“The man who complains about the way the ball bounces is likely to be the one who dropped it.” - Lou Holtz.
College football is finally back, which inspired the quotation by legendary coach Lou Holtz. Perhaps this observation is also relevant to our financial crisis, especially as the FDIC begins their efforts to require the nation’s largest banks to create “living wills” to help make their possible dissolutions more orderly. Undoubtedly, this requirement of the Dodd-Frank Act will be unpleasant for the mega-banks, but do they really have the right to complain?
Former Louisiana Commissioner Mourned
Fred C. Dent, Jr. passed away Sunday, September 12, 2010 at the age of 73. Dent served as the Commissioner of Financial Institutions for the state of Louisiana from 1987-1991. A well known Baton Rouge businessman, Dent most recently was the head of the anti-tax group Tax Busters. Dent served as a captain in the U.S. Army Special Forces, or Green Berets, and worked in President John F. Kennedy’s emergency planning office in the early 1960s. Dent is survived by his wife, Elizabeth; three children, Catherine, Charlie and Fred; and his stepdaughter, Judi Arnold Doerle.
Former Iowa Superintendent and IBA President Passes Away
Edward Lane Tubbs passed away September 17 at the age of 90. Tubbs began his banking career in 1959 when he joined the Jackson State Bank in Maquoketa, Iowa. Also in 1959 he was a member of the first agricultural delegation from the U.S. to the Soviet Union. He later made two trips to Russia: the first as a member of the Friendship Force in 1985, and the second representing the IBA and Iowa State University to assist in their transition from a central to a private banking system in 1993. He served as Treasurer, then President, of the Iowa Bankers’ Association and a director of the American Bankers’ Association. Tubbs was Superintendent of Banking for the state of Iowa from 1987-1989. Tubbs was preceded in death by his wife Grace and is survived by his wife, Elaine; and sons Steven, Alan, and William.
California Commissioner Bill Haraf Named to Financial Services Oversight Board (FSOC)
Commissioner Bill Haraf of California will represent state bank supervisors on the newly formed FSOC. “Bill’s tremendous career in academia, the private sector, with a respected think tank, and both federal and state government have given him vast knowledge and understanding of our financial system,” said Neil Milner, CSBS President and CEO. “His perspective and input will be critical as the FSOC seeks to identify and mitigate potential risks to the stability of the United States financial system.” The recently enacted Dodd-Frank Act authorizes a state banking supervisor, a state insurance commissioner, and a state securities commissioner to serve as non-voting members of the FSOC. The FSOC is charged with coordinating financial regulators in order to identify systemic risks to the nation’s financial stability. The first meeting of the FSOC will take place on October 1, 2010. Read more
Obama Taps Elizabeth Warren to Set Up Bureau of Consumer Financial Protection
President Obama selected Elizabeth Warren to set up the new CFPB created by the Dodd-Frank Act. Warren will serve as an assistant to the president and as a special advisor to Treasury Secretary Geithner. The White House announcement can be viewed here
The appointment came the same week Geithner announced the date when the CFPB will begin official operation. In a notice in The Federal Register, the Treasury Department said on July 21, 2011 certain authorities currently carried out by federal agencies will be transferred to the CFPB. Read more
Warren wasted no time getting to work this week by meeting with bank trade groups, including the Oklahoma Bankers Association (who also met with CSBS staff this week), and moving to address a top priority for the CFPB: merging mortgage disclosure requirements of RESPA and TILA. During a meeting with mortgage industry representatives, consumers, housing counselors and financial literacy experts, Warren and Geithner unveiled a draft 4-page disclosure form, which can be found here
Small Business Lending Bill Heads to White House for Signature
Thursday, the House of Representatives passed the small-business lending bill (H.R. 5297) by a vote of 237-187. With Senate passage last week, the bill now goes to the President for his signature. The bill creates a $30 billion fund to provide capital for banks with assets under $10 billion to increase their small-business lending. This program will be administered by the Treasury Department in consultation with the federal banking agencies. Additionally, the requirements of this program include consultation with state banking supervisors when an applicant is a state-chartered institution. Capital treatment for this program remains to be determined, though members of Congress have urged capital provided under this program to be treated as Tier I capital. The bill also creates a State Small Business Credit Initiative that provides federal funding for state small business lending funds.
