Banking Law Prof Blog

Banks Should Address Compliance With Newly Effective Federal Regulations

Thanks to Shannon Phillips at Independent Bankers Association of Texas (IBAT) for a great listing of a host of new and revised federal regulations affecting banks, including:

• RESPA:  New FAQs for substantive changes effective Jan. 1, 2010
• Overdraft Services:  Final Rule with mandatory compliance July 1, 2010
• Higher Priced Mortgage Loans (Regulation Z) and Short-Term Balloon Loans
• Interim Final Rule and Request for Comments on Notices to Consumers of Sale/Transfer of Mortgage Loan (Regulation Z)
• S.A.F.E. Act Final rules requiring registration with the Nationwide Mortgage Licensing System and  Registry (expected to be operational in 2010)
• HUD:  New RESPA FAQs
• Credit Card Act Technical Amendments and proposed REGULATION Z Amendments
• Proposed Guidance on Incentive Compensation
• GLBA Model Privcy Form as safe harbor
• FRB Amended Routing Number Guide
• FFIEC Guidance on Commercial Real Estate Loan Workouts
• OTS Revised Exam Handbook on TILA
• Final Rule on Mortgage Loans modified under Home Affordable Mortgage Program

IBAT's Capitol Comments are always informative and helpful!

Banking Law Prof Quoted in NY Times.com

Banking Law Professor Ann Graham, editor of the Banking Law Prof Blog, has previously analyzed federal preemption in the financial institutions arena and the opinion delivered by the U.S. Supreme Court in Cuomo v. Clearing House Association. See Archived Posts:  Federal Preemption.

Her comments on the 2009 case were quoted in the November 3, 2009, New York Times article by David Streitfeld and John Collins Rudolf, “States Are Pondering Fraud Suits Against Banks.”

Link to the article: http://www.nytimes.com/2009/11/03/business/03suits.html

(ag) Nov. 23, 2009, in Federal Preemption

 

Interesting Timing for BofA to Fire Its GC Last December

Coincidence?  You be the judge.

Bank of America's General Counsel Tmothy Mayopoulos was summarily dismissed "just one day after he learned of bigger than expected at Merrill [Lynch, which was acquired by BofA, which allegedly failed to disclose to BofA shareholders large bonuses to Merrill executives] and asked to speak to the chief financial officer about his concerns.

But it's okay.  Mayopoulos is now GC of Fannie Mae.

Link to full story:  http://www.abajournal.com/weekly/how_b_of_as_gc_got_fired_leave_now_and_leave_your_blackberry_behind

(ag) Nov. 20, 2009, in Economy

Fireworks Between Geithner and Representative Brady

In today's Joint House and Senate Economic Committee hearing, Republican Representative from Texas  Kevin Brady asked Treasury Secretary Timothy Geithner to resign.  Geithner responded in the negative, pointing out that President Obama inherited an economy "falling off the cliff." 

Link:  http://blogs.wsj.com/washwire/2009/11/19/geithner-says-he-wont-quit-takes-swings-at-gop-rep-brady/

(ag) Nov. 19, 2009, in Economy

Geithner Tells Banks They Should Lend More To Small Businesses

Bloomberg's Rebecca Christie has an article today discussing Treasury Secretary Timothy Geithner's perspective that bank's are "obligated" to extend more loans to small businesses.  The point is that if the economy is to recover, small businesses must have access to credit in order to preserve and create jobs. 

Loan originations by the biggest banks, specifically Bank of America and Wells Fargo, are dropping.  The article quotes Geithner as saying, "Large businesses get 30 percent of their financing from banks, while small businesses rely on banks for 90 percent for their credit."

Link to article:  http://www.bloombergtv.com/apps/news?pid=20670001&sid=aSGqj0grrrwM

(ag) Nov. 18, 2009, in Economy

Determining Who Gets A Bailout

Thanks to my Banking Law students for this insight into which financial entities receive government assistance and which do not:

Link: http://www.ebaumsworld.com/video/watch/80617042/

(ag) Nov. 17, 2009, in Economy

Government Overpaid for AIG Bailout

Special Inspector General for the Troubled Asset Program (SIGTARP) Neil Barovsky has issued a report concluding that negotiations conducted by then-New York Federal Reserve Bank President Timothy Geithner were "bungled." 

The amount of bailout funds to AIG increased from $85 Billion to $180 Billion.  And "billions more than necessary went to U.S. banks including Goldman Sachs Group Inc.; Merrill Lynch, now part of Bank of America Corp.; and Wachovia, now part of Wells Fargo & Co.; and European banks including Societe Generale, Deutsche Banke, UBS and Calyon."

