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| January 4, 2010 |  | “Each time history
repeats itself, the price goes up.” – Author Unknown
January
to December, we'll have moments to remember… This time of year, that old
song by the Four Lads comes to mind. It’s the first Monday of a brand
new decade. Many commentators have had their say on the last decade. But
we have shorter-term memories and have decided to glance back at the year just
ended rather than try to tackle an entire decade. Heaven only knows, 2009
was monumental enough. The question is whether it was a year to remember
or a year we’d rather forget. Whatever the case, here’s one last look
in the rear view mirror before we set our sights on the year to come.
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| JANUARY | | 2009 arrived on a Thursday. We knew the seeds of change
had been planted with the election of a new president, whose campaign motto was
“Change You Can Believe In.” Financial regulatory reform was a plank
in his platform. Looking ahead, CSBS announced a set of principles for the upcoming
regulatory debate with the goal of preserving the dual banking system reaffirming
the state role in chartering and supervising financial institutions, and encouraging
a diverse universe of financial institutions. CSBS sent a letter asking the FDIC
to review its brokered deposit regulation for banks that fall below well-capitalized,
recommending they be given 12 months to unwind their holdings, helping to ensure
adequate liquidity as the banks work to enhance capital and reduce their risk
profiles. The U.S. Supreme Court agreed to hear a case involving the ability of
states to enforce state laws for national banks. CSBS and 49 state attorneys general
were among the parties seeking the high court’s review of the case, Cuomo
v. the Clearing House Association. Wrapping up the month, the Senate confirmed
Timothy F. Geithner as Treasury Secretary by a 60-34 vote, paving the way for
the new administration to unveil a new financial regulatory overhaul plan.
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| FEBRUARY | | Treasury Secretary Geithner outlined a “financial
stability plan” to put the largest banks through a so-called stress test.
He also unveiled the Obama administrations homeowner stability plan, with the
goal of helping up to nine million families to restructure their mortgages to
avoid foreclosure. The Nationwide Mortgage Licensing System, launched Jan. 2,
2008, reported a successful first year of operations, with 22 participating states
and managing over 90,000 company, branch and loan officer licenses. The System
was created by CSBS and the American Association of Residential Mortgage Regulators
to serve as a key supervisory tool for state regulators. The FDIC Board
approved charging banks an “emergency special assessment” to bolster
its deposit insurance fund. President Obama outlined seven key principles for
transforming the nation’s financial regulatory system, including the creation
of a new comprehensive regulatory system.
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| MARCH | | Senate Banking Committee Chairman Chris Dodd (D-Ct.) announced
a legislative initiative to raise FDIC’s borrowing authority with the Treasury
Department. CBS’s “60 Minutes” ran a segment about how
the Federal Deposit Insurance Corporation handles a bank closing, centered on
the closing of a state-chartered community bank in Illinois that had been closed
by the Illinois Department of Financial Professional Regulation. West Virginia
Governor Joe Manchin announced the selection of Acting Banking Commissioner Sara
(Sally) Cline to be the Commissioner for the Division of Banking. CSBS Chairman-elect
Joseph A. Smith Jr., North Carolina Commissioner of Banks, testified alongside
federal regulators at a hearing on modernizing bank supervision and regulations.
He challenged the assumption that the best solution is to consolidate banking
supervision at the federal level and pointed out that the country is comprised
of thousands of communities where state regulation has a vital role to play. The
economy and regulatory restructuring took center stage at the annual CSBS Washington
Fly-In, with a full schedule of policy briefings and visits with members of Congress.
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| APRIL | | CSBS registered its support of proposed amendments to Regulation
E that would give customers automatic overdraft coverage options. Missouri Governor
Jay Nixon nominated Missouri Deputy Director Rich Weaver for the post of Commissioner
of the Division of Finance. William S. (Bill) Haraf was sworn in as California
Commissioner of Financial Institutions on April 8, having been appointed by Governor
Arnold Schwarzenegger and confirmed by the California State Senate. The
Oklahoma State Banking Department held a dedication ceremony for the department’s
new headquarters building. The U.S. Supreme Court heard oral arguments in the
Cuomo v. the Clearing House Association case involving the question of whether
and to what extent state authorities are able to exercise visitorial powers over
national banks. Testifying on behalf of CSBS before the House Financial Services
Committee, Massachusetts Commissioner of Banks Steven L. Antonakes pressed for
a more coordinated system of oversight to enhance supervision of the mortgage
market.
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| MAY | | According to a report by the Financial Stability Oversight
Board, more than 250 financial institutions that had received preliminary approval
for TARP funds under the Capital Purchase Program withdrew their applications.
The Education Foundation of State Bank Supervisors celebrated its 25th anniversary.
