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Inside Washington (04/15/2009)
* WASHINGTON (4/16/09)--Several watchdog reports indicate that banking agencies are not using their power effectively. The reports come as policymakers consider giving regulators more power. The Federal Deposit Insurance Corp. and the Treasury’s inspectors general have written eight reports on bank failures since April 2008. The reports suggest that regulators did not crack down enough on lenders taking risks during the housing boom (American Banker April 15). Some former regulators have discounted the reports, but other financial industry observers perceive the reports as a guide to help figure out what went wrong. The reports are required from a bank when its failure will cost the Deposit Insurance Fund more than $25 million. As the number of bank failures has increased, the number of reports also has increased... * WASHINGTON (4/16/09)--The Obama administration plans to reveal the results of stress tests conducted at 19 of the nation’s biggest banks (The New York Times April 15). The banks are all expected to pass the tests. Releasing the results could give investors a better idea of which institutions are strong or weak, clearing up rumors, observers say. The administration’s decision also may have been triggered by Goldman Sach’s announcement that it would repay the $10 billion it received from the Troubled Asset Relief Program (TARP). Goldman sold $5 billion in stock on Tuesday and said it would use the profits to repay the TARP funds. Treasury officials this week said they would encourage banks to reveal their information, although critics have said that the hypothetical situations under which the banks are tested may not be realistic. Concern about stress tests in general has been high. Last week, the Federal Reserve warned banks undergoing the tests not to divulge the results during the earning season ... * WASHINGTON (4/16/09)--President Barack Obama said during a speech at Georgetown University Tuesday that he does not support nationalizing the nation’s largest banks. Government takeovers will likely cost taxpayers more in the end, he said (American Banker April 15). He also noted that governments should practice “first do no harm,” a doctor’s principle ... * WASHINGTON (4/16/09)--If Herbert Allison moves from his post as Fannie Mae CEO to director of the Troubled Asset Relief Program (TARP), it will send a message that the CEO position at Fannie Mae and Freddie Mac is irrelevant, financial observers say (American Banker April 15). From the White House’s perspective, Federal Housing Finance Agency (FHFA) Director James Lockhart runs the enterprises, said Tom Stanton, National Academy of Public Administration fellow. Freddie’s former CEO, David Moffett, left his post because he said he didn’t have enough control over the company. Allison said last month that he controls Fannie's operations but he views FHFA as the controlling shareholder (News Now March 25) ... * WASHINGTON (4/16/09)--Next week, Congress will return from recess, and Sen. Tom Harkin (D-Iowa) plans to place stronger requirements on derivatives trading than those the House Agriculture Committee already has approved. The requirements would essentially ban over-the-counter (OTC) trading. OTC trading uses specialized contracts drawn up for individual counterparties, which prevents the contracts from being brought to a central clearing platform. The trades are recorded and counterparties post capital to the clearing party instead of to each other (American Banker April 15). Some observers say Harkin’s measure is too harsh, noting that other efforts to ban OTC trading already have died in the House. Kathryn Dick, deputy comptroller for credit and market risk at the Office of the Comptroller of the Currency, said there is still a role for customized contracts. She noted that if all contracts had to be cleared, novel products could be constrained. However, Harkin’s spokesman said he would proceed with pushing for the ban ...


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