Financial News and Views
for the Rest of US
July 9, 2009
Reregulating Financial Services – An Approach
The time has finally come to get down to the business of getting the financial services sector under control. Everyone, except the large financial service companies themselves, agrees, to some extent, that the current business model is the problem. The difficulty is how to go forward without hamstringing the industry but yet eliminating the abuses that have created the current meltdown in the world economy.
Pressure is being applied from everywhere with recommendations from leaving everything alone (since the system is righting itself and the worst has been avoided) to going back to the rules and regulations of the 1930’s. The extremes, as usual, are both wrong but where are we to find the correct balance?
The first step, which may be the biggest one, is to agree on where things went wrong. One should not assume that the problem started with unregulated hedge funds, out of control mortgage lending and “me first” chief executives, no, those are symptoms of a much larger problem that needs to be addressed: the fundamental makeup of the financial services system and the redefining of the relationships that should exist among all parties.
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June 10, 2009
What Kind of Recession is It?
There has been much talk about the type of recession we are in, even though it hasn’t been completely defined as yet, so I though it would be a good time to demystify some of the commentary that seems to be confusing to many people. News articles, be they of the hardcopy type or the cable news version, always make assumptions that readers or viewers understand the topic or they wouldn’t be reading or watching the subject matter. Having received a number of questions asking me to explain what is going on I thought I would give it a shot.
There are four types of recessions that are continually referred to when doing a analysis: V, W, U, and L. There may be a few others but since these are the most common let’s start here.
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June 1, 2009
Lunch at Vincent’s Place
For the first time volunteers there’s a hint of hesitation; a feeling of apprehension; a tendency to huddle together with the other volunteers but the smiles and the good natured welcomes by the staff and experienced volunteers breaks the ice quickly. Part of the feeling of uncomfortableness comes from being in a strange place and doing something unfamiliar and another part comes from not knowing how to deal with people with substance abuse problems, psychological and psychosocial problems and the underclass of society.
What they do not seem to be prepared for is the smiles, the laughter, the politeness and the all around good naturedness of everyone in the building: the Society of St. Vincent de Paul’s main dining room in downtown Phoenix.
The volunteers often come in teams from all over the region. They represent industrial corporations, banks, church groups, schools, colleges, service clubs; they wear tee shirts with emblems on them with company names and logos but most of all they represent themselves and a desire to give back.
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May 27, 2009
1928 vs. 2008
The Election of 1928, in hindsight, had quite a few thankful people on the losing side and considering the different approaches that were presented by each of the political parties, something that was also a hallmark of the 2008 election; I suspect that there may be quite a few thankful people out there today as well. Admittedly they are not particularly vocal since it would make them seem turncoats to a certain spectrum of the losing side, but they are probably sleeping a bit better than they might have had their candidate won.
In 1928 the Republican Party was in power and led by President Calvin Coolidge; his Secretary of Commerce was Herbert Hoover. However, even though Coolidge was elected in 1924 with an almost two to one majority over his Democratic Party opponent, John W. Davis (15,725,003 votes to 8,385,586), and his re-election to a second term seemed secure, prosperity was reported to be everywhere, he decided not to run for a second term. Now there’s a man that was surely thankful.xx
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April 30, 2009
Banks Winning Again
There is a general perception that all the really smart guys in the room work in the financial services sector and all the dumb guys seem to be in Congress. Now why is that? The answer is very simple: it’s true. A member of Congress is expected to be a “jack of all trades” since members deal with subjects ranging from telecommunications, to weapons systems, finance, international trade, labor relations and every other topic one can think of so they can’t be expected to know everything about everything and are obliged to rely upon industry experts.
Another problem has to do with job security. Members of Congress are elected every two or six years depending as to weather they are in the House of Representatives or the Senate. They also tend to be “squeaky wheel” oriented in that vocal, ideological, well informed and organized constituent groups within their election districts seem to have an edge over the average “I’ve got better things to do than tell you how to do your job” resident.
How does this help the financial service companies? It plays right into their hands.
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FED Watch
June 12, 2009
Termination of enforcement action against Bank of New York
The Federal Reserve Board on Friday announced the termination of the enforcement action listed below. Terminations of enforcement actions are listed on the Federal Reserve's public website.
