June 19, 2009

Senators Skeptical About Giving Fed Additional Regulatory Power
Many Senate Banking Committee members yesterday told Treasury Secretary Timothy Geithner they are skeptical about the administration’s proposal in its regulatory reform plan to give the Federal Reserve new powers to oversee the largest financial institutions, and shut down any that become a risk to the system.

Geithner in his opening statement to the panel minimized the authority that would be transferred to the Fed under the plan. “It already supervises and regulates bank holding companies, including all major U.S. commercial and investment banks,” he said. “Our plan gives a modest amount of additional authority -- and accountability -- to the Fed to carry out that mission.”

But some senators -- including panel Chairman Chris Dodd (D-Conn) and ranking member Richard Shelby (R-Ala.) -- believe the central bank was a primary contributor to the economic crisis, and charged that its lax monetary policy allowed the housing bubble to inflate.

Geithner countered that the Fed has the most experience dealing directly with financial markets and institutions, so it makes sense to make it the focal point of such reform. “We think creating a new institution from scratch would risk losing the necessary expertise and experience,” he said. Read Geithner’s opening statement.  Watch a video of the hearing.

House Panel Postpones Geithner Testimony; Schedules 10 Hearings on Reg Reform
In related news, yesterday’s House Financial Services Committee hearing featuring Treasury Secretary Timothy Geithner was postponed because of floor votes, and will be rescheduled at a later date. Panel Chairman Barney Frank (D-Mass.), however, has tentatively scheduled 10 full committee or subcommittee hearings on financial regulatory reform in June and July, with consideration of legislation slated for July 29 and 30. Frank has said that he intends to pass regulatory reform legislation in his committee by the August recess. Read the committee schedule.

Senate Panel Again Postpones Consideration of Bankruptcy Legislation
Senate Judiciary Committee yesterday postponed for the third straight week consideration of an AmBA-opposed bill (S. 257) that would require bankruptcy courts to disallow creditors’ claims arising from “high-cost consumer credit transactions.” AmBA has expressed its strong opposition to the bill, saying it would prevent creditors from recovering almost any debts in bankruptcy, and that in turn would lead to a restriction of credit.

AmBA To Host Free Members-Only Conference Call on Regulatory Reform Plan
AmBA -- on Tuesday, June 23, at 4 p.m. EDT -- will host a free, members-only conference call to review the Obama administration’s sweeping regulatory reform proposal and hear bankers’ reactions to it. AmBA President and CEO Ed Yingling and COO Diane Casey-Landry, who are moderating the one-hour call, are strongly encouraging members to participate and provide as much feedback as possible on the proposal.

AmBA has prepared a summary of the administration’s plan to help members prepare for the call. Please dial in at least five minutes before the start, and use only one phone line per bank to minimize congestion. Read an AmBA summary of the proposal.  Register here if you are a bank member.  Register here if you are a service member.  For more information on the call, contact AmBA’s Charlotte Birch. 

June 18, 2009

Lawmakers to Grill Geithner on Restructuring Plan Today
Lawmakers today will begin delving into the details of the Obama administration’s regulatory restructuring proposal, when Treasury Secretary Timothy Geithner testifies before both the Senate Banking Committee and the House Financial Services Committee.

The chairmen of the two panels, Sen. Chris Dodd (D-Conn.) and Rep. Barney Frank (D-Mass.), said yesterday they both have received assurances from the House and Senate leadership that a regulatory reform bill will be given full consideration this year. Frank intends to pass legislation in his committee by the August recess, while Dodd, who also is heavily involved in the healthcare debate, envisions moving a bill in the fall.

Meanwhile, AmBA President and CEO Ed Yingling, who represented the banking industry at the White House yesterday, said the administration’s proposal is so vast and controversial that it will be extremely difficult to enact. “It needlessly rips apart all the existing regulatory agencies, eliminates charter choices and creates a new agency with powers to mandate loans and services that go well beyond consumer protection,” said Yingling, who was widely quoted in the print and electronic media.

He explained that AmBA will advocate legislation that focuses on creating a systemic regulator, providing a strong mechanism for resolving troubled systemically important firms, and filling gaps in the regulation of the shadow banking industry. “Such significant legislation would address the principal causes of the financial crisis and constitute major reform,” Yingling said.

AmBA staff members yesterday also participated in a conference call with senior Treasury officials. They discussed the administration’s plan and asked pointedly about inconsistencies in the jurisdiction of the proposed Consumer Financial Protection Agency, which AmBA strongly opposes. For more information, contact AmBA’s Wayne Abernathy. 

Senate Panel Slated to Consider Bankruptcy Legislation Today
The Senate Judiciary Committee today is scheduled to consider an AmBA-opposed bill (S. 257) that would require bankruptcy courts to disallow creditors’ claims arising from “high-cost consumer credit transactions.” AmBA said in a joint memo to the panel that the legislation would “deny the possibility for creditors to recover almost any debts in bankruptcy, which would in turn limit the number of loans made, and therefore restrict the credit markets even further.” The committee has postponed consideration of S. 257 several times. Read the memo. 

Subchapter S Relief Bill Introduced
Rep. Ron Kind (D-Wis.) yesterday introduced an AmBA-backed bill (H.R. 2910) that would reduce the amount of time, from 10 to seven years, that S corporations must hold unproductive assets after converting to the Subchapter S tax classification. A similar, temporary measure was included in the economic stimulus law enacted earlier this year, but H.R. 2910 makes the change permanent. “Right now, S corporations are taxed twice on assets they sell within 10 years of converting to this tax classification – making the sale and reinvestment of these assets prohibitively expensive and hindering growth and job creation,” Kind explained. “... [A] three-year reduction in this unreasonable and unproductive penalty will help ease the overall tax burden on small and family-owned businesses and help them grow and prosper in an increasingly competitive market.”  Read more.  For more information, contact AmBA’s Fran Mordi.


June 16, 2009

Rep. Gutierrez Slated to Introduce Bill to Change FDIC Assessment System
Rep. Luis Gutierrez (D-Ill.), chairman of the House Financial Services’ Financial Institutions Subcommittee, today is slated to introduce a bill that would change the assessment system for capitalizing the Deposit Insurance Fund. Under the legislation, the FDIC would be required to consider the risk represented by a depository institution’s assets and liabilities -- and those of its affiliates. The bill also would require that an additional “systemic risk premium” be levied at least annually on banks the FDIC -- in consultation with the Treasury secretary and Federal Reserve Board -- deems “systematically important.”

The legislation would mandate that an institution’s assessment base be equal to the product of the assessment rate the FDIC establishes and the amount of the institution’s average total assets during the assessment period -- less the entity’s average tangible equity during that period. The bill also would permanently establish the standard maximum deposit insurance amount at $250,000, and permanently increase from $250,000 to $500,000 the insurance coverage for certain retirement accounts. Read a bill summary.  Read the bill. 

AmBA, State Associations Strongly Opposed to House Interchange Fee Bills
AmBA and 55 state bankers associations yesterday told all House members that they strongly oppose bills (H.R. 2695 and H.R. 2382) -- introduced by House Judiciary Committee Chairman John Conyers (D-Mich.) and Rep. Peter Welch (D-Vt.), respectively -- that would regulate interchange fees, and they urged the lawmakers not to co-sponsor or support the measures.

“Both bills, if enacted, would seriously disrupt the proper functioning of our nation’s electronic payment system to the detriment of consumers, businesses and the broader economy,” the trade groups said in a memo. “Moreover, they would dramatically impact the ability of community banks to competitively provide credit and debit cards to local consumers.”

Because the merchants think “they are being charged too much for the many benefits of outsourced card processing, [they] are asking Congress to lower their cost of doing business,” the trade groups said. “Congress should not inject itself into the debate over what is essentially a contract issue between industries … .” Read the memo.  For more information, contact AmBA’s Ken Clayton. 

AmBA Regulatory Expert to Participate Today in Small-Business Roundtable
Mark Tenhundfeld, AmBA SVP for regulatory policy, will participate today in a roundtable discussion with the House Small Business Committee’s Democratic members on regulations that are hindering small business growth. AmBA Chief Economist Jim Chessen in May participated in a roundtable discussion on small-business lending with the committee’s Republican members.

June 15, 2009

Administration Financial Reform Plan Preserves NCUA’s Independence

The Obama Administration on Wednesday unveiled its plan for sweeping financial regulatory restructuring.  While the proposal would merge OTS and OCC into a new National Bank Supervisor and abolish the thrift charter, the Obama Administration would preserve NCUA’s independence as a cheerleader regulator of credit unions. Fred Becker, president of the National Association of Federal Credit Unions, thanked the administration for recognizing “the importance of maintaining an independent regulator and insurance fund for credit unions.”

