March 25, 2005

"Ideas are like rabbits. You get a couple, learn how to handle them, and pretty soon you have a dozen." - John Steinbeck

Back in the '80s, we remember Sears was first thinking about getting more into financial services. We used to talk about "buying your stocks where you buy your socks." Through the years, we've often had discussions with bankers about what new services they'd like to offer. This question always provoked the "hmmm look" as bankers scratched their heads trying to come up with ideas. A few banks started selling coffee (or giving it away), and we even heard of one that had a gas pump. But this week, the Credit Union Journal tells us that a Michigan credit union (through a CUSO) has opened a car lot to sell vehicles on which the leases have expired. We thought that was a novel idea, although we aren't sure whether the banking-powers-that-be in Washington might deem it to be a no-no mixing of banking and commerce. But for the life of us, we can't figure out why banks can't offer some value-added services. As we finish up our business at the drive-in facility, we'd love to run our car through a car wash. What if a bank partnered with a fast-food outlet and we could grab a burger with our deposit slip. What about offering manicures in the lobby? Or haircuts and shoe shines? Or a photographer to capture our smiling faces? The possibilities are seemingly endless. The FDIC says it will look at applications on a case-by-case basis. Come to think of it, we could use a good manicure.


The federal banking regulators issued joint guidance on Friday to help financial institutions understand their responsibilities under the Gramm-Leach-Bliley Act to respond appropriately when there is an incident involving unauthorized access to or use of customer information that could result in substantial harm or inconvenience to a customer. The final guidance gives financial institutions greater flexibility in designing a response program than the agencies had originally proposed. Under the guidance, some of the required elements of a bank's program include: assessing the scope of the incident, notifying the primary federal regulator, notifying law enforcement when criminal violations are involved, containing the situation and notifying customers when warranted. The agencies publishing the guidance were FDIC, the Federal Reserve, the Office of Thrift Supervision and the Office of the Comptroller of the Currency. For more information, click here...


Federal financial regulators issued joint guidance on Tuesday on appraisal independence through a series of questions and answers. The document provides clarification of existing standards in such areas as selecting an appraiser, ordering an appraisal, accepting a transferred appraisal and reviewing appraisals. For example, one of the questions asks if a staff appraiser or an appraisal company affiliated with the bank can be considered independent since the regulated institution compensates them? The regulators said yes, if the appraiser is independent of the lending, investment and collections functions and not involved in the approval of the transaction. The document was published by FDIC, the Federal Reserve, the Office of Thrift Supervision, the Office of the Comptroller of the Currency and the National Credit Union Administration. To access the guidance, click here...


The most common reason banks switch their charters is to align holding company banks under one regulator, according a report published by FDIC's Ombudsman's Office on Monday. The office contacts banks that have recently converted their charters each quarter and asks them why. During 2004, the office discovered the charter conversion reasons of 69 banks with 34 converting to charters regulated by FDIC and the states and 35 converting from FDIC to other regulators. Some of the other reasons for converting to FDIC were: regulation by FDIC was "less expensive" and more "banker friendly." The report found FDIC was viewed as more helpful with local market knowledge and more lenient on market share increases and Bank Secrecy Act compliance. Some of the other reasons given for switching from FDIC as a regulator were: thrift charters allowed more flexibility for expanding and branching within a mutual holding company; federal charters involved less regulation; and other regulators were "service oriented" and "communicate more effectively." The report may be found here...


John B. Taylor, who has served as Treasury Undersecretary for International Affairs since the spring of 2001, announced plans to step down on April 22 to return to Stanford University.

Treasury Secretary John Snow commended Taylor's participation in the Administration's efforts to fight terror and spread freedom around the world. "John was part of the creation of an international coalition to freeze terrorist assets in the weeks following September 11, 2001. He played a key role in the successful creation of a new currency in Iraq . He also helped shepherd international agreements to reduce Iraq's debt by 80 percent and led efforts to establish an historic new economic engagement with the Broader Middle East and North African countries."

Snow's full statement may be found at:

President Bush said he will nominate Timothy D. Adams to succeed Taylor. Adams, 43, recently served as policy advisor for the Bush-Cheney 2004 campaign. He previously served as Chief of Staff at the Department of the Treasury. Prior to joining the Administration, he co-founded and served as managing director of The G7 Group, a Washington, D.C. based consulting firm. Adams also served as deputy associate director of the Office of Policy Development at the White House during President George H. W. Bush's Administration. He received his bachelor's degree and two master's degrees from the University of Kentucky.

Also this week, the White House said President Bush plans to designate Arnold Havens as acting deputy Treasury secretary. Havens has been Treasury general counsel since December 2003.


State tax revenues rose 7.8 percent between the fourth quarter of 2003 and 2004, which was the strongest fourth quarter growth since 1991, according to a report released by The Nelson A. Rockefeller Institute of Government. The growth was boosted 4.9 percent by inflation and .05 percent by new tax law changes creating a real net gain of 2.3 percent. The report found that all three major sources of tax revenue showed strong growth with the largest gains - 27 percent - recorded by corporate income tax. Personal income tax revenue rose by 8.8 percent, and sales tax revenue increased 6 percent. The report also found that revenue growth was strongest in the far West at 12.1 percent and weakest in the Great Lakes states at 2.9 percent. Employment grew in all but two states. Thirty-one states had employment growth of 1 percent or more, up from 24 states in the third quarter. Additional information about the report is posted here...


