April 2, 2004

"Money frees you from doing things you dislike. Since I dislike doing nearly everything, money is handy." - Groucho Marx (1890-1977)

We were starting to get worried. Someone had purchased a winning ticket in the Virginia Lottery seven weeks ago, but had not shown up yet to claim the $239 million jackpot. Even though the Commonwealth of Virginia could have used the dough, we really wanted it to go to its rightful owner. No fooling, on April Fool's Day, a 69-year-old truck driver with his wife of 35 years by his side, came forth to claim their prize. He chose a lump sum payout, which will total around $100 million once state and federal taxes are deducted. The winners, J.R. and Peggy Triplett, appeared yesterday at a news conference, probably something they weren't accustomed to. Mr. Triplett told reporters that after finding out that he had the winning ticket, he kept a long-held promise to buy a tombstone for the grave of a childhood friend who had died many years ago. Mr. Triplett said he had always been a poor man. But he had been buying lottery tickets for the past 25 years, just in case luck would come his way. And it did sometime during the week of Valentine's Day 2004. How sweet it is.


High school students are becoming slightly more knowledgeable about financial matters, according to a survey by the Jump$tart Coalition for Personal Financial Literacy. The survey of more than 4,000 high school students in 33 states measured 12th graders' knowledge on the basics of personal finance. On average, students who participated in the 2004 survey answered 52.3 percent of the questions correctly, up from 50.2 percent in 2002 and 51.9 percent in 2000. The survey found parents had a great role in score results with 58.3 percent of the students saying they learned financial skills at home, verses 19.5 percent at school, and 17.6 percent from experience. Nearly 78 percent of the students have a savings and/or checking account with a bank. There was virtually no difference in performance by gender, but average scores were higher for white students than other races. A summary of the survey is available here.

The Conference of State Bank Supervisors is a Jump$Start partner. CSBS President and CEO Neil Milner encourages all CSBS members to get involved in a local effort to improved financial literacy education. "All sorts of financial heartbreaks could be nipped in the bud by improved financial education. Those of us in the banking industry share a common responsibility for better consumer education. CSBS commends Jump$Start for raising public awareness of how important financial literacy is in this day and age," he said.


The House Financial Services Committee questioned Comptroller of the Currency John D. Hawke Jr. for more than two hours Thursday at an oversight hearing into the OCC's recent rulemaking that exempts national banks and their operating subsidiaries from state consumer protection laws and licensing requirements. Next week, the Senate Banking Committee will hold an oversight hearing into the matter on Wednesday, April 7.

While Committee Chairman Michael G. Oxley (R-Ohio) opened the hearing with a statement indicating his support of the Comptroller's preemption ruling, the hearing quickly turned more contentious when Ranking Minority Member Barney Frank (D-Mass.) began his questioning after the Comptroller's opening statement. Rep. Frank noted that the OCC had issued its ruling in spite of requests by Committee members from both sides of the aisle to wait for Congress to hold a public hearing on the proposal. He then aired an introductory clip from a videotape featuring Mr. Hawke touting how his agency could assist banks and insinuated that the Comptroller's action was intended to lure larger state-chartered banks to convert to national banks. Frank opined that the OCC should restrict itself to regulating existing national banks instead of advertising for national bank conversions. Mr. Hawke replied that many state banking departments were promoting the state charter's advantages, including lower examination costs, adding that competition between charters was "the essence of the dual banking system."

Committee members lined up to protest the Comptroller's decision and the fact that the rules were finalized in early January while Congress was in recess. Reportedly 20 or so of the 70 Committee members were present for the hearing, with twice as many Democrats as Republicans in attendance. Several bipartisan letters have gone out questioning the Comptroller's actions. The Committee's Vice Chairman, Rep. Sue W. Kelly (R-N.Y.) chaired an Oversight and Investigations Subcommittee hearing into the matter in late January.

Rep. Kelly and Rep. Louis Gutierrez (D-Ill.) announced at Thursday's hearing they have asked the General Accounting Office to examine the OCC's preemption decision and its timing.

The transcript from Thursday's hearing is not yet available. Opening statements from Committee Chairman Michael Oxley and Comptroller Hawke are posted on the Committee's Web site.

The Conference of State Bank Supervisors is staunchly opposed to the OCC's preemption rule and sees it as a serious threat to state-chartered banking. "If OCC is allowed to set national lending standards absent Congressional action, a state's ability to protect its citizenry is seriously undermined," CSBS President Neil Milner said.

Idaho Director of Finance Gavin M. Gee will testify on behalf of CSBS at the Senate Banking Committee oversight hearing next week. Gee is CSBS immediate past chairman.


If you are planning to attend the Conference of State Bank Supervisors' 2004 Annual Conference next month and have not made your hotel reservations with the Westin Mission Hills Resort, you should do so before the cut off date of this Sunday April 4. This is the last day the hotel will honor our conference group rate of $205. To make your reservations, please call the Westin Mission Hills Resort at (760) 328-5955. For additional information about the CSBS 103rd annual gathering, click here. We look forward to seeing you in Rancho Mirage, CA.


The Senate this week approved the nomination of Alphonso R. Jackson to be the secretary of Housing and Urban Development. Jackson has been the acting secretary of HUD since Mel Martinez stepped down in December to run for a Senate seat in Florida. His nomination will now be voted on by the full Senate. Jackson was unanimously confirmed by the Senate in June 2001 as HUD's deputy secretary and chief operating officer. In that position, he managed the daily operations of the $32 billion agency. Before coming to HUD, Jackson was president of American Electric Power-TEXAS, a $13 billion utility company in Austin, Texas. To read Jackson's biography, click here.


