Arkansas Bankers Association

August 31, 2010

AmBA Cautions Against Small-Biz Quotas for FHLBs
The member-owners of the Federal Home Loan Banks should determine what forms of collateral they wish to accept for advances, not Congress or the regulators, AmBA COO Diane Casey-Landry wrote in last week’s FHLB Member Insights, one of AmBA ’s 30-plus e-mail bulletins.

Casey-Landry’s column addressed a recent Government Accountability Office report which found that small-business and agricultural collateral back only a small percentage of the advances made by the Federal Home Loan Banks. Rep. Paul Kanjorski (D-Pa.), who co-authored legislation in 1999 that allowed FHLBs to accept such collateral, expressed disappointment with GAO’s finding and said he will introduce a bill that would establish a dedicated funding stream for FHLBs to support business lending.

“Requiring the FHLBanks [and their members] to make a certain amount of loans to a certain segment of the market reduces the flexibility of the system and risks repeating a dangerous mistake made with other [government-sponsored enterprises] in the recent past,” Casey-Landry wrote. “When Fannie Mae and Freddie Mac were required to ‘lead the market’ toward more and more lending with limited underwriting and lower or no down-payments, the result was catastrophic.” Read the newsletter. Subscribe to FHLB Member Insights.

August 17, 2010

House Dems Push for Warren Nomination
House Financial Services Committee Chairman Barney Frank (D-Mass.) and 62 other House Democrats last month sent a letter to President Obama asking him to nominate Harvard University law professor Elizabeth Warren to head up the Consumer Financial Protection Bureau.

“At a time when the nation is still coping with the aftermath of a decade of a hands-off regulatory approach that brought the nation the worst financial crisis in three generations, with mortgage foreclosures still occurring at a rate of one million a year..., we need a CFPB Director who truly understands the burden that American families are coping with today, and the mission of this new body,” the members wrote.

The letter was sent the same day that three Senate Republicans -- who voted for the Dodd-Frank bill -- cautioned the White House not to bypass the Senate confirmation process by nominating someone during the August recess.

Speculation about Warren ’s nomination spiked last week after Warren met with senior White House officials. It’s unclear when the president will make known his choice, but spokesman Robert Gibbs warned not to expect an announcement this week. Read the letter.

August 11, 2010

House Passes State Aid Bill
The House yesterday passed by a 247-161 vote -- and cleared for President Obama’s signature -- a bill (H.R. 1586) that will provide the states with $16.1 billion for six more months of increased Medicaid funding and $10 billion to prevent teacher layoffs. The House returned temporarily from its August recess to consider the measure after the Senate approved the legislation last Thursday, 61-39. Both chambers will reconvene on Sept. 13.

August 10, 2010

House to Vote Today on State Aid Bill
The House, which has returned temporarily from its August recess, will vote today on a bill (H.R. 1586) that would provide the states with $16.1 billion for six more months of increased Medicaid funding and $10 billion to prevent teacher layoffs. The Senate approved the legislation last Thursday by a 61-39 vote.

August 9, 2010

Senate Rejects Fed Nominee Diamond
The Senate returned Peter Diamond’s nomination to become a Federal Reserve Board member to the White House on Thursday night before leaving on August recess. Senate Banking Committee ranking Republican Richard Shelby (R-Ala.) requested the action because he believes Diamond, a Massachusetts Institute of Technology economics professor, does not have sufficiently broad macroeconomic experience to help run the central bank, press reports said. President Obama is expected to resubmit Diamond’s nomination, a White House official said on Friday.

The Senate in September still is expected to approve the nominations of Maryland bank regulator Sarah Bloom Raskin , and Janet Yellen, president of the San Francisco Federal Reserve Bank, who will serve as vice chairman of the Fed’s board.
House to Return From Recess Tuesday for Final Vote on State Aid Bill
The House will return from August recess on Tuesday for a final vote on a bill (H.R. 1586) that would provide the states with $16.1 billion for six more months of increased Medicaid funding and $10 billion to prevent teacher layoffs. The Senate last Thursday approved the legislation by a 61-39 vote.

