August 8, 2008

"If it keeps up, man will atrophy all his limbs but the push-button finger." - Frank Lloyd Wright

Some states are now passing laws against text-messaging while driving. What’s amazing that it takes a law to dissuade people from endangering themselves and others. We question whether text-messagers will obey such a law in the first place. Here in Washington, the city passed a law last year making it illegal to use a cell-phone while driving. No one seems to be obeying that law either. We venture out at lunch, and it seems like one out of every two people are on their cell phones or text-messaging as fast as their thumbs will go. We observed one guy who was so busy text-messaging that he walked right into the busy intersection oblivious to the fact that he didn’t have the walk light. Nearly every day we see people trying to text message and drive at the same time, weaving and veering and generally being a nuisance. Back in the olden days, we joked about people who couldn’t walk and chew gum at the same time. Nowadays we just wish they were chewing gum instead.

Virginia Banker Takes Seat On Federal Reserve Board of Governors

Elizabeth A. (Betsy) Duke on Tuesday took the oath of office as a member of the Board of Governors of the Federal Reserve System. The oath was administered by Chairman Ben S. Bernanke in the Chairman's office. Ms. Duke was nominated on May 15, 2007 by President George W. Bush to a seat vacated by the resignation of Susan Schmidt Bies on March 30, 2007. She was confirmed by the Senate on June 27, 2008. She participated in Tuesday’s meeting of the Federal Open Market Committee. Her term will expire January 31, 2012.

At the time of her nomination, Duke held the position of senior vice president and chief operating officer of TowneBank, a state-chartered bank in Hampton Roads, Va. She is currently the only Board member with a background in commercial banking. 

Duke is well-known in banking circles, having served as chairman of the American Bankers Association in 2004-2005. She also served as president of the Virginia Bankers Association in 1999 and served on the board of the Federal Reserve Bank of Richmond from 1998 to 2000. Before joining TowneBank in 2005, she served as executive vice president of the merger project office at Wachovia Bank. Previously, she served as executive vice president of community bank development of SouthTrust Bank. Earlier in her career, Duke served as president and chief executive officer of Bank of Tidewater, Virginia Beach, Va., which she helped organize.

She received her bachelor's degree from the University of North Carolina at Chapel Hill and her MBA from Old Dominion University. She is also a graduate and former instructor of the Stonier Graduate School of Banking. Her biography may be found here.

CSBS President and CEO Neil Milner said, "Betsy Duke brings a strong community banker perspective to the board’s policy-making at a critical time for the nation’s financial industry. CSBS looks forward to working with her on the many issues at hand."

Tom McVey Joins CSBS Professional Development Team

The Conference of State Bank Supervisors announced this week that C. Thomas McVey Jr. has joined its Professional Development Division as Director of Learning Services.

"Tom brings a wealth of experience to CSBS, and we are happy to add him to our staff of seasoned professionals," said CSBS President and CEO Neil Milner.

CSBS Vice President Sebastien Monnet noted that Tom’s extensive experience in financial supervision will further round out CSBS’s professional development program in its mission to meet the expanding needs of state banking departments.

Before joining CSBS, McVey was with the West Virginia Division of Banking for 15 years, where he served as chief examiner in the department’s bank/credit union group and the MSB group, which oversees money transmitters. Earlier in his career, McVey was an account manager with NCR’s Financial Systems Group and also spent 10 years in banking, as a retail banking officer and in mortgage lending.

McVey is a certified examination manager and has been an instructor for CSBS and the Money Transmitter Regulators Association for the past eight years. He holds a Banking and Finance degree from West Virginia University and is a graduate of the West Virginia School of Banking.

