March 8, 2010

CBO: Customers Would Bear Some Costs of Proposed Bank Tax
Part of the Obama administration’s proposed tax on large banks would be passed on to consumers, the Congressional Budget Office said last week in letter to Sen. Charles Grassley (R-Iowa). “The cost of the proposed fee would ultimately be borne to varying degrees by an institution’s customers, employees, and investors, but the precise incidence among those groups is uncertain,” the CBO said. “Customers would probably absorb some of the cost in the form of higher borrowing rates and other charges … .”

The CBO study also found that the tax would result in a “slight decrease” in the total supply of credit to the financial system. Grassley had asked the CBO to answer questions about the possible effects of the proposed tax. The tax would apply a 0.15 percent annual assessment on the total liabilities, minus insured deposits, of financial firms with at least $50 billion in assets that received government assistance -- either capital from the Troubled Asset Relief Program or debt guaranteed by Temporary Liquidity Guarantee Program.

AmBA strongly opposes the bank-tax proposal and continues to remind policymakers that taxpayers will actually profit from the bank portion of TARP. Read the CBO’s letter.

Frank: Fannie, Freddie Debt Shouldn’t Have Same Status as Treasury Debt
It would be a mistake for Congress to take action that would give debt from Fannie Mae and Freddie Mac the same legal status as Treasury debt, House Financial Services Committee Chairman Barney Frank (D-Mass.) said in a statement Friday. Frank emphasized, however, that he supports the Treasury Department’s position that it will stand behind debt from the government-sponsored enterprises.

The government’s backing of Fannie and Freddie will be one of the issues lawmakers will address when they craft legislation on the future of the two companies, he said. “It is also the case in going forward, as we restructure housing finance, we will make sure that there are no implicit guarantees, hints, suggestions, or winks and nods,” Frank said. “We will be explicit about what is and is not an obligation of the federal government.” Read Frank’s statement. 

March 5, 2010

Dodd: Consumer Agency Must Have Power to Make, Enforce Rules
Senate Banking Committee Chairman Chris Dodd (D-Conn.) yesterday issued a statement emphasizing that a new agency to regulate consumer products must have the autonomy to craft rules and the ability to enforce them. He also said the issue of whether to house the consumer agency in the Federal Reserve has not been settled.

“A lot of attention is being paid to what address the new consumer watchdog will have, but the critical question is will this office have the authority and independence it needs to prevent ... the abuses we have seen in recent years ... ," Dodd said. “I am pushing for an office with an independent head, appointed by the president and confirmed by the Senate; that has an independent budget to do its work; autonomy to craft rules; and an ability to enforce those rules.”

Some Republicans want the regulatory agency in which the consumer organization is housed to have veto power over any rules it writes, but Dodd reportedly has said that will not happen. As of last night, there was no agreement on the consumer agency issue or on an overall regulatory reform bill, he said. Committee Democratic and Republican staff members are expected to work through the weekend on a compromise proposal. Read Dodd’s statement. 

REGULATORY REFORM
Levin Tapped as Acting Ways and Means Chairman
Rep. Sander Levin (D-Mich.) yesterday became acting chairman of House Ways and Means Committee after the more senior Rep. Pete Stark (D-Calif.) decided not to take the post. Stark said in a statement that he wanted to remain in charge of the panel’s Health Subcommittee. Levin, 78, the brother of Sen. Carl Levin (D-Mich.), will serve as interim successor to Chairman Charles Rangel (D-N.Y.), who is taking a leave of absence while the House Ethics Committee completes investigations involving his travel, finances and disclosures.

Administration Sends ‘Volcker Rule’ Language to Congress
The Obama administration this week sent draft legislative language to Congress that is intended to implement the president’s January proposal to cap big banks’ future growth. It also would bar them from proprietary trading and from owning, investing in or sponsoring hedge funds or private equity funds.

According to a White House fact sheet, the proposal -- named the “Volcker rule” after former Federal Reserve Chairman Paul Volcker -- would not allow a financial firm to acquire another company if the resulting firm would have more than 10 percent of the financial system’s liabilities.

It also would attempt to define proprietary trading. The fact sheet says such trading is “purchasing or selling, or otherwise acquiring and disposing of, stocks, bonds, options, commodities, derivatives or other financial instruments for the institution's or company's own trading book, and not on behalf of a customer, as part of market making activities, or otherwise in connection with or in facilitation of a customer relationship (including hedging activities related to the foregoing).”

The administration is asking Congress to include the proposal in pending financial regulatory reform legislation. Read the fact sheet. 

March 4, 2010

House Trio Seeks Support for Increasing CU Business Lending
Reps. Paul Kanjorski (D-Pa.), Ed Royce (R-Calif.), and Marcy Kaptur (D-Ohio) are seeking colleagues' signatures on a letter to the House leadership supporting legislation (H.R. 3380, S. 2919) to increase the credit union business lending cap. The letter also asks that that the legislation be included in any future jobs-creation bill the House considers. AmBA continues to encourage bankers to contact their House members to express opposition to the credit union provisions, and to urge them not to co-sign the letter.

AmBA Supports Continuing Fed’s Role in Financial Supervision
AmBA and five other financial services trade groups yesterday urged Senate Banking Committee Chairman Chris Dodd (D-Conn.) and ranking member Richard Shelby (R-Ala.) to preserve the Federal Reserve’s role in financial supervision.

The trade groups emphasized that while the Fed’s primary responsibility is monetary policy, regulatory reform legislation should not separate that role from financial supervision. “The hands-on supervisory experience of the Federal Reserve conducted through its 12 regional Federal Reserve Banks directly informs its monetary policy analysis, keeping it closely connected with financial and economic conditions as they develop throughout the country,” the trade groups said in a letter. They added that the experience the Fed gains through its supervisory operations supports its conduct of monetary policy.

