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Inside Washington (12/07/2011)

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  • WASHINGTON (12/8/11)--Federal Reserve Board Chairman Ben Bernanke publicly disputed media reports that portray the Federal Reserve helping big banks at the expense of the American public during the 2008 financial crisis (American Banker Dec. 7). In letters to the congressional banking committees, Bernanke disclosed a four-page memo distributed to Fed employees refuting a number of facts in recent articles by Bloomberg News and other media outlets. "There have been a series of recent articles--one just last week--concerning the Federal Reserve's emergency lending activities during the financial crisis," Bernanke wrote in the letter. "The articles have largely repeated the same information in different formats and have contained a variety of egregious errors and mistakes." Although the memo did not name Bloomberg specifically, it offered details of a Nov. 27 Bloomberg Markets Magazine article that claimed big banks had received $13 billion of income after the Fed had committed $7.7 trillion in guarantees and lending before March 2009. The central bank never provided a lending program that was not disclosed to the public or Congress, according to the memo. Bloomberg stands by its reporting in the article, a company spokesman said …
  • WASHINGTON (12/8/11)--House members showed support Tuesday for measures to bar lawmakers from profiting on inside knowledge, but they differed on what approach that ban should take (American Banker Dec. 7). The agreement comes in the wake of a Nov. 13 60 Minutes report about congressional representatives from both political parties making trades after receiving non-public information (News Now Nov. 21). The Stop Trading on Congressional Knowledge Act, the bill with the most support, would expressly bar members from making trades based on nonpublic knowledge regarding legislative activity, strengthen disclosure rules for certain trades, prohibit congressional staffers from disclosing nonpublic information about legislation that could be used by traders, and require lobbying registration for firms that gather political intelligence for investors. Other bills would require lawmakers to place their investments in a blind trust …
  • WASHINGTON (12/8/11)--The Office of the Inspector General at the Federal Deposit Insurance Corp. confirmed that the office is involved in an investigation into the premature and seemingly unauthorized release of a plan to implement the so-called Volcker Rule, which, under the Dodd-Frank Wall Street Reform Act, would restrict proprietary trading in which banks could engage (American Banker Dec. 7). During a Senate Banking Committee hearing, Sen. Richard Shelby (R-Ala.) said it has been a struggle for regulators to effectively implement a number of Dodd-Frank rules, most notably the Volcker Rule.  He said those efforts specifically have been marked by "misconduct, ambiguity, and interagency discord" …
  • WASHINGTON (12/8/11)--The Federal Housing Finance Agency has appointed Manoj K. Singh as principal examiner for risk in charge of Fannie Mae and Freddie Mac. Singh most recently worked as a special adviser with The Collingwood Group, a Washington-based consulting firm (American Banker Dec. 7). From 2006 to July he worked at Freddie Mac, where he last served as senior vice president of pricing and securitization on the single-family side of the business. He was previously senior vice president of market risk management …
  • WASHINGTON (12/8/11)--The Office of the Inspector General at the Federal Deposit Insurance Corp. confirmed that the office is involved in an investigation into the premature and seemingly unauthorized release of a plan to implement the so-called Volcker Rule, which, under the Dodd-Frank Wall Street Reform Act, would restrict proprietary trading in which banks could engage (American Banker Dec. 7). During a Senate Banking Committee hearing, Sen. Richard Shelby (R-Ala.) said it has been a struggle for regulators to effectively implement a number of Dodd-Frank rules, most notably the Volcker Rule.  He said those efforts specifically have been marked by "misconduct, ambiguity, and interagency discord" …

HUD reports 5.4 million mortgage mods made

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WASHINGTON (12/8/11)--More than 5.4 million mortgage modification arrangements were started between April 2009 and the end of October 2011, the U.S. Department of Housing and Urban Development (HUD) reported in its November Housing Scorecard.

HUD said the loan adjustments included more than 1.7 million trial modifications under the Home Affordable Modification Program (HAMP) and more than 1.1 million Federal Housing Agency loss-mitigation and early-delinquency interventions. HUD said more than 880,000 permanent mortgage modifications have been made through HAMP, reducing the average payments made by those homeowners by 37%.

