Banking Law Prof Blog

Fed's Beige Book Reports Weak Economic Recovery

Eight times a year, the Federal Reserve Board publishes a "Summary of Commentary on Current Economic Conditions,"  commonly known as "The Beige Book."  The most recent publication appeared January 13, 2010.  Analysis of the economy by sector shows only a modest recovery.

Link:  http://www.federalreserve.gov/FOMC/BeigeBook/2010/20100113/default.htm

(ag) Jan. 31, 2010, in Economy

Bernanke Confirmed for Second Term

Today, in the closest confirmation vote ever for a Federal Reserve Board Chairman, the Senate confirmed Ben Bernanke for a second term.  The vote was 70-30.

(ag) Jan. 28, 2009, in Economy

New SEC-Required Disclosures About Climate Change

The SEC voted yesterday to make it clear that, in public filings, companies must disclose the risks associated with climate change.  Companies must provide information about how potential new regulations and legislation, both domestically and internationally, could impact business and profitability.  Likewise, companies will be required to to disclose the impact of potential economic and physical risk factors associated with climate change.

Arguably public companies were already required to disclose and discuss potential risks of all types.  Viewed in that light, this is clarification only. 

On the other hand, the SEC vote fell out on party lines -- Democrats voting for the new disclosure requirement and Republicans opposing it.

(ag) Jan. 28, 2009, in SEC, Economy

Link to story:  http://www.washingtonpost.com/wp-dyn/content/article/2010/01/27/AR2010012704502.html?wpisrc=nl_fed

Bernanke, Geithner, and Goldman on the Ropes

These are difficult days for Federal Reserve Board Chairman Ben Bernanke, who is facing strong opposition as he seeks confirmation by the Senate of his proposed nomination to a second term as Fed Chairman.  

Treasury Secretary Timothy Geithner is facing troubles of his own as Congressmen grilled him about the AIG Bailout.

Goldman Sachs has benefited extensively from the bailouts -- a fact which has not escaped the attention of Congress or the American public.

LInk to Bernanke story:  http://www.nytimes.com/2010/01/23/business/economy/23fed.html

Link to Geithner story (including strong critism of benefit to Goldman Sachs):  http://www.washingtonpost.com/wp-dyn/content/article/2010/01/27/AR2010012704771.html

(ag) Jan. 27, 2020, in Economy

The Supreme Court, Campaign Finance, and Financial Regulatory Reform

The U.S. Supreme Court's 5-4 decision in Citizens United v. Federal Election Commission eliminates federal campaign finance restrictions (and as a consequence, overturns state restrictions) that have prohibited corporations and unions from paying for ads that support or oppose a particular candidate. 

 
 Acting as the perennial swing-vote, Justice Anthony Kennedy wrote the majority opinion. 

What a time to be allowing big corporate money more influence!  This decision does not bode well for effective financial regulatory reform. 

Link to Supreme Court opinion:  http://www.supremecourtus.gov/opinions/09pdf/08-205.pdf

Link to story:  http://www.nytimes.com/aponline/2010/01/21/us/AP-US-Supreme-Court-Campaign-Finance.html

(ag) Jan. 26, 2010, in Financial Regulatory Reform, Supreme Court

If the Fed Ends Programs Supporting Low Mortgage Interest Rates, What Will Happen to the Economy?

Getting the government out of programs that provide artificially low mortgage interest rates is a good thing.  How and when may be another problem. 

The Federal Reserve plans to end its purchase of mortgage-backed securities by March 2010.  Keeping promises to exit these programs is essential to maintaining financial market credibility.  But has the mortgage market recovered sufficiently?  What will happen to the availability of mortgage lending and to the volume of home purchases absent government support?

Link to story:  http://www.washingtonpost.com/wp-dyn/content/article/2010/01/24/AR2010012402996.html?wpisrc=nl_pmheadline

(ag) Jan. 25, 2010, in Economy

Bloomberg Global Poll of Investors Expresses Concern About Too Much Congressional Control Over Federal Reserve

In a quarterly poll, global investors expressed concern that too much Congressional control over the U.S. Federal Reserve would politicize monetary policy and have a negative effect on the U.S. economy. 

More than half of the respondents thought that the proposed fees on large banks to recover TARP money would be a bad idea. 