GOP Regulatory Restructuring Plan Would Combine NCUA with Bank Agencies

The Republican Party is floating a proposal that would combine all of the banking and credit union regulators under one roof.  The plan would centralize supervision of deposit-taking entities in one agency, while preserving charter choice, including the credit union charter.  The plan would consolidate the Office of the Comptroller of the Currency with the Office of Thrift Supervision and shift the supervisory functions from the FDIC and Federal Reserve to the new agency. By consolidating bank regulation under one agency, the Republican plan states that “institutions engaged in similar activities and serving similar functions will be regulated similarly, limiting the potential for competitive distortions.”  http://republicans.financialservices.house.gov/images/stories/fscrepregreformplan.pdf

Frank Says OTS Should Be Eliminated
The Office of Thrift Supervision should be eliminated as part of financial regulatory restructuring, House Financial Services Committee Chairman Barney Frank (D-Mass.) told Bloomberg News last week. “The [Office of the Comptroller of the Currency] and the OTS have the most similar role,” Frank said. “I think that’s the one easy and sensible consolidation to make.” ABA strongly advocated that the OTS continue as the thrift regulator in a recent letter to Treasury Secretary Timothy Geithner. The Obama administration is expected to unveil its regulatory overhaul plan on Wednesday, and Geithner is scheduled to testify Thursday on the proposal during a Senate Banking Committee hearing.

GOP Lawmakers Urge Obama to Use Returned CPP Money To Pay Down National Debt
Thirty-five House Republicans on Friday signed a letter calling on President Obama to clarify what he plans to do with the $68 billion in Capital Purchase Program funds that 10 of the industry’s largest banks are returning to the Treasury Department. House Republican Leader John Boehner (R-Ohio) and other key GOP lawmakers sent a letter to question whether the funds would be returned to the $700 billion Troubled Asset Relief Program or be used to pay down the federal debt. “As supporters of legislation to ensure that these TARP repayments pay down our enormous national debt and not be recycled by Treasury for other uses, we strongly urge that all such funds be immediately used to pay down the national debt and help restore lost confidence among American taxpayers,” the lawmakers said. Read more.  Read the letter. 

June 12, 2009

AmBA: Banks Are Meeting Credit Needs of Rural America -- Especially Small Farmers
Banks currently provide more than $123.5 billion in loans to farmers and ranchers -- more than any other industry -- and continue to be well-positioned to lend to creditworthy agricultural borrowers at competitive rates and terms, AmBA said yesterday in testimony to House Agriculture’s Conservation, Credit, Energy, and Research Subcommittee.

“Since the beginning of the financial crisis, AmBA has ramped up communications to farmers, ranchers and all rural Americans about the availability of credit,” the association said. “The AmBA staff, affiliated state bankers associations and hundreds of volunteer bankers nationwide have actively communicated to their customers and communities that banks have adequate resources to make loans … have a desire to make [such] loans at competitive rates and terms, and … believe that agriculture is a good business to lend to.”

The AmBA Center for Agricultural and Rural Banking’s annual Farm Bank Performance Report shows 93 percent of farm banks specializing in agricultural lending were profitable in 2008, and they are small farmers’ major source of credit. AmBA explained that such banks made small farm loans -- with an original amount of $500,000 or less -- that totaled $32.8 billion as of the end of June 2008.

“Farm banks reported holding $9.8 billion in loans with an original value of $100,000 or smaller,” AmBA said. “In fact, about 23 percent or 517 farm banks only make farm loans that are less than or equal to $100,000. Farm banks [also] held an additional $11.6 billion in farm loans with an original value between $100,000 and $250,000.” Read AmBA’s testimony.  For more information, contact AmBA’s John Blanchfield. 

Dodd Proposes Financial Consumer Protection Agency
Senate Banking Committee Chairman Chris Dodd (D-Conn.) said that he believes that any financial services regulatory restructuring plan should include an independent consumer protection agency. Under Dodd’s proposal, the agency would have broad regulatory and enforcement authority over credit and bank products; be responsible for protecting consumers from the predatory practices of payday lenders, mortgage brokers, banks and other financial institutions; and would have a seat next to the safety and soundness regulators as part of a systemic risk council.

AmBA strongly opposes such an agency because, among other things, it would add to the complexity of the financial regulatory system, and it would irrationally separate consumer policy from enforcement, operational and safety and soundness issues. AmBA outlined its opposition in a letter to Treasury Secretary Timothy Geithner last month. Read Dodd’s statement.  Read AmBA's letter to Geithner. 

Senate Panel Postpones Consideration of Bankruptcy Legislation
The Senate Judiciary Committee postponed for the second straight week consideration of an AmBA-opposed bill (S. 257) that would require bankruptcy courts to disallow creditors’ claims arising from “high-cost consumer credit transactions.” AmBA said in a joint memo to the panel last week that the legislation would “deny the possibility for creditors to recover almost any debts in bankruptcy, which would in turn limit the number of loans made, and therefore restrict the credit markets even further.”

June 11, 2009

AmBA Suggests Changes To Enhance SBA Programs for Community Banks
The American Recovery and Reinvestment Act provisions could create opportunities for small businesses and community bank lenders, but the Small Business Administration must make program changes to take advantage of such opportunities, AmBA banker Michael McGannon told the House Small Business Committee.

"Most small community banks are intimidated by the amount of paperwork required for a regular SBA 7(a) loan," said McGannon, SVP and chief lending officer at Country Club Bank, Kansas City, Mo. He explained that the SBA's Low Doc Program had a two-page application and an 80-percent guarantee, but it was eliminated and replaced with the SBA Express, which has only a 50-percent guarantee.

"Community banks would be more inclined to participate in the SBA program if a regular guaranty was offered for a loan of $150,000 or less," McGannon said. The act's America's Recovery Capital Loan Program "may fit this bill," he added, but " … the funds allocated for the program will be expended in a matter months, if not weeks."

McGannon recommended that the SBA reduce the time it takes for participating banks to collect on loan guarantees, and he emphasized that community institutions need personal contacts with knowledgeable SBA loan specialists similar to those his bank has in the Kansas City SBA office. Read more.  Read McGannon's testimony.  For more information, contact AmBA's James Ballentine. 

Sen. Durbin Introduces Interchange Fee Bill
Sen. Richard Durbin (D-Ill.) on Tuesday introduced an AmBA-opposed bill (S. 1212) that would amend antitrust laws to require retailers to collectively negotiate interchange rates with card issuers. "This legislation -- which is backed by giant retailers -- inappropriately seeks government intervention to increase their profits at the expense of consumers and the broader economy," AmBA President and CEO Ed Yingling said. "The result will be more federal bureaucracy, less industry competition, fewer choices and higher prices for consumers."

Yingling emphasized that the issue is extremely important for banks of all sizes. "From the largest financial institutions to the smallest community banks, interchange revenue provides compensation for taking on the extensive infrastructure costs required to support our card payments system, as well as the risk of nonpayment, while providing an adequate return on investment," he said. House Judiciary Committee Chairman John Conyers (D-Mich.) introduced a similar bill (H.R. 2695) last week. Read the Senate bill.  Read Yingling's statement. 

Senate Panel Slated to Consider Bankruptcy Legislation Today
The Senate Judiciary Committee today is scheduled to consider an AmBA-opposed bill (S. 257) that would require bankruptcy courts to disallow creditors' claims arising from "high-cost consumer credit transactions." AmBA said in a joint memo to the panel last week that the legislation would "deny the possibility for creditors to recover almost any debts in bankruptcy, which would in turn limit the number of loans made, and therefore restrict the credit markets even further." The committee has postponed consideration of S. 257 several times. Read the memo. 

June 10, 2009

Dodd Will Not Move Regulatory Restructuring Bill Until the Fall
Senate Banking Chairman Chris Dodd (D-Conn.) will not move legislation to restructure financial services regulation until the fall because the healthcare debate has become a greater priority, press reports said yesterday. Senate leaders want to bring up regulatory restructuring after the August recess and that is appropriate because “health care is number one,” Dodd said.

Meanwhile, House Financial Services Chairman Barney Frank (D-Mass.) has said that he wants to pass a regulatory restructuring bill before the August recess. Frank wants to move regulatory restructuring legislation in two parts. One part would deal with oversight and systemic risk, while the other would address the general makeup of the regulatory agencies.