The trade groups also backed the Fed’s continued supervision of state-chartered banks that are members of its system. Limiting the Fed to supervising only large, complex institutions in major financial centers would be a mistake, they said. “The Federal Reserve needs a broader regulatory focus to ensure that for both its central bank and regulatory functions it has a clear view of banks of all sizes, from all regions, and from differing types of communities,” the trade groups said. Read the letter. 

Bill Extends SBA Program Enhancements
The unemployment benefits extension bill (H.R. 4691) that the Senate passed late Tuesday -- after Sen. Jim Bunning (R-Ky.) released his hold on it -- includes a provision that reauthorizes the expired 90-percent guarantee on the Small Business Administration’s 7(a) loan program through March 28. The legislation also provides $60 million to fund the higher guarantee and the elimination of borrower fees for the SBA's 7(a) and 504 loan programs. AmBA has testified numerous times over the past several months in favor of extending these programs. For more information, contact AmBA's James Ballentine. 

March 3, 2010

Dodd, Corker Agree on Proposal to House Consumer Agency in Fed
Senate Banking Committee Chairman Chris Dodd (D-Conn.) and panel member Bob Corker (R-Tenn.) reportedly are in broad agreement on a proposal to create an agency within the Federal Reserve to regulate consumer products. Under the proposal, the new agency would have a presidentially approved director, an independent budget and autonomous rule-writing authority.

The banking regulators would enforce the new agency's rules. But among the remaining issues Dodd and Corker must decide are whether the consumer agency could impose rules over the regulators' objections, and how broadly the rules would apply to nonbanks. The plan ultimately would also need to overcome the opposition of some Democrats, including House Financial Services Chairman Barney Frank (D-Mass.).

Johnson Outlines Steps to Improve Small-Business Lending
Creating a small-business capital investment program for community banks and further enhancing Small Business Administration initiatives are among the steps the government can take to bolster credit for smaller firms, AmBA Chairman Art Johnson told Senate Banking’s Economic Policy Subcommittee yesterday.

The recession has stressed community banks’ capital sources, and AmBA appreciates the president’s initiative to use Troubled Asset Relief Program funds to provide additional capital to small banks that volunteer to use it to increase small-business lending, said Johnson, chairman and CEO of United Bank of Michigan, Grand Rapids, Mich. “A key factor to this proposal is removing it from the rules and restrictions of TARP … [because] community banks will be disinclined to participate if there is any possibility of TARP-related stigma being attached to it,” he said.

Johnson also cited two programs in his home state of Michigan -- the Capital Access Program and the Michigan Collateral Support Program -- that could be adapted nationally to help small businesses in local markets. He added that while Congress has offered valuable support to SBA programs, more should be done to extend their reach. He recommended, for example, that Congress extend the stimulus package’s provisions that increased the 7(a) program’s loan guarantee level and lowered its fees.

Johnson emphasized that banks are working to provide loans to creditworthy businesses. But examiners’ inappropriately conservative approach to analyzing asset quality is hampering them, particularly with commercial real estate loans. While the CRE sector will continue to pose problems for the industry, examiners must be careful not to overreact, he said. Read Johnson’s testimony.  For more information, contact AmBA’s James Ballentine.

Sen. Levin Proposes Plan to Boost Small-Biz Loans
In related news, Sen. Carl Levin (D-Mich.) yesterday proposed a reserve fund that a bank could use when a small-business borrower’s collateral dropped in value. A small-business borrower would pledge 3.5 percent to 7 percent of a loan's value as collateral into a reserve account at the lending bank, and that would be matched by state and federal funding, Levin explained to Senate Banking’s Economic Policy Subcommittee. The plan is based on Michigan’s Capital Access Program that funds reserve accounts to back loans to businesses needing collateral support.

The concept is reportedly similar to a bill (H.R. 4629) that Levin’s brother, Rep. Sander Levin (D- Mich.), introduced last week that would provide $20 billion of repaid Troubled Asset Relief Program funds to help manufacturers obtain credit by addressing cash flow and collateral shortfalls. House Financial Services Committee Chairman Barney Frank (D-Mass.) is one of the bill’s co-sponsors. Read Sen. Levin’s testimony.  Read about H.R. 4629.  Read more about Michigan’s Capital Access Program. 

AmBA Urges House Leaders to Oppose CU Business-Loan Changes
AmBA yesterday strongly urged House Speaker Nancy Pelosi (D-Calif.) and Minority Leader John Boehner (R-Ohio) to oppose a bill (H.R. 3380) that would unnecessarily expand credit union business-lending authority requirements, and it also urged them to oppose efforts to include the measure in any future jobs legislation.

H.R. 3380 would increase the business lending cap from 12.25 percent of a credit union’s total assets to 25 percent, raise the business-loan de minimis level to $250,000 and exclude other loans from the cap.

Increasing the business-lending cap and expanding credit unions’ already broad authority would substantially increase credit unions’ risk exposure, affect only a handful of credit unions and therefore have only a minimal impact on lending, Floyd Stoner, AmBA EVP for congressional relations, said in a letter that also was sent to all House members.

“In fact, only 37 of the nearly 7,600 credit unions, or about one-half of one percent of all credit unions, would be directly impacted because they are at or near their congressionally mandated 12.25 percent lending cap,” Stoner explained.

“Furthermore, the National Credit Union Administration reported that the number of credit unions offering any business loans fell by 14.3 percent since the beginning of the year to 1,674 credit unions. Therefore, raising the cap would have very little impact on lending to businesses,” he said. Read the letter.  For more information, contact AmBA’s Keith Leggett. 

March 2, 2010

Dodd, Corker Explore Proposal to House Consumer Agency in Fed
Senate Banking Committee Chairman Chris Dodd (D-Conn.) and panel member Bob Corker (R-Tenn.) are reportedly nearing a deal to create an agency within the Federal Reserve to regulate consumer products. Under the latest proposal, the new agency would have a presidentially approved director, an independent budget and autonomous rule-writing authority.