August 6, 2010

AmBA Asks Financial Stability Oversight Council to Examine FASB Proposal’s Impact
AmBA yesterday asked that the Financial Stability Oversight Council, created by the Dodd-Frank Act, examine how the Financial Accounting Standards Board’s fair value accounting proposal for all financial instruments will affect the financial system.

AmBA President and CEO Ed Yingling emphasized in a letter to Treasury Secretary Timothy Geithner, the oversight council’s chairman, that it is “very important” that the council -- under an AmBA-backed Dodd-Frank Act requirement -- review and submit comments to the Securities and Exchange Commission and to FASB on the proposed fair value accounting standards.

“For banking institutions, whose primary assets and liabilities are financial instruments, such accounting could dramatically change banking products and services as well as change how banking institutions are viewed by shareholders, depositors and regulators,” Yingling said.

He said FASB’s proposal will dramatically decrease the traditional banking business model’s relevance, increase costs and volatility, and significantly reduce credit availability. Yingling added that it also will decrease the ability of investors, regulators and bank customers to understand the business of banking; put U.S. companies at a competitive disadvantage with international competitors; and significantly disrupt efforts to achieve international accounting convergence.

He also explained that FASB’s proposal is not in accordance with the G20’s principles for accounting standards, which include encouraging accounting standards-setters to focus on international convergence, mitigating pro-cyclicality, and working urgently with supervisors and regulators. “We believe that the proposal will not achieve what the G20 had hoped … and will set the U.S. on a directly contradictory path from that being followed by other countries,” Yingling said. Read the letter. For more information, contact AmBA ’s Donna Fisher.
Senate Passes Bill With Funding for Multifamily Mortgage Loan Guarantees
The Senate late Wednesday night passed by voice vote -- and cleared for President Obama’s signature -- an AmBA-backed bill (H.R. 5872) that authorizes $20 billion in fiscal year 2010 for guaranteed loans under Federal Housing Administration’s General and Special Risk Insurance Funds. The legislation increases by $5 billion FHA’s commitment authority for multifamily mortgage loan guarantees -- which would have been exhausted sometime this month -- to ensure coverage for the remainder of the fiscal year.
Senate Also Approves Bill to Help Stabilize FHA
In related news, the Senate on Wednesday night also passed by voice -- and cleared for President Obama’s signature -- a bill (H.R. 5981) that would put the Federal Housing Administration on firmer financial footing by allowing the agency to raise the cap on the annual premium it charges borrowers from 0.55 percent to 1.55 percent. The FHA’s Mutual Mortgage Insurance Fund has capital reserves equal to just 0.53 percent of the value of the thousands of outstanding home mortgages it insures, well below the 2.0 percent required by law.

FHA officials have said that if the provision became law, they would gradually raise the premium to 0.90 percent for borrowers who make a down payment of 5 percent or less, and to 0.85 percent for borrowers who put down more than that. The legislation is nearly identical to a key measure in the broader FHA Reform Act (H.R. 5072) that the House passed on June 10, but the Senate has not yet considered. The House passed H.R. 5981 on July 30.
Small-Biz Lending Bill Will Be First Measure Considered After August Recess
Senate Small Business Committee Chairwoman Mary Landrieu (D-La.) said yesterday that the AmBA-backed small-business lending bill (H.R. 5297) will be the first legislation that the Senate will consider after it returns from August recess on Sept. 13. Majority Leader Harry Reid (D-Nev.) will schedule floor votes on amendments that will allow passage of H.R. 5297 during that first week back, she said.

The legislation stalled in the Senate last week because of a disagreement between Democratic and Republican leaders on amendments. Democrats “have the necessary votes to prevail” and failed to finish the measure this month only because of time constraints,” Reid said yesterday. Read an AmBA backgrounder on the bill. For more information, contact AmBA 's James Ballentine.

August 4, 2010

Senate Panel Approves Bill to Create Sustainable Housing Office in HUD
The Senate Banking Committee yesterday approved panel Chairman Chris Dodd’s (D-Conn.) bill (S. 1619) that would create an Office of Sustainable Housing and Communities within the Department of Housing and Urban Development to coordinate federal policies fostering sustainable development, and implement grant programs. The legislation, among other things, also would authorize $2.2 billion in competitive grants for projects to help communities create and preserve affordable housing, redevelop brownfields and foster economic development. Read more.