AmBA Thanks Supporters of FDIC Bill
AmBA thanked the members of the House and Senate who supported the AmBA-backed S. 896, legislation that expanded the insurance limits for deposits to $250,000 for four years and expanded FDIC’s line of credit with the Treasury from $30 billion to $100 billion. Expanding the deposit insurance limit provided additional protection that was particularly important to small businesses, retirees, and other bank depositors that need to protect their payrolls or life-savings, AmBA EVP Floyd Stoner noted in a memo. And the cost savings that came from expanding the FDIC’s line of credit “was dramatic, as the special assessment originally proposed by the FDIC would have devastated the earnings of banks, particularly community banks, just at the time funds are needed most in their communities.” Read the memo. 

AmBA-OPPOSED INTERCHANGE BILL INTRODUCED
Sen. Richard Durbin (D-IL) introduced AmBA-opposed interchange legislation (S. 1212) that would amend anti-trust laws in order to set interchange fees and terms for merchants.  AmBA believes that the legislation would result in more federal bureaucracy and less industry competition, as well as fewer choices and higher prices for consumers.

“This is an extremely important issue for banks of all sizes,” said AmBA President and CEO Ed Yingling.  “From the largest financial institutions to the smallest community banks, interchange revenue provides compensation for taking on the extensive infrastructure costs required to support our card payments system, as well as the risk of non-payment, while providing an adequate return on investment…This bill is really about retailers wanting the numerous benefits of card payment systems without having to pay for it.”

June 5, 2009

SENATE PANEL DELAYS BANKRUPTCY MARKUP
The Senate Judiciary Committee postponed yesterday’s scheduled markup of AmBA-opposed bankruptcy legislation (S. 257) for at least another week.  The bill would disallow creditors from making claims during bankruptcy proceedings for any “high costs” debts.  AmBA believes this would reduce the credit available for personal loans, credit cards, and auto finance, and we will continue to oppose the legislation.

Interchange Fee Bill Introduced
House Judiciary Committee Chairman John Conyers (D-Mich.) and Rep. Bill Schuster (R-Pa.) introduced a bill (H.R. 2695) that would require payment system companies to negotiate interchange rates with merchants. The bill, the latest in a series of attempts by retailers to coerce lower interchange rates, met with AmBA’s immediate opposition.

“The bill … represents an effort by the merchant community to have the government interfere with the payment system so that they can reduce their cost of doing business,” AmBA President and CEO Ed Yingling said. “It’s clear that giant retailers want to pocket interchange revenue, and continue to receive the added convenience and protection payment cards provide. Simply put, giant retailers don’t want to pay their fair share and would rather have consumers bear this burden.”

AmBA and grassroots bankers have successfully fended off interchange legislation for the past year and will continue to work to protect this vital source of revenue. Read the bill.  Read Yingling’s statement.  For more information, contact AmBA’s Bill Boger. 

June 4, 2009

House Subcommittee Approves Data Breach Bill
A House Energy and Commerce subcommittee yesterday approved by voice vote a bill (H.R. 2221) that would require companies to develop reasonable security measures to protect personal information, and to set up procedures to notify consumers of data breaches that could lead to identity theft. The panel also approved an amendment that would ensure that the legislation would not override provisions included in other laws, including the privacy provisions of the Gramm-Leach-Bliley Act and the Fair Credit Reporting Act.

AmBA and five other trade groups sent a letter to subcommittee members yesterday asking for such an exemption. The trade groups also said they were concerned that the bill does not fully pre-empt state laws or regulations, and that the definition of “information broker” may include financial institutions. Read the letter. 

Bankruptcy Bill Would Restrict Consumer Credit
AmBA and six other trade groups yesterday urged the Senate Judiciary Committee to oppose a bill (S. 257) that would require bankruptcy courts to disallow creditors’ claims arising from “high-cost consumer credit transactions.” The legislation would “reduce the credit available for personal loans, credit cards and auto finance,” the trade groups said in a memo. It also “would deny the possibility for creditors to recover almost any debts in bankruptcy, which would in turn limit the number of loans made, and therefore restrict the credit markets even further,” they said. The committee is scheduled to consider the legislation today, but there have been several previous postponements. Read the memo. 

Velazquez Questions SBA Plan to Offer Loans to Auto, RV Dealers
House Small Business Committee Chairman Nydia Velazquez (D-N.Y.) yesterday asked the Small Business Administration why the agency broke from its practice of not using programs for wholesale lending, when it recently offered guaranteed inventory loans to automobile, recreational vehicle and boat dealers. “Because lenders are limited in their ability to exercise full control over the financed items, the exposure to loss in floor plan loans is greater than in other types of financing,” Velázquez said in a letter to SBA Administrator Karen Mills. “While clearly there is a need to provide this industry with transitional assistance, doing so by focusing on inherently risky financial arrangements seems questionable.” Read more.  Read the letter.  For more information, contact AmBA James Ballentine. 

June 3, 2009

AmBA SEEKS CLARITY ON DATA BREACH BILL’S SCOPE
AmBA and five other trade groups wrote to the Commerce Subcommittee of the House Energy and Commerce Committee this morning regarding data breach legislation (H.R. 2221) that the Subcommittee is marking up today.

“H.R. 2221 would put in place data protection and notice requirements for a broad range of entities that acquire and use personal information about consumers,” the joint letter said.  “We support such requirements for businesses that are not already subject to clear legal and regulatory standards that require them to protect consumers’ sensitive personal information and to provide notice in the event of a breach of that information.  However, we have serious concerns that certain aspects of H.R. 2221 could result in duplicative and inconsistent regulation of financial services providers.”

The legislation would require the Federal Trade Commission (FTC) to write data protection rules, and would provide for FTC enforcement by both the FTC and state attorneys general.  The letter asked for clarification that the bill would not apply to financial services entities, including affiliates and subsidiaries, which already are covered by Gramm-Leach-Bliley Act requirements.

The letter also expressed concerned that the bill does not fully preempt state law or regulations, and that the definition of “information broker” may include financial institutions.

BILL WOULD GRANT FTC ‘OVERLY BROAD’ AUTHORITY ON UDAP, JOINT LETTER SAYS
AmBA also signed on to a joint letter to the Commerce Subcommittee yesterday with six other trade groups, regarding consumer protection legislation (H.R. 2309) that would grant the Federal Trade Commission (FTC) expedited rulemaking authority and authority to obtain civil penalties in connection with unfair and deceptive acts or practices (UDAP).  The Subcommittee is marking up the bill today.

Although the bill is primarily directed at debt settlement services and auto sales, we are concerned about the overly broad FTC rulemaking authority and provisions that would allow for enforcement by state attorneys general.

Such FTC authority “could result in rushed and unfair decisions that have a broad negative impact on industry and consumers,” the letter said, “allowing the FTC to create major industry-wide regulatory changes without adequate time for business input and thoughtful consideration.”

The letter also expressed concern with the FTC civil penalty provisions.

May 28, 2009

House Panel to Hold Hearing on Regulatory Restructuring Legislation
In related news, the House Financial Services Committee has scheduled hearings June 10, 11, 17, and 18 on regulatory restructuring legislation, and plans to consider a bill by the end of the month. AmBA is tentatively slated to testify on June 10. Panel Chairman Barney Frank (D-Mass.) has said that he wants to move regulatory restructuring legislation in two parts. One part would deal with oversight and systemic risk, while the other would address the general makeup of the regulatory agencies.

May 27, 2009

REGULATORY RESTRUCTURING HEARINGS SCHEDULED
The House Financial Services Committee plans to begin work next month on regulatory restructuring legislation.  The Committee has scheduled four hearings for the mornings of June 10, 11, 17, and 18.  The Committee plans to mark up a bill by the end of the month, although no specific date has been set at this time.

Committee Chairman Barney Frank (D-MA) has previously said that he wants to move regulatory restructuring legislation in two parts.  One part would deal with oversight and systemic risk, and the other would address the general makeup of regulatory agencies.

AmBA will follow the hearings and legislative developments closely.  We have previously testified to the Committee that any legislation designed to restructure the financial services marketplace should focus on creating a systemic risk regulator, establishing a method to handle nonbank institutions threatening systemic risk, and closing regulatory gaps.

May 26, 2009

Credit Card Bill Signed Into Law
President Obama signed into law credit card legislation that makes a number of significant changes to how card companies conduct business, including restrictions on risk management practices. AmBA President and CEO Ed Yingling attended the White House bill signing ceremony.

