 basis points at this meeting. View the Committee’s statement.

SBA: The Small Business Administration has teamed up with Nationwide Mutual Insurance Company to launch a disaster-planning guide for small-business owners. The 10-page guide, available on SBA’s Web site, provides business owners with the information they need to develop an effective plan to protect customers and employees in the event of a disaster. It helps business owners identify potential hazards, create plans to remain in operation and understand the limits of insurance coverage. Disasters may have a devastating impact on small business, said Nationwide Assistance Vice President for Safety Bill Windsor. More Information

Upcoming Events

December 17 - David Walker, Comptroller General, U.S. Government Accountability Office, will speak at a luncheon hosted by the National Press Club. Walker will discuss the government's overall fiscal condition and what needs to be done to turn things around. - 12:30 p.m., National Press Club, Washington, D.C.

December 17 - The American Enterprise Institute will hold a forum titled "What Lies Beyond the Credit Crunch?” Five AEI economists will assess the present and the future of financial markets. - 2 - 4 p.m., AEI Building, 1150 17th St. N.W. 

December 19 - The FDIC Board of Directors will meet in open session. Discussion items on the agenda include the agency’s proposed 2008 corporate operating budget, a proposal on claims and large-bank modernization, and late assessment penalties delegations and amendments. - 10 a.m., Sixth Floor, FDIC headquarters, 550 Seventeenth Street NW, Washington, D.C.

Closing Comment

"And today our credit is crunching. The familiar squeeze would not do — too mild — and crisis, cousin to crisis of confidence, is too severe. Crunch seems just right, combining the sound of an icebreaker plowing through the Arctic wastes with the happy sound of breakfast cereal snapping, crackling and popping in the mouth." - William Safire, writing in Sunday's New York Times Magazine's "On Language" column.