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Inside Washington (11/23/2010)
* WASHINGTON (11/24/10)--The Federal Housing Finance Agency on Monday issued a proposal that could potentially lead to the consolidation of entities within the Federal Home Loan Bank System (FHLBS), according to industry observers (American Banker Nov. 23). The proposal provides guidelines and procedures for the voluntary mergers of any of the 12 banks within the FHLBS. While Home Loan banks can currently merge, the existing Housing and Economic Recovery Act does not offer specific guidelines or terms of approval for mergers. The proposal comes one week after the FHFA disclosed that seven of the 12 FHL banks had very low supervisory ratings, according to Karen Shaw Petrou, managing partner at Federal Financial Analytics Inc. Petrou said the proposal reflects the condition of these banks and gives them reason to consider their strategic options. Under the proposal, the FHFA said it would consider a merger where two banks combine to form an entirely new bank. Purchase-and-assumption agreements, in which one or more banks acquire the assets and assume most of the liabilities of another bank, would also be considered … * WASHINGTON (11/24/10)--With unemployment rates still high and economic growth sluggish, two more of the Obama administration’s top economic advisers are leaving the White House (The Wall Street Journal Nov. 23). National Economic Committee Deputy Director Diana Farrell and U.S. Treasury Department Assistant Secretary for Financial Institutions Michael Barr will depart by the end of the year, the White House said. Both Farrell and Barr helped shape the financial overhaul legislation passed by Congress earlier this year. Barr met with credit union trade association officials, including representatives from the Credit Union National Association, during the process. Farrell played a key role in the restructuring of General Motors and Chrysler, and also was involved in the administration’s efforts to address the mortgage crisis … * WASHINGTON (11/24/10)--Bankers are worried that language in the Dodd-Frank regulatory reform law will give the Consumer Financial Protection Bureau (CFPB) too much leeway in banning certain financial products or services. While the agency can currently limit or bar a practice it defines as unfair or deceptive, bankers fear that adding the word “abusive” to that criteria will give the CFPB too much flexibility, (American Banker Nov. 23). Until 2008, the Federal Reserve Board had the power to ban unfair or deceptive products, and the Fed used that power sparingly. For example, only when it was pressured by Congress in 2008 did the Fed ban certain credit card practices. The Dodd-Frank law transferred that power to the CFPB and added “abusive” as a category of product that the agency can ban or restrict. Laurence Platt, a partner with the law firm K&L Gates, said plenty of case law defines what is unfair and deceptive, but similar standards don’t exist for the term “abusive.” Some regulators did not harbor the same worries. New York Banking Superintendent Richard Neiman suggested the term “abusive” was added to ensure that advantage was not taken of consumers. Dodd-Frank did offer a definition of “abusive,” describing it as a product or service that materially interferes with a consumer’s ability to understand a term or condition of a product or takes unreasonable advantage of the ability of a consumer to understand it … * WASHINGTON (11/24/10)--House Financial Services Committee Chairman Barney Frank expressed disappointment with Republicans for joining foreign central banks in their recent criticism of the Federal Reserve Board (American Banker Nov. 23). Frank said it was the role of lawmakers to debate economic policy rather than join attacks by foreign central banks whose cause is to convince the Federal Reserve to subordinate U.S. economic needs in favor of their own currency requirements. Republican congressional leaders last week sent a letter to Fed Chairman Bernard Bernanke expressing their reservations about the Fed’s decision to purchase $600 billion in Treasury bonds, as a quantitative easing to boost the economy … * WASHINGTON (11/24/10)--The first meeting of the Financial Stability Oversight Council, the new regulatory panel given authority by the U.S. Congress to remove risks to the financial system, sparked an onslaught of 1,500 public comment letters when the council asked two controversial questions: How should regulators define the term "systemically significant" as it would apply to non-bank firms, a designation that would bring tougher oversight? And how should regulators go about banning propriety trading under what has come to be known as the "Volcker Rule"? (Washington Post Nov. 22) It seems everyone had something to say as opinions--ranging from long essays pondering the intricate aspects of the rule to short notes simply urging a new regulatory toughness--were sent by industry executives, explaining why their institutions should not be considered systemically important, as well as consumer advocates and ordinary citizens. The council was scheduled to conduct its second session, with a closed meeting in the morning and an open meeting at noon, yesterday …


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