Link to story:   http://news.yahoo.com/s/ap/20091117/ap_on_bi_ge/us_aig_bailouts

(ag) Nov. 16, 2009, in Economy

CFPA in the Dodd Version of Financial Reform

A New York Times analysis of the regulatory reform measure introduced by Senator Chris Dodd concludes that it gives new energy to the likelihood of an independent Consumer Financial Protection Agency.  Of course, a committee markup, controversial Senate vote, and harmonization with the House bill present significant opportunities for "death by a thousand cuts," to quote Elizabeth Warren.

Link:  http://bucks.blogs.nytimes.com/2009/11/10/the-status-of-the-consumer-financial-protection-agency/ 

(ag) Nov. 13, 2009, in Financial Regulatory Reform/Consumer Protection

Veteran's Day Salute

Link to Gettysburg Address:  http://www.youtube.com/watch?v=V4bM9geY0do

Report on SCAP Institutions Needing More Capital

Last Spring, 19 financial holding companies were required to undergo "stress testing" in the Supervisory Capital Assessment Program (SCAP).  Ten were determine to need more capital.  The Federal Reserve now says that nine of those have met increased capital targets.  The one exception is GMAC, which should meet increased capital standards through the TARP Automotive Industry Financing Program.

Link to FRB Press Release:  http://www.federalreserve.gov/newsevents/press/bcreg/20091109a.htm

(ag) Nov. 11, 2009, in Economy/Capital

International Banking Conference in India

Professor Ann Graham will be one of the featured speakers at an international banking law conference on "The Bankrecht -- Emerging Trends in Banking Law."  Her presentation addresses the problem of "Too Big to Fail."  The conference is sponsored by the government Law College, Kozhikode, India.  Other speakers include representatives from the Reserve Bank of India and the State Minister for Finance, as well as representatives from major banks operating in India and globally. Download Banking Conference India

Commenting on Cuomo

A post from Charles Carreon, Attorney, in Tucson, AZ:

"No federal agency should be allowed to market a charter as a get-away-with-it-free card providing immunity from state consumer protection laws." 

Well-said! The unity of banking and the federal government is a self-reinforcing system.  Over-centralization of government is fueled by the power of unlimited credit expansion, which is enabled by a private banking system that makes maximum use of government-provided leverage, that can only be sustained by further expansion of private banking.

(ag) Nov. 4, 2009, in Federal Preemption

Support for the CFPA

More than 80 law professors support the proposed new Consumer Financial Protection Agency.  Financial industry trade associations oppose it.  Will Congress have the backbone to pass this consumer legislation?

Link to Editorial:  http://www.huffingtonpost.com/norman-i-silber/news-flash-lenders-prefer_b_342341.html

(ag) Nov. 3, 2009, in Consumer Protection

CFPA Bill Moves Forward

Here's what CSBS says about the progress of a bill to create a new Consumer Financial Protection Agency: 

"The House Energy and Commerce Committee on Thursday passed legislation (H.R. 3126) to create the new Consumer Financial Protection Agency, which was passed earlier by the House Financial Services Committee.

The committee adopted a key change that would replace the single executive for the agency with a five-member commission with staggered terms. The change drew immediate condemnation from House Financial Services Chairman Barney Frank (D-Mass.), who said a single executive is needed for the agency to take prompt and efficient action to protect consumers. House Energy and Commerce Committee Chairman Henry Waxman (D-Calif.) expressed concern that the House Financial Services Committee added too many exemptions and exclusions to the bill. While not amending the bill, Waxman said he might seek changes in the future to ensure that the new agency has the right to regulate and take enforcement actions against merchants and retailers, auto dealers and others.

 The bill now moves to the House for consideration."

(ag) Nov. 2, 2009, in Consumer Protection

Black Tuesday - Oct. 29, 2009

For an informative comparison to today's crisis, see this clip of PBS documentary discussing the 1929 Stock Market Crash on Black Tuesday, Oct. 29, 2009 . . . "The Wall Street economy disconnected from the real economy":

Link:  http://www.youtube.com/watch?v=RJpLMvgUXe8

(ag) Oct. 31, 2009, in Economy

An Opinion About Giving the Fed Too Much Power

In today's Forbes.com commentary, there's an interesting letter from Jagadeesh Gokhale, currently a Senior Fellow at the Cato Institute and formerly a Senior Economic Advisor at the Federal Reserve Bank of Cleveland.  Here's part of his message:

"In light of the recent asset price implosions and failures of large investment banks, should the Fed try to pre-emptively prick asset price bubbles? Furthermore, should the Fed be vested with the responsibility of regulating all financial institutions? Short answer: 'no' and 'no.'"