Bank of New York, New York, New York
Written Agreement dated April 21, 2006
Terminated June 5, 2009
The enforcement action was entered into by the FED and the Bank of New York when BNY was found to be deficient in its monitoring practices with regard to suspicious activity referrals.
Full details of the enforcement action and its release may be found at: the following link.
June 10, 2009
Written Agreement with Sterling Bank
The Federal Reserve Board on Wednesday announced the execution of a Written Agreement by and among, Sterling Bank, Lantana, Florida, a state member bank, the Federal Reserve Bank of Atlanta, and the State of Florida, Office of Financial Regulation.
A copy of the Written Agreement is attached. Link to Agreement.
May 12, 2009
Stress and More Stress
By Tim Holland
While the stock market is expressing what might be called a sigh of relief over the “stress test” results, whereby it appears that none of the 19 largest banks in the country are expected to fail, small banks around the country continue to reflect the real health of the county’s financial system.
The Federal Reserve announced on Tuesday, May 12 that they had placed a series of banks on a short leash that are owned and controlled by Security Bank Corporation and Security Interim Holding Corporation (both of Macon, Georgia). In effect, the controlling entities are bank holding companies that could be considered smaller versions of the 19 financial services companies that have just finished their examination by the Fed. Read full story....
March 30, 2009
FED Puts Two More Banks on Watch List
In two separate notices, the Federal Reserve on Friday, March 27 and this morning March 30, announced the addition of two more banks to its watch list. This brings the total number of banks added to the FED’s list to 22 for 2009.
The banks are added to the watch list by means of entering into a legal agreement with the local Federal Reserve Bank in the region where the bank is located. In this instance, BankEast of Knoxville, Tennessee and its bank holding company parent, BankEast Corporation, also of Knoxville, entered into their agreement with the Federal Reserve Bank of Atlanta, Atlanta, Georgia. Read full story....
March 25, 2009
Fed Puts Four Banks on Short Leash
By Tim Holland
The FED announced on March 24, 2009 that it has entered into a written agreement with four more banks. Such agreements are usually entered into when it is deemed that a banking company’s financial position does not meet the minimum Federal Reserve System’s requirements. The banks involved consist of three in Minnesota and one in Oregon.
Unlike the Federal Deposit Insurance Corporation (FDIC), which has the capability of taking over and operating a bank in receivership, the regional district Federal Reserve Banks perform a monitoring function to assure a healthy banking system. Read full story....
FDIC Watch
June 17, 2009
PRESS RELEASE
FDIC Chairman Sheila C. Bair Comments on the Obama Administration's Regulatory Reform Plan
FDIC Chairman Sheila C. Bair said, "I commend President Obama for his leadership on financial regulatory reform and his inclusive approach to policy development. There are key areas of reform within our regulatory structure that should be addressed in any effort to strengthen the oversight of our financial markets, enhance consumer protection and promote market discipline. Of primary importance is addressing too big to fail. Market participants should understand that large institutions can and will fail and that an effective resolution mechanism will be uniformly applied to institutions in a fair, transparent and consistent manner. It is also important that we maintain a focus on assuring strong capital requirements for banks and their holding companies. As the ultimate insurer of over $6 trillion in deposits, the FDIC's emphasis on capital has proven to be a crucial component in monitoring and preventing systemic risks. As we move through the reform effort, it will be important to take the lessons from the current financial crisis and apply them in a constructive and workable way.
I would again salute the President for his attention to this issue. I look forward to working with the Administration and Congress as we begin the legislative process."
xx
June 11, 2009
PRESS RELEASE
Agencies Issue Frequently Asked Questions on Identity Theft Rules
Six federal agencies issued a set of frequently asked questions (FAQs) today to help financial institutions, creditors, users of consumer reports, and issuers of credit cards and debit cards comply with federal regulations on identity theft and discrepancies in changes of address.
The “Red Flags and Address Discrepancy Rules,” which implement sections of the Fair and Accurate Credit Transactions Act of 2003 (FACT Act), were issued jointly on November 9, 2007, by the Board of Governors of the Federal Reserve System (FRB), Federal Deposit Insurance Corporation (FDIC), National Credit Union Administration (NCUA), Office of the Comptroller of the Currency (OCC), Office of Thrift Supervision (OTS), and Federal Trade Commission (FTC).