CSBS Generally Supportive of UDAP Proposal

The Conference of State Bank Supervisors expressed general support for the proposal issued by the Federal Reserve Board, the Office of Thrift Supervision, and the National Credit Union Administration to prohibit unfair or deceptive acts and practices in connection with consumer credit card accounts and overdraft services for deposit accounts. CSBS also urged the agencies to ensure the proposed rule does not have the unintended consequence of limiting the availability of credit for qualified borrowers. In its comment letter, CSBS President and CEO Neil Milner said credit card users need clear, concise, comprehensible and timely information about fees. The letter spoke in support of the proposal's "time to make payment" provision that would require statements to be mailed or delivered to consumers at least 21 days before the payment due date. In addition CSBS suggested the agencies require credit card issuers to disclose their payment allocation practices. CSBS also supports the proposed requirement of a 45-day notice for rate increases on outstanding balances. CSBS also supported prohibiting institutions from assessing over-the-credit-limit fees if the limit was exceeded due solely to a hold. Likewise, CSBS agreed with the proposal's prohibition of overdraft fees based on a hold. CSBS also voiced strong support for consumers to be allowed to opt out of an institution's overdraft service.

Florida Bank Closed Friday; Reopened Monday Under SunTrust Bank Banner

The Commissioner of the Florida Office of Financial Regulation closed First Priority Bank, Bradenton, Fla., on Friday and named FDIC as receiver. FDIC said it has entered into a purchase and assumption agreement with SunTrust Bank in Atlanta to assume the insured deposits of First Priority. The six branches of First Priority will reopen today as branches of SunTrust Bank. First Priority Bank opened in December 2003 and operated six offices at the time of closure.  Loan losses related to the real estate and general market slowdown depleted First Priority Bank’s capital. On June 30, 2008, First Priority Bank had $258.6 million in total assets and $1.5 million in capital.  First Priority Bank is the first Florida state chartered bank to fail since 1992. As of June 30, First Priority had total assets of $259 million and total deposits of $227 million. At the time of closing, there were approximately $13 million in uninsured deposits held in approximately 840 accounts that potentially exceeded the insurance limits. The agency said SunTrust agreed to assume the insured deposits for no premium. SunTrust Bank also will purchase approximately $42 million of the failed bank's assets. The assets are comprised mainly of cash, cash equivalents and securities. In a separate agreement, LNV Corp., Plano, Texas, purchased $14 million in First Priority's assets. LNV is a subsidiary of Beal Bank Nevada, Las Vegas. FDIC estimated the cost of the failure to the Deposit Insurance Fund would be $72 million. First Priority is the first bank to fail in Florida since Guaranty National Bank in Tallahassee closed on March 12, 2004. Eight FDIC-insured institutions have been closed in 2008. More Information

Conference of State Bank Supervisors To Host Bank Directors Seminar in Coeur d'Alene

The Graduate School of Banking at Colorado and the Conference of State Bank Supervisors join forces to hold a bank directors seminar Sept. 7-9 at the Coeur D'Alene Resort, Coeur d'Alene, ID. The program features sessions that are relevant to community bank managers and board members.

Presentations include:

  • Market overview
  • Conditions and opportunities in the M&A market
  • Bond portfolio management, real estate appraisals
  • Risk management Issues for commercial real estate
  • Emerging risks
  • Red flags from problem banks

The capstone of the program will be the Regulators Roundtable, an interactive session with state commissioners on issues facing banks in their states and the importance of banks to local economic development. Participants will receive a certificate of completion from GSBC and CSBS.

This seminar is being held at the Coeur d'Alene Resort. For information or to register online, click here.

Around The States

District of Columbia: To assist in the ongoing fight against financial services fraud, the D.C. Department of Insurance, Securities and Banking is launching Financial Fraud Awareness Week on Aug. 10-17. DISB has partnered with organizations such as the National Insurance Crime Bureau, the Coalition against Insurance Fraud, the Federal Bureau of Investigation and the Financial Crimes and Fraud Unit at the Metropolitan Police Department to assist the agency in identifying criminal patterns and providing its investigators with information and investigative techniques that may be used to develop enforcement cases. "We have seen an increase in reports of financial fraud in the District of Columbia," said DISB Commissioner Thomas E. Hampton. He noted that homeowners are often victimized by foreclosure-rescue schemes and mortgage-related bankruptcy schemes. During the week, DISB will provide daily information to District residents on fighting fraud, especially mortgage and foreclosure scams. The agency also will take part in various seminars and fraud events hosted by other D.C. agencies. More information  