Link to story:  http://www.businessweek.com/news/2010-01-20/congress-curbs-on-fed-undermining-u-s-economy-in-global-poll.html

(ag) Jan. 20, 2010, in Economy

Protecting Tenants at Foreclosure Act

The OCC has issued new examination procedures for the Protecting Tenants at Foreclosure Act of 2009.

Link to Examination Procedures:  http://www.occ.gov/ftp/bulletin/2010-2.html

(ag) Jan. 20, 2010, in Consumer Protection/Real Estate Lending/OCC

AIG to Pay $619 Million in Retention Pay and Congress Doesn't Like It

The House Committee on Oversight and Government Reform expects to convene hearings in March to review AIG's proposed payout of $619 Million in executive compensation for those who remain with the company while it is being liquidated.  That's a lot of executive compensation after a public bailout!

Link to story:  http://www.bloomberg.com/apps/news?pid=20601087&sid=aeBpUdJjqFhs&refer=home

(ag) Jan. 19, 2010, in Executive Compensation

Financial Crisis Responsibility Fee

Beginning June 30, 2010, and continuing for at least 10 years, the largest and most highly leveraged financial firms will be assessed fees designed to repay up to $117 Billion in TARP costs.

The fee will apply only to financial firms with more than $50 Billion in consolidated assets.  Banks and thrifts and their holding companies and broker-dealers and their holding companies will fall with the purview of the fee.  Both U.S. firms and U.S. subsidiaries of foreign firms will be subject to the fees which will be assessed at fifteen basis points or .15% of covered liabilities each year.  The fee will be collected by the IRS and go to reduce the national deficit.

Link to Treasury Dept. Fact Sheet:  http://www.treas.gov/press/releases/tg506.htm

(ag) Jan. 15, 2009, in Economy

More Credit Card Protections Will Be Effective February 22, 2010

On Jan. 12, 2010, the Federal Reserve Board adopted a Final Rule effective February 22, 2010, which includes the following consumer protections for credit card holders.  The new rules will:

•Protect consumers from unexpected increases in credit card interest rates by generally prohibiting increases in a rate during the first year after an account is opened and increases in a rate that applies to an existing credit card balance.

•Prohibit creditors from issuing a credit card to a consumer who is younger than the age of 21 unless the consumer has the ability to make the required payments or obtains the signature of a parent or other cosigner with the ability to do so.

•Require creditors to obtain a consumer's consent before charging fees for transactions that exceed the credit limit.

•Limit the high fees associated with subprime credit cards.

•Ban creditors from using the "two-cycle" billing method to impose interest charges.

•Prohibit creditors from allocating payments in ways that maximize interest charges.

(ag) Jan. 14, in Consumer Protection

FDIC Poses Questions About Executive Compensation and Risk

On Jan. 12, 2010, FDIC's Board of Directors voted to publish an Advance Notice of Proposed Rulemaking about incorporating executive compensation structures into the deposit insurance risk assessments paid by insured financial institutions.

FDIC Chairman Sheila Bair said that the proposal is to address compensation structures not the amount of compensation.

Fifteen questions relate to how to define compensation, how to adjust risk premiums to best influence compensation practices, guaranteed bonuses, deferred compensation, vesting periods, and ways of aligning incentives.  The comment period is open.

(ag) Jan. 14, 2009, in Executive Compensation

Shareholders at Deere Want Say-On-Pay for Executive Compensation

Deere & Co. shareholders will get an advisory vote on two proposals to be considered at the February 24, 2010 annual meeting. 

One proposal asks for a cap on CEO compensation; the other asks for an annual advisory vote on compensation for top executives.  No surprise, management opposes both proposals.

Link to story:  http://news.yahoo.com/s/ap/20100113/ap_on_bi_ge/us_deere_compensation_concerns_1

(ag) Jan. 13, 2009, in Executive Compensation

The Bank of America/Merrill Lynch Saga Continues

The SEC has filed another suit against Bank of America, based on B of A's failure to disclose to its own shareholders the extent of Merrill losses B of A picked up in the government assisted acquisition which closed January 1, 2009.

