CCH Financial Reform News Center

Volcker Calls for International Coordination of Financial Reforms

In testimony before the Joint Economic Committee, Mr. Volcker, former Federal Reserve Board Chair and now top Obama Administration adviser, said that international standards will minimize regulatory arbitrage and combat a tendency by some jurisdictions to seek competitive advantage by tolerating laxity in oversight. Volker specifically listed accounting standards, capital and liquidity standards, and registration and reporting mandates as areas that demand international consistency. He singled out fair value accounting standards as having been inconsistently applied and contributing to downward spiraling valuations in illiquid markets.

Citigroup Exchange Agreement Increases Treasury Department's Risk Exposure

The Treasury Department has agreed to convert a part of its preferred share investment in Citigroup into common equity by participating in a series of exchange offers. Under the agreement, the Treasury will convert up to $25 billion of the preferred shares it received under the Capital Purchase Program into common shares, but only to the extent that private holders of preferred shares make the same exchange. Any remaining shares held by the Treasury and shares held by the Federal Deposit Insurance Corporation will be converted into trust preferred securities with a higher seniority. Treasury is willing to participate in this arrangement to the extent Citigroup is able to reach agreement with its other preferred holders, under the following conditions:

• Treasury would convert its security to match dollar for dollar the private preferred exchanges;
• Treasury would convert up to the $25 billion of preferred stock issued under the Capital Purchase Program. Remaining Treasury and FDIC preferred issued under the Targeted Investment Program and Asset Guarantee Program would be converted into a trust preferred security of greater structural seniority that would carry the same 8% cash dividend rate as the existing issue; and
• Treasury will receive the most favorable terms and price offered to any other preferred holder through this exchange.

Treasury noted that the transaction does not increase the amount of Treasury's investment in Citigroup.  

http://www.ustreas.gov/press/releases/tg41.htm

Bachus Criticizes Housing Bill and “Cram-Down” Proposal

Financial Services Committee Ranking Member Spencer Bachus, R-Ala., has pointed to two reasons for his opposition to a proposed bill on housing and mortgage foreclosures. According to Bachus, the bill would attempt to fix the Hope for Homeowners program, which has been “a failure by virtually every metric,” in a way that would increase taxpayer risk. Regarding proponents’ claim that the program would provide relief to 400,000 borrowers, Bachus stated, “They were wildly off mark. In fact, the program has received a mere 400 applications and closed on just 43 new loans.” Bachus also asserted that the bankruptcy “cram-down” provisions that would allow bankruptcy court judges to alter mortgages would reward the few lenders and consumers who made poor decisions, while adding uncertainty to the market and increasing mortgage costs for the vast majority of Americans.

http://republicans.financialservices.house.gov/news/PRArticle.aspx?NewsID=323

Bachus Attacks Proposed Budget

The budget proposed by the Obama administration would increase government borrowing and raise taxes on small businesses, Financial Services Committee Ranking Member Spencer Bachus, R-Ala., has charged. He said the budget “will not encourage job creation, or put Americans back to work.” Bachus called for an end to “generational theft.”

http://republicans.financialservices.house.gov/news/PRArticle.aspx?NewsID=324

Financial Services Committee Republicans Cite Editorials

The Republican members of the Financial Services Committee have reproduced quotes from selected editorials that criticize the Administration's housing and mortgage foreclosure relief plan.

http://republicans.financialservices.house.gov/news/PRArticle.aspx?NewsID=322

OTS Enhances Supervision Efforts for Large Thrifts

The Office of Thrift Supervision has announced steps intended to enhance the supervision of large thrifts and improve the consistency of enforcement for all thrifts. The agency has established a large bank unit in its Washington headquarters to review and approve supervisory actions by OTS regional offices for institutions with assets of more than $10 billion. It also is implementing new developed standards for reviewing and approving enforcement actions by the existing Regional Office Enforcement Review Committees. press release

Thrift Industry Reports Record Loss in 2008

The U.S. thrift industry had a record loss of $13.4 billion in 2008 as thrifts bolstered their reserves for loan losses by a record amount of $38.7 billion, the Office of Thrift Supervision has announced. This included a loss of about $3 billion in the fourth quarter of 2008, compared with a loss of about $8.8 billion in the fourth quarter of 2007 and about $4.4 billion in the third quarter of 2008. However, the agency said that the substantial response to economic conditions not only improved the position of thrifts to absorb potential loan losses, but also prepared thrifts to participate in the financial rebound when the nation emerges from the recession.

“The economic storm that began in housing hit thrifts hard and early,” said OTS Director John Reich. “However, I am optimistic that actions taken by thrift managers and boards of directors will position thrifts to be on the leading edge when recovery comes.” press release.

FTC Tells Congress of Efforts to Help Financially Distressed Consumers

Federal Trade Commission  testimony before the Senate Commerce Committee described the agency’s law enforcement and consumer education efforts addressing mortgage foreclosure rescue scams, bogus debt relief and credit repair services and unlawful debt collection. The FTC also recommended legislative and other remedies to enhance its effectiveness. The agency made four specific recommendations:

• permit the FTC to employ notice and comment rulemaking procedures to declare acts and practices relating to financial services to be unfair or deceptive in violation of the FTC Act;

• authorize the FTC to obtain civil penalties for unfair or deceptive acts and practices related to financial services and to bring suit in federal court to obtain civil penalties;

• authorize the agency to issue rules to implement the Fair Debt Collection Practices Act; and

• provide additional resources to assist the FTC in increasing its law enforcement activities related to consumer financial services and expanding its work on the efficacy of disclosures.

http://ftc.gov/opa/2009/02/financial.shtm

President Obama Sets Forth Principles for Financial Reform

President Obama has outlined seven broad key principles involving transparency, systemic risk management, and investor protection that will guide Congress in passing legislation to reform the financial and securities markets. In an earlier address to a joint session of Congress, the President called for quick action on legislation to reform the nation’s outdated financial regulatory regime.

Banks Lose $26.2 Billion; 252 Make FDIC’s “Problem List”

Commercial banks and savings institutions insured by the Federal Deposit Insurance Corp. (FDIC) reported a net loss of $26.2 billion in the fourth quarter of 2008, a decline of $27.8 billion from the $575 million that the industry earned in the fourth quarter of 2007 and the first quarterly loss since 1990. More than two-thirds of all insured institutions were profitable in the fourth quarter, but their earnings were outweighed by large losses at a number of big banks. Total deposits saw the largest percentage increase in 10 years, with domestic offices registering a 3.8 percent increase.

Commenting on the increase in deposits, FDIC Chairman Sheila Bair said, “Public confidence in the banking system and deposit insurance is demonstrated by the increase in domestic deposits. Clearly, people see an FDIC-insured account as a safe haven for their money in difficult times.” Financial results for the fourth quarter and full year are contained in the FDIC's latest Quarterly Banking Profile.

The FDIC also noted that its “Problem List” grew during the fourth quarter from 171 to 252 institutions, the largest number since the middle of 1995.

http://www.fdic.gov/news/news/press/2009/pr09027.html