CSBS was saddened over the passing of former FDIC Chairman L. William Seidman
who had served as the 14th chairman of FDIC between 1985 and 1991. Treasury Secretary
Timothy Geithner reopened the application window for banks with assets of less
than $500 million under the Capital Purchase Program. CSBS made some suggestions
for improving the program by expediting the approval process by using state bank
regulators to review applications and determining the viability of an institution
after the CPP investment.”To best understand local needs, local markets
and a diverse system, it is critical to build in the state perspective to our
regulatory system,” said CSBS President and CEO Neil Milner. North Carolina
Commissioner of Banks Joseph A. Smith Jr. was installed as Chairman of the Board
of the Conference of State Bank Supervisors for 2009-2010. He succeeded North
Dakota Commissioner of Financial Institutions Timothy J. Karsky. Iowa Superintendent
of Banking Thomas B. Gronstal was installed as CSBS Chairman-Elect. Other newly-installed
officers included Vice Chairman, Louisiana Commissioner of Financial Institutions,
John P. Ducrest; Secretary Massachusetts Commissioner of Banks Steven L. Antonakes;
and Treasurer, California Commissioner of Financial Institutions William S. (Bill)
Haraf.
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| JUNE | | The FDIC issued final rules to prevent banks that are less
than well capitalized from soliciting deposits at interest rates that significantly
exceed prevailing rates. CSBS had sought a change in the proposed rule to
allow banks time to unwind their brokered-deposit holdings. The Treasury Department
adopted interim rules to govern executive compensation at companies that received
funds under the government’s Troubled Asset Relief Program, creating a special
paymaster to review compensation practices. CSBS noted that 76 percent of the
nation’s banks were state-chartered, according to the FDIC’s Quarterly
Banking Profile. The Obama Administration unveiled its plan to restructure the
oversight of the financial services industry with the creation of new regulatory
authorities, new responsibilities for current regulators, the elimination of the
thrift charter, and the continuation of the dual banking system. The following
week, the House Financial Services Committee held the first of 13 planned hearings
on the Administration’s proposal. Meanwhile, CSBS called on FDIC and others
to extend the Temporary Liquidity Guarantee Program’s coverage of non-interest-bearing
transaction accounts. CSBS President and CEO Neil Milner said the program has
done more to stabilize the banking system and enhance public confidence than any
other program. Maryland Commissioner of Financial Regulation Sarah Bloom
Raskin testified before the Joint Economic Committee in support of provisions
in the Obama Administration’s regulatory restructuring plan that would grant
states the authority to pass laws and write rules that would apply to all financial
firms operating in their states and to examine and enforce these laws. Finally,
the U.S. Supreme Court, in a 5-4 ruling on June 29, ruled that the Office of the
Comptroller of the Currency’s regulations on preemption of state laws went
beyond legitimate interpretation in prohibiting ordinary enforcement of state
laws for national banks.
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| JULY | | House Financial Services Committee Chairman Barney Frank
(D-Mass.) introduced legislation to adopt President Obama’s plan to create
a new Consumer Financial Protection Agency. The Federal Financial Institutions
Examination Council issued a statement reaffirming the unified position of supervisors
on regulatory conversions that regulators will only consider applications undertaken
for legitimate reasons and will not entertain regulatory conversion applications
that undermine the supervisory process. CSBS sent a comment letter to the
Federal Trade Commission supporting the FTC’s initiation of rule-making
on mortgage assistance relief services. CSBS President and CEO Neil Milner encouraged
the FTC to refer to state initiatives designed to protect consumers. The Obama
Administration introduced legislation to merge the Office of the Comptroller of
the Currency and the Office of Thrift Supervision and create a National Bank Supervisor.
Under the bill, the Federal Reserve, FDIC and the National Bank Supervisor would
adopt joint rules on bank regulatory fees, and banks with more than $10 billion
in assets would pay bank examination fees regardless of charter. CSBS Chairman
Joseph A. Smith Jr. testified before the House Financial Services Committee on
the Obama administration’s proposal for financial regulatory restructuring.
Smith agreed that the time has come to fix key regulatory weaknesses but insisted
that the dual banking system be preserved. CSBS submitted a report to Congress
detailing the rapid and successful implementation of provisions required under
the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (the SAFE Act).
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| AUGUST | | The Senate Banking Committee held a hearing on the proposed
creation of a single regulatory agency for the nation’s financial industry
that revealed major differences among federal regulators. FDIC Chairman Sheila
Bair cautioned on the proposed funding of a single agency, saying if the national
bank supervisor is funded through fees on the state-chartered banks it would examine,
‘this would almost certainly result in the demise of the dual banking system.”