Dodd and Corker were contacting other committee members to gauge their support for the proposal, and they also had briefed panel ranking Republican Richard Shelby (R-Ala.), who was reviewing it. In the last few days, Dodd, Corker and Shelby have traded proposals and counterproposals that would have -- as an alternative to an ABA-opposed stand-alone Consumer Financial Protection Agency -- housed the consumer agency in the Fed, FDIC and Treasury Department. So far, no consensus has been reached.

Kerry Asks Dodd, Shelby to Preserve Thrift Charter
Sen. John Kerry (D-Mass.) last week asked Senate Banking Committee Chairman Chris Dodd (D-Conn.) and panel ranking member Richard Shelby (R-Ala.) to retain the federal thrift charter in the pending financial regulatory reform legislation. AmBA continues to strongly advocate preservation of the thrift charter as part of its consistent reg reform message.

The draft reform legislation that Dodd unveiled late last year would have preserved existing thrift charters, but prevented granting new charters, “which I believe is the wrong treatment for a vital segment of our nation’s financial system,” Kerry said in a letter. He emphasized that thrift institutions are needed to rebuild and sustain a healthy level of homeownership, since they must hold a certain percentage of their portfolios in housing-related assets.

“Eliminating or discouraging the creation of more thrift charters could harm borrowers by reducing the number of lenders with an explicit mandate to make safe and sound, quality home loans. Our nation needs the thrift charter,” Kerry said. Read the letter. 

March 1, 2010

Negotiations Continue on CFPA Alternative
Senate Banking Committee Chairman Chris Dodd (D-Conn.) on Friday proposed a Bureau of Financial Protection inside the Treasury Department -- instead a stand-alone Consumer Financial Protection Agency -- to regulate consumer products, but the plan met with resistance from the banking panel's Republican negotiators. 

Under the Dodd proposal, the bureau would be run by a presidentially appointed director and would have the power to write rules for all banks and other companies offering financial services. Senate Banking Committee ranking Republican Richard Shelby (R-Ala.) and panel member Bob Corker (R-Tenn.) -- who share AmBA's concerns about separating the regulation of a bank's products from its safety and soundness -- objected to the rule-writing powers. Negotiations continued over the weekend in hopes that a revised reform bill could be unveiled this week.

Senate Panel to Hold Hearing on Small-Business Lending
In related news, AmBA Chairman Art Johnson will testify Tuesday at a Senate Banking Committee hearing on proposals to fix small-business borrowing and lending problems. Johnson is chairman and CEO of United Bank of Michigan, Grand Rapids, Mich.

House Trio Seeks Support for Increasing CU Business Lending
Reps. Paul Kanjorski (D-Pa.), Ed Royce (R-Calif.), and Marcy Kaptur (D-Ohio) are seeking colleagues' signatures on a letter to the House leadership supporting legislation (H.R. 3380, S. 2919) to increase the credit union business lending cap. The letter also asks that that the legislation be included in any future jobs-creation bill the House considers.

The credit union measure would increase the business lending cap from 12.25 percent of a credit union's total assets to 25 percent, raise the business-loan de minimis level to $250,000 and exclude other loans from the cap. AmBA continues to encourage bankers to contact their House members to express opposition to the credit union provisions, and to urge them not to co-sign the letter. Read talking points to share with your House member.  For more information on the legislation, contact AmBA's Keith Leggett.  For more information on contacting House members, contact AmBA's James Ballentine. 

Groups Urge Congress to Maintain Flexible Employer-Provided Retirement System
AmBA joined more than 200 other trade groups and companies on Friday to urge all House and Senate members to maintain and strengthen the current voluntary, flexible employer-provided retirement system in the wake of concerns about employment security. "As plan sponsors and service providers, we support the current system and encourage Congress to maintain the flexibility that allows employers to provide benefits tailored to their workforce," they said in a letter.

The groups pointed out that private-sector employers participate in a wide variety of retirement arrangements, and that variety demonstrates the need for flexibility to meet the needs of various workforces. While "the past year has put America's entire economy to a test … we are committed to working with Congress and the executive branch to ensure that the current voluntary and flexible employer-provided retirement plan system continues to flourish and benefit American workers," they said. Read the letter.  For more information, contact AmBA's Lisa Bleier. 
February 26, 2010

NCUA Promises Enhanced Business-Loan Regulation if Cap Is Raised
The National Credit Union Administration this week said it would beef up its oversight if Congress passed AmBA-opposed legislation increasing credit unions’ business-lending cap.

“Let me assure you: If legislative changes increase or eliminate the current aggregate [member business-lending] cap, NCUA would promptly revise our regulation to ensure that additional capacity in the credit union system would not result in unintended safety and soundness concerns,” agency Chairman Deborah Matz said in a letter to Treasury Secretary Timothy Geithner.

She added that the NCUA would adopt a tiered approval process that would only allow credit unions to increase their business lending gradually. Read more.  Read the letter.  For more information, contact AmBA’s Keith Leggett. 

AmBA’s Grant to Testify Today on Small-Biz, CRE Lending
AmBA community banker William Grant will testify today at a joint hearing of the House Financial Services and Small Business Committees that will examine the condition of small-business and commercial real estate lending in local markets. Grant is chairman and CEO of First United Bank & Trust in Oakland, Md.

Bernanke: Fed Should Keep Bank Regulatory Powers
Congress should not strip the Federal Reserve of its bank regulatory powers, and to do so would be a “grave mistake,” Federal Reserve Chairman Ben Bernanke told the Senate Banking Committee yesterday. Bernanke said the Fed would gladly surrender the authority it used in 2008 to arrange the sale of Bear Stearns and the bailout of other large financial firms. But he added that the Fed is uniquely positioned to provide “strong, consolidated supervision” of the biggest financial companies.

