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Inside Washington (07/08/2011)
* WASHINGTON (7/11/11)--Friday was Sheila Bair’s last day as the head of the Federal Deposit Insurance Corp. (FDIC), but hers is not the only transition on the board (American Banker July 8). FDIC Vice Chairman Martin Gruenberg is the nominee to assume the chairmanship. Tom Curry will continue to serve on the board; however, as the nominee to succeed acting Comptroller of the Currency John Walsh, Curry would be elevated in his FDIC board position if or when he takes over the comptroller position. The changes don’t stop there. John Bowman, who is acting director of the Office of Thrift Supervision (OTS), will be off the FDIC board when the thrift agency ceases to exist later this month. OTS duties, under the Dodd-Frank Act, are to be assumed by the director of the Consumer Financial Protection Bureau … * WASHINGTON (7/11/11)--Bankers told a House panel Friday that examiners are going too far in declassifying loans, which in turn, they say, is forcing banks to retain higher capital levels than is really necessary (American Banker July 8). The bankers urged federal lawmakers to support a bill, drafted by Rep. Bill Posey (R-Fla.), that would allow banks to treat non-accrual loans as accrual for capital purposes if certain conditions are met. Among those conditions are the requirements that the loans are current, amortizing, not paid from an interest reserve account and have not been more than 30-days delinquent within the previous six months. Generally, modified loans are treated as non-accrual for six months, but the Posey bill also would allow the mortgages to be considered accrual if they continue to meet the legislation’s other standards. Also, the bill would require a study by the Financial Stability Oversight Council to determine how to avoid conflicting guidance from being issued regarding loan classifications and capital requirements. The legislation would expire after two years. As one banker put it, tough treatment by bank examiners is forcing banks to forgo good loan opportunities for fear of examiner write-downs and a resulting income and capital loss. However, a bank regulator also testifying at the House committee hearing warned that the legislation in question would dangerously undermine examiners’ ability to ensure the safety and soundness of banks. … * WASHINGTON (7/11/11)--The first round of capital has been released under the U.S. Treasury Department’s Small Business Lending Fund (SBLF), and six community banks have received a total of $123 million from the fund. The government-funded program is intended to encourage banks to increase their lending to small businesses, and federal lawmakers have been pushing Treasury recently to get the funds distributions going. However, Treasury resisted the pressure saying it would continue to carefully screen applicants to protect the taxpayer dollars funding the bank program. Additional funding announcements are expected to be rolled out over the summer, and, as of June 22, Treasury reportedly had received 869 applications for approximately $11.6 billion in SBLF funds. The deadline to distribute funds is Sept. 27 American Banker July 8). Meanwhile, credit unions continue to urge the U.S. Congress to increase their statutory member business lending limit to 27.5% of assets, up from the current 12.25%. Credit Union National Association research has indicated that the increase would add more than $13 billion in small business credit and more than 140,000 jobs to the U.S. economy--with no involvement of taxpayer dollars … * WASHINGTON (7/11/11)--IndyMac Bank was the first big Federal Deposit Insurance Corp. (FDIC) seizure in the country’s exploding mortgage crisis and now, three years later, the FDIC has filed suit against the bank’s former top executive, Michael Perry. The FDIC has charged in U.S. District Court in California that Perry did not halt IndyMac's operation of a $10 billion pool of risky mortgages meant for resale, even though, according to the FDIC, Perry recognized and acknowledged the instability in the secondary market. While the FDIC action against the former leader of IndyMac may be one of the highest-profile suits brought by the agency, eight such lawsuits have been filed so far under the FDIC’s authority to sue the managers of collapsed banks. The FDIC is pursuing, to some degree, legal actions seeking almost $7 billion from former directors and officers (American Banker July 8) …


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