Most of the provisions in the new law, which AmBA and grassroots bankers kept free of negative interchange fee amendments, will take effect in 9 months. Among other things, the law:

• Prevents an issuer from raising a customer’s rate on an existing balance unless the consumer is more than 60 days behind on a payment; 

• Prohibits applying interest rate charges to two full cycles of card balance;

• Requires mailing bills 21 days before the due date;

• Prohibits charging over-the-limit-fees unless the cardholder first opts-in to the charges;

• Requires promotional rates to last at least six months; and

• Prohibits increasing rates in the first year the card account is opened.

AmBA has expressed concern that some provisions of the new law will have a dramatic impact on the ability of consumers, students, and small businesses to obtain and use credit cards.

May 22, 2009

AmBA Urges Geithner to Promote NOL Carryback Relief Without TARP Exclusion
AmBA and five other trade groups yesterday urged Treasury Secretary Timothy Geithner to promote a net operating loss carryback period extension in Congress for all industries -- without exclusions. Unlike the general proposal to extend the NOL carryback period in the administration’s fiscal year 2010 budget, there are several pending bills that would exclude Troubled Asset Relief Program participants from eligibility, the trade groups explained in a letter.

For example, Rep. Richard Neal (D-Mass.), introduced such legislation (H.R. 2452) last week. But Neal said that he would be willing to drop the TARP exclusion from his bill, pending clear guidance from the administration. The trade groups emphasized that the Treasury Department’s leadership will be needed in such cases to ensure that NOL carryback legislation fully serves its purpose of helping to spur the economic recovery. “Making NOL carryback relief available to all taxpayers represents sound policy,” they said. Read the letter.  For more information, contact AmBA’s Larry Seyfried. 

AmBA Continues to Spread Message that Banks Are Lending
Despite the difficult economic environment and tighter lending standards, banks continue to lend and are actively looking for good loan opportunities, AmBA Chief Economist Jim Chessen told a House Republican small-business lending roundtable this week. “Banks are anxious to meet the credit needs of small business and we know that such capital is vital to an economic recovery,” Chessen said. He cited a recent National Federation of Independent Businesses survey that showed only 8 percent of small businesses reported problems in obtaining the financing they desired.

Chessen explained, however, that all businesses, including banks, are exercising more caution in taking on new financial obligations. “Banks are looking carefully at the risk of a loan and re-evaluating the proper pricing of that risk,” he said. “This is a prudent business practice and one expected by our bank regulators.” Chessen added that the Obama administration’s recent initiatives to temporarily raise guarantees to up to 90 percent on Small Business Administration 7(a) loans and eliminate fees on the 7(a) and 504 programs will give banks an incentive to lend, and provide lenders with greater confidence to extend credit during difficult times. Read Chessen’s statement.  For more information, contact AmBA's Chessen.

May 21, 2009

PRESIDENT SIGNS FDIC Bill
AmBA President and CEO Ed Yingling joined President Obama at the White House as he signed the AmBA-supported FDIC and housing bill (S. 896) into law yesterday.  As enacted, the legislation increases FDIC borrowing authority to $100 billion, which will enable the FDIC to reduce the proposed special assessment on all banks – likely to as low as 5 basis points, down significantly from the originally proposed 20 basis points.

The legislation also extends the period for the restoration of the FDIC’s deposit insurance fund from five to eight years, and provides a temporary extension (through 2013) of the FDIC’s $250,000 deposit insurance limit.  The bill’s housing provisions will make it easier for servicers to modify loan agreements and improve the Hope for Homeowners Program.  The legislation does not include any language on mortgage bankruptcy cram down.

In addition, the legislation has provisions creating a Corporate Credit Union Stabilization Fund (CCUSF).  AmBA has prepared a summary of the CCUSF provisions that provides background on credit unions’ insurance structure and details of the changes the new law will make. 

AmBA would like to thank everyone for their efforts on this important piece of legislation.  This victory could not have been achieved without the work of the state associations and the thousands of bankers that wrote letters, called, and met with their Members of Congress and the FDIC.

May 20, 2009

AmBA Grassroots Team Delivers Another Win; Special Assessment Could Drop to as Low as 5 Basis Points on New Base
The AmBA grassroots team achieved yet another crucial win yesterday, when the House passed by a 367-54 vote the critical deposit insurance bill (S. 896) that will increase the FDIC’s Treasury borrowing authority to $100 billion and allow the agency to substantially reduce its proposed 20-basis-points special assessment.

The legislation -- that the efforts of the Direct Contact Bankers, state associations and AmBA members’ 25,000-plus letters have kept free of negative amendments -- now will be sent to the Senate, which is expected to pass it quickly and send it to President Obama by the end of the week. S. 896 also would, among other things, maintain the current $250,000 FDIC deposit insurance coverage for four years through 2013; allow the FDIC to take up to eight years, from the current five years, to recapitalize the Deposit Insurance Fund; and make it easier for mortgage servicers to modify loan agreements.

Meanwhile, the FDIC on Friday is expected to approve an even lower special assessment -- around 5 basis points. The lower assessment is possible not only because of the legislation passed yesterday, but also because AmBA persuaded the FDIC to channel revenue from the Temporary Liquidity Guarantee Programs to the Deposit Insurance Fund. AmBA also recently suggested charging a smaller special assessment in the second quarter -- for example, 4 or 5 bp -- with an option for a second assessment, if necessary, later in 2009.

An additional factor in the lower premium for most banks is that the FDIC is expected to use a broader base -- a bank’s total assets minus Tier 1 capital -- to calculate the special assessment. This base favors banks that rely mostly on domestic deposits for funding. Slightly more than 100 banks -- including some of the very largest and bankers’ banks -- would pay more using this expanded base.

Read more in yesterday’s Newsbytes special edition. For more information, contact AmBA’s Jim Chessen. 

Senate Passes Credit Card Legislation; Interchange Fee Amendment Not Offered
The Senate yesterday passed by a 90-5 vote a credit card bill (H.R. 627) that would restrict card issuers’ ability to factor in risk when making credit decisions. As reported in Daily Newsbytes Tuesday morning, an interchange fee amendment was not offered thanks to relentless lobbying by AmBA, its state association allies and grassroots bankers, who deluged the Senate with more than 20,000 customized letters opposing the measure.

AmBA expects the House, which passed its version of legislation on April 30, to quickly take up the Senate bill, and clear it for President Obama’s signature by the end of the week. While H.R. 627 contains a number of tough but workable provisions, it also contains some provisions that will undermine credit availability, ABA President and CEO Ed Yingling said.

“The goal in the legislation should be to obtain the right balance: providing protections, while maintaining the important role of credit cards in providing loans to consumers and small businesses,” Yingling said. “Unfortunately, we believe the bill does not achieve that balance and will therefore cause an unnecessary decrease in credit availability.” He added that going forward AmBA will continue to work with Congress and the administration to try to achieve that balance.

During final consideration of the bill yesterday, the Senate adopted a substitute amendment offered by Banking Committee Chairman Chris Dodd (D-Conn.) and ranking member Richard Shelby (R-Ala.) that, among other things, would allow credit card companies to increase rates after 60 days of delinquency, although they would have to re-evaluate the customer's account in six months and reduce the interest-rate increase if the consumer’s credit improved.

The measure also would prohibit card companies from raising rates on cardholders at any time during the first year of the account’s activation, and would require compliance with the bill’s provisions within nine months of enactment. Read a bill summary.  Read Yingling’s statement.  For more information, contact AmBA’s Ken Clayton. 

May 19, 2009

AmBA Victory: FDIC Bill Clears House; Special Assessment Could Drop to as Low as 5 Basis Points
Thanks to weeks of aggressive advocacy work by AmBA, the state associations and grassroots bankers, the House this afternoon passed by a 367 to 54 vote the critical deposit insurance bill (S. 896) that that will increase the FDIC’s Treasury borrowing authority from $30 billion to $100 billion, allowing the agency to substantially reduce its proposed 20-basis-point special assessment.

The legislation, which is free of negative amendments, now will be sent to the Senate, which is expected to take it up quickly, pass it and send it to President Obama by the end of the week to be signed into law. The bill also would, among other things, maintain the current $250,000 FDIC deposit insurance coverage for four years through 2013; allow the FDIC to take up to eight years, from the current five years, to recapitalize the Deposit Insurance Fund; and make it easier for mortgage servicers to modify loan agreements.

AmBA put its considerable weight behind the legislation as soon as FDIC Chairman Sheila Bair promised in early March to substantially reduce the special assessment if the agency’s borrowing authority was increased. Bair’s pledge came after she and AmBA bankers and staff members had many extensive conversations to explore alternatives.