“It’s hard for me to understand why, in the face of a crisis that was so complex and covered so many markets and institutions, you would want to take out of the regulatory system the one institution that has the full breadth and range of those skills to address those issues,” Bernanke told panel ranking member Richard Shelby (R-Ala.).

Yingling Reiterates AmBA Reg Reform Message to Geithner
AmBA President and CEO Ed Yingling and the heads of several other financial services trade groups yesterday discussed financial regulatory reform in a candid give-and-take session with Treasury Secretary Timothy Geithner. Geithner, who requested the meeting, said the Obama administration will continue to push hard for such reform and stressed that it’s important to pass a bill to restore certainty to the markets about the future regulatory regime.

Yingling and the other trade-group representatives told Geithner that any reg reform bill would almost certainly need broad bipartisan support to be enacted. Yingling said that AmBA supports regulatory reform, but he reiterated the association’s opposition to the Consumer Financial Protection Agency. AmBA also supports a strong resolution regime to end ‘too-big-to-fail,” and the need for the Federal Reserve to continue to have regulatory responsibilities, he said.

Yingling emphasized to Geithner that bankers across the country are increasingly concerned that the regulators are going too far in forcing some banks to write off performing loans, raise capital when they are already well capitalized, and shrink their balance sheets.

SEN. SHELBY REJOINS REGULATORY BILL DISCUSSIONS
Senate Banking Committee Ranking Member Richard Shelby (R-AL) is once again negotiating with panel Chairman Chris Dodd (D-CT) on regulatory restructuring legislation.  Sen. Shelby told reporters yesterday that they are moving toward a consensus on the AmBA-opposed Consumer Financial Protection Agency (CFPA), stating that he is in “90 percent” agreement with Chairman Dodd on the issue.  Remaining areas of disagreement on the CFPA issue were not enunciated.

February 25, 2010

Yingling to Meet With Geithner Today on Reg Reform Issues
AmBA President and CEO Ed Yingling and the heads of other major financial services trade groups are meeting today with Treasury Secretary Timothy Geithner to receive a briefing on the status of regulatory reform issues.

Geithner met yesterday with Senate Banking Committee Chairman Chris Dodd (D-Conn.) and panel member Bob Corker (R-Tenn.), who have been negotiating on the reg reform bill that Dodd was scheduled to introduce this week. However, his spokeswoman said yesterday that she expects an agreement on the legislation next week.

For more than a year, AmBA has reiterated its consistent message on reg reform issues. That message has included preserving charter choice, stressing the need for a strong resolution mechanism to end “too-big-to-fail,” and strongly opposing the Consumer Financial Protection Agency.

Frank Will Not Push Credit Union Measure Unless Senate Acts First
House Financial Services Chairman Barney Frank (D-Mass.) said at the Credit Union National Association’s Governmental Affairs Conference yesterday that he would not would push AmBA-opposed legislation increasing the cap on credit union business lending, unless the Senate acts first. Frank said the reason for his position is banks’ strong opposition, and he explained AmBA’s argument that the increase is not needed because less than 1 percent of the nation’s credit unions are near the lending cap.

“Unless there is some prospect of the Senate acting, it will be very hard for me to persuade members of the House to vote on controversial issues, particularly as November approaches,” he said. Sen. Mark Udall ( D-Colo.) and Rep. Paul Kanjorski (D-Pa.) have introduced bills -- S. 2919 and H.R. 3380 -- that would increase the business lending cap from 12.25 percent of a credit union’s total assets to 25 percent, raise the business-loan de minimus level to $250,000 and exclude other loans from the cap.

CUNA had advocated -- and AmBA bankers had strongly opposed with a deluge of letters -- attaching such provisions to jobs legislation, but the jobs bill the Senate passed yesterday did not contain such language. Credit unions now reportedly are lobbying to have the business-lending cap language included in the Obama administration’s legislation to transfer $30 billion in repaid Troubled Asset Relief Program funds to a new Small Business Lending Fund that community banks would use to make more business loans.

Frank: No Interchange Fee Legislation This Year
In related news, House Financial Services Committee Chairman Barney Frank (D-Mass.) also told attendees at the Credit Union National Association's Governmental Affairs Conference that his panel will not take up interchange fee legislation this year. During the past two years, AmBA, the state associations and grassroots bankers have rallied to oppose and successfully fend off several bills that would require card issuers to negotiate interchange rates with merchants.

SENATE PASSES ‘JOBS’ BILL
The Senate passed a “jobs” bill (H.R. 2847) yesterday, by a vote of 70-28, that includes a “Build American Bond” provision, a one-year extension of the highway bill, an extension of a small business expensing provision, and a tax credit for businesses hiring new employees. 

Those provisions are offset by a Foreign Account Tax Compliance provision (addressing tax havens).  The bill does not include the extension of several popular tax credits that expired on December 31, 2009, nor does it include a further delay in the effective date of the worldwide interest allocation rules.

The House is not expected to take up the legislation this week.

NO DEAL REACHED ON REGULATORY BILL
Following a meeting with Sen. Bob Corker (R-TN) and Treasury Secretary Timothy Geithner last night, Senate Banking Committee Chairman Chris Dodd (D-CT) told reporters that “no deal” has been reached in discussions on regulatory restructuring legislation. 

“We haven’t settled on anything,” Chairman Dodd said.  He had hoped to release a new bill this week, but said last night only that a bill will be released “soon.”

AmBA President and CEO Ed Yingling and the heads of other financial services trade groups are meeting today with Sec. Geithner on the status of regulatory restructuring issues.

REFORM PLAN FOR FANNIE, FREDDIE COULD WAIT UNTIL NEXT YEAR
Treasury Secretary Geithner told the House Financial Services Committee yesterday that the Administration would not release a detailed plan to deal with Fannie Mae and Freddie Mac, although they would announce a set of “principles and broad objectives” sometime this year.

