Words are powerful things. Last year, the phrase “toxic assets” must have been uttered a billion times. We wondered who coined the term, and we got real tired of hearing it. This year, those toxic assets blossomed into “legacy securities.” The term sounds so much better than its predecessor. We decided to do some sleuthing so we  looked the two terms up in our New World Dictionary (copyright 1975). While legacy was defined as “money or property left to someone by a will,” toxic was defined as “of, affected by or caused by a toxin, or poison.” Soon these assets will go on sale with a lot of backing from the federal government. Time will tell if the linguists were right to rename them. May the taxpayers win.

The FDIC recently published fourth quarter 2008 statistics on banking trends for all 50 states, Puerto Rico and the Virgin Islands. The state profiles are formatted into data sheets tracking economic indicators, asset quality, capital/earnings, liquidity, loan concentrations and other statistics. For example, in Oregon, the median level of past-due and nonaccrual loans at the end of the fourth quarter was 3.2 percent, up from 3.11 percent in the third quarter and from 1 percent a year earlier. Oregon institutions had a median return on assets of .02 percent in the fourth quarter, down from .41 percent in the third quarter and from .88 percent a year earlier. For banks in Connecticut, the median level of past-due and nonaccrual loans at the end of the fourth quarter was 2.02 percent, up from 1.69 percent in the third quarter and 1.27 percent a year earlier. Connecticut institutions had a median return on assets of .48 percent in the fourth quarter, up from -.62 percent in the third quarter, but down from .55 percent a year earlier. For banks in Missouri, the median level of past-due and nonaccrual loans at the end of the fourth quarter was 2.8 percent, up from 2.42 percent in the third quarter and from 2.23 percent a year earlier. Missouri institutions had a median return on assets of .53 percent in the fourth quarter, down from .77 percent in the third quarter and .77 percent a year earlier. For banks in Georgia, the median level of past-due and nonaccrual loans at the end of the fourth quarter was 5.1 percent, up from 3.93 percent in the third quarter and 2.79 percent a year earlier. Georgia institutions had a median return on assets of -.50 percent in the fourth quarter, down from .14 percent in the third quarter and from .64 percent a year earlier. More Information

The Treasury Department on Monday released additional guidance for potential investors in the securities portion of the Public Private Investment Program. The new guidance extends the deadline for applications to the program until April 24, from April 10, with Treasury informing applicants about preliminary qualification on or prior to May 15. Treasury also explained how the Legacy Securities program will work with the Federal Reserve’s Term Asset-Backed Securities Lending Facility. Treasury said the Fed program will be separate with its own set of terms, conditions and eligibility requirements.  Legacy TALF will be made available to investors who meet the Federal Reserve’s eligibility standards, regardless of whether or not they participate in the Legacy Securities program. While the Legacy Securities program is limited to non-agency commercial-backed securities and residential mortgage securities issued prior to 2009, Treasury will solicit comments from fund managers about expanding the program to other asset classes later. Treasury noted that failure to meet all the program’s criteria would not necessarily disqualify a proposal. More Information

Federal Reserve Bank of Minneapolis President and Chief Executive Officer Gary H. Stern announced he will retire from the bank this summer. He has been the president of the bank for more than 24 years. He joined the Federal Reserve Bank of Minneapolis in 1982 as senior vice president and director of research and became president in 1985. Before that, he was a partner in a New York-based economic consulting firm. Stern's prior experience includes seven years at the Federal Reserve Bank of New York. In a recent speech before the Brookings Institution in Washington, D.C., Stern said the key to addressing the too-big-to-fail crisis is to reduce the potential size and scope of the spillovers so that policymakers may be confident that government intervention is unnecessary. He said reductions in spillovers require early identification of direct and indirect exposures among large financial institutions and between those institutions and capital markets; enhanced prompt corrective action; and explicit communication by policymakers about efforts to limit spillovers. Stern was a keynote speaker at CSBS’s 2005 annual meeting and conference in San Antonio. More Information

The Obama Administration on Monday announced a new coordinated effort by federal and state governments and the private sector to target mortgage loan modification fraud and foreclosure rescue scams.  The initiative involves a targeting effort by the Treasury Department and Financial Crimes Enforcement Network. Under the plan, FinCEN will marshal information about possible fraudulent actors from a variety of sources and refer potential criminal targets to participating law enforcement authorities. FinCEN also will issue advisories to financial institutions about emerging schemes related to loan modifications. The new campaign also involves consumer education with several private sector national loan servicers, including Chase Home Finance, Suntrust Mortgage, GMAC Mortgage and American Home Mortgage Servicing, distributing the Federal Trade Commission’s consumer alerts for avoiding mortgage relief scams and directing them to free, legitimate counseling services for at-risk homeowners. The FTC released a list of more than 20 states that have already taken law enforcement action on loan modification or foreclosure rescue scams. More Information

California: William S. Haraf was confirmed by the California State Senate as Commissioner of Financial Institutions on March 23. The California Senate Rules Committee unanimously supported his confirmation on March 4. Governor Schwarzenegger appointed Haraf as Commissioner effective March 10, 2008 and he was sworn in by Business, Transportation and Housing Agency Secretary Dale E. Bonner on April 8, 2008.

