What is art? What is not art?

Last week, we decided to take a train up to the Big Apple. We had visions of a relaxing trip with scenic views of the countryside, but what a train traveler quickly discovers is there’s a huge amount of graffiti out there. One might think that applying graffiti from a train track might be somewhat dangerous. Graffiti, it seems, like tattoos, will always be with us, so we might as well appreciate it. Some people even think of it as art. Then we heard a news story that in New York City, Mayor Bloomberg’s graffiti removal team reportedly removed 2.5 million square feet of graffiti at 4,000 sites already this year. In fact, the city council is considering legislation to have graffiti removal taken over by the city, unless property owners see it as artwork. What we still can’t understand is how graffiti artists do their work without being reported. But as they say, where there’s a will there’s a way, and art is in the eye of the beholder.

House Financial Services Committee Chairman Barney Frank (D-Mass.) this week introduced legislation (H.R. 3126) to adopt President Obama’s plan to create a new Consumer Financial Protection Agency. The bill would create an independent agency with a full range of rulemaking, information-gathering, supervisory, and enforcement tools to oversee financial products offered through banks and nonbanks. The bill does have some differences from the plan announced by President Obama. For example, the bill preserves the current federal banking regulators’ role for enforcing the Community Reinvestment Act. The bill also omits references to creation of a National Bank Supervisor through the merger of the Office of the Comptroller of the Currency and the Office of Thrift Supervision. Frank said such restructuring would be done separately at a later date. The bill has 12 co-sponsors, all Democrats.

The Conference of State Bank Supervisors formed a special task force, chaired by Maryland Commissioner of Financial Regulation Sarah Bloom Raskin, which is analyzing the proposal and its potential impact on the state banking system.

Chairman Frank has indicated his intention to complete committee action on the bill by the end of July. The Senate Banking Committee plans to hold a hearing on the Obama proposal on Tuesday.

The Federal Financial Institutions Examination Council issued a statement reaffirming the unified position of supervisors on regulatory conversions. The statement said regulators will only consider applications undertaken for legitimate reasons and will not entertain regulatory conversion applications that undermine the supervisory process. The statement said prospective supervisors will be expected to follow existing supervisors' work on examination and enforcement actions, including consumer protection and safety and soundness issues. FFIEC said “conversion requests submitted while serious or material enforcement actions are pending with the current chartering authority or primary federal regulator should not be entertained because such requests could delay or undermine supervisory actions.” For an institution with a rating of 3, 4, or 5, substantial noncompliance regarding Community Reinvestment Act, or a serious or material corrective program in place or being contemplated, the prospective chartering authority will consult with the Federal Reserve Board, FDIC, or the National Credit Union Administration, as appropriate. More Information

Community banks are still lending in these troubled economic times, two bankers told the Senate Banking Committee at a hearing on July 8. “In spite of the downturn, community banks in rural communities expanded lending by 7 percent since the recession began,” said Arthur C. Johnson, chairman and CEO of United Bank of Michigan in Grand Rapids and chairman-elect of the American Bankers Association.  Also testifying at the hearing, Jack Hopkins, president and CEO of CorTrust National Bank Association in Sioux Falls, S.D., said while the largest banks saw a 3.23 percent decrease in 2008 in net loans and leases, institutions with less than $1 billion in assets experienced a 5.53 percent growth.  Both bankers also identified problem areas that may hamper banks from continuing to lend. Johnson noted that Michigan, for example, is facing its eighth consecutive year of job losses and that other areas with a manufacturing employment base are suffering similar problems. Hopkins told the lawmakers that several bankers have expressed concern about the potential for regulators to second-guess their desire to make additional loans. He also said bankers were concerned about regulatory pressure to reduce the use of Federal Home Loan Bank advances. “FHLB advances have become an important source of funding for community banks that must be allowed to continue,” Hopkins said. He also urged the lawmakers to retain the dual system of state and federal bank charters, saying that it provides checks and balances, promotes consumer choice and helps create a diverse and competitive financial system. More Information

Federal financial institution regulators issued a joint statement providing guidance for financial institutions on California registered warrants. Beginning July 2, and until a budget is passed, California is issuing warrants for most general fund payments. The regulators said state chartered institutions should ensure their holdings of warrants are consistent with their state laws and regulations. The State Attorney General has opined that these warrants are valid and binding obligations of the state. Because they share the same expected source of repayment, the warrants generally have the same credit quality characteristics as the state's other general obligations. For risk-based capital purposes, the warrants will receive a 20 percent risk weight, the agencies said. The regulators said banks’ risk management practices should include evaluating the credit quality of the warrants, establishing appropriate concentration limits, and ensuring appropriate liquidity risk management. Supervisors will evaluate financial institutions' risk management practices as part of the normal supervisory process. The agencies issuing the statement were FDIC, the Federal Reserve, the Office of the Comptroller of the Currency, the Office of Thrift Supervision and the National Credit Union Administration. More Information

State and federal regulators last Wednesday closed seven banks, naming FDIC as receiver. The banks were located in Illinois and Texas, bringing the total number of bank closings for 2009 to 52.

In Illinois, the Department of Financial and Professional Regulation closed five banks that were controlled by one family. They included John Warner Bank, Clinton, Ill.; First State Bank of Winchester, Winchester, Ill.; Rock River Bank, Oregon, Ill.; Elizabeth State Bank, Elizabeth, Ill.; and Founders Bank, Worth, Ill. In addition, the Office of the Comptroller of the Currency closed The First National Bank of Danville, Danville, Ill.

