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Inside Washington (04/06/2010)
* WASHINGTON (4/7/10)--Some provisions of proposed regulatory reform bills would give regulators power they already have, said financial observers. Provisions such as creating higher capital requirements, cracking down on risky activities and boosting leverage limits already have been included in laws Congress passed more than a decade ago. John Douglas, former general counsel for the Federal Deposit Insurance Corp., likened the situation to dealing with a “three-year-old” (American Banker April 6). “It’s like, ‘This time I really mean it,’” he said. Many observers said they were skeptical because the pending legislation only creates an appearance of real reform. Rick Carnell, former Treasury official, said Congress is “recycling” the same provisions that failed once already when regulators didn’t “use their discretion” when they should have, he said. The Banker also noted that the pending regulatory reform bills would require the Federal Reserve Board and a council of regulators to set standards for risk-based capital, leverage, liquidity and credit exposure. However, the bills do not say how the standards should be created, leaving it for regulators to decide--which could preserve the status quo, observers said .. * WASHINGTON (4/7/10)--The Federal Housing Administration (FHA) said Monday it will issue regulations to increase the net worth requirements of FHA-approved lenders, strengthen lender approval criteria, and make lenders liable for the oversight of mortgage brokers. To ensure that FHA lenders are sufficiently capitalized to meet potential need, effective immediately, all new lender applicants for FHA programs must now possess a minimum net worth of $1 million. Since 1993, the agency has required approved lenders to have a net worth of at least $250,000. Current lenders must possess a minimum net worth of $1 million and current FHA-approved small business lenders must have a net worth of $500,000. The changes also require that mortgage brokers or other FHA-approved originators can originate FHA-insured loans through the end of the year without sponsorship of an FHA-approved lender. After Jan. 1, 2011, the origination authority will end. Effective three years following the enactment of the provision: approved lenders and applicants to FHA single-family programs must have a net worth of $1 million plus 1% of total loan volume in excess of $25 million; approved lenders and applicants to FHA multifamily programs must have a minimum net worth of $1 million; multifamily lenders that also engage in mortgage servicing must have an additional 1% of total volume in excess of $25 million; and multifamily lenders that do not perform mortgage servicing must have an additional 0.5% of total loan volume more than $25 million ... * WASHINGTON (4/7/10)--Federal Reserve Board Chairman Ben Bernanke and Governors Elizabeth Duke, Kevin Warsh and Daniel Tarullo met Monday to discuss the interest rate it assesses to banks on emergency loans (American Banker April 6). Analysts had debated whether the rate would be increased, but the Fed did not indicate it was planning to change the rate ... * WASHINGTON (4/7/10)--A panel created by Congress to address the causes of the nation’s financial crisis has been set back by the size of its task--explaining a crisis that still confuses Americans, said The New York Times (April 5). The Financial Crisis Inquiry Commission’s chairman, Phil Angelides, said the panel is working to satisfy its mandate of determining the role of 22 factors in the crisis. It also is working with an $8 million budget--compared with $38 million spent by a federal bankruptcy trustee to analyze the Lehman Brothers collapse, Angelides said in an interview. He said he hopes to come up with some findings to help future policymakers, even though the panel will not give formal recommendations. In interviews with the Times, the 10 commissioners discussed the panel’s work but would not be identified by name. Some said disagreements among panelists signal healthy debate. However, some said Angelides appears to focus on holding hearings instead of selecting a few areas for deep examination. The commission also has not issued subpoenas for bank executives to testify, although it has the power to do so, the newspaper said. Alan Greenspan, former Federal Reserve Board chairman, is slated to testify on Wednesday ...


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