August 3, 2010

President Signs Bill Ensuring Funding for USDA Guaranteed Loans, 502 Program
President Obama late last week signed the fiscal year 2010 Supplemental Appropriations Bill (H.R. 4899) that includes an AmBA-backed provision that provides $31.5 million in funding for the Agriculture Department’s Farm Service Agency guaranteed loan programs. The funding will support an additional $1 billion in FSA lending authority and should cover projected shortfalls in the agency’s programs through this fiscal year.

The legislation also contains AmBA-supported provisions that will ensure that the USDA’s 502 Single Family Housing Guaranteed Loan Program will have sufficient money to continue operating for the rest of the fiscal year.

The legislation will enable the program -- administered by the USDA’s Rural Housing Service -- to pay for itself by, among other things, increasing the loan guarantee fee up to 3.5 percent, and collecting an annual fee of up to 0.5 percent of the loan’s outstanding principal balance. The bill also allows the Agriculture Secretary to waive fees for the program’s “very low- and low-income borrowers.” For more information, contact AmBA ’s Seaver Sowers.

August 2, 2010

The House is in recess until after Labor Day. The Senate is expected to recess at the end of the week.

SMALL BUSINESS LENDING BILL LIKELY ON HOLD UNTIL SEPTEMBER

Attempts by Senate leaders to reach an agreement on allowable amendments to the AmBA-supported small business lending bill (H.R. 5297) have not been fruitful, although further attempts may be tried. We expect, however, that the legislation will not be completed in the Senate until sometime after the August recess, as other issues may take precedence, including the pending Supreme Court nomination.

Senate Expected to Try Once More to Pass Small-Biz Lending Bill
The Senate this week will take one more shot at passing the AmBA-backed small-business lending bill (H.R. 5297), which stalled last week over a disagreement between Democratic and Republican leaders on amendments. Majority Leader Harry Reid (D-Nev.) said last Thursday that he would work with Republicans to seek a compromise on the amendments to be offered to the legislation.

He hopes to reach an agreement that would set up a quick series of votes and passage of the bill by Wednesday. Republicans last week sought votes on four amendments, while Reid offered three. Passage of the bill would be postponed until September if they don’t reach a deal -- which also would have to include a Republican agreement to limit debate time.

Meanwhile, the chamber on Wednesday is expected to begin consideration of Solicitor General Elena Kagan’s Supreme Court nomination, and a Thursday night vote is likely. For more information, contact AmBA 's James Ballentine.

In addition, the bill includes fee disclosure provisions that would require expansive new disclosure obligations for retirement accounts. Because the Labor Department is close to issuing final rules on fee disclosures, AmBA believes it would be disruptive to the process to include further statutory changes to fee disclosure at this time.

AmBA to Conduct Telephone Briefing Today on FASB Mark-to-Market Proposal
AmBA today at 2 p.m. EDT will hold a free one-hour, telephone briefing -- for AmBA bank and state association members only -- on the AmBA-opposed mark-to-market accounting proposal that the Financial Accounting Standards Board released last Wednesday. The briefing, which will be conducted by AmBA accounting experts Donna Fisher and Mike Gullette, will walk participants through the proposal’s major sections, point out the related business and operational challenges in each section, and describe how they can get involved in standard-setting process.

Register for the briefing.
Read more at AmBA’s FASB proposal resources page.

Letters Needed to Urge Congress to Remove Durbin Interchange Amendment
AmBA also is asking bankers to use its automated system to send customized letters to their congressional lawmakers to urge them to remove from the final regulatory reform bill Sen. Richard Durbin’s (D-Ill.) amendment that would direct the Federal Reserve to set prices on debit-card interchange fees.

The amendment would harm banks of all sizes, but it would particularly hurt traditional community banks and their ability to serve local communities. Interchange fees allow banks to provide numerous services to their customers. If the retailer-backed Durbin amendment becomes law, banks’ ability to provide a variety of financial services to customers at low or no cost will be eliminated.

AmBA has provided customizable talking points to help bankers compose effective, individualized letters on why the Durbin amendment should be struck from the final reg reform bill. Please send a letter. For more information, contact AmBA 's James Ballentine.