More than 2.5 million proprietary modifications were made under the HOPE Now program, HUD added. HOPE Now is an alliance of major mortgage servicers, mortgage counselors, government officials and non-profit groups intended to develop strengthened efforts to help struggling homeowners keep their homes.

Nearly one in four homes that took part in HAMP are located in California, and the greater Los Angeles area accounted for 7% of all mortgage modifications, nationwide.

More than 20% of mortgages held in Florida were more than 60-days past due, the report added.

For the full HUD release and report, use the resource links.

Cordrays CFPB confirmation vote expected today

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WASHINGTON (12/8/11)--A U.S. Senate vote on the nomination of Richard Cordray to become director of the Consumer Financial Protection Bureau (CFPB) is expected to take place today.

The nomination of a CFPB director has proven controversial, with legislators for or against the appointment lining up mostly by party lines. For instance, a group of 44 Senate Republicans earlier this year signed a letter saying they would block any CFPB nominee if certain structural changes were not made to the CFPB.

These lawmakers back replacing the director's position with a five-member panel of leadership, among other changes. Some supporters argue this would make the agency actions more transparent. A bill that would impose the changes passed the House by a 241-173 vote in late July, but has not been brought up in the Senate Banking Committee.

Deputy U.S. Treasury Secretary Neil Wolin has countered that the CFPB concerns are unfounded, for instance saying in a Wednesday Treasury Notes Blog post that the CFPB does not lack accountability nor transparency. Treasury is parent agency to the consumer bureau.

CFPB unveils sample credit card disclosures

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WASHINGTON (12/8/11)--The Consumer Financial Protection Bureau (CFPB) has begun another stage of its Know Before You Owe project, announcing on Wednesday that its sample credit card disclosures.

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A two-page disclosure that "contains the key terms consumers need, clearly laid out and without fine print" has been released to the public, and the CFPB said its initiative will simplify contracts to help consumers better understand their credit cards while allowing card issuers to retain their freedom to design credit card products.

The sample form divides credit card information into three sections: Costs, Changes and Additional Information.

The Costs section lays out interest rates and related charges tied to purchases, balance transfers, and cash advances, and provides information on returned payment fees, replacement card fees, rush card fees, and foreign currency transaction fees. Payment deadlines and possible late payment issues are also explained on the form.

The form also addresses changes that could be applied to the credit card account, including penalty interest rates and other interest rate changes, credit limit changes, fees, and other terms.

Cardholder and card issuer rights are explained in the Additional Information section. Consumer privacy rights and other terms of the credit card agreement are also addressed.

The CFPB has launched a testing program with one credit card issuer, and has also released the sample form for public comment. The CFPB said it ultimately would not set the terms of card products, and credit card issuers will "have total control of terms within the limits of existing law."

The new credit card project was announced at a Wednesday meeting in Cleveland, Ohio. The Ohio Credit Union League and 10 representatives from five Ohio-based credit unions attended the announcement, and gave their opinions on the new disclosure during a roundtable discussion with the CFPB. The credit union representatives also covered financial education and general credit union issues during the meeting.

The Credit Union National Association will be reviewing the sample form with its Consumer Protection Subcommittee and Lending Council and providing feedback to the CFPB later this month.

In a separate blog post, the CFPB advised credit card shoppers on how to proceed as they decide which credit card they should use.

Credit card shoppers should first determine how they are going to use their new card, and whether or not they will pay the card off every month or maintain a balance on their credit card. Card customers should also know which terms to compare when evaluating credit card offers. The CFPB suggested that they focus on annual percentage rates (APR), APR for balance transfers, penalty APRs, and fees attached to the credit card account.

The CFPB said that credit unions or other financial institutions with which the consumer already has an account may offer the best credit card terms, but added that consumers should not hesitate to compare mailed or online offers with offers from their current financial institutions. Credit card shoppers can also ask their current financial institutions to match the terms of any credit card offer, the CFPB said.

For more on the CFPB's credit card work, use the resource links.