“We are going to propose reforms to Congress next year to try to make sure we bring about fundamental change in the housing market and get ourselves in  a position where the government is playing a less risky but more constructive role in supporting housing markets,” Sec. Geithner said.

AmBA is leading a task force to develop proposals for dealing with the government-sponsored enterprises.

REP. FRANK WON’T ACT ON INTERCHANGE, CREDIT UNION LENDING CAP THIS YEAR
House Financial Services Committee Chairman Barney Frank (D-MA) said yesterday that his Committee will not take up interchange fee legislation this year.  AmBA, the state bankers associations, and grassroots bankers have worked the past two years to oppose several interchange bills.

Chairman Frank also said yesterday that he will not would push AmBA-opposed legislation (S. 2919, H.R. 3380) increasing the cap on credit union business lending, unless the Senate acts first. 

“Unless there is some prospect of the Senate acting, it will be very hard for me to persuade Members of the House to vote on controversial issues, particularly as November approaches,” he said, citing bank opposition to the legislation. 

AmBA has argued that only 41 out of the country’s 8,000 credit unions are near their business lending cap.

February 23, 2010

Dodd Asks for Update on Efforts to Stabilize CRE Market
Senate Banking Committee Chairman Chris Dodd (D-Conn.) yesterday asked banking and credit union regulators for an update on how the Federal Financial Institutions Examination Council’s October commercial real estate guidance is helping to stabilize the “troubled” CRE market. He also asked how each regulator has addressed the CRE issue and what additional steps they plan to take.

“I believe that the weakness in the CRE market requires prompt and robust responses from the regulators to guard against harmful effects on financial institutions and the economy,” Dodd said in a letter. “I urge you to redouble your efforts to provide appropriate oversight of this vital component of our economy, and look forward to working with you to bring much needed stability to the CRE market.” Read more. 

February 19, 2010

Dodd Expected to Introduce Revised Reg Reform Bill Next Week
Senate Banking Committee Chairman Chris Dodd (D-Conn.) plans to introduce a revised financial regulatory reform bill next week, and the panel could begin considering the legislation during the first week of March, his spokeswoman said yesterday. Dodd and GOP freshman committee member Bob Corker (R-Tenn.) began negotiations last week on the bill to try to find a bipartisan compromise after Dodd and panel ranking Republican Richard Shelby (R-Ala.) broke off talks over an impasse on the AmBA-opposed Consumer Financial Protection Agency.

Those negotiations will continue this weekend as Dodd and Corker travel together on a congressional trip through Central America. While details are still being worked out, Dodd's revised bill is expected to include a systemic risk council composed of regulators to monitor emerging threats to the financial system. The Treasury secretary would chair the council, with the Federal Reserve chairman serving as vice chair.

The FDIC's role is likely to be expanded to include all state-chartered banks under the legislation, and a new mechanism would be created for resolving troubled large financial firms without using taxpayer funds. The CFPA's enforcement power and the Fed's regulatory role continue to be among the most controversial legislative issues that need to be resolved for the full Senate to pass the massive measure.

Meanwhile, Shelby plans to unveil a GOP alternative reg reform bill when the committee starts considering Dodd's legislation, and he would likely offer it as a substitute amendment, Shelby's aides said.

House Panel to Hold Hearing on Public, Private Pay Practices
The House Financial Services Committee will hold a hearing next Thursday on the pay practices of both private and public financial entities -- including AIG, Fannie Mae and Freddie Mac -- in which the federal government plays a role in reviewing and/or approving compensation.

February 18, 2010

AmBA Urges Senators to Include SBA Measures in Jobs Bill
AmBA and 79 other business trade groups yesterday urged all Senate members to support including provisions in the upcoming jobs-creation legislation that would extend through 2010 Small Business Administration loan-program enhancements contained in the 2009 economic stimulus bill. Currently, the bill's 90-percent guarantee on eligible SBA 7(a) program loans expires Feb. 28, and the fee waiver on certain SBA 7(a) and 504 program loans is authorized until Sept. 30, or until funds are exhausted.

"We urge you to act quickly so that we can continue to realize the SBA lending momentum we saw in 2009," the trade groups said in a letter. They also asked the senators to support adding to the jobs legislation a bill (S. 2869) -- introduced by Sens. Mary Landrieu (D-La.) and Olympia Snowe (R-Maine) -- that would increase the maximum size of SBA 7(a) and 504 loans from $2 million to $5 million. Read the letter.  For more information, contact AmBA’s James Ballentine. 

February 17, 2010

Sen. Brown Introduces Bill to Tax Bonuses
Senate Banking Committee member Sherrod Brown (D-Ohio) last week introduced a bill that would impose a 50 percent tax on all bonuses -- both cash and stock payouts -- in excess of $25,000 at financial firms that received Troubled Asset Relief Program funds. Revenues from the tax would be used to fund small-business direct loans administered by the Small Business Administration. Brown’s bill is similar to legislation (H.R. 4426) Rep. Peter Welch (D-Vt.) introduced in the House on Jan. 12 that would impose a 50 percent tax on bonuses of more than $50,000 at financial firms receiving TARP money. Read more. 

Sen. Webb Wants to Include Bonus Tax in Jobs Bill
In related news, Sen. Jim Webb (D-Va.) said Friday that he would push to include his bonus-tax legislation (S. 2994) as an amendment to the upcoming jobs bill. S. 2994, which Webb and Sen. Barbara Boxer (D-Calif.) introduced on Feb. 4, would require executives at financial firms that received at least $5 billion in Troubled Asset Relief Program funds to pay a 50 percent tax on any 2009 bonuses above $400,000. According to press reports, Senate Majority Leader Harry Reid (D-Nev.) has said that his jobs bill will only include four elements, and it has not been decided whether he will allow amendments. Read more. 