The fact that the bill is free of onerous amendments is another tribute to the grassroots firepower of bankers, who sent more than 25,000 letters during Congress’ consideration of the legislation. The industry helped defeat an amendment that would have given bankruptcy judges the broad power to cram down the remaining balances on mortgages and modify or change the interest rate or loan terms. Banks also repelled an attempt to require institutions receiving financial assistance from the Troubled Asset Relief Program legislation to establish a de-facto principal write-down program for farm loans.

Meanwhile, the FDIC is expected to approve an even lower special assessment – around 5 basis points on a broader base of total assets less Tier 1 capital -- when it meets on Friday. The lower assessment is possible not only because of the legislation passed today, but also because AmBA persuaded the FDIC to channel revenue from the Temporary Liquidity Guarantee Programs to the Deposit Insurance Fund. AmBA more recently suggested charging a smaller special assessment in the second quarter -- for example, 4 or 5 bp -- with an option for a second assessment, if necessary, later in 2009.

May 18, 2009

Rep. Neal Sponsors Legislation to Expand Net Operating Loss Carryback Period
Rep. Richard Neal (D-Mass.), chairman of the House Ways and Means Committee’s Select Revenue Measures Subcommittee, on Friday filed a bill that would expand the net operating loss carryback period from two years to five years for 2008 and 2009. The legislation, however, includes a provision that would prevent companies receiving Troubled Asset Relief Program funds, such as Capital Purchase Program participants, from the using the extension. A similar Senate bill (S. 823) also contains a provision excluding TARP recipients. While AmBA supports expanding the net operating loss carryback period, it strongly opposes excluding TARP recipients. Neal said in a floor statement that he would be amenable to dropping the TARP exclusion from his legislation. Read the bill. For more information, contact AmBA’s Larry Seyfried. 

May 15, 2009

AmBA Updates Capital Purchase Program FAQs to Reflect Geithner Announcement
AmBA late yesterday updated its frequently asked questions on the Capital Purchase Program to reflect Treasury Secretary Timothy Geithner’s announcement this week that community banks with under $500 million in assets will have an additional six months to apply for CPP participation. Those banks also can request the capital equivalent of up to 5 percent of their risk-weighted assets, instead of the program’s original 3 percent. Current CPP participants with less than $500 million in assets can reapply to get the higher amount, with an expedited approval process. Treasury also is extending the deadline by six months for small banks that want to form a holding company for CPP purposes. Read the updated CPP FAQs. For more information, contact AmBA’s Cathy McTighe. 

May 7, 2009

AmBA Victory: Senate Passes FDIC Bill
AmBA grassroots advocacy sparked the banking industry to an important victory today as the Senate passed by a 91 to 5 vote a critical bill (S. 896) that will increase the FDIC’s Treasury borrowing authority from $30 billion to $100 billion, allowing the agency to cut its planned special assessment from 20 to 10 basis points.

The FDIC’s borrowing authority increase, which AmBA recommended soon after the agency announced its emergency premium, is expected to be quickly accepted by the House -- which passed a similar bill (H.R. 1106) last month -- and signed by the president.

The increase, combined with other measures the FDIC has taken, including instituting a Temporary Liquidity Guarantee Program surcharge that is transferred to the Deposit Insurance Fund, could reduce the special assessment to about 8 basis points.

AmBA supported the legislation with its full grassroots firepower as soon as FDIC Chairman Sheila Bair promised to substantially reduce the special assessment if the agency’s borrowing authority was increased. Bair’s pledge came after she and AmBA bankers and staff members had many extensive conversations to explore alternatives.

AmBA grassroots efforts also helped keep the FDIC bill free from several onerous amendments. They included a mortgage cram-down measure offered by Sen. Richard Durbin (D-Ill.) that the Senate rejected last week by a 51-45 vote following an outpouring of opposition from the state associations, Direct Contact Bankers and other AmBA members.

An amendment by Sen. Russ Feingold (D-Wis.) to require institutions receiving financial assistance from the Troubled Asset Relief Program legislation to establish a de-facto principal write-down program for farm loans was replaced -- in the face of state association and AmBA banker opposition -- by a new measure that would require the Congressional Oversight Panel to study the issue and produce a report. A possible amendment to increased credit unions’ business lending authority was never offered after AmBA bankers sent 13,000 letters of opposition.

S. 896, in addition to increasing FDIC’s borrowing authority, also would:

• Maintain the current $250,000 FDIC deposit insurance coverage for four years through 2013.
• Allow the FDIC to take up to eight years, from the current five years, to recapitalize the Deposit Insurance Fund.
• Grant the FDIC temporary additional borrowing authority of $500 billion for systemic reasons -- subject to a two-thirds vote of the agency’s board, a two-thirds vote of the Federal Reserve, and the agreement of the Treasury secretary in consultation with the president. 
• Allow the FDIC to levy bank holding companies for any systemic special assessment if they stand to benefit from government actions, such as the debt guarantee program.
• Give more power to the Federal Housing Administration and the Rural Housing Authority to modify loans.
• Expand access to the Hope for Homeowners Program. 
• Increase the National Credit Union Administration’s borrowing authority.

May 6, 2009

HOUSE TO CONSIDER MORTGAGE BILL
AmBA remains concerned that mortgage legislation (H.R. 1728) scheduled for House floor consideration today “needs serious work,” we said in a letter to House Members.  The letter outlined several concerns with the bill, particularly in the areas of risk retention, the safe harbor, and uniform national standards.

“While the very narrow safe harbor included in the original bill has been expanded beyond just 30 year fixed rate loans, we are concerned that it is still far too narrow,” AmBA wrote, as the language on   adjustable rate mortgages (ARMs) “remains too restrictive.”

AmBA also recommended excluding insured depositories from the bill’s risk retention provisions, and to clarify the enforcement provisions in order to, at a minimum, “give the federal banking regulators notice of a state attorney general’s intention to act, and allow the federal regulator a reasonable time to act before the state is allowed to do so.”

A number of amendments are anticipated during floor consideration.  “As a general rule, we oppose amendments which would increase regulatory burden on banks and their employees, and support amendments which recognize the role that regulated, insured, and examined institutions play in protecting consumers’ interests and in providing products and services which benefit our national marketplace,” AmBA explained.

The Rules Committee approved a rule for general debate, and will consider a second rule on submitted amendments.  Floor debate is scheduled.

Vote on AmBA-Backed FDIC Bill Today; Feingold Replaces Farm Loan Restructuring Measure
Final Senate passage of the AmBA-backed FDIC legislation (S. 896) is scheduled for today. Before final action, the Senate will approve the Dodd-Shelby substitute amendment, which ABA has strongly endorsed, that would increase the FDIC’s Treasury borrowing authority to $100 billion, allowing the agency to cut its planned special assessment from 20 to 10 basis points.

The measure also would, among other things, maintain the current $250,000 FDIC deposit insurance coverage for four years through 2013; and allow the FDIC to take up to eight years, from the current five years, to recapitalize the Deposit Insurance Fund.

In related news, AmBA grassroots bankers and the state associations achieved another significant victory for the industry yesterday, when Sen. Russ Feingold (D-Wis.) agreed to replace his onerous amendment on farm loan restructuring with another measure. The original AmBA-opposed amendment would have required institutions receiving financial assistance from the Troubled Asset Relief Program legislation to establish a de-facto principal write-down program for farm loans.

The new measure would require the Congressional Oversight Panel to issue a special report after analyzing the state of commercial farm credit markets and the use of loan restructuring as an alternative to foreclosure by institutions receiving financial assistance under TARP. Read the new Feingold amendment. 

Schumer Amendment Would Threaten Viability of Popular Gift Card
AmBA told Sen. Charles Schumer (D-N.Y.) yesterday that an amendment he has offered to a credit card reform bill (S. 414) would threaten the viability of “open loop,” network-branded gift cards issued by AmBA members and accepted at millions of retail locations. The amendment, which would restrict financial institutions involved in delivering bank-issued gift cards from assessing periodic fees and lengthen their expiration period, ultimately would “cause issuers to increase the purchase price for gift cards, or to stop offering them altogether,” Ken Clayton, AmBA SVP for card policy, said in a letter to Schumer.

“[T]he impact will be increased and unwarranted costs for the 90 percent of consumers who use their cards within the first six months, or worse, the disappearance of a highly valued and utilized consumer product -- the ‘open loop’ gift card.” Read the letter.  For more information, contact AmBA’s Clayton. 