The Senate last week unanimously confirmed Ronald A. Rosenfeld as a director of the Federal Housing Finance Board for a term that will end on Feb. 27, 2009. Rosenfeld has served as chairman of the board since his recess appointment by President Bush on Dec. 15, 2004. Previously, Rosenfeld was president of the Government National Mortgage Association, known as Ginnie Mae. From 1995-1998, he was the secretary of commerce for the state of Oklahoma. The announcement is posted on the FHFB Web site.


Wisconsin: Patricia D. Struck, administrator of the Wisconsin Department of Financial Institutions Division of Securities, warned Wisconsin investors about the most common ploys to con them out of hundreds of millions of dollars. The North American Securities Administrators Association listed the top 10 tricks of con artists. Some of the ploys include: Ponzi schemes where early investors are paid with money from later investors; unlicensed individuals selling securities; investment products that not have been registered through stringent state requirements; and promissory notes that are promises worth less than the paper on which they are printed. Senior citizens are often the targets of investment fraud, and the pitches usually involve triple-digit returns and risk-free guarantees. The advisory may be found online...


FDIC: Banks may be missing opportunities to lend to creditworthy Hispanics because of information gaps created by language and cultural differences, FDIC said. The agency's FYI publication looked at Hispanic information gaps identified in several studies. Hispanics often think their credit and job histories have to be perfect to qualify for a mortgage. The report said Hispanic focus groups in Mobile, Ala., and Las Vegas found that most participants did not know how to establish a credit history. Another study identified unfamiliarity with the U.S. credit system and lack of a credit history as two of the greatest barriers to immigrant homeownership. The publication outlined some of the numerous and often free resources available to bankers to reach out to prospective Hispanic homeowners. For more information about the FDIC's report, click here...

FDIC/FinCEN: The FDIC and the Financial Crimes Enforcement Network (FinCEN) are co-sponsoring a symposium to discuss anti-money laundering and anti-terrorist financing. On Wednesday, April 6, in Austin, Texas. Keynote speakers will be Michael J. Zamorski, FDIC director of supervision and consumer protection, and William J. Fox, FinCEN director. Three panels of experts from the banking industry, federal and state government and law enforcement will discuss current challenges in combating money laundering and terrorist financing. The contact for further information or registration is Cindy Scott, special assistant to the FDIC's Regional Director in Dallas,, (972) 761-2033.

FRB: The Federal Reserve signaled to Citigroup that it might need to slow down on its merger and acquisition activities and concentrate on securities-related compliance issues. The Federal Reserve delivered this message in approving the company's acquisition of First American Bank SSB, Bryan, Texas. Citigroup, with assets of approximately $1.48 trillion, is the largest insured depository institution in the United States. First American Bank, with about $3.5 billion in assets, is the 18th largest institution in Texas. In the approval letter, the Federal Reserve said it is monitoring investigations of Citigroup's securities-related activities. The Federal Reserve said it expects Citigroup's senior management and board to concentrate on compliance issues. The agency added: "it is important that management's attention not be diverted from these efforts by the demand that mergers and acquisitions place on management resources." For more information about the Board's action, click here...

FTC: The Federal Trade Commission shut down AmeriDebt, Inc.'s debt management operation as part of a settlement that charged the company with deceiving consumers into paying at least $170 million in hidden fees. FTC alleged that the company misrepresented that it was a nonprofit credit counseling organization that would teach consumers how to manage their finances for no up-front fee. The settlement requires AmeriDebt to transfer all current clients' accounts to a third party and bars the company from participating in any aspect of the credit counseling business in the future. FTC said that rather than operating for charitable purposes as advertised, AmeriDebt was funneling profits to affiliated for-profit entities, including DebtWorks and Andris Pukke. Notice about the FTC's action is posted here...

OTS: The Office of Thrift Supervision is looking for ideas on how it can reduce the compliance burden on bank collection requirements. Specifically, OTS is looking for input on its flood hazard determination form. The effort is part of the requirements of the Paperwork Reduction Act. Comments are due by May 23. The announcement may be found at:

EDITORS NOTE: For a more detailed review of regulatory activity, refer to the Regulatory Newsbytes section of our Web site. 


March 28-April 4
Congress continues in recess all week.

March 28-April 4
The Conference of State Bank Supervisors is working all week.


The FDIC has announced plans to hold a public hearing May 24 on a petition filed by the Financial Services Roundtable seeking FDIC action to preempt host-state laws for state banks that have interstate operations.

FDIC Chairman Don Powell, quoted in the March 24 American Banker article as to whether national preemption is a negative for state-chartered banks: "Someone thinks it is or they wouldn't have petitioned us. They want choice. I love choice."

Mary White, Editor
Teresa Dean, Contributing Writer