February 16, 2010

Bayh to Retire From Senate
Senate Banking Committee member Evan Bayh (D-Ind.) announced yesterday that he will not seek election to a third term. Bayh's reason for not running is what he called the political bickering and gridlock that prevails in Congress. "For some time, I have had a growing conviction that Congress is not operating as it should. There is too much partisanship and not enough progress -- too much narrow ideology and not enough practical problem-solving. Even at a time of enormous challenge, the peoples' business is not being done," he said in a statement. Read Bayh's statement. 

February 12, 2010

Oversight Panel Warns of Banks' CRE Exposure
A wave of commercial real estate loan failures over the next few years could jeopardize the stability of many banks, particularly community banks, and threaten the economy, the Congressional Oversight Panel said in a report yesterday. The report notes that $1.4 trillion in commercial real estate loans made over the last decade will require refinancing in the next four years and nearly half are currently underwater.

Though the panel made no specific recommendations, it urged regulators to take action. "The Panel is concerned that until Treasury and bank supervisors take coordinated action to address forthrightly and transparently the state of the commercial real estate markets… the financial crisis will not end," the report said.

AmBA said the report painted a misleading picture of community banks' financial strength. "It has been clear for many months that some community banks are dealing with difficulties in their commercial lending portfolios, and bank regulators have moved very aggressively to address this issue," said AmBA President and CEO Ed Yingling. "The real issue for a number of banks is the lack of access to capital.

"The AmBA has been urging Treasury for over a year to invest in banks that are struggling but viable. However, the government's investments to date have left those community banks on the sidelines that would most benefit from some help," Yingling said. "We urge policymakers to create capital options for viable community banks." Read the report.  Read AmBA's statement.  For more information, contact AmBA's Mark Tenhundfeld.

GOP Sen. Corker to Negotiate Reg Reform With Dodd
Senate Banking Committee Chairman Chris Dodd (D-Conn.) will resume bipartisan negotiations on a regulatory reform bill with GOP panel member Bob Corker (R-Tenn.). The announcement came after Dodd's talks with the ranking Republican on the panel, Sen. Richard Shelby (R-Ala.), broke down last week.

Corker, who has been working with Sen. Mark Warner (D-Va.) on proposals to establish a resolution authority, said he is committed to ending "too big to fail." He also reiterated in a CNBC interview that he opposes creation of a separate Consumer Financial Protection Agency.

"Consumer protection is probably THE hot button issue, and Senator Dodd and I have agreed to set that topic aside for now," Corker said in a statement yesterday. "I believe our goal should be trying to figure out a way to enhance consumer protection without negatively impacting the safety and soundness of our financial system. I am a businessman at heart and feel strongly about placing limits on the federal government's intrusion into the marketplace." Read Corker's statement.

Jobs Bill Floated, Then Scrapped
Senate Finance Committee Chairman Max Baucus (D-Mont.) and Ranking Member Chuck Grassley (R-Iowa) yesterday released a draft bipartisan jobs bill that included extensions of several tax provisions of interest to banks, including the research and development credit, the new markets tax credit, the active finance exception under Subpart F, and the CFC look-through rules. But within hours Senate Majority Leader Harry Reid (D-Nev.) had scrapped the proposal after Democratic senators complained that it was too focused on tax breaks and not enough on job creation.

Reid said he would move a scaled-back bill that would include Build-America bonds for infrastructure; a payroll tax break for employers who hire new workers; an extension of measures allowing small businesses to write off up to $250,000 worth of certain capital expenses; and a one-year extension of the highway bill. The Senate will consider the bill the week of Feb. 22, Reid said, indicating that other measures in the original Baucus/Grassley bill may be considered at a later date. For more information, contact AmBA's Larry Seyfried. 

February 11, 2010

Paulson, Buffet: Taxpayers Will Profit on Bank Investments
Former Treasury Secretary Henry Paulson on Tuesday repeated a key AmBA message: that U.S taxpayers will earn a profit on the government's bank investment programs. "We will get every penny we put into the banks back and with a profit," Paulson told billionaire investor Warrant Buffet during a meeting of the Greater Omaha Chamber in Omaha, Neb. "I agree," replied Buffet. AmBA has repeatedly stressed this fact to policymakers and recently ran an ad in Capitol Hill publications out of concern that misleading rhetoric was being used to justify legislation that could harm all banks. Watch the Paulson-Buffet interview.  View AmBA's ad. 

Reed Bill Would Create Institute to Monitor Systemic Risk
Sen. Jack Reed (D-R.I.) on Monday introduced legislation that would establish a National Institute of Finance to gather and analyze financial data in order to prevent, detect and manage systemic risk. Reed, who chairs the Senate Banking Subcommittee on Securities, Insurance and Investment, said his proposed NIF would map the interconnections between financial institutions, along with details on their transactions and positions; house a research center that measures systemic risk posed by individual firms; and provide independent periodic reports to Congress on the state of the financial system. Read more. 

February 10, 2010

Oversight Panel Launches Investigation of HAMP Program
The House Oversight and Government Reform Committee has launched an investigation into the Home Affordable Modification Program. “Although HAMP has been central to the nation’s foreclosure mitigation efforts, we are concerned that loan services have been slow to modify loans, inconsistent in their application of the program, and are not communicating clearly with eligible homeowners,” said panel chairman Edolphus Towns (D-N.Y.) in a Feb. 4 letter to Treasury Secretary Timothy Geithner.

Towns also criticized Treasury for having not yet “fully embraced” transparency and accountability. He asked Treasury to provide detailed information on, among several other things, how the “net present value” of a home is defined and what specific criteria are used to determine a homeowner’s eligibility for loan modifications. Read the letter. 

February 5, 2010

Dodd Plans to Move Reg Reform This Month
Senate Banking Committee Chairman Chris Dodd (D-Conn.) said today that he will move forward on regulatory reform legislation – with or without Republican support. "Last night, Senator Shelby assured me that he is still committed to finding a consensus on Financial Reform, but for now we have reached an impasse," Dodd said. The major stumbling block remains creation of an independent Consumer Financial Protection Agency, which Sen. Richard Shelby (R-Ala.) and other panel Republicans oppose.

