Financial Crisis News Center

State Street Bank to Settle Charges of Misleading Subprime Mortgage Investors

This story appeared in Bank Digest.

State Street Bank and Trust has agreed to settle SEC charges that it misled investors about their exposure to subprime investments while selectively disclosing more complete information to specific investors. The company has agreed to pay more than $300 million that will be distributed to investors who lost money during the subprime market meltdown in 2007, in addition to nearly $350 million it previously agreed to pay to investors to settle private claims. The SEC said the suit arose from joint efforts with the Massachusetts Securities Division and the Massachusetts Attorney General's office.

Monthly Report Issued on Credit and Liquidity Programs and Fed Balance Sheet

This story appeared in Bank Digest.

The Federal Reserve Board has issued its monthly report on the credit and liquidity programs that were created to address the financial crisis and the effect those programs have had on the Fed’s balance sheet. The report was issued as part of the Fed’s efforts to enhance transparency and to ensure appropriate accountability to Congress and the public concerning policy actions taken to address the financial crisis.

Regulators Seek Comments on New Basel Capital Proposals

This story appeared in Bank Digest.

The federal bank and thrift regulatory agencies are encouraging comments on Basel Committee on Banking Supervision proposals that aim to strengthen the resiliency of the banking sector through new capital and liquidity standards. The proposed changes include introduction of new standards for liquidity risk management, the addition of a leverage ratio to the Basel II framework, improvements to the quality and consistency of capital and strengthening of capital requirements for counterparty credit risk.

Congressional Spending Bill Responds to NCUA Priorities

This story appeared in Bank Digest.

The NCUA issued a release noting that Congress removed the borrowing cap on Central Liquidity Facility (CLF) borrowing for another fiscal year and increased the appropriation for the Community Development Revolving Loan Fund (CDRLF) as part of H.R. 3288, a broad 2010 spending package approved on Dec. 13, 2009. NCUA Chairman Debbie Matz hailed the weekend Congressional action, noting that “yesterday's passage of the FY2010 Financial Services Appropriation is a continuing sign that Congress is committed to working with NCUA to mitigate the effects of the economy on credit unions and their 90 million members. I commend Congress for lifting the CLF cap and authorizing NCUA to fulfill the essential role of providing additional liquidity for the credit union system.”

Monthly Report Issued on Fed’s Credit and Liquidity Programs

This story appeared in Bank Digest.

The Fed has issued its monthly report on the credit and liquidity programs that were created to address the financial crisis and the effect those programs have had on the Fed's balance sheet. The report was issued as part of the Fed's efforts to enhance transparency and to ensure appropriate accountability to Congress and the public concerning policy actions taken to address the financial crisis.

Deputy Secretary Discusses Moral Hazard

This story appeared in Bank Digest.

The government's intervention in the financial system will make the problem of moral hazard worse unless meaningful financial services system reforms are enacted, Deputy Treasury Secretary Neal S. Wolin told the Financial Services Roundtable. Investment banks must be subject to consolidated federal supervision by the Federal Reserve Board, he asserted, and both capital and liquidity standards must be raised. Also, it must be made clear that there is no guarantee of future federal government support, and there must be a mechanism for resolving the failures of such institutions.

GAO Reports on TARP Funds Used to Support AIG

By Gregg D. Killoren, J.D., CCH State Banking Law Reporter, Bank Digest and Individual Retirement Plans Guide.

The Government Accountability Office has released a report concluding that the federal supports, including a portion of the Troubled Asset Relief Program, used to prop up American International Group Inc. (AIG) are helping to stabilize the company. However, the GAO states in the report, it is too early to tell whether AIG can restructure its businesses and repay the taxpayers.

Status Report on Financial Stabilization Efforts Released

By Richard Roth, J.D., Editor, the CCH Federal Banking Law Reporter, CCH Bank Compliance Guideand Bank Digest.

The Treasury Department has issued a “status report“ summarizing the Obama administration's financial system stabilization efforts to date and describing planned steps toward ending the current support programs. According to the report, some of the programs already are winding down, with the Money Market Mutual Fund Guarantee Program scheduled to end on Sept. 18, 2009, and the Debt Guarantee Program component of the Temporary Liquidity Guarantee Program (TLGP) scheduled to end on Oct. 31, 2009. Market condition improvements mean that there is no plan to extend either of these programs, although an emergency facility may be put in place to allow banks to issue guaranteed debt for an additional six months.

Treasury Announces Stronger Capital and Liquidity Standards

Lisa M. Psaute, J.D., Editor, Secured Transactions Guide and Financial Privacy Law Guide.

The Treasury Department has announced stronger capital and liquidity standards for banking firms in order to better protect the safety and soundness of individual banking institutions and the stability of the global financial system and economy.

The Treasury's core principals include:

FDIC Seeks to Wind Down Debt Guarantee Program

This story appeared in Bank Digest.

The FDIC is seeking comment on a Notice of Proposed Rulemaking on two alternatives for phasing out the Debt Guarantee Program, a component of the FDIC's Temporary Liquidity Guarantee Program. The FDIC's guarantee will expire no later than Dec. 31, 2012.