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Inside Washington (10/30/2009)
* WASHINGTON (11/2/09)--Overdraft policies may change the way financial institutions offer free checking programs, according to financial industry observers (American Banker Oct. 30). Legislation proposed last month by Senate Banking Committee Chairman Christopher Dodd (D-Conn.) to control overdraft fees may mean that financial institutions will have to find other ways to earn noninterest income. Financial institutions have offered free checking for some time as a way to gather deposits, but the product may have to be retooled. Hank Israel, director of payments and checking at Novantas LLC said financial institutions will still tout the product as free, but it “will become a damaged item. Banking companies could be “pinched,” added Kevin Jacques, former Treasury Department economist. Many banks have become too dependent on noninterest income, he said. The fee changes also could harm proactive banks, noted Robert E. Marling Jr., CEO of Woodforest National Bank. The company has allowed its customers to opt out of overdraft protection and has refunded overdraft fees, he said ... * WASHINGTON (11/2/09)--House Financial Services Committee Chairman Barney Frank (D-Mass.) said publishing a public list of systemically important financial companies constitutes a moral hazard because once individuals find out their institution is on the list, they’ll think their deposits are protected (American Banker Oct. 30). Frank, who opposes publishing a list, is working on legislation with Treasury Secretary Timothy Geithner that would increase supervision of large financial companies and create a system to help them if they are in trouble. Geithner has said it would be too difficult to keep a “too big to fail” list. Federal Reserve Board Gov. Dan Tarullo agreed, saying that because of some disclosures to analysts and shareholders, it’s likely the institutions would be known. Rep. Spencer Bachus (R-Ala.) said it’s “foolish” to keep the list a secret. Market participants would be able to quickly figure out who is on the list based on regulatory constraints placed on each systemic firm, he said ...


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