CCH Financial Reform News Center

Hearing on Subprime Lending and Securitization and GSEs Announced

This story appeared in Bank Digest.

The Financial Crisis Inquiry Commission has announced that it will hear from public and private sector entities in a hearing titled “Subprime Lending and Securitization and Government-Sponsored Enterprises (GSEs).” Hearing sessions will include the following entities: the Federal Reserve Board, Citigroup, Fannie Mae, the Federal Housing Finance Agency and its predecessors, the Federal Housing Finance Board and the Office of Federal Housing. The forum, to be held April 7-9, 2010, will also be webcast live at www.FCIC.gov.

Fed Issues Reminder of New Credit CARD Act Requirements

This story appeared in Bank Digest.

The Fed has sent a letter to its supervised institutions to reiterate and highlight Regulation Z (Truth in Lending) requirements related to the submission of consumer credit card agreements. Under the Credit Card Accountability Responsibility and Disclosure Act of 2009, credit card issuers must submit their consumer credit card agreements to the Fed for posting on the Fed's website. However, card issuers are not required to submit agreements for private label plans offered on behalf of a single merchant or a group of affiliated merchants if each of these plans has fewer than 10,000 open accounts. Also, issuers are not required to submit agreements for plans offered in order to test a new credit card product provided that the plan involves no more than 10,000 accounts. Agreements that are not currently offered to the public are also excepted from the rule.

Bi-Partisan Senate Bill Would Provide Tax Relief to Victims of Ponzi Investment Schemes

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

Bi-partisan Senate legislation would provide tax relief to investors victimized by securities fraud in Ponzi-scheme types of operations. Since the legislation applies only to qualified fraudulent investment losses discovered in calendar years 2008 or 2009, it essentially assists victims of frauds such as those run by disgraced financiers Bernie Madoff and Alan Stanford. Generally, the measure would extend certain benefits that are already available to larger investors to smaller investors as well. It would allow victims to take a deduction for funds lost from their IRA accounts, allow for accelerated and increased contributions to tax-free retirement accounts to make up for losses, and allow for penalty-free early withdrawals from retirement accounts for investors in dire need of cash.

Community Banks Win with Financial Reform

This story appeared in Bank Digest.

According to a Senate Banking Committee release, “Community banks are big winners in financial reform.” The release states that the reform measure imposes greater costs and restrictions on the superbanks, reining in the abuses that caused the crisis, but allows community banks to continue serving their communities. For the first time, the release continues, community banks will no longer have to compete with unregulated non-banks. The Consumer Financial Protection Bureau (CFPB) will have the ability to adopt rules that prohibit unfair or deceptive practices, and it will have the power to enforce these rules on large banks, mortgage companies, and major players in the shadow banking industry. R. Michael Menzies, Chairman of the Independent Community Bankers of America, stated on March 15, 2010, “This financial and economic crisis has clearly demonstrated the need for meaningful financial regulatory reform that protects America's taxpayers and the integrity of our financial system. The best way to accomplish this is by ending too-big-to-fail and regulating and enforcing rules on the unregulated financial players.”

Treasury Plans to Sell Citigroup Common Stock

This story appeared in Bank Digest.

The Treasury Department has announced its intention to fully dispose of its approximately 7.7 billion shares of Citigroup, Inc. common stock over the course of 2010 subject to market conditions. Treasury received these shares of common stock pursuant to the June 2009 Exchange Agreement between Treasury and Citigroup, which provided for the exchange into common shares of the preferred stock that Treasury purchased in connection with Citigroup's participation in the Capital Purchase Program. Treasury has engaged Morgan Stanley as its capital markets advisor in connection with its Citigroup position.

New Round of Assistance for Hardest Hit Home Markets to Be Offered

This story appeared in Bank Digest.

The Obama Administration has announced an expansion of the Housing Finance Agency Innovation Fund for the Hardest Hit Housing Markets to target five additional states with high shares of their populations living in local areas of concentrated economic distress. This second HFA Hardest Hit Fund will include up to $600 million in funding for innovative measures to help families stay in their homes or otherwise avoid foreclosure in states that have been hit hard by concentrated economic distress. While the first HFA Hardest Hit Fund targeted five states with home price declines greater than 20 percent, the second HFA Hardest Hit Fund will target five states with high concentrations of people living in economically distressed areas, defined as counties in which the unemployment rate exceeded 12 percent in 2009. Less than 15 percent of the U.S. population lives in such high unemployment rate counties. The five states that will receive allocations based on this criterion are: North Carolina, Ohio, Oregon, Rhode Island and South Carolina.

Lower-Cost Capital Program Application Deadline Extended

This story appeared in Bank Digest.

The National Credit Union Administration has informed credit unions that the deadline has been extended on the U.S. Treasury Community Development Capital Initiative to invest lower-cost capital in certain financial institutions, including low-income credit unions (LICUs), to April 30, 2010. The program, designed to expand financial institution lending to small businesses and in low income areas, is open to financial institutions, including LICUs and the equivalent for state-chartered credit unions that are designated as Community Development Financial Institutions.

Credit Unions Encouraged to Help Homeowners

This story appeared in Bank Digest.

National Credit Union Administration Chairman Debbie Matz has encouraged the nation’s credit unions to redouble efforts to work with members who are seeking ways to deal with troubled mortgages. Matz issued a statement as the White House unveiled a package of plans to enhance federal programs, through the Treasury Department and Federal Housing Administration, that seek to stem the tide of home foreclosures. The NCUA Chairman noted, “In these extraordinary times, when so many homeowners are underwater in their mortgages through no fault of their own, I believe credit unions should evaluate every possible remedy to help responsible borrowers—especially those who are victims of the real estate market crash and those who are unemployed.”

Lessons From Stress Tests Examined

This story appeared in Bank Digest.

Federal Reserve Board Governor Daniel K. Tarullo discussed the Fed’s experience with the Supervisory Capital Assessment Program, or “stress testing” of major financial institutions, during the financial crisis. Tarullo made his remarks before the Federal Reserve Board International Research Forum on Monetary Policy in Washington, D.C. Tarullo noted that a crisis accelerates adoption of policies and practices that might beneficially have been implemented beforehand and then are sensibly continued after the crisis has passed. He noted that the stress tests required development on the fly, and under enormous pressure, of ideas that academics and supervisors had been considering for some time. The Fed Governor also discussed the rationale for releasing the results of the stress tests to the public. Tarullo noted, “it is clear that the public release of the SCAP results played an important role in stabilizing the financial system.”

Senate Financial Reform Legislation Provides for Say on Pay and Independent Compensation Committees

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

The Senate Banking Committee has reported out financial reform legislation that would enhance corporate governance and mandate increased transparency of executive compensation. The bill gives shareholders a say on pay with the right to a non-binding vote on executive compensation. This advisory vote on executive compensation is designed to give shareholders a powerful opportunity to hold accountable executives of the companies they own, and a chance to disapprove where they see the kind of misguided incentive schemes that threatened individual companies and, in turn, the broader economy.