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Inside Washington (05/25/2011)
* WASHINGTON (5/26/11)--Kansas City Federal Reserve President Thomas Hoenig expressed his support for the Volcker Rule and said banks need to get “back to the business of banking.” He made the comment during a speech in Philadelphia on Tuesday. The Volcker Rule, part of the Dodd-Frank Act, restricts banking organizations from engaging in proprietary trading activities and involvement with hedge and private equity funds. Dealing, market making, brokerage, and proprietary trading create instability in core banking services such as deposits and lending, Hoenig said. The difficulty in assessing those risks led to the recent financial crisis, he said. “Banking is based on a long-term customer relationship where the interests of the bank and customer are more aligned,” Hoenig said. “Both the bank and loan customers benefit if borrowers do well and are able to pay off their loans. In contrast, as shown only too clearly with this recent crisis, trading is an adversarial zero-sum game--the trader’s gains are the losses of the counterparty, who is oftentimes the customer” … * WASHINGTON (5/26/11)--Five of the nation’s largest banks were told by state attorneys general on Tuesday that they could face more than $17 billion in civil lawsuits if a settlement is not reached on foreclosure handling abuses The Wall St. Journal May 25). Still to be included are billions of dollars in potential claims from federal agencies. Federal officials have not submitted a possible settlement figure. Representatives of the nation’s largest banks met on Tuesday with state and federal officials to discuss potential costs they will face if a settlement isn’t reached. Federal and state officials have dismissed banks’ $5 billion settlement offer to compensate borrowers negatively affected by the foreclosure process. Some officials have said $20 billion would be sufficient to resolve foreclosure-handling abuses that surfaced last fall …


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