"While I still hope that we will ultimately have a consensus package, it is time to move the process forward," Dodd said, adding that he had instructed his staff to begin drafting legislation to present to the committee later this month.

"I appreciate the good work that has been done to this point by Senator Shelby and the other Banking Committee members who have worked so hard in this process," Dodd said. "Over the past two months we have had productive bi-partisan negotiations in a number of areas and I intend to incorporate many of those agreements in this new proposal."

Executives Question Need for Initiatives to Limit Large Banks
Some large-bank executives yesterday questioned the need for the Obama administration's proposals to limit such institutions' size and activities during a Senate Banking Committee hearing. The hearing was the panel's second this week on the White House initiatives -- advocated by former Federal Reserve Chairman Paul Volcker -- that would cap big banks' future growth, and bar them from proprietary trading and from owning, investing in or sponsoring hedge funds or private equity funds.

"Restricting activities that could loosely be defined as proprietary trading would reduce the safety and soundness of our banking institutions, raise the cost of capital formation, and restrict the availability of credit for businesses, large and small -- with no commensurate benefit in reduced systemic risk," said Barry Zubrow, EVP and chief risk officer at JPMorgan Chase.

Gerald Corrigan, managing director of Goldman Sachs, noted that proprietary trading would make up at most 10 percent of his firm's revenues. He said that a greater concern should be how banks are interconnected through various deals. Such ties make a firm's collapse dangerous for its competitors as well, he said.

Senate Banking Committee Chairman Chris Dodd (D-Conn.) said it would be difficult to write precise legislation to curb banks’ proprietary trading, and added that it could be easier to require regulators to examine questions related to the proposal. Read witnesses’ testimony. 

House Passes Legislation to Raise Debt Ceiling
The House yesterday passed by a 217-212 vote -- and cleared for President Obama’s signature -- legislation to increase the federal government’s statutory debt limit by $1.9 trillion to $14.3 trillion. House members also approved by a 233-187 vote a pay/go provision requiring that any mandatory spending increases or tax cuts be offset. Revenue losses from changes to the estate tax or alternative minimum tax would be exempt from the pay/go rules for two years. The Senate passed the debt-ceiling legislation last week.

Bill Would Tax Bonuses at Largest TARP Firms
Sens. Barbara Boxer (D-Calif.) and Jim Webb (D-Va.) introduced a bill yesterday that would require executives at financial firms that received at least $5 billion in Troubled Asset Relief Program funds to pay a 50 percent tax on any 2009 bonuses above $400,000. The senators estimated that the legislation would affect 13 firms and generate roughly $10 billion, which would be used for deficit reduction. Read more. 

February 4, 2010

Panel Holds Second Hearing on Proposal to Limit Large Banks
The Senate Banking Committee today will hold its second hearing this week on President Obama's proposals to limit the size and activities of large commercial banks. Witnesses for the hearing -- titled “Implications of the ‘Volcker Rules’ for Financial Stability” -- include Gerald Corrigan, managing director of Goldman Sachs; Barry Zubrow, EVP and chief risk officer of JPMorgan Chase; and former Citigroup CEO John Reed, who has advocated some resurrection of barriers between commercial and investment banks. Read more.

February 3, 2010

AmBA Urges Bankers to Oppose CU Biz-Lending Increase
AmBA today is urging all bankers to use its automated system to send customized letters to their senators, asking them to oppose including a proposal in the upcoming jobs creation bill that would raise the credit union business-lending cap from 12.25 percent of a credit union's total assets to 25 percent.

The proposal, which is being pushed by a small, aggressive group of nontraditional credit unions, would affect only 37 of the nearly 7,600 credit unions -- or about one-half of 1 percent -- that are at or near their congressionally mandated 12.25 percent lending cap.

Raising the business-lending cap would substantially increase credit unions' risk exposure and cause them to stray further from their traditional mission of serving consumers -- especially those of modest means. Please send a letter.  For more information, contact AmBA's James Ballentine. 

Volcker Urges Senators to Adopt Large-Bank Limits
Former Federal Reserve Chairman Paul Volcker and Deputy Treasury Secretary Neal Wolin urged the Senate Banking Committee yesterday to adopt President Obama's proposals to limit the size and activities of large commercial banks, and they emphasized that taxpayers should not be liable for risky activities that aren't intended to directly help an institution's customers.

The initiatives would bar large institutions from proprietary trading operations, and from owning, investing in or sponsoring hedge funds or private equity funds. They also would cap an individual bank's share of the total market for nondeposit liabilities.

A number of committee member expressed skepticism about the proposals. They argued that proprietary trading had not caused they financial crisis, and questioned why it should be banned. "There are firewalls that exist," Sen. Bob Corker (R-Tenn.) said. "There is no commercial bank that failed due to proprietary trading or owning a hedge fund."

Panel chairman Chris Dodd (D-Conn.) said he supported the proposals but he also criticized the administration's timing, saying the last-minute addition to reform legislation was complicating efforts to produce a bipartisan bill. Watch the hearing.  Read Volcker's testimony.  Read Wolin's testimony. 

House Members Urge More Action to Stabilize CRE Market
A bipartisan group of 79 House members -- led by Reps. Paul Kanjorski (D-Pa.) and Ken Calvert (R-Calif.) -- sent a letter Monday to Treasury Secretary Tim Geithner and Federal Reserve Chairman Ben Bernanke, urging regulators to take further action to stabilize the commercial real estate market.

The lawmakers urged regulators to establish a clear method for measuring and evaluating the effectiveness of recent CRE loan modification guidance, and to institute metrics to more clearly differentiate performing and nonperforming loans. They also said regulators should make clear statements encouraging lenders to continue making credit available for performing assets to restore confidence and long-term value in the CRE market.