John Prendergast Joins CSBS
John Prendergast has joined CSBS as Vice President of Non-Depository Supervision. In this role, Prendergast will be responsible for enhancing and coordinating state supervision of non-depository financial services providers, such as mortgage lenders and money services businesses. Prior to joining CSBS, Prendergast was the Chief Risk Officer for the Massachusetts Division of Banks, a post he held since 2006. “John is highly regarded as a national expert and leader in non-depository supervision,” said Neil Milner, CSBS President and CEO. “His experience and knowledge of the industry and its supervision make him a tremendous asset to CSBS as we continue to facilitate comprehensive and seamless state supervision of insured depository institutions and non-depository financial services providers alike.” Read more
Around the States
Kansas: Kansas Office of the State Bank Commissioner has received a certificate of accreditation, certifying that the department maintains the standards and practices in state banking supervision set by the organization’s Accreditation Program. Read more
North Carolina: Advance America has agreed to pay $18.75 million to settle a class action lawsuit alleging it charged illegal fees and interest. The settlement still requires court approval, but would resolve claims that Advance America’s lending practices violated state laws and constituted unfair and deceptive trade practices. After a ruling by the state commissioner of banks, Advance America announced in December 2005 that it was no longer involved in payday loans. The state attorney general has also reached settlements with three other major payday lenders that required them to cease such loans. As part of the settlement agreement, Advance America denied it violated state law. Read more
Around the Agencies
Federal Reserve: The Federal Open Market Committee voted to retain the target range for the federal funds rate at 0 to 1/4 percent, saying that the pace of recovery and employment had slowed in recent months. Kansas City Federal Reserve Bank President Thomas M. Hoenig continued to vote against the low rate, saying it was no longer warranted and would lead to future imbalances that undermine stable growth. Read more
FFIEC: The Federal Financial Institutions Examination Council announced the availability of data on mortgage lending transactions at 8,124 U.S. financial institutions covered by the Home Mortgage Disclosure Act (HMDA). The HMDA data reflects a growing reliance on loans backed by FHA insurance during the recent mortgage market difficulties. First-lien lending for home purchases backed by Veterans Administration guarantees also increased markedly, although VA-backed lending is much smaller in scope than FHA-backed lending. Read more
FHA: The Federal Housing Administration announced a new modified version of its reverse mortgage product, called Home Equity Conversion Mortgage Saver. The new option reduces upfront loan closing costs for homeowners who want to borrow smaller amounts than what is available with the standard loan. The option will become available on October 4, 2010. Read more
FTC: The Federal Trade Commission issued a proposal to ban misrepresentations for all mortgages and allow the agency and the states to seek civil money penalties against those who violate the rules. The proposal would prohibit all material misrepresentations in advertising about consumer mortgages and provides 19 examples of misrepresentations about fees, costs, obligations and other aspects of credit that would be violations. The rules would apply to mortgage lenders, brokers and servicers; real estate agents and brokers; advertising agencies; home builders; lead generators; rate aggregators; and other entities. Read more
NCUA: The National Credit Union Administration has approved a final rule setting guidelines for credit unions to offer small-dollar, short-term loans and set share insurance premiums at 12.4 basis points beginning in November. The rule will allow credit unions to offer small-dollar, short-term loans to their members as an alternative to non-bank payday lenders that charge higher interest rate and fees.
September 26—September 28: Bank Directors Seminar. The Graduate School of Banking at Colorado and CSBS join forces to deliver the best and most effective bank director training.
September 28: NMLS Training Workshop—Managing LOs. The Nationwide Mortgage Licensing System is sponsoring this professionally-moderated conference call and webinar on managing loan officers in NMLS.
September 29: The House Financial Services Committee holds a hearing on “The Future of Housing Finance—A Review of Proposals to Address Market Structure and Transition.”
September 30: The Senate Banking Committee holds a hearing on “Implementing the Dodd-Frank Wall Street Reform and Consumer Protection Act.” Witnesses include Sheila Bair, Ben Bernanke, Gary Gensler, Mary Schapiro, John Walsh and Neal Wolin.
“We’ve had a Treasury Secretary from Goldman Sachs under a Democratic President and a Treasury Secretary from Goldman Sachs under a Republican President. The outcomes were not good.” – Federal Reserve Bank of Kansas City President Tom Hoenig in an interview with Bloomberg. Hoenig has been a vocal critic of the excesses of Wall Street and has called for breaking up the nation’s largest institutions.
Catherine Woody, Editor
Teresa Dean, Contributing Writer