Dodd-Frank News Center

Geithner Addresses Challenges from Exiting Economic Crisis

This story appeared in Bank Digest.

“Confidence in the American economy will increasingly depend on our ability to demonstrate again that we have a political system that works, that can deliver reforms commensurate with the size of our challenges, and that can bring people together even when many things still divide us,” stated Treasury Secretary Tim Geithner at the Detroit Economic Club on April 28, 2011. In his remarks, Geithner discussed the three main challenges the United States faces coming out of the economic crisis: economic growth; financial repair and reform; and fiscal sustainability. 

SIGTARP Issues Quarterly Report to Congress

This story appeared in Bank Digest.

The Special Inspector General for the Troubled Asset Relief Program has issued its most recent quarterly report to Congress. The report includes: 

• details of SIGTARP's activities;
• updates on TARP programs and spending;
• Office of Financial Stability operations and administration; and
• SIGTARP's recommendations to the Treasury with respect to TARP operation.

According to the report, TARP may have entered a new phase, but it is far from over. As of March 31, 2011, there was approximately $146.8 billion in TARP funds still outstanding and $60 billion obligated and available to be spent.

Guidelines for Servicing Delinquent Mortgages to Be Aligned

This story appeared in Bank Digest.

Fannie Mae and Freddie Mac have been directed by Federal Housing Finance Agency Acting Director Edward J. DeMarco to align their guidelines for servicing delinquent mortgages they own or guarantee. The updated framework will establish uniform servicing requirements as well as monetary incentives for servicers that perform well and penalties for those that do not. Fannie Mae and Freddie Mac will each issue detailed guidelines to their servicers in the second and third quarters of 2011. The agency also has answered frequently asked questions regarding its Servicing Alignment Initiative.

Mortgage Interest Rates Reported

This story appeared in Bank Digest.

The Federal Housing Finance Agency has reported that the National Average Contract Mortgage Rate for the Purchase of Previously Occupied Homes by Combined Lenders, used as an index in some adjustable-rate mortgage contracts, was 4.84 percent based on loans closed in March. This is an increase of 0.05 percent from the previous month. The FHFA also has reported that the average interest rate on conventional 30-year, fixed-rate mortgage loans increased 9 basis points to 5.06 percent in March. These rates are calculated from the FHFA's Monthly Interest Rate Survey of purchase-money mortgages. These results reflect loans closed during the March 25-31 period. Typically, the interest rate is determined 30 to 45 days before the loan is closed. Thus, according to the agency, the reported rates depict market conditions prevailing in mid to late February.

CRS Analysis Shows Large Banks Received “Backdoor Bailouts”

This story appeared in Bank Digest.

Sen. Bernie Sanders, I-Vt., has stated that the emergency loans provided to the largest banks by the Federal Reserve Board during the crisis were used by those institutions to buy government securities. The banks then received interest payments on the government securities that were up to 12 times greater than the rates charged for the Fed loans, according to Sanders.

Consumers Receive $1.5 Million from Discriminatory Mortgage Lender

This story appeared in Bank Digest.

The FTC has announced that 3,162 refund checks have been mailed to borrowers allegedly harmed by Golden Empire Mortgage, Inc., and Howard D. Kootstra, who were alleged by the FTC to have illegally charged Hispanic consumers higher prices for mortgage loans than non-Hispanic white consumers--price disparities that could not be explained by the applicants' credit characteristics or underwriting risk. A settlement order imposed a $5.5 million judgment that was suspended when the defendants paid $1.5 million for consumer redress. The settlement order bars the defendants from discriminating on the basis of national origin in credit transactions and requires Golden Empire to establish and maintain a policy that restricts loan originators' pricing discretion, a fair lending monitoring program, a program to ensure the accuracy and completeness of their data, and employee training programs.

Sentences Handed Down in Omni National Bank Case

This story appeared in Bank Digest.

The Office of Special Inspector General for the Troubled Asset Relief Program has announced that Delroy Oliver Davy, of Lithonia, Ga., who pleaded guilty on May 11, 2010, to bank fraud and conspiracy to commit bank, mail and wire fraud, in connection with a scheme to fraudulently obtain millions of dollars of mortgage loans from Omni National Bank of Atlanta, Ga., and other lenders, was sentenced by U.S. District Judge J. Owen Forrester to serve 14 years in federal prison. The SIGTARP also announced that Jeffrey L. Levine, of Atlanta, Ga., former Executive Vice President of Omni Bank, was sentenced by Judge Forrester to serve five years in federal prison for causing materially false entries that overvalued bank assets to be made in the books, reports and statements of Omni. Christy L. Romero, Acting Special Inspector General for the Troubled Asset Relief Program, stated, “Jeffrey Levine joins a growing list of convicted bank executives who, through deliberate and excessive risktaking, contributed to the demise of a financial institution at the height of the financial crisis.”

Financial Stability Oversight Board Minutes Released

This story appeared in Bank Digest.

The Financial Stability Oversight Board has released the minutes of its March 28, 2011, meeting. As part of the meeting, the FSOB members discussed the contents and conclusions of the final Congressional Oversight Panel report with respect to the cost of the Troubled Asset Relief Program to taxpayers. Another item discussed was the status of AIG’s ongoing efforts to repay the assistance provided to the company by the U.S. government. Members and officials discussed, among other things, AIG’srecent repayment to the Treasury Department of approximately $6.6 billion, drawn from the $9.6 billion of proceeds AIG received from the March 8, 2011, closing of AIG’s previously announced sale of its entire equity holdings of MetLife, Inc.

Secretary Geithner Due to Respond This Week to Senator Hatch's Regulatory Arbitrage Concerns

By James Hamilton, J.D., LL.M., Principal Analyst, CCH Federal Securities Law Reporter and CCH Derivatives Regulation Law Reporter.

Treasury Secretary Tim Geithner is due to respond by April 28 to the call of Senator Orrin Hatch (R-UT) for the delay of further implementation and rulemaking under the Dodd-Frank Act until the Senate is provided assurances that G-20 nations have agreed to adopt similar regulatory reforms. He is concerned that regulations implementing Dodd-Frank are being drafted without adequate consideration of the possibility that they will push financial activity to foreign financial institutions in jurisdictions that fail to adopt similar regulations. The Senator, who is the Ranking Member on the Finance Committee, specifically focused on regulations to implement the Volcker Rule and the implementation of the Consumer Financial Protection Bureau.

Fed Asks for Comments on Resolution-Related Studies

This story appeared in Bank Digest.

The Fed is seeking information that will help it conduct two studies required by the Dodd-Frank Act--one on the resolution of financial companies under Chapter 7 or Chapter 11 of the U.S. Bankruptcy Code and one on international coordination relating to the resolution of systemic financial companies under the Bankruptcy Code and applicable foreign law. Issues include whether amendments to the Bankruptcy Code are needed, whether a special court or panel of masters should be created and how international cooperation can be enhanced.