Connecticut: Connecticut State Banking Commissioner John P. Burke imposed a $100,000 fine on American Express Financial Advisors Inc. The action settles an investigation into the possible violations of the Connecticut Uniform Securities Act by American Express Financial Advisors Inc. The Department of Banking's Securities and Business Investments Division found that American Express used a wrap exit/purchase policy that penalized its representatives a $1,000 per occurrence for moving clients' funds, held less than 36 months, from a mutual fund to a wrap account. A wrap account is an investment product that charges a fee based on a percentage of assets under management. During the investigation, the division also discovered that American Express provided the agency with inaccurate information. In agreeing to the settlement, American Express did not admit or deny the Commissioner's findings. Part of the settlement includes reimbursing 32 representatives $42,000. More information about the action may be found here.

Idaho: Idaho Department of Finance Director Gavin Gee issued a cease and desist order against a fraudulent credit union on March 22. The order stops five individuals and one company from fraudulently using the name of a credit union to solicit consumer loans in Idaho. This is the second order issued recently by the department against a phony credit union. The phony credit union used the name "Credit Union One" of Toronto, Canada. The phony company in Canada is not related to or endorsed by a legitimate credit union in Michigan that has the same name. Idaho consumers who responded to the ad were told that as a condition for receiving a loan, they must provide copies of their drivers' licenses or Social Security cards and pay $1,450. Idaho consumers who paid the money were asked to send an additional $465 payment as an "international border tax" premium. Gee said many state financial service regulators have reported similar instances of phony credit unions seeking to defraud consumers. The Justice Department and the FBI are working to end the scam. A press release about the Department's action is available here.

South Dakota: South Dakota Gov. Mike Rounds has signed legislation that allows financial institutions to be organized as limited liability companies. The bill takes effect July 1.


FDIC: FDIC published its quarterly report profiling the conditions of banks in each state on Thursday. The report is available on the FDIC's Web site at http://www.fdic.gov/bank/analytical/stateprofile/index.html.

FFIEC: The Federal Financial Institutions Examination Council on Wednesday issued revised guidance for examiners, financial institutions and technology service providers on the risks associated with retail payment systems. The "Retail Payment Systems Booklet" covers risks and risk-management practices in such areas as electronic benefit transfers, card-based electronic payments and automated clearing house transactions. More information may be found at http://www.ffiec.gov/press/pr033104.htm.

FTC: The Federal Trade Commission received 34,543 complaints about third-party debt collectors in 2003, which represents more complaints than any other industry, the agency said in publishing its report on the Fair Debt Collection Practices Act on March 23. Consumers' No. 1 complaint in 2003 was repeated calls from collectors. The agency received 8,559 complaints about frequent calls, up from 4,570 in 2002. Another 5,650 consumers claimed that collectors used obscene and abusive language during the calls. The number of consumers saying they received false threats rose by 41 percent to 3,364. The number of complaints about collectors calling places of employment also increased by 33 percent in 2003 to 3,101. For more information, click here.

NCUA: National Credit Union Chairman Dennis Dollar announced on Wednesday that he is leaving his post, effective April 30. Dollar said he decided to leave after serving a year past the end of his official term because the "timing is right for me and my family." President George W. Bush selected Dollar as chairman in 2001. See announcement...

EDITOR'S NOTE: For a more detailed review of regulatory activity, refer to the Regulatory Newsbytes section of our website.


April 3-19
The House of Representatives is not in session during the spring district work period.

April 6
The FDIC Board will meet in open session. Items on the discussion agenda include a proposed rule on whether funds underlying stored value cards qualify as insurable "deposits"; a proposed rule on medical privacy regulations under the Fair and Accurate Credit Transactions Act of 2003. - 10 a.m., FDIC Headquarters 6th Floor Board Room, 550 Seventeenth Street NW, Washington, DC.

April 7
The Senate Committee on Banking, Housing, and Urban Affairs will meet in open session to conduct a hearing on "The Review of the National Bank Preemption Rules." The hearing will feature testimony from Comptroller of the Currency John D. Hawke Jr., Idaho Director of Finance Gavin M. Gee, North Carolina Attorney General Roy Cooper, Center for Responsible Lending CEO Martin Eakes, Consumer Bankers Association President Joe Belew, George Washington University Associate Professor of Law Art Wilmarth, Secura Group Chairman William M. Isaac, National Association of Realtors President Walt McDonald, and American Bankers Association Director of Regulatory and Trust Affairs James McLaughlin. - 2 p.m., 538 Dirksen Building.

April 8
The Senate Committee on Banking, Housing, and Urban Affairs will hold the 10th in a series of hearings on current investigations and regulatory actions regarding the mutual fund industry. This hearing will focus on the views of the Securities and Exchange Commission. SEC Chairman William H. Donaldson is scheduled to testify. - 10 a.m., 538 Dirksen Building.


"It is not in the interest of the financial community to use your muscle to push something through that is inherently unstable because of the degree of resistance it has engendered." -- Rep. Barney Frank (D-Mass.), Ranking Minority Member of the House Financial Services Committee, as quoted in Thursday's edition of CongressDaily's article on the Committee's hearing on the OCC's recent decision to exempt national banks and their operating subsidiaries from state laws and regulations.

Mary White, Editor
Teresa Dean, Contributing Writer