LInk: http://www.forbes.com/2009/10/28/fed-regulation-asset-bubbles-opinions-contributors-jagadeesh-gokhale.html

(ag) October 29, 2009, in Economy

Will the Bailouts Never End?

Bloomberg news reports that GMAC may get a third bailout.  They've already received two government bailouts totaling $13.5 billion, and are currently negotiating with the Treasury Department for a possible third capital injection of $2.8 billion to $5.6 billion.

Link to story:  http://www.bloomberg.com/apps/news?pid=20601087&sid=abvqTkQC.Ft4

(ag) Oct. 28, 2009, in Economy

Bernanke Talks About the Role of the Fed After the Crisis

Federal Reserve Board Chairman Ben Bernanke is already looking ahead to the end of the financial crisis and what the role of the Federal Reserve should be then.  He spoke at the Federal Reserve Bank of Boston's 54th Economic Conference, 

Chairman Bernanke called for

• Strengthening standards governing bank capital, liquidity, risk management, incentive compensation, and consumer protection;
• Improving supervision, with greater macroprudential focus, through enhanced consolidated supervision and development of new supervisory tools--including comprehensive horizontal reviews, off-site quantitative evaluations, and more extensive information gathering.
• Comprehensive financial reform by Congress, including strengthening consolidated supervision, setting up a mechanism (such as a systemic oversight council) to identify and monitor risks to financial stability, and creating a framework that allows for the safe unwinding of failing, systemically critical firms.

Link to speech:   http://www.federalreserve.gov/newsevents/speech/bernanke20091023a.htm

(ag) Oct. 26, 2009, in Financial Regulatory Reform

 

CFPA Bill Out of Committee - Preemption Provisions

The House Financial Services Committee concluded its markup of H.R. 3126 which will create a new Consumer Financial Protection Agency (CFPA).   The favorable committee vote was 39-29,  A summary of the preemption provisions of the bill follows:

Subtitle D – Preservation of State Law

National Bank / Federal Thrift Preemption
This legislation will reinstate the preemption standard in Barnett Bank of Marion County, N.A. v. Nelson, permitting the federal regulator to preempt state consumer financial protection laws only after a written finding that the state law “prevents or significantly interferes” with the exercise of powers granted to a federally regulated bank or thrift.  Preemption determinations must once again be made by notice and comment regulation or on a case-by-case basis, and with consultation  with CFPA to ensure that consumers will be protected under federal law if the state law is preempted.

Operating Subisidiaries
The bill reverses Watters v. Wachovia, in which the Supreme Court exempted operating subsidiaries of national banks and federal thrifts (which generally are state incorporated entities) from state consumer protection laws. H.R. 3126 will require state-chartered business entities to comply with state laws.

Enforcement by State Regulators
The bill codifies Cuomo v. Clearinghouse with explicit provision that state attorneys general and other appropriate state regulators are not prevented from enforcing state laws against national banks and federal thrifts. The bill also authorizes state attorneys general to enforce CFPA regulations, after consultation with the CFPA.

Link to full bill summary:  http://financialservices.house.gov/Key_Issues/Financial_Regulatory_Reform/FinancialRegulatoryReform/CFPA_Summary_of_HR_3126.pdf

LInk to CSBS summary:  http://www.csbs.org/Content/NavigationMenu/PublicRelations/CSBSExaminer/Examiner.htm

(ag) Oct. 24, 2009, in Congress, Consumer Protection, Federal Preemption.

Consumer Credit, Debt and Bankruptcy

Consumer Credit, Debt and Bankruptcy:  Comparative and International Perspectives

Edited by Johanna Niemi, Iain Ramsay and William C Whitford

The following is an abstract of an intriguing book of essays: 

"After a long period of prosperity and steady economic growth, the world's leading economies are now in crisis, and although there will be debate about its origins, the scale and seriousness of the crisis is in no doubt. There is also no doubt that excessive amounts of consumer credit, allied to a weak understanding of how globalised credit markets might react to a crisis, have played a significant part. This book, which is primarily about credit, debt and the trouble they have led to, is written by authors who have specialised in researching into over-indebtedness, that is, situations in which an individual's debt burden has become overwhelming.  For these authors the plight of individuals is a primary concern, but the wider issue is how credit is used and how it changes societies.  

The essays in this volume, addressing topics which are fundamental to our understanding of the current crisis, range widely across the whole sector of consumer finance, including mortgages, 'credit-binges', the regulation of consumer lending, insolvency, repayment plans, debt counselling and much more besides. The conclusions drawn from the book are equally wide-ranging, but above all the lesson learned from these essays is that the financialisation of contemporary life ensures that issues of the appropriate role of credit remain of critical importance in society."

(ag) Oct. 21, 2009, in Economy, Consumer Protection