Dodd-Frank News Center

Quarterly Banking Report Shows Improvement in Net Income

This story appeared in Bank Digest.

The FDIC has released its “Quarterly Banking Profile,” which provides a comprehensive summary of the most current financial results for the banking industry. The report showed that commercial banks and savings institutions insured by the FDIC reported an aggregate profit of $914 million in the fourth quarter of 2009, a $38.7 billion improvement from the $37.8 billion net loss the industry sustained in the fourth quarter of 2008, but still well below historical norms for quarterly profits. More than half of all institutions (50.3 percent) reported year-over-year improvements in their quarterly net income. Almost one-third of all institutions (32.7 percent) reported net losses for the quarter, compared to 34.6 percent a year earlier. For the full year, banks reported net income totaling $12.5 billion, up from $4.5 billion in 2008. “Consistent with a recovering economy, we saw signs of improvement in industry performance,” said FDIC Chairman Sheila C. Bair. “But as we have said before, recovery in the banking industry tends to lag behind the economy, as the industry works through its problem assets.”

IOSCO Report Shows Need to Regulate Hedge Funds for Systemic Risk

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

As the US and EU try to pass legislation to regulate hedge fund operators and advisers, a report by an IOSCO working group concluded that hedge funds can have a systemic impact on financial stability and hence the lack of a prudential regime for monitoring hedge funds is a critical gap in the regulatory framework. The failure of a large, highly leveraged hedge fund could systemically impact its investors, other financial institutions and the markets. Further, the G-20 identified hedge funds as one of the most significant group of institutions in the “shadow” banking system.

Exposures to hedge funds are important sources of counterparty risk, noted IOSCO, especially if a hedge fund borrows from multiple brokers or is engaged in multiple trading relationships and individual counterparties do not have a full picture of the hedge fund’s leverage or of its other risk exposures. The current lack of transparency constitutes a major obstacle to risk mitigation.

White House Continues Push for Standalone Consumer Protection Agency

By Sarah Borchersen-Keto, CCH Washington News Bureau, Contributing Author, the CCH Federal Banking Law Reporter.

The White House continued to make its case for a separate consumer financial protection agency February 23, as the proposed agency proves to be a major stumbling block in efforts to enact financial regulatory reform.

Senate Banking Committee Chairman Chris Dodd, D-Conn., and ranking committee member Sen. Richard Shelby, R-Ala., are both expected to release versions of financial reform legislation in the coming days. Sen. Bob Corker, R-Tenn., the lead negotiator for the Republicans, has stressed that a standalone agency is a non-starter.

Treasury Criticized for Attempt to Exclude Oversight of Small Business Lending Fund

This story appeared in Bank Digest.

House Oversight and Government Reform Committee Ranking Member Darrell Issa, R-Calif., has issued a statement criticizing the Treasury Department's reported plan to exclude oversight by the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) in creating a new Small Business Lending Fund: “SIGTARP has been an aggressive watchdog for American taxpayers and this attempt to circumvent their oversight must not go forward. It is disturbing, but not altogether out of character, that this Treasury Department would attempt to deny SIGTARP the ability to conduct oversight of this proposed program. Denying SIGTARP the ability to defend taxpayers sends a chilling message that IGs who conduct real oversight will be punished for holding this Administration accountable.”

Court Approves Bank of America Settlement with SEC

This story appeared in Bank Digest.

The U.S. District Court for the Southern District of New York has approved a $150 million Bank of America settlement with the Securities and Exchange Commission. The settlement stems from Bank of America's failure to disclose extraordinary financial losses at Merrill Lynch prior to a shareholder vote to approve a merger between the two companies. The court determined that the bank failed to adequately disclose bonuses and losses, but that it was unclear whether the lack of disclosure resulted from negligence or intentional fraud.

Frank Statement on Banks' Response to Credit CARD Act

This story appeared in Bank Digest.

In a statement regarding implementation of the Credit Card Accountability, Responsibility and Disclosure (CARD) Act, House Financial Services Committee Chairman Barney Frank, D-Mass., commented on letters that credit card companies have been sending to their customers. “These letters indicate that Americans are now seeing the benefits of the CARD Act. It was unfortunately the case that some banks tried to game the system after we passed the bill into law, but their actions provide further evidence of our need for a Consumer Financial Protection Agency...Had the CFPA been in existence we could have moved right away to block the banks' egregious actions.”

Dodd Asks Regulators for Answers on Commercial Real Estate Market

This story appeared in Bank Digest.

Senate Banking Committee Chairman Chris Dodd, D-Conn., has sent a letter to federal bank regulators asking them to report on their efforts to stabilize the troubled commercial real estate (CRE) market. He asked the agencies to provide an update on how the guidance issued by the Federal Financial Institutions Examination Council is helping to stabilize the CRE market. Dodd's letter continued, “In addition, I would like an explanation of how [each agency] has addressed the CRE issue so far, and what additional steps you plan to take.”

President Announces Help for Hardest Hit Housing Markets

This story appeared in Bank Digest.

President Obama, with Senate Majority Leader Harry Reid, D-Nev., announced $1.5 billion in funding for innovative measures to help families in the states that have been hit the hardest by the aftermath of the housing bubble. In the announcement, the president noted that in each of these states—California, Nevada, Arizona, Florida and Michigan—the average price for all homes has fallen more than 20 percent from the peak. The funding was set aside as part of the Emergency Economic Stabilization Act of 2008.

Speaker of the House Nancy Pelosi, D-Calif., noted, “President Obama’s announcement is an encouraging step in the effort to stabilize our nation’s housing markets, help unemployed homeowners, and bring relief to many families hardest hit by the recession.”

Dodd Highlights Credit CARD Act Changes

This story appeared in Bank Digest.

Senate Banking Committee Chairman Chris Dodd, D-Conn., has reminded consumers to look for important new credit card protections on Monday, Feb. 22, 2010, when major provisions of the Credit CARD Act take effect. In his statement, Dodd noted, “I urge consumers to learn more about these significant new protections, and keep a close eye on their credit card statements.” He added, “Make sure credit card companies are giving you 45 days notice if they’re going to change your terms. If you don’t like the new terms, shop around for a better deal and exercise your new right to opt-out of the changes.”

Hearing to Examine Administration Response to Foreclosure Crisis

This story appeared in Bank Digest.

Rep. Dennis Kucinich, D-Ohio, Chairman of the House Domestic Policy Subcommittee, has announced that there will be a hearing on Thursday, Feb. 25, 2010, entitled “Foreclosures Continue: What needs to Change in the Administration’s Response.” The hearing will examine the function and the impact of the Administration’s response to the ongoing foreclosure crisis. The subcommittee will hear testimony from a Treasury Department official, as well as other experts who will provide insight as to the impact of the Administration’s program, and suggestions for its improvement.