The rules require financial institutions and creditors to develop and implement written Identity Theft Prevention Programs and require issuers of credit cards and debit cards to assess the validity of notifications of changes of address. The rules also provide guidance for users of consumer reports regarding reasonable policies and procedures to employ when consumer reporting agencies send them notices of address discrepancy.
The agencies’ staff have jointly developed answers to these FAQs to provide guidance on numerous aspects of the rules, including which types of entities and accounts are covered; establishment and administration of an Identity Theft Prevention Program; address validation requirements applicable to card issuers; and the obligations of users of consumer reports upon receiving a notice of address discrepancy.
NOTE: A pdf file containging the freequently asked questions may be found at the following LINK.
May 4, 2009
FDIC Creates Bridge Bank
By Tim Holland
The Federal Deposit Insurance Corporation (FDIC) announced the creation of a bridge bank to take over the operations of Silverton Bank, National Association, Atlanta, GA. Silverton Bank was closed by the Office of the Controller of the Currency, the regulator of national banks, on Friday, May 1, 2009 and appointed the FDIC as receiver. Silverton Bank did not deal directly with consumers but served as a correspondent bank for smaller banks around the country. The new bank will be called Silverton Bridge Bank.
Silverton Bank’s failure continues to demonstrate the weakness in the country’s financial structure. The bank’s primary function was to provide correspondent banking services to smaller independent banks around the country and did not deal directly with consumers. It had 1,400 client banks in 44 states and maintained six regional offices. Silverton, at the time of its closing, had assets of $4.1 billion and $3.3 billion in deposits (all of which will be covered by FDIC insurance).
Read full story....
April 5, 2009
A look at the week past
News analysis by Tim Holland
With the President and First Lady off on the grand tour of Europe, much financial news slipped by un-noticed last week. The stock market did get some attention, since it was advancing, but the market anticipates or reacts to economic news it doesn’t create it, which is why, since banks and financial service companies are at the heart of our current problem, watching what the Federal Deposit Insurance Corp. (FDIC) has been doing is critical.
Yes, another bank did fail - the 21st this year. The FDIC closed Omni National Bank, Atlanta, GA with the deposits being moved to SunTrust Bank in Atlanta. As no buyer for the bank was immediately found, SunTruat Bank will operate the six former branches of the bank on behalf of the FDIC until April 27, 2009. Omni had branches in Georgia, Florida, Illinois and Texas.
Read full story....
March 23, 2009
IndyMac Sold – Three Banks Fail
By Tim Holland
The FDIC announced the sale of IndyMac Federal Bank FSB, Pasadena, CA to OneWest Bank. FSB, a newly formed Pasadena, California based federal savings bank. IndyMac bank is the largest bank to fail in the current recession and the most visible as the FDIC was obliged to actually take over the bank and operate it as opposed to immediately selling it to a third party.
All thirty three branches of IndyMac officially became branches of OneWest on Friday.
Read full story
FTC Watch
Crackdown on mortgage scams
By Tim Holland
The Federal Trade Commission (FTC), in conjunction with the Federal Reserve and the Justice Department, made a joint announcement earlier this week in which they made the crackdown on mortgage modification and foreclosure rescue scams an official part of the effort to right the economy. Speaking first at a press conference and later with the release of a detailed press statement, the FTC took the lead in an effort to educate the consumer about the increasing amount of fraud and deception that is evolving around the effort to help consumers that are in difficulty with their mortgage loans.
Unfortunately, many of the people who were duped into signing mortgage loan agreements by unscrupulous lenders are now becoming victims of similar scams to rewrite those mortgages. The FTC announced that it had sent warning letters to 71 companies who may be deceptively marketing mortgage loan modification of foreclosure rescue services.
Read full story...
DOJ Anti-Trust Watch
March 27, 2009
Michigan School Official Sentenced in Fraud Scheme
By Tim Holland
The Anti-Trust Div. of the Department of Justice (DOJ) announced on March 26, the sentencing of a former Michigan school official to serve 48 months in jail and pay $1.34 million in restitution with regard to a fraudulent scheme regarding a Michigan school district and falsifying loan documentation with regard to a credit line obtained from a Minnesota bank. Read full story....
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