New York: New York Governor David A. Paterson signed into law a subprime lending reform bill on Tuesday to addresses the mortgage situation in New York State. Data from the New York State Banking Department shows that approximately one in 200 New York homes are in the foreclosure process. The new law requires lenders to send a pre-foreclosure notice to borrowers at least 90 days before foreclosure proceedings may be initiated. Borrowers must be provided with a list of government-approved housing counselors serving their area. The law also establishes a mandatory settlement conference for foreclosure proceedings involving homeowners with certain subprime loans, and has provisions to halt foreclosure rescue scams. To prevent a future crisis, the law establishes stronger consumer protections for subprime loans, such as requiring an ability-to-pay standard for loans. Mortgage brokers have a new duty of care to act in a borrower’s interest. The law also requires all mortgage servicers that service loans on residential property in New York to be registered with the Banking Department. For more information, see press release here.

Around The Agencies

Fed: The Federal Reserve on Tuesday set the dollar amount of fees that will trigger additional disclosure requirements under the Truth in Lending Act for certain mortgages at $583 for 2009. The Home Ownership and Equity Protection Act of 1994 restricts credit terms, such as balloon payments, and requires additional disclosures when total points and fees payable by the consumer exceed the fee-based trigger or 8 percent of the total loan amount, whichever is larger. The fee trigger was originally $400 and is adjusted annually to reflect changes in the Consumer Price Index.

FFIEC: The Federal Financial Institutions Examination Council recently approved examination procedures for determining compliance with regulations issued by the Defense Department on limitations on consumer credit extended to service members and dependents. The Defense Department’s rules cover payday loans, motor vehicle title loans and tax refund anticipation loans, and apply to all people engaged in the business of extending such credit and their assignees. The rules limit the amount that a creditor can charge service members and their dependents to 36 percent, which must be expressed as a total dollar amount and as an annualized rate, known as the "military annual percentage rate" or MAPR. The rules apply to consumer credit extended on or after Oct. 1, 2007. Read more

FTC: Four companies and their principals agreed to settle Federal Trade Commission charges that they deceptively marketed a "debt settlement" program that failed to provide services they claimed would reduce consumers’ debt. The case involved Edge Solutions, Inc. of Delaware, Edge Solutions, Inc. of New York, and Money Cares, Inc., all a/k/a The Debt Settlement Company and a/k/a The Debt Elimination Center; Pay Help, Inc.; and Robert and Miriam Lovinger. The agency alleged that the companies and principals did not fulfill their promises to pay off, for a substantially reduced amount, all debts referred to the companies’ program, contact all creditors referred into the program to negotiate settlements and start making payments within several weeks after a consumer joined the program, and provide personalized one-on-one financial consulting. For more information about the case, go to

NCUA: The National Credit Union Administration announced that Michael E. Fryzel has been sworn in as chairman. Fryzel served on the Illinois Governor’s Board of Credit Union Advisors from 1992 to his NCUA appointment. He previously worked for the Illinois Department of Financial Institutions. His NCUA term expires August 2, 2013.

Upcoming Events

August 10-13: The Conference of State Bank Supervisors holds its annual Legal Seminar for state banking department attorneys, assistant attorneys general assigned to the departments, and other regulatory attorneys. – Portland, ME

August 13-15: The Conference of State Bank Supervisors holds its annual Deputy Seminar, an opportunity for key banking department officials to learn about upcoming issues, share challenges, and learn potential solutions. – Portland, ME

Closing Comment

"Easy credit and government housing policies made bad homeowners out of good renters, along with making good homeowners with a $200,000 house into bad homeowners with a $500,000 house." - University of Michigan Economics Professor Mark J. Perry, commenting on society's obsession with homeownership in his blog, Carpe Diem.

Mary White, Editor
Teresa Dean, Contributing Writer