Bernanke: Credit Card Issuers Need Sufficient Time to Implement New Regs
In related news, Sen. Charles Schumer (D-N.Y.) yesterday took Federal Reserve Chairman Ben Bernanke to task at a Joint Economic Committee hearing for saying in a letter to Schumer that his agency believes credit card issuers “must be afforded sufficient time for implementation” of regulations the Fed approved last December. Schumer called the decision "unconscionable," according to press reports. Bernanke said that he shared Schumer's frustration but found himself balancing competing priorities.

“My real quandary is how can we best help consumers in ways that don't create worse problems in the market,” he said. “That's the issue I’m still grappling with.” Bernanke added that he believes credit card companies need time to determine how to restructure their business model so they can provide credit to riskier consumers in a way that they find profitable. “I think that their short-term response would be just to cut a lot of people off,” he said. Read Bernanke’s testimony. 

May 4, 2009

AmBA Urges Passage of FDIC Bill Without Extraneous Amendments
AmBA last week wrote to Senate Banking Committee Chairman Christopher Dodd (D-Conn.) and panel ranking member Richard Shelby (R-Ala.), strongly endorsing their substitute to the FDIC bill (S. 896) under consideration in the Senate. “AmBA urges the Senate to pass this important legislation without extraneous amendments, and we look forward to working with you to have it enacted into law as quickly as possible,” Floyd Stoner, AmBA EVP of congressional relations, said in a letter.

The Dodd-Shelby substitute, among other things, would increase the FDIC’s Treasury borrowing authority to $100 billion, allowing the agency to cut its planned special assessment in half; maintain the current $250,000 FDIC deposit insurance coverage for four years through 2013; and allow the FDIC to take up to eight years, from the current five years, to recapitalize the Deposit Insurance Fund. Read the letter. 

Bankers Asked to Contact Senators to Oppose Farm Loan Restructuring Amendment 
In related news, Sen. Russ Feingold (D-Wis.) on Tuesday is expected to offer an onerous AmBA-opposed amendment on farm loan restructuring during consideration of the FDIC bill (S. 896). ABA continues to encourage state association executives and bankers to contact their senators to express opposition to the measure.

Feingold’s amendment would require institutions receiving financial assistance from the Troubled Asset Relief Program legislation -- including banks that are participating in various financial stabilization programs such as homeowner assistance and debt guarantee programs -- to restructure farm loans through modifications, rescheduling or write-downs. Bankers can reach their Senate members through the Capitol switchboard at 202-224-3121. Read the Feingold amendment.  For more information, contact AmBA’s John Blanchfield or Seaver Sowers.

May 1, 2009

Bankers’ Grassroots Efforts Secure Cram-Down Victory
Efforts by AmBA and state association bankers, including personal visits by more than 800 bankers who attended AmBA’s Government Relations Summit in March and thousands of letters and contacts, led to the defeat of an amendment yesterday that would have given bankruptcy judges the broad power to cram down the remaining balances on mortgages and modify or change the interest rate or loan terms. The amendment was offered during consideration a bill (S. 896) that would increase the FDIC’s Treasury borrowing authority to $100 billion, allowing the agency to cut its planned special assessment in half. Read more about the cram-down vote in yesterday’s special edition of Newsbytes.

Sens. Dodd, Shelby to Offer Key Substitute Amendment to FDIC Bill
Senate Banking Committee Chairman Christopher Dodd (D-Conn.) and panel ranking member Richard Shelby (R-Ala.) today are expected to offer a substitute amendment that will make some substantive changes in the FDIC bill (S. 896) under consideration in the Senate. The substitute amendment would maintain the current $250,000 FDIC deposit insurance coverage for four years -- through 2013 -- rather than make it permanent as in legislation (H.R. 1106) the House recently passed.

The amendment would increase the FDIC’s Treasury borrowing authority from the current $30 billion to $100 billion, allowing the agency to cut its planned special assessment in half. Unlike the House bill, however, the Senate measure also would grant the FDIC temporary additional borrowing authority of $500 billion for systemic reasons -- subject to a two-thirds vote of the agency’s board, a two-thirds vote of the Federal Reserve, and the agreement of the Treasury secretary in consultation with the president. The National Credit Union Administration would also receive new borrowing authority, but at a much lower level.

Both the House and Senate bills would allow the FDIC to take up to eight years – up from the current five years -- to recapitalize the Deposit Insurance Fund. Both bills also would allow the FDIC to levy bank holding companies for any systemic special assessment if they stand to benefit from government actions, such as the debt guarantee program.

The Dodd-Shelby substitute also generally mirrors the housing sections of the House bill, including expanded power for the Federal Housing Administration and the Rural Housing Authority to modify loans, and expanded access to the Hope for Homeowners Program.

AmBA strongly supports the Dodd-Shelby substitute amendment, and believes there is a possibility that the House may take up and pass S. 896 in the near future.

Sen. Feingold Expected to Offer Updated Amendment on Farm Loan Restructuring
In related news, Sen. Russ Feingold (D-Wis.) next Tuesday is expected to offer an onerous amendment on farm loan restructuring during consideration of the FDIC bill (S. 896). AmBA is encouraging state association executives and bankers to contact their senators to express opposition to the measure.

Feingold has redrafted the amendment that was reported on yesterday by removing language requiring institutions that have received financial assistance from the economic stimulus legislation -- which would have included many community banks -- to restructure farm loans through modifications, rescheduling or write-downs.

However, the measure still covers any institutions receiving financial assistance from the Troubled Asset Relief Program legislation -- including banks that are participating in various financial stabilization programs, such as homeowner assistance and debt guarantee programs. As a result, AmBA remains strongly opposed to the amendment. Bankers can reach their Senate members through the Capitol switchboard at 202-224-3121. Read the updated Feingold amendment.  For more information, contact AmBA’s John Blanchfield  or Seaver Sowers. 

House Passes Credit Card Legislation
The House yesterday passed by a 357-70 vote a credit card bill (H.R. 627) that would add more restrictions on the ability of card issuers to factor in risk when making credit decisions, and also increase the operational challenges facing the industry as it prepares to comply with the Federal Reserve’s new rules.

As the legislative process moves forward, AmBA believes lawmakers “should strive to achieve the right balance between enhancing consumer protection and ensuring that credit remains available to consumers and small businesses at a reasonable cost,” association President and CEO Ed Yingling said. “We continue to believe that more work needs to be done to achieve that balance.”

During consideration of H.R. 627, the House adopted a number of White House-backed amendments, including one that would require cardholders to get customers’ permission before charging them over-the-limit fees.

Other approved amendments the administration sought would limit a college student’s card account to $500 or 20 percent of annual income, whichever is higher; require teaser promotional rates to be offered for at least six months; and mandate that card payments be applied to the highest-rate balances first. The Senate is expected to vote on its credit card bill (S. 414) this month. Read Yingling’s statement.  For more information, contact AmBA’s Ken Clayton.

April 30, 2009

Vote Tally on Bankruptcy Amendment
The Senate defeated today, by a vote of 45-51, the AmBA-opposed bankruptcy cram down amendment that Sen. Richard Durbin (D-IL) offered to the housing-FDIC bill (S. 896).  Twelve Democrats voted against the amendment.  The vote tally is available here.

The vote against the amendment was the result of a strong industry effort, and we thank you for your work on this issue.

AmBA Grassroots Bankers, State Associations Defeat Cram-Down Amendment
A deluge of 12,450 letters from AmBA members, in addition to numerous phone calls, personal e-mails and correspondence from Direct Contact Bankers and the state associations, paid big dividends today when the Senate rejected by a 51-45 vote a “cram-down’ amendment offered by Sen. Richard Durbin (D-Ill.).

The amendment -- which would have given bankruptcy judges the broad power to cram down the remaining balances on mortgages and modify or change the interest rate or loan terms -- was offered during consideration a bill (S. 896) that would increase the FDIC’s Treasury borrowing authority to $100 billion, allowing the agency to cut its planned special assessment in half.

AmBA has led the industry’s fight against adding language to S. 896 and other key bills, emphasizing -- in testimony and meetings -- the chilling effect it would have on lending. “We have consistently maintained that allowing bankruptcy judges to arbitrarily rewrite the terms of a mortgage contract -- including allowing them to reduce -- or ‘cram down’ the amount owed on a mortgage, change interest rates, or stretch out the terms of the loan -- would bring additional risk and uncertainty to an already volatile mortgage market and would make home loans more expensive and less available for consumers,” Floyd Stoner, AmBA EVP of congressional relations said.