The Texas Department of Banking closed  Millennium State Bank of Texas, Dallas. State Bank of Texas, Irving, Texas, purchased the bank’s $115 million in deposits and all of the $118 million in assets.

FDIC arranged an agreement with State Bank of Lincoln, Lincoln, Ill., to assume all of the deposits of John Warner Bank. John Warner had total assets of $70 million and total deposits of approximately $64 million.

The Winchester bank’s deposits were acquired by the First National Bank of Beardstown, Beardstown, Ill., First State had total assets of $36 million and total deposits of approximately $34 million.

For Rock River Bank, FDIC entered into an agreement with The Harvard State Bank, Harvard, Ill., to assume all of the deposits for a 2 percent premium and purchase about $72.9 million of the bank’s assets.  Rock River had total assets of $77 million and total deposits of approximately $75.8 million

Galena State Bank and Trust, Galena, Ill., acquired all of the deposits of Elizabeth State Bank. The bank had total assets of $55.5 million and total deposits of about $50.4 million.

For Founders Bank, FDIC reached an agreement with PrivateBank and Trust Company, Chicago, to purchase the bank’s $848.9 million in deposits along with $888.4 million of the bank’s assets.

 For First National Bank, Danville, Ill.,, FDIC arranged a purchase of all the $147 million in deposits and $148 million in assets by First Financial Bank, N.A., Terre Haute, Ind.

More Information

New Jersey: Steven Goldman has announced plans to leave his post as commissioner of New Jersey Department of Banking and Insurance, effective July 15. He will join the law firm of Kramer, Levin, Naftalis and Frankel LLP, which has offices in New York and Paris. Goldman has served as commissioner since March 1, 2006. Gov. Jon Corzine expects to name a successor early next week.

Pennsylvania: Pennsylvania Governor Edward G. Rendell recently signed two bills to combat mortgage fraud by strengthening communication between homeowners and their lenders and encouraging employees at mortgage companies to report illegal activity. "These bills will provide increased protection for Pennsylvania consumers shopping for a mortgage or refinancing their homes," said Rendell.  The first new law will prohibit a mortgage broker or originator from being the sole recipient of communications from lenders. The law will help ensure that consumers receive monthly statements and other notices intended for them by their lenders. The second law will shield mortgage company employees who report illegal activity or take part in an investigation from retaliation through reduced salaries, termination or other actions taken by their employers.  Both laws will go into effect in about 60 days.

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FDIC: FDIC issued a question and answer document for its rules governing deposit accounts in the event of a bank failure. The rules, which were published on Jan. 27, 2009, establish practices for determining deposit and other account balances at a failed depository institution. They also include disclosure requirements for certain sweep accounts that went into effect on July 1, 2009. The question and answer document covers frequent questions posed on the sweep account disclosure requirements. Some of the areas covered in the document are: the types of sweep accounts covered by the disclosure requirements and those excluded; the type and nature of disclosures required by the rules; the frequency of sweep account disclosures; the principles FDIC used to determine how swept funds will be treated in the event of failure; and the requirements for a properly structured repo sweep. More Information

FBI: Bank robberies declined modestly in 2008, according to statistics released by the FBI on Monday. In 2008, there were 6,700 robberies at financial institutions, 121 burglaries and 28 larcenies for a total of 6,849 crimes compared to 6,933 in 2007.  Loot was taken in 91 percent of the crimes in 2008 for a total value of more than $61.9 million. A note was used in 3,833 incidents; a firearm was used in 1,734 incidents; and robbers threatened the use of a weapon in 2,839 incidents. Acts of violence were committed during 293 of the incidents. Firearms were discharged in 78 cases, assaults occurred in 171 cases, and hostage situations occurred in 53 incidents. Twenty-one deaths occurred in 2008, including 17 perpetrators, one employee, and three deaths classified as other. No law enforcement officers were killed responding to bank crimes in 2008, but seven law officers and 69 employees were injured. Most violations occurred on Friday. Regardless of the day of the week, crimes were most prevalent between the hours of 9 a.m. and 11 a.m. More Information

July 13 - The House Financial Services Subcommittee on Oversight and Investigations will hold a hearing on “Preventing Unfair Trading by Government Officials.” 2 p.m., 2128 Rayburn House Office Building.

July 14 - The Senate Banking Committee will hold a hearing titled "Creating a Consumer Financial Protection Agency: A Cornerstone of America’s New Economic Foundation." - 9 a.m., 538 Dirksen Senate Office Building.

July 14 - The House Financial Services Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises will hold a hearing on SEC oversight.- 10 a.m., 2128 Rayburn House Office Building.

July 15 – The House Financial Services Committee will hold a hearing on “Banking Industry Perspectives on the Obama Administration’s Financial Regulatory Reform Proposals.” -  10 a.m., 2128, Rayburn House Office Building.

“It’s been said that confidence grows at the rate the coconut tree grows and falls at the rate in which the coconut falls.” - Montek Aluwalia, the Deputy Chairman of India’s Planning Commission, commenting on confidence in banking at this year’s Davos World Economic Forum, as reported in the June 29 issue of Bank Systems & Technology.