CSBS and the American Association of Residential Mortgage Regulators issued the
first Multi-State Mortgage Committee Report, outlining the ongoing effort to promote
greater uniformity and coordination among regulatory agencies to supervise multi-state
mortgage companies. Arizona Governor Jan Brewer announced the appointment of Thomas
L. Wood to be the interim director of the Arizona Department of Financial Institutions,
succeeding Felecia A. Rotellini. President Obama announced his intention to reappoint
Ben S. Bernanke to chair the Federal Reserve Board of Governors. FDIC announced
the extension of special rules that apply to de novo state nonmember institutions
to seven years rather than three years. The District of Columbia announced that
Gennet Purcell would succeed Thomas Hampton as Commissioner of the Department
of Insurance, Securities and Banking.
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| SEPTEMBER | | In Indiana, Gov. Mitch Daniels named former bank executive
David Mills to serve as Director of the Indiana Department of Financial Institutions,
to succeed Judith Ripley. New York Bank Superintendent Richard Neiman, who represents
the states on the Congressional Oversight Panel, posed a number of questions to
Treasury Secretary Timothy Geithner relating to the housing crisis and slow progress
in the mortgage modification program. In addition, he queried Geithner about the
Administration’s proposal to consolidate bank regulation at the federal
level into one agency, effectively taking the Federal Reserve and the FDIC out
of bank supervision. Neiman issued a statement stating that “the creation
of a giant regulatory agency as a means of improving financial regulation relies
on the faulty assumption that regulatory consolidation leads to a stronger and
safer banking system.” Massachusetts Commissioner of Banks Steven L. Antonakes
told Congress that Community Reinvestment Act examinations should be commensurate
with a bank’s market share, adding that a more robust annual examination
process should be undertaken for the top 20 bank lenders in the country. “Inconsistent
implementation of the federal CRA law is one more area in which the nation’s
community banks are held to a different standard than the nation’s largest
institutions,” he stated. CSBS Chairman Joseph A. Smith Jr., testifying
before the House Financial Services Committee, called “too big to fail”
a dire threat to our free enterprise banking system.
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| OCTOBER | | Senate Banking Committee Chairman Christopher Dodd (D-Conn.)
continued to push for consolidation of federal regulators as part of the industry
reform package. CSBS President and CEO Neil Milner responded that, regulatory
consolidation leads to industry consolidation. “A monolithic regulator would
threaten economic growth and stability by undoing the diversity of the banking
industry.” The FDIC issued a proposal to require banks to prepay their estimated
quarterly risk-based assessments for the fourth quarter of 2009 and for all of
2010, 2011 and 2012 to bolster the Deposit Insurance Fund. The House Financial
Services Committee began markups on four regulatory reform bills. First on tap
was the bill to create a new regulatory scheme for over-the-counter derivatives,
followed by a bill creating a new Consumer Financial Protection Agency. CSBS Chairman
Joseph A. Smith Jr. told a Senate Banking panel that the current economic conditions
are deleterious to the banking industry nationwide and community banks in particular.
He called the Troubled Asset Relief Program as a “lost opportunity for the
federal government to support community and regional banks and provide economic
stimulus. He pointed out that the federal government took unprecedented steps
to protect the largest institutions, “but has not treated the rest of the
industry with the same expediency, creativity or fundamental fairness.”
Closing out the month, the House Financial Services Committee Chairman Barney
Frank (D-Mass.) put a financial regulatory reform bill on the fast track. The
bill would create a systemic risk regulatory structure for the financial industry.
Frank indicated his plan to pass a bill before year-end.
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| NOVEMBER | | The House Financial Services Committee began marking up
the Financial Stability Improvement Act of 2009. Meanwhile, Senate Banking Committee
Chairman Christopher Dodd (D-Ct.), introduced a separate bill in discussion draft
format the second week of November. The 1,136 page discussion draft drew mixed
reactions from major industry trade groups and opposition from the Republicans
on the committee. CSBS released a statement saying the bill’s provisions
to consolidate supervision into one monolithic federal agency would likely “create
a too-big-to-fail regulatory agency that reinforces a too-big-to-fail industry.”
A week later, the Senate Banking Committee aired the Dodd bill, revealing a deep
divide between Democrats and Republicans on many details of how to regulate the
financial industry.
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| DECEMBER | | The House Financial Services Committee approved the Financial
Stability Improvement Act by a vote of 31-27 to create a systemic risk regulatory
structure for the financial industry. The vote wrapped up work on nine financial
reform bills passed by the committee over the past several weeks. The legislation
was then combined into one bill – the Wall Street Reform and Consumer Protection
Act of 2009. With three days of floor debate, the House approved the 1,279 page
bill by a vote of 223-202. The Treasury Department extended the Troubled Asset
Relief Program until October 2010. The Senate Banking Committee voted 16 to 7
in favor of the nomination of Ben Bernanke for a second term as chairman of the
Federal Reserve Board of Governors.
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| More to come in 2010! | | A New Year’s
Greeting
Closing the book on 2009, all of us at the Conference of State Bank Supervisors
look
forward to serving you in 2010 and send our best wishes for a very happy new year.
Conference
of State Bank Supervisors
Mary White, Editor
Teresa Dean, Contributing
Writer
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