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February 10, 2012
The following news highlights are brought to you by ABA Daily Newsbytes.
ABA Testifies on Need to Assure CFPB Accountability
ABA supports an effective mechanism for applying checks and balances to the Consumer Financial Protection Bureau’s authority and it applauds congressional efforts to achieve that goal, association COO Mike Hunter told the House Financial Institutions Subcommittee on Wednesday.
Hunter was testifying on bills that would