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Inside Washington (09/14/2009)
* WASHINGTON (9/15/09)--The Federal Deposit Insurance Corp. (FDIC) is encouraging its loss-share partner institutions to consider temporarily reducing mortgage payments for its borrowers who are underemployed or unemployed. Unemployment or underemployment is the primary cause for default on a home mortgage, according to FDIC. The agency is urging its partners to consider the borrower for a temporary forbearance plan, reducing the loan payment level for at least six months. The monthly payment should be established based on an affordable payment--given the borrower’s circumstances--and it should allow for reasonable living expenses after payment of mortgage-related expenses, FDIC said ... * WASHINGTON (9/15/09)--Rumors that the Federal Deposit Insurance Corp. (FDIC) is broke may be unfounded. The agency appeared on paper to have only $10 billion left at the second quarter to deal with bank failures, but the FDIC has more than $42 billion on hand--$4 billion less than it had nine months earlier (American Banker Sept. 14). Financial observers say the news media and analysts had incorrectly assumed that bank failures had risked emptying the fund. The media enjoys looking at fund balances, when a look at the “whole picture” is needed, said Paul Miller, managing director at Friedman, Billings, Ramsey & Co. Art Murton, FDIC division of insurance and research director, said the agency has been emphasizing that people need to look at federal reserves and contingent loss reserves ... * WASHINGTON (9/15/09)--In recent reports, the Office of the Inspector General of the Federal Deposit Insurance Corp. (FDIC) faulted the FDIC in three bank failures: Corn Belt Bank and Trust Company, Pittsfield, Ill.; FirstBank Financial Services, McDonough, Ga.; and Sherman County Bank, Loup City, Neb. Sherman County Bank failed because of its decisions to increase and fund loan commitments without considering borrowers’ ability to repay and underlying collateral. FirstBank failed due to its management’s pursuit of rapid growth in the commercial real estate lending in Atlanta. Corn Belt failed because its management did not implement sound risk management practices in loan underwriting and credit administration during a period of key growth. The FDIC could have taken more action in the Sherman County Bank and FirstBank cases, the report said. The FDIC should have required Corn Belt to hold more capital or submit a capital contingency plan ... * WASHINGTON (9/15/09)--President Barack Obama Monday discussed his administration’s work to keep the economy from collapsing. The economy is “beginning to return to normalcy,” but “normalcy cannot lead to complacency,” he said. Obama also noted his plan for financial reform. First, the administration would give the Federal Reserve Board the ability to oversee systemic risk. Second, a consumer agency would be created. Third, the government would have the power to resolve institutions slated “too big to fail.” Financial observers have said it’s too tough to pass financial reform this year, but Obama said he would continue to work on reform. Obama also rebutted some arguments against financial reform (American Banker Sept. 14). He said that criticisms that the consumer protection agency would hinder innovation are unfounded. Financial institutions could do better by not hiding the real costs, he said. Many credit cards and mortgages had attracted consumers with their low rates--which then increased to levels they could not afford ...


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