CCH Financial Reform News Center

Treasury to Commit Additional $3.8 Billion to GMAC

This story appeared in Bank Digest

The Treasury Department has announced that it is acting on its previously announced commitment to provide capital to GMAC as identified in May 2009 under the Supervisory Capital Assessment Program (SCAP). In May, SCAP identified an additional capital need of $5.6 billion for GMAC. Due to a variety of factors, including that the restructurings of General Motors and Chrysler were accomplished with less disruption to GMAC than banking supervisors initially projected, Treasury will commit $3.8 billion of new capital to GMAC, rather than the $5.6 billion originally announced, resulting in a $1.8 billion reduction in Treasury’s previously forecasted Troubled Asset Relief Program expenditures. The $3.8 billion of new capital will be provided in the form of $2.54 billion of Trust Preferred Securities (TRUPs), which are senior to all other capital securities of GMAC, and $1.25 billion of Mandatory Convertible Preferred Stock (MCP). In connection with providing this capital, the Treasury will also receive warrants to purchase an additional $127 million of TRUPs and $63 million of MCP, which it will exercise immediately at the closing of the transaction.

FINRA Investment Adviser Oversight Stripped from House Legislation

This story appeared in Jim Hamilton's World of Securities Regulation.

A floor amendment to the Wall Street Reform and Consumer Protection Act, HR 4173, offered by Rep. Cohen of Tennessee stripped a provision out of the legislation that would have authorized the SEC to delegate the regulation of investment advisers to FINRA. The provision had been inserted during the mark up of the bill by the Financial Services Committee. Offered during the mark up by Committee Ranking Member Spencer Bachus of Alabama, the amendment would have allowed the SEC to permit or require FINRA to enforce compliance by its members and associated persons with the provisions of the Act. The Bachus Amendment would have empowered FINRA to enforce the fiduciary duty provisions in the Investment Advisers Act against not only broker-dealer members but also against any affiliated investment advisory firm or any associated person. Additionally, the amendment would have given FINRA sweeping rulemaking authority. The provision would have extended FINRA’s jurisdiction to SEC registered investment advisers that manage almost 80 percent of all advisory firms’ assets under management.

FHFA Issues Final Rule on FHLB Membership for CFPIs

This story appeared in Bank Digest.

The Federal Housing Finance Agency has released a final rule amending its membership regulations to implement provisions of the Housing and Economic Recovery Act of 2008 that authorized community development financial institutions (CDFIs) that have been certified by the Treasury Department’s CDFI Fund to become members of a Federal Home Loan Bank (FHLB). The newly eligible CDFIs include community development loan funds, venture capital funds, and state-chartered credit unions without federal insurance. The final rule sets out the eligibility and procedural requirements that will enable CDFIs to become members of a FHLB. The FHFA also is amending its community support regulations to provide that certified CDFIs may be presumed to be in compliance with the statutory community support requirements by virtue of their certification by the CDFI Fund.

HAMP Servicer Agreements Released

This story appeared in Bank Digest.

The Treasury Department has posted the following servicer participation agreements for the Home Affordable Modification Program (HAMP): Eaton National Bank & Trust Co.; Grafton Suburban Credit Union; HomeStar Bank and Financial Services; Iberiabank; Tempe Schools Credit Union; and The Bryn Mawr Trust Company.

These agreements are the first step servicers need to take to participate in HAMP for loans that are not owned, securitized or guaranteed by Fannie Mae or Freddie Mac.

Proposed Regulation D Amendments Would Enable Establishment of Term Deposit Facility

This story appeared in Bank Digest.

The Federal Reserve Board has proposed amendments to Regulation D (Reserve Requirements of Depository Institutions) that would enable the establishment of a term deposit facility. Under the proposal, the Federal Reserve Banks would offer interest-bearing term deposits to eligible institutions through an auction mechanism.Term deposits would be one of several tools that the Fed could employ to drain reserves to support the effective implementation of monetary policy. The Fed stated that this proposal is one component of a “process of prudent planning” on its part and has no implications for monetary policy decisions in the near term.

Peterson-Frank Remarks: Securities and Derivatives Exchanges Not Subject to Systemic Risk Regulation

This story appeared in Jim Hamilton's World of Securities Regulation.