“Congress and the administration have taken several strong steps to help troubled borrowers and get our economy back on track. Giving bankruptcy judges broad cram-down authority would work against those efforts and effectively undermine the goal of stabilizing the housing market,” Stoner said.

The Senate's consideration of the FDIC bill is expected to continue into early next week. AmBA is working to keep the bill free of other onerous amendments and to secure its passage.

See how your senator voted on the cram-down amendment.

House Panel Approves Mortgage-Reform Bill; ABA-Requested Amendments Approved 
The House Financial Services Committee yesterday approved by a 49-21 vote a bill (H.R. 1728) aimed at curbing abusive mortgages. The legislation -- tentatively scheduled for full House consideration on May 7 -- would, among other things, require regulators to issue regulations that ensure borrowers have the ability to repay their mortgage loans, and mandate that refinancing terms provide a “net tangible benefit.”

As AmBA requested, the committee approved several amendments that would expand the bill’s safe harbor and improve its risk retention provisions. The panel adopted an amendment by Reps. Melissa Bean (D-Ill.) and Mike Castle (R-Del.) that would add to the safe harbor certain fixed-rate and adjustable-rate mortgages with limited fees and rates, along with Veterans Affairs and Federal Housing Administration loans, and Fannie Mae and Freddie Mac conforming loans. Another amendment, by Reps. Gary Miller (R-Calif.) and Leonard Lance (R-N.J.), would expand the safe harbor to jumbo loans of more than $730,000 that do not exceed a certain rate.

The panel also adopted an amendment by Chairman Barney Frank (D-Mass.) that would ease the 5 percent risk-retention requirement and clarify that regulators have the authority to adjust the retention amount to satisfy “appropriate risk practices.” An AmBA-opposed measure by Rep. Paul Hodes (D-N.H.) was approved that would let state attorneys general enforce the bill’s federal standards.

One of the key changes the committee adopted was an AmBA-backed amendment that would withdraw the Department of Housing and Urban Development’s final Real Estate Settlement Procedures Act rule. The measure, offered by Reps. Judy Biggert (R-Ill.) and Ruben Hinojosa (D-Texas), would require HUD to work with the Federal Reserve to develop and issue a new joint RESPA rule to simplify the mortgage process.

AmBA, which sent a joint letter to the panel supporting the amendment, has been a lead advocate in arguing that HUD’s RESPA rules must be suspended or withdrawn to allow for better coordination with the Fed’s regulations. As of last night, the committee had not issued a summary of the bill’s approved amendments. For more information, contact AmBA’s Joe Pigg. 

AmBA Urges Senators to Oppose Cram-Down Amendment
AmBA yesterday sent a memo -- and also joined 11 other trade groups in a letter -- asking all senators to oppose a bankruptcy cram-down amendment that Sen. Richard Durbin (D-Ill.) is expected to offer today during consideration of a bill (S. 896) that would increase the FDIC’s Treasury borrowing authority to $100 billion, allowing the agency to cut its planned special assessment in half.

“The Durbin amendment would allow bankruptcy judges, for the first time, to alter the terms of a mortgage on a principal residence,” Floyd Stoner, AmBA EVP of congressional relations, said in the memo. “Giving bankruptcy judges the unilateral authority to reduce interest rates, lengthen the term of the loan or reduce the amount owed to the lender will add significant risk and uncertainty to an already unstable housing market, and will lead to increased borrowing costs and less credit availability for future homeowners.”

AmBA bankers have sent 12,238 letters opposing the cram-down amendment. That’s in addition to numerous phone calls, personal e-mails and state association letters. Read AmBA’s memo.  Read the joint trade group letter. 

Sen. Feingold Expected to Offer Amendment on Farm Loan Restructuring
In related news, Sen. Russ Feingold (D-Wis.) today is expected to offer an AmBA-opposed amendment on farm loan restructuring during consideration of the FDIC borrowing authority bill (S. 896). AmBA is encouraging state association executives and bankers to contact their senators to express opposition to the measure.

The amendment would require financial institutions that have received Troubled Asset Relief Program or economic stimulus assistance -- possible triggers are receipt of a loan guarantee through Small Business Administration loan programs, or the USDA Business and Industry Loan Program -- to restructure farm loans through modifications, rescheduling or write-downs. Institutions would be restricted from participating in other federal government programs until the restructurings occur. Bankers can reach their Senate members through the Capitol switchboard at 202-224-3121. Read the Feingold amendment.  Read talking points on the amendment.  For more information, contact AmBA’s John Blanchfield or Seaver Sowers. 

House to Tackle Credit Card Bill Today; Geithner Weighs In
The House today is expected to begin consideration of a credit card bill (H.R. 627) that will be subject to several amendments that could severely affect banks’ ability to offer cards to customers. While AmBA has maintained that legislation is unnecessary in light of the Federal Reserve sweeping new card rules, there is significant political pressure for Congress to enact legislation.

Treasury Secretary Timothy Geithner, who issued a statement yesterday pressing for strong bipartisan support of H.R. 627, outlined critical provisions that the administration would like both the House and Senate to incorporate into their respective bills. They include a ban on “universal default,” the risk-based pricing practice; a required opt-in for over-the-limit fees; and public disclosure of rates, fees and terms on a new national Web site. All of those measures will be offered today as amendments to the bill.

AmBA is concerned that the legislation will significantly impact, to varying degrees, the card operations of more than 6,000 large and bank card issuers. The association continues to work with members of Congress to discourage proposals that would restrict credit and to make proposals more workable from a bank operations standpoint. AmBA to date has helped deflect an amendment that would control interest rates and another that would regulate bank interchange rates. Read Geithner’s statement.  Read a list of amendments the House will consider.  For more information, contact AmBA’s Ken Clayton. 

April 29, 2009

House Panel Approves AmBA-Backed Amendment to Mortgage-Reform Bill
The House Financial Services Committee yesterday did not complete work on a bill (H.R. 1728) aimed at curbing abusive mortgages. But the panel did pass by voice vote an amendment that would exclude more loan types from a risk-retention measure requiring lenders to retain 5 percent of loans that they sell into the secondary market. Under the original bill, only 30-year fixed rate mortgages would be excluded under the definition of “qualified loans.”

The amendment -- offered by Reps. Michael Castle (R-Del.) and Melissa Bean (D-Ill.) -- would expand that definition to exclude fully amortized mortgage loans not exceeding the average prime rate by 1.5 percent for first mortgages, or 3.5 percent for second liens. The measure also would exclude prime loans with adjustable interest rates that reset to no more than 1.5 percent over the prime rate; Veterans Affairs and Federal Housing Administration loans; as well as Fannie Mae and Freddie Mac conforming loans.

AmBA had asked for the expansion and included it in a letter sent to the committee yesterday requesting a laundry list of modifications to the legislation The committee today will consider several more amendments. Read AmBA’s letter.  For more information, contact AmBA’s Joe Pigg. 

Senate Passes Mortgage Fraud Bill
The Senate yesterday overwhelmingly passed legislation that would give federal investigators more tools to combat mortgage fraud. The legislation, which would provide more than $500 million over two years to cover more fraud prosecutions and enforcement actions, also would create a commission to examine the cause of the financial crisis.

Sen. Specter Switches to Democratic Party
Sen. Arlen Specter of Pennsylvania announced yesterday that he is switching from the Republican to the Democratic Party and will seek re-election in 2010 in the Democratic primary. He was expected to face a difficult GOP primary challenge from former Rep. Pat Toomey. The addition of Specter to the Democratic caucus, if combined with the seating of Al Franken in Minnesota’s disputed Senate race, theoretically would give the party the 60 votes required to break filibusters that can stall legislation. But Specter, first elected to the Senate in 1980, warned that he would “not be an automatic 60th vote for cloture.” The change in party affiliation “does not mean that I will be a party-line voter any more for the Democrats than I have been for the Republicans,” he said in a statement. Read Specter’s statement. 

April 28, 2009

AmBA Urges Bankers to Send Letters Opposing ‘Cram-Down,’ and Lifting of CU Business-Lending Cap
AmBA is urging bankers to use the association’s automated system to send letters to their senators expressing their strong opposition to a mortgage “cram-down” provision -- and also an amendment that would remove or raise the cap on credit union business lending for 12 months.

