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Inside Washington (12/01/2009)
* WASHINGTON (12/2/09)--Revised language of a House bill expected to be approved Wednesday by the Financial Services Committee would allow the Federal Deposit Insurance Corp. (FDIC) to lend to a failing company to unwind it. Originally, House committee Chairman Barney Frank (D-Mass.) proposed giving the FDIC authority to help failing companies without closing them, and to act as a receiver for companies compromising the financial system. However, amendments approved Nov. 18-19 have curbed the FDIC’s powers to help keep a company afloat (American Banker Dec. 1). Financial industry critics said the House amendment would allow the FDIC to create a debt guarantee program. The legislation has loopholes allowing “regulators to pay off creditors,” said Peter Wallison, American Enterprise Institute fellow. However, John Douglas, former FDIC counsel, said it’s difficult for the FDIC to offer liquidity guarantees. It has been reluctant to use “systemic exceptions.” The Senate Banking Committee is expected to adopt a similar measure. The Senate legislation does not contain provisions on FDIC assistance, but sources expect that Chairman Christopher Dodd (D-Conn.) will change his bill to match the House version ... * WASHINGTON (12/2/09)--The Federal Reserve Board plans to sell securities into financial markets soon through reverse repurchase agreements. The sales will test the central bank’s ability to absorb extra cash (American Banker Dec. 1). The transactions are expected to be small, with no material impact on market rates or availability of reserves, said the Fed. The tests are “advanced planning” and do not represent changes in the Fed’s stance on monetary policy ... * WASHINGTON (12/2/09)--Large regional and community banking firms that have built up concentrations of commercial real estate (CRE) loans will be affected by emerging conditions in real estate markets, said Joe Greenlee, a Fed official, during a speech Monday before the House Financial Services subcommittee on oversight and investigations. Demand for commercial property has declined and vacancy rates have increased, which pressures construction and development projects that don’t generate income until after completion, he said. At the end of the second quarter, about $3.5 trillion of outstanding debt was in CRE losses. Of the amount, $1.7 trillion was held on the books of banks and thrifts. Nine percent of CRE loans in bank portfolios were delinquent, doubling last year’s levels ...


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