Title I of the House Wall Street Reform and Consumer Protection Act, HR 4173, creates a systemic risk oversight and regulatory structure that enables regulators to raise capital requirements and impose heightened prudential standards on large, interconnected firms that could pose a threat to financial stability. The legislation also empowers the Federal Reserve Board to impose a host of additional requirements on institutions and activities deemed systemically important.

Further Guidance Provided on Credit CARD Act

This story appeared in Bank Digest.

The Federal Deposit Insurance Corp. has updated the information it provided in FIL-44-2009 regarding statutory amendments to the Truth in Lending Act made by the Credit Card Accountability Responsibility and Disclosure Act of 2009 (Credit CARD Act). In its latest guidance, the FDIC has provided information regarding amendments made by the Credit CARD Technical Corrections Act of 2009, which narrowed the scope of application of the Credit CARD Act’s requirement that creditors mail or deliver periodic statements at least 21 days before the payment due date to credit card accounts only.

Status of Support for Housing Programs Updated

This story appeared in Bank Digest.

The Treasury Department provided an update on initiatives established under the Housing and Economic Recovery Act (HERA) of 2008, which supports housing market stabilization and provides relief to struggling homeowners. As part of a commitment to wind down programs that were established during the crisis and are no longer critical to financial stability, the Treasury Department will terminate several HERA programs at the end of the year. The Treasury Department will also amend the terms of its agreements—Preferred Stock Purchase Agreements (PSPAs)—Fannie Mae and Freddie Mac to support their ongoing stability. The amendments to the PSPAs allow the cap on the Treasury Department’s funding commitment under these agreements to increase as necessary to accommodate any cumulative reduction in net worth over the next three years. At the conclusion of the three-year period, the remaining commitment will then be fully available to be drawn per the terms of the PSPAs. The Treasury Department noted that the steps are necessary for preserving the continued strength and stability of the mortgage market.

Wells Fargo and Citigroup Repay $45 Billion; AGP Ends

This story appeared in Bank Digest.

The Treasury Department has received repayments on its Troubled Asset Relief Program (TARP) investments in Wells Fargo and Citigroup in the sum of $45 billion, bringing the total amount of repaid TARP funds to $164 billion. Wells Fargo repaid $25 billion under the Capital Purchase Program (CPP) and Citigroup repaid $20 billion under the Targeted Investment Program (TIP), both of which will wind down at the end of this year. The Treasury Department now estimates that total bank repayments should exceed $175 billion by the end of 2010, cutting total taxpayer exposure to the banks by three quarters. In addition, the Treasury Department, the Federal Reserve Board, the Federal Deposit Insurance Corp. and Citigroup terminated the agreement under which the federal government agreed to share losses on a pool of originally $300 billion of Citigroup assets. This arrangement was entered into in January 2009, under the Asset Guarantee Program (AGP) and was originally expected to last for 10 years. The government parties did not pay any losses under the agreement, and will keep $5.2 billion of $7.0 billion in trust preferred securities as well as warrants for common shares that were issued by Citigroup as consideration for such guarantee. With this termination, the AGP is being terminated at a profit to the taxpayer.

Mortgage Interest Rates Reported

This story appeared in Bank Digest.

The Federal Housing Finance Agency has reported that the average interest rate on conventional 30-year, fixed-rate, mortgage loans of $417,000 or less decreased one basis point to 5.09 percent in November. The average interest rate on 15-year, fixed-rate loans of $417,000 or less increased one basis point to 4.63 percent in November. These rates are calculated from the FHFA’s Monthly Interest Rate Survey (MIRS) of purchase-money mortgages. These results reflect loans closed during the November 23-30 period. Typically, the interest rate is determined 30 to 45 days before the loan is closed. The contract rate on the composite of all mortgage loans (fixed- and adjustable-rate) was 5.00 percent in November, down 2 basis points from 5.02 percent in October. The effective interest rate, which reflects the amortization of initial fees and charges, was 5.09 percent in November, down 2 basis points from 5.11 percent in October. The report contained no data on adjustable-rate mortgages due to insufficient sample size.