"We strongly believe that regulators must take continued steps to mitigate ongoing turmoil in the CRE sector before it becomes a full-fledged crisis, forestalls our economic recovery, and possibly requires additional taxpayer-funded capital injections," the lawmakers said. Read the letter. 

HEARING FOCUSES ON LARGE-BANK LIMITATIONS PROPOSAL
Former Federal Reserve Chairman Paul Volcker and Deputy Treasury Secretary Neal Wolin urged the Senate Banking Committee during a hearing yesterday to adopt President Obama’s proposals to limit the size and activities of large commercial banks.

The proposals would bar large institutions from proprietary trading operations, and from owning, investing in, or sponsoring hedge funds or private equity funds.  They also would cap an individual bank’s share of the total market for non-deposit liabilities.

“[T]he proposed restrictions should be understood as a part of the broader effort for structural reform,” said Volcker, who serves as Chairman of the President’s Economic Recovery Advisory Board.  “It is particularly designed to help deal with the problem of ‘too big to fail’ and the related moral hazard that looms so large as an aftermath of the emergency rescues of financial institutions, bank and non-bank, in the midst of crises.”

Some Committee Members expressed doubt about the proposals’ effectiveness.  Sen. Bob Corker (R-TN), for example, noted that “there is no commercial bank that failed due to proprietary trading or owning a hedge fund.”

February 2, 2010

NEW BANK TAX ‘NOT THE SOLUTION’ TO ECONOMIC CRISIS, HOUSE MEMBERS SAY
“A 10-year tax on our nation’s largest financial institutions is not the solution to our nation’s economic crisis,” Rep. Peter King (R-NY) and ten other House Republicans said last week in a letter to President Obama outlining their opposition to the “Financial Crisis Responsibility Fee” that the President proposed last month.

“Our biggest priority should be job creation and economic recovery,” the letter said.  “History has shown us that our small businesses play a major role in job growth.  Your bank tax will restrict access to capital for small businesses and other job creators.”

The letter also points out that the tax burden will be borne by consumers and risks “driving capital overseas.”

Rep. King, Rep. Michael McMahon (D-NY), and Rep. Gregory Meeks (D-NY) sent a similar letter to the President as Members of the New York delegation.

BANKING PANEL HEARING WILL EXAMINE PROPOSAL TO LIMIT LARGE BANKS
Former Federal Reserve Chairman Paul Volcker and Deputy Treasury Secretary Neal Wolin will testify today at a Senate Banking Committee hearing on President Obama’s proposals to limit the size and activities of large commercial banks.  The hearing is scheduled to begin at 2:30 p.m. Eastern time.

February 1, 2010

Senate Confirms Bernanke for Second Term
The Senate yesterday voted 70-30 to reappoint Ben Bernanke for a second four-year term as chairman of the Federal Reserve. Earlier, senators had voted 77-23 to end debate on the nomination, clearing the way for a final tally. During the debate, Bernanke's Senate backers argued that defeating the nomination would spark turmoil in U.S. and foreign financial markets and thwart a budding economic recovery.

But opponents criticized him for his record before the financial crisis on bank supervision and mortgage regulation, along with some actions he took in response to the crisis. The Senate has never rejected the nomination of a Fed chairman. Paul Volcker was confirmed for a second term in 1983 by a vote of 84-16, which previously had been the smallest margin ever.

Senate Passes Legislation to Raise Debt Ceiling
The Senate yesterday passed by a 60-39 party-line vote legislation that would increase the federal government's statutory debt limit by $1.9 trillion to $14.3 trillion. The senators also approved by a 60-40 vote a pay/go amendment to the legislation -- offered by Majority Leader Harry Reid (D-Nev.) -- requiring that any mandatory spending increases or tax cuts be offset. Revenue losses from changes to the estate tax or alternative minimum tax would be exempt from the pay/go rules for two years. The House still must pass the debt-ceiling legislation, and is expected to do so next week.

SENATE CONFIRMS BERNANKE
Federal Reserve Board Chairman Ben Bernanke won Senate confirmation to a second four-year term yesterday.  The Senate confirmed the nomination by a vote of 70-30, after passing a procedural motion on the nomination by a vote of 77-23.  Bernanke’s current term as Chairman expires on Sunday, and his term on the Board expires in 2020.

AmBA Opposition Efforts Cited in Story on Fading Chances for CFPA
Chances are fading for legislation to create a separate Consumer Financial Protection Agency as Senate Banking Committee Chairman Chris Dodd (D-Conn.) considers alternatives in order to win bipartisan support, according to a story in The Washington Post on Sunday. The story chronicles the origin and evolution of the CFPA proposal and cites ABA's opposition efforts.

"Business groups – most vociferously the U.S. Chamber of Commerce and the American Bankers Association – have campaigned fiercely against what they describe as an unneeded, intrusive new agency that would increase the cost of doing business," the story said. The reporter also referenced AmBA President and CEO Ed Yingling's concerns that a new agency would inevitably come into conflict with prudential regulators, and that such conflict could undermine banks' safety and soundness. Read the story. 

Senate Panel to Review Obama Proposal to Limit Large Banks
The Senate Banking Committee will hold hearings Tuesday and Thursday on President Obama's proposals to limit the size and activities of large commercial banks. Former Federal Reserve Chairman Paul Volcker -- after whom the president named his initiatives -- will be the only witness at Tuesday's hearing, which will focus on prohibiting banks and bank holding companies from participating certain high-risk investment activities.

Witnesses for Thursday's hearing -- titled "Implications of the 'Volcker Rules' for Financial Stability" -- will include Gerald Corrigan, managing director of Goldman Sachs; Barry Zubrow, EVP and chief risk officer of JPMorgan Chase; and former Citigroup CEO John Reed, who has advocated some resurrection of barriers between commercial and investment banks. Read Thursday's complete witness list.