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Inside Washington (01/13/2010)
* WASHINGTON (1/14/10)--The heads of four large Wall Street banks testified Wednesday before the Financial Crisis Inquiry Commission. The commission’s role is to find the cause of the economic crisis. Lloyd Blankfein of Goldman Sachs said there were three factors to blame for the crisis: 10 low, long-term interest rates; federal policies to promote homeownership; and huge growth in foreign capital (American Banker Jan. 14). John J. Mack of Morgan Stanley said proprietary trading should be scaled back, and noted he supported creating a systemic risk regulator and a federally regulated clearinghouse for derivatives. Jamie Dimon of JPMorgan Chase said lawmakers should re-examine regulators’ roles in the system. No institution should be too big to fail, he added. During his opening remarks, commission Chair Phil Angelides said that consumers are angry because Wall Street is earning record profits after receiving a government bailout while families are struggling. More than two million families have lost their homes and more than 16% of the work force are underemployed or unemployed ... * WASHINGTON (1/14/10)--The Federal Reserve Board does not want to be forced into revealing the names of financial firms that might have failed had the government not stepped in with bailout money, and the agency is asking a U.S. appeals court to overturn a federal judge’s order that the Fed do so. The case revolves around a formal information request made by Bloomberg LP, parent company of Bloomberg News. The Fed argues against making the information public, saying that action could cause a run on those lenders or prompt a sell-off by investors. Bloomberg, on the other hand, has argued that the public has the right to know. Whatever the outcome at the appeals court level—and a ruling is not anticipated there for months--it is unlikely that will be the end of the argument. The losing party may then seek a rehearing or appeal to the full appeals court, and could eventually even petition the U.S. Supreme Court (American Banker Jan. 13) … * WASHINGTON (1/14/10)--The Federal Deposit Insurance Corp. (FDIC) introduced its plan to link bank compensation practices to premium assessments, but Comptroller of the Currency John Dugan and Office of Thrift Supervision Director John Bowman opposed the move (American Banker Jan. 13). The plan conflicts with other pending policies to restrict compensation, Dugan and Bowman said. FDIC’s proposed model would not set specific limits on compensation. Rather, institutions would be discouraged from giving too much compensation up-front to lenders and employees in risky jobs. Employee pay plans also would have to be approved by a separate subcommittee. FDIC officials said “loose” pay practices have led to bank failures. Bowman, however, said most bank executives are not overpaid ... * WASHINGTON (1/14/10)--A review of 15 lenders by the Department of Housing and Urban Development (HUD) was not an investigation and the companies can continue writing Federal Housing Administration (FHA) loans, the department said Tuesday (American Banker Jan. 13). HUD picked 15 lenders for the review based on high default rates. The review aimed to determine why the companies had high rates and whether there was wrongdoing. Several lenders told American Banker they were surprised about the review. Bernie Cason, president of Mac-Clair Mortgage Corp., said he was blown away when he received a subpoena. Richard Reese, president of Dell Franklin Financial LLC, also said he was very surprised. Phillip Schulman, partner at K&L Gates LLP, said that HUD should not have released the names of the lenders under review because it looks as though the companies did not originate the loans in compliance with FHA standards ... * WASHINGTON (1/14/10)--Proposals that would open central bank policymaking to more scrutiny could lead to the politicization of the central bank, which puts the U.S. on a path to “economic ruin,” Richard Fisher, president of the Federal Reserve Bank of Dallas, warned Congress Tuesday. Fisher’s comments in a speech were aimed at a proposal by Rep. Ron Paul (R-Texas) that would subject the Federal Reserve to audits. The House approved Paul’s measure last month. The Senate version has 31 co-sponsors. Fisher also said Fed bank presidents shouldn’t be subject to Senate confirmation ...


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