Financial Crisis News Center

Frank Sees Significant Expansion of Derivatives Regulation

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

House Financial Services Committee Chairman Barney Frank, D-Mass., said Congress will be “significantly expanding” the regulation of derivatives, an area of the financial services industry that saw explosive growth over the past decade.

“Where we have instruments, activities, entities that are an important means to gathering the funds that our private sector economy needs to do productive activity, we need to protect that. We need to make sure it’s done with integrity,” Frank told a joint hearing of the House Financial Services Committee and the House Agriculture Committee on July 10.

California IOUs are Securities, Says SEC Staff

This article was published in Jim Hamilton’s World of Securities Regulation.

Instruments issued by the state of California during its current budget crisis are securities, advised the SEC staff in an advisory statement. The state issued the instruments, commonly referred to as "IOUs," to individuals who were entitled to a tax refund or vendors who were entitled to payments. The release was staff advice, and did not involve any formal action by the Commission.

Dodd Calls for Review of Past Credit Card Rate Increases

This story appeared in Bank Digest.

Senate Banking Committee Chairman Christopher Dodd, D-Conn., has urged the federal bank, thrift and credit union regulators to adopt strict regulations requiring that credit card issuers review interest rate increases that have been imposed this year. Noting that the recently enacted Credit Card Accountability Responsibility Disclosure (Credit CARD) Act requires that increases after Jan. 1, 2009, must be reviewed every six months, Dodd told the regulators that this “look-back” period will be effective only if it is enforced through appropriate regulations.

Report Issued on Housing Program Effects on Financial Crisis

This story appeared in Bank Digest.

Federal government intervention in the housing market was a significant cause of the current financial crisis, according to a staff report issued by the Committee on Oversight and Government Reform. While affordable housing programs and the government sponsored housing enterprises were able to raise the national homeownership rate, they created “a mortgage tsunami that wrought devastation on the American people and economy.”

Fed Governor Discusses Examination Focus Shift

This story appeared in Bank Digest.

Federal Reserve Board Governor Elizabeth Duke gave a preview of issues that will be emphasized in upcoming bank examinations. In a speech to the Minority Depository Institutions National Conference in Chicago Ill., Duke said that upcoming examinations may focus on:

• concentrations in commercial real estate loans, including the need for updated appraisals;
• liquidity and capital planning;
• compensation; and
• credit availability.

FHFA Releases First Five-Year Strategic Plan

This story appeared in Bank Digest.

The Federal Housing Finance Agency has published its first Strategic Plan since the agency was created nearly a year ago. The plan details the goals and objectives for 2009-2014 that will guide the agency in its efforts to restore the financial health of Fannie Mae and Freddie Mac, enhance the Federal Home Loan Bank System, contribute to the strength and stability of the nation's housing finance market and promote affordable housing.

OTS Issues Guidance on California Warrants

This story appeared in Bank Digest.

The OTS has informed thrifts of interagency guidance on the treatment of warrants the state of California is issuing in payment of some general obligations. The guidance does not take a position on whether financial institutions should accept the warrants, leaving the decision to each institution's judgment. If the warrants are accepted, they should be assigned a 20-percent risk weight, the guidance said.

Thrifts Cautioned on Concentration Policies

This story appeared in Bank Digest.

Noting that recent examinations have revealed possible problems with asset and liability concentrations and associated risk management policies, the OTS has issued guidance on the risk management framework it expects thrifts to have. Higher levels of concentration and risk require that more capital must be held, the agency said, and rapid growth in concentration should be monitored carefully. The OTS warned that reliance on volatile funding sources often leads to higher risk lending activities.

Regulators Announce Fund Managers for PPIP

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

The Treasury Department, the Federal Reserve Board and the Federal Deposit Insurance Corp. announced July 8 that they have pre-qualified nine firms to participate as fund managers in the initial round of the Legacy Securities Public-Private Investment Program (PPIP). The program enables investors to buy distressed securities from troubled institutions.

The legacy asset program will initially be modest in size, regulators said. The Treasury said it will commit up to $30 billion of debt and equity into the program, matching $10 billion in private sector funding.

Frank Introduces Consumer Financial Protection Agency Bill

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

House Financial Services Committee Chairman Barney Frank, D-Mass., has formally introduced legislation to establish the Consumer Financial Protection Agency (CFPA), a central element of the administration’s plan to overhaul financial regulation.

H.R. 3126 would create the CFPA, an independent agency tasked with protecting consumers who purchase financial products from banks and non-bank financial institutions.