As reported earlier, the cram-down provision -- which would give bankruptcy judges the broad power to cram down the remaining balances on mortgages and modify or change the interest rate or loan terms -- will be included in one bill (S. 895) or offered as an amendment to a similar bill (S. 896) the Senate will consider Thursday. Both S. 895 and S. 896 include AmBA-supported measures to increase the FDIC’s Treasury borrowing authority to $100 billion, which would allow the agency to cut its planned special assessment in half.

AmBA learned yesterday that an amendment may be offered to remove or raise the cap on credit union business lending for a 12-month period. This AmBA-opposed amendment would reverse a 1998 law that enacted limits on such business lending to ensure the credit union industry’s safety and soundness.

It’s critical that bankers send as many letters as possible opposing both the cram-down provision/amendment, and the credit union business-lending cap amendment. Please send a letter opposing the cram-down provision/amendment.  Please send a letter opposing the credit union business-lending cap amendment.  For more information, contact AmBA’s James Ballentine. 

AmBA Working to Protect Banks From Onerous Mortgage Requirements
The House Financial Services Committee today is scheduled to consider a bill (H.R. 1728) aimed at curbing abusive mortgages. The legislation includes a risk retention provision that would require lenders to retain 5 percent of loans that they sell into the secondary market.

The provision currently would exclude only 30-year fixed rate mortgages, but AmBA is working to have the provision modified to exclude all durations of fixed-rate mortgages and “garden variety” adjustable rate mortgages issued by insured depository institutions. The bill also would allow Truth in Lending Act regulations to supersede state and local laws, except for state-level unfair and deceptive acts and practices laws. AmBA opposes such a bifurcated approach, and is urging panel members to implement a uniform national standard.

Other provisions in the bill would bring all residential mortgage lenders under the same regulations; reduce the triggers on high-cost loans; and require lenders to determine that borrowers have a reasonable ability to repay. Read a bill summary.  For more information, contact AmBA’s Joe Pigg.

April 27, 2009

AmBA Urges Bankers to Send Letters to Senators Opposing ‘Cram-Down’ Provision
AmBA is urging bankers to use the association’s automated system to send letters to their senators expressing their strong opposition to a mortgage “cram-down” provision.

The provision will be included in one bill (S. 895) or offered as an amendment to a similar bill (S. 896) the Senate is expected to consider this week. The provision/amendment would give bankruptcy judges the broad power to cram down the remaining balances on mortgages and modify or change the interest rate or loan terms.

Both S. 895 and S. 896 are likely to include AmBA-supported measures to increase the FDIC’s Treasury borrowing authority to $100 billion, and to revise the Hope for Homeowners program. The FDIC provision would allow the agency to cut its planned special assessment in half.

Senate leaders first are expected to try to bring up S. 895 -- which includes the cram-down provision -- for a vote. But if they are blocked because they can’t garner 60 votes, AmBA believes they will then bring up S. 896 -- which does not contain the bankruptcy provision -- and instead allow Sen. Richard Durbin (D-Ill.) to offer the cram-down provision as an amendment to the legislation. Either way it’s critical that bankers send as many letters as possible opposing the cram-down provision/amendment. Please send a letter.  For more information, contact AmBA’s James Ballentine.

April 24, 2009

AmBA Calls for Modifications in Mortgage-Reform Bill
Modify mortgage-reform legislation (H.R. 1728) to ensure that it neither curtails traditional bank lending to creditworthy borrowers nor subjects banks to greater burdens than less-regulated nonbank competitors, AmBA banker Gary Berner told the House Financial Services Committee yesterday. “Any regulation or legislation should promote a return to universal and conservative underwriting practices like those maintained at most banks,” said Berner, EVP at First Niagara Bank, Lockport, N.Y. “Conservative practices must be codified and promoted for all lenders … [and] legislation must ensure that nonbank lenders comply with the same duties of care as federally regulated banks.”

He added that the bill’s narrow safe harbor for lenders should be expanded to include all durations of fixed-rate mortgages and “garden variety” adjustable rate mortgages. The safe harbor also should be irrebuttable for banks making the safest loans, Berner said. He emphasized that AmBA has embraced the Federal Reserve’s Regulation Z amendments to curb subprime excesses. “Congress may choose to go beyond these changes, but we feel it is important to understand the cumulative effect of the recent regulatory changes and changes in the marketplace before enacting further restrictions,” Berner said. Read more.  Read Berner’s testimony.  Read a bill summary.  For more information, contact AmBA’s Joe Pigg. 

April 23, 2009

AmBA’s Berner to Testify Today on Mortgage Lending Bill
AmBA banker Gary Berner will testify today at a House Financial Services Committee hearing on a bill (H.R. 1728) intended to address abusive mortgage-lending practices. Berner, EVP and chief lending officer at Lockport, N.Y.-based First Niagara Bank, will outline AmBA’s concerns about the legislation, which seeks to address yield-spread premiums for mortgage originators and brokers, and assignee liability for mortgage securitizers.

AmBA is concerned that the legislation may subject federally regulated banks to greater burdens than less-regulated competitors, and that the safe harbor provisions in the bill are too limited. The committee plans vote on the bill April 28, and AmBA will work with panel members to modify the measure.  Read more.  Read a bill summary.  Read the bill.  For more information, contact AmBA’s Joe Pigg. 

April 22, 2009

House Panel Approves Credit Card Bill
The House Financial Services Committee approved this afternoon, by a vote of 48-19, credit card legislation (H.R. 627) that we believe would have a negative effect on lenders’ ability to offer reasonably priced credit to consumers.

The Committee also approved, by a 40-22 vote, an amendment by Rep. Carolyn Maloney (D-NY) that would provide an interim, 90-day effective date for a provision requiring advance notice to be given before interest rate increases could take effect.  The amendment undermines the more workable one-year effective date that was included for the entire bill during Subcommittee markup.

ABA continues to believe that the legislation is unnecessary in light of new Federal Reserve rules that eliminate most of the practices that the legislation seeks to address.  The bill also would exacerbate some of the rules’ unintended consequences. 

We will continue working with Members to address our concerns with the legislation, which is expected on the House floor next week.

April 21, 2009

AmBA’s Berner to Testify on Mortgage Lending Bill
AmBA banker Gary Berner will testify Thursday at a House Financial Services Committee hearing on a bill (H.R. 1728) intended to address abusive mortgage-lending practices. Berner, EVP and chief lending officer at Lockport, N.Y.-based First Niagara Bank, will outline AmBA’s concerns about the legislation, which seeks to address yield-spread premiums for mortgage originators and brokers, and assignee liability for mortgage securitizers. The committee plans to vote on the bill April 28, and AmBA will work with panel members to modify the measure. Read more.  Read a bill summary.  Read the bill.  For more information, contact AmBA’s Joe Pigg. 

JOINT ECONOMIC PANEL EXAMINING SYSTEMIC RISK
The Joint Economic Committee is holding a hearing this morning to examine the “systemic threats of large financial institutions.”  The hearing will focus on the criteria that should be used to determine when institutions pose systemic risk and how regulators should deal with those institutions if they become insolvent.  The hearing, which began at 9:30 a.m. Eastern time, can be watched here.

April 3, 2009

AmBA Summit Messages Resonate with Key Lawmakers
Echoing what bankers told him in a meeting, House Majority Leader Steny Hoyer (D-Md.) told Bloomberg News that banks are lending and changes to mark-to-market accounting rules are needed. A delegation of bankers, including AmBA Chairman Arthur Connelly and former AmBA Chairman Aubrey Patterson, met with Hoyer, Majority Whip James Clyburn (D-S.C.), and other members of Congress as part of the AmBA Government Relations Summit.

In what was described as a very positive meeting, the bankers told the House leaders about the role traditional banks are playing in the economic recovery. They also expressed concern about continuous changes to the Capital Purchase Program and the effect those changes are having on the reputation of healthy banks. Several other bankers attending the summit reported that the members of Congress they met with were similarly receptive to AmBA’s messages on traditional banking, mark-to-market accounting and other issues vital to the banking industry.

Subcommittee Approves Credit Card Legislation
The House Financial Institutions Subcommittee approved by voice vote an AmBA-opposed credit card reform bill (H.R. 627). AmBA believes the legislation is unnecessary in light of the sweeping credit card rules the Federal Reserve and other regulators adopted last December. “Banks are working aggressively to implement these new rules, but the bill’s differences from the rules, and the potential for more add-ons that may appear as the legislative process continues, could have a very real effect on lenders’ ability to offer reasonably-priced credit to consumers and small businesses … ,” said Ken Clayton, AmBA SVP for card policy. The full Financial Services Committee is expected to consider the legislation after the Easter recess, which ends April 20. Read