You may remember that SEC previously sued B of A for failure to disclose to its shareholders the huge year end bonuses for Merrill executives.  SEC and B of A proposed to settle that litigation but U.S. District Judge Jed Makoff rejected the settlement, saying,

“It is quite something else for the very management that is accused of having lied to its shareholders to determine how much of those victims’ money should be used to make the case against the management go away.”

Judge Makoff further criticized the proposed settlement saying, "The S.E.C. gets to claim that it is exposing wrongdoing on the part of the Bank of America in a high-profile merger and the Bank’s management gets to claim that they have been coerced into an onerous settlement by overzealous regulators.”

Link to September 14, 2009, New York Times story about previously rejected settlement:  http://www.nytimes.com/2009/09/15/business/15bank.html

Link to current Business Week story:  http://www.businessweek.com/news/2010-01-12/sec-files-suit-claiming-bank-of-america-hid-merrill-losses.html

(ag) Jan. 13, 2009, in Economy

More Ways to Recoup Bailout Money

Bloomberg reports today that the Obama administrative has suggested that it may recoup up to $120 Billion of TARP expenditures through a tax on the largest banks.  No details and lots of concern about how to implement such a proposal and the "unintended consequences."

Link to story:  http://www.businessweek.com/news/2010-01-12/obama-plans-to-raise-as-much-as-120-billion-from-bank-fees.html

(ag) Jan. 12, 2009, in Economy

Fed Makes Money in '09 -- Subject to Future Losses (or gains)

The New York Times reports today that the Federal Reserve managed the bailouts, the money supply, and interest rates, in a very difficult year for the U.S. economy and still came out ahead on earnings.  In fact, the Fed had a record year for earnings, returning $45 Billion to the U.S. Treasury.

What does that mean for the future?  There could be future losses as the Federal Reserve may have to sell assets in the future for less than it paid.  There could still be losses from the AIG and Bear Stearns bailouts and the future of Fannie Mae and Freddie Mac could hold future losses for the Fed.

Also note, that Goldman Sachs, JP Morgan Chase, and Bank of America will also show substantial profits from the Year of the Bailout -- and will pay substantial executive bonuses.

Link to story:  http://www.washingtonpost.com/wp-dyn/content/article/2010/01/11/AR2010011103892.html?wpisrc=nl_politics

(ag) Jan. 12, 2009, in Economy/FRB

A New Wrinkle in Executive Compensation: Give 'em big bucks but require charitable contributions

Under criticism for large executive bonuses, Goldman Sachs' solution is to give the bonuses anyway but to require top executives to donate a percentage of their earnings to charity.

Link to story:  http://www.nytimes.com/2010/01/11/business/economy/11goldman.html?em

(ag) Jan. 11, 2009, in Executive Compensation

Financial Crisis Inquiry Commission - First Hearing

The Financial Crisis Inquiry Commission (FCIC), a ten-member commission appointed by Congress to investigate the causes of the financial crisis, has scheduled its first hearing for January 13 & 14.

Link to story:  http://www.mondaq.com/unitedstates/article.asp?articleid=91974

(ag) Jan. 8, 2009, in Economy

Bank Examiners Are Checking for Compliance with New RESPA Requirements

FDIC has instructed its examiners and advised its banks that compliance with the new RESPA requirements is mandatory as of January 1, 2010.  Key changes include:

• New Good Faith Estimate (GFE) form
• New Uniform Settlement Statement (HUD-1)
• New requirment for reimbursement to borrowers within 30 days of settlement for any overcharges outside permitted tolerances

Link to FDIC FIL 75-2009:  http://www.fdic.gov/news/news/financial/2009/fil09075.html

(ag) Jan. 8, 2009, in Consumer Protection, Real Estate

Financial Regulatory Reform in 2010 - It's Up to the Senate

Later this month, financial regulatory reform will again be on the Congressional agenda, this time in the Senate.  It won't be an easy task.

Key issues:

• Will the FDIC keep bank supervisory authority over state-chartered banks?
• Which agency or agencies will regulate holding companies?
• What are the prospects for the dual banking system?
• Will there be a new Consumer Financial Protection Agency?

Link to story:  http://www.financial-planning.com/news/Reform-Dodd-Senate-FDIC-2665264-1.html

(ag) Jan. 7, 2009, in Financial Regulatory Reform, Consumer Financial Protection Agency