New Jersey: New Jersey Governor Jon S. Corzine recently announced an agreement with Countrywide Financial Corporation to resolve allegations that the company placed borrowers in risky, high-priced and ultimately unaffordable subprime mortgages. The agreement establishes a no-fee, streamlined loan modification program and creates a $3.67 million foreclosure relief fund for New Jersey borrowers and for state mortgage foreclosure mitigation programs. The state will receive half of the $3.6 million to fund mortgage modification programs sponsored by various state agencies. The remaining half will be available to subprime borrowers who have lost their homes to foreclosure after making six or fewer payments. The state estimated that 8,200 New Jersey borrowers will be assisted by the agreement. The program applies to Countrywide subprime adjustable-rate mortgages, Pay Option ARMs or other subprime residential mortgages for owner-occupied properties serviced by Countrywide and which were entered into between Jan. 1, 2004, and Dec. 31, 2007. Loan modifications would create monthly payments that incorporate principal, interest, property taxes and insurance and consume between 34 percent and 42 percent of a borrower’s monthly income. More Information

Oklahoma: The Oklahoma State Banking Department held a dedication ceremony for the department’s new headquarters building on Wednesday. Commissioner Mick Thompson officiated, and Lieutenant Governor Jari Askins gave the keynote address  There was also an unveiling of a bronze and steel sculpture by Master Artist Enoch Kelly Haney that had been commissioned for the external entrance to the building. Haney is a Native American artist and the creator of the sculpture atop the State Capitol. Over 100 people, including state officials, legislators, financial executives, FDIC officials and CSBS representatives, Chairman Tim Karsky, North Dakota Commissioner of Financial Institutions, former Chairman John Allison, Mississippi Commissioner of Banking and Consumer Finance, CSBS President and CEO Neil Milner and CSBS Senior Vice President Roger Stromberg in attendance. The building has been fully paid for by the department and is located at 2900 North Lincoln Blvd., Oklahoma City, OK.

FDIC: Most banks will have to file their first quarter Call Reports by April 30, FDIC and other regulators reminded bankers. There were only a few call report changes that took effect as of March 31 with more to come in June and December 2009. For the March changes, FDIC said banks may provide reasonable estimates for any new or revised items. Some of these changes include additional items to the Call Report loan schedule for held-for-investment loans and leases acquired in business combinations during the current year, and revising several report schedules for financial reporting changes that apply to minority interests in consolidated subsidiaries. Other changes this quarter involve a new annual item on the bank's fiscal year-end date; exemptions from reporting certain existing Call Report items for banks with less than $1 billion in total assets; clarification of the definition of the term “loans secured by real estate”, guidance on quantifying misstatements in the Call Report; and elimination of confidential treatment for data collected from trust institutions on fiduciary income, expenses and losses. More Information

Federal Reserve: The Federal Reserve Banks launched a new automated clearing house service on April 6 aimed at the cross-border market. The FedGlobal ACH Services will provide cross-border, electronic payments to more than 30 countries in Europe and Latin America. While the Federal Reserve has provided outbound ACH payments to Canada, Mexico and several European countries, the new offering will increase the number of countries and the payment options. The Reserve Banks will first expand the service to 22 European countries and Panama. The plan calls for future growth into Latin America and Asia. In addition to payments between deposit accounts, the Reserve Banks will allow transfers of funds from accounts at U.S. depository institutions to people without a banking relationship at bank locations or at trusted, third-party providers. “Banks and credit unions have been requesting this service for several years now,” said Elizabeth McQuerry, assistant vice president at the Federal Reserve Banks’ Retail Payments Office. More Information

FinCEN: The Financial Crimes Enforcement Network provided guidance to financial institutions on Monday about filing suspicious activity reports on loan modification and foreclosure rescue scams. FinCEN said banks may learn of scams from their customers and also may be approached by those committing the frauds for deposit and other services. To assist law enforcement in its efforts to target this type of fraudulent activity, FinCEN requested that financial institutions include the term "foreclosure rescue scam" in the narrative portions of all relevant SARs filed and provide all information available for each party suspected of engaging in the fraudulent activity. FinCEN also asked financial institutions to provide all available information on potential fraud victims in the narrative part of SARs to assist law enforcement. The agency outlined potential indicators of loan modification and foreclosure rescue scams, such as use of up-front fees for services; use of aggressive tactics to seek out homeowners; claims that the process will be quick with relatively little information and paperwork required from the homeowners; or offers to buy houses and then rent them back to the homeowners. More Information

FTC: The Federal Trade Commission halted a counterfeit cashier’s check scam and imposed a $1 million judgment against the operators -- Cash Corner Services, Inc., and Family Choice Store, Inc., and their principals, Odowa Roland Okuomose and Evelyn Okuomose. In the scam, consumers received letters congratulating them on winning a lottery or sweepstakes and enclosing fake checks. The victims were told the checks were for taxes or fees that had to be paid before the “winnings” were paid out. Consumers were instructed to deposit the checks and wire back a portion of the proceeds. Prize winnings supposedly ranged from $250,000 to $750,000. In some cases, instead of receiving letters and counterfeit checks, consumers were cold-called by telemarketers, who persuaded them to send the taxes or fees to receive their prize winnings. In both scenarios, consumers received nothing, despite the fact that some consumers sent in payments of as much as $24,000 to pay the bogus fees. More Information

April 6-17 – Congress out for spring state/district work period.

April 15 - June 30 - The Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators are holding an online Model Examination Guidelines School. The web-based school was developed by AARMR and CSBS to assist mortgage regulators and mortgage industry compliance personnel implement the examination procedures for the Guidance on Nontraditional Mortgage Product Risks and the Statement on Subprime Mortgage Lending. 

“In this new paradigm, a legacy, usually a gift, is a burden. A potential loss is spun as a potential gain. War is peace. See what I mean by Orwellian?” – Newsweek columnist Daniel Gross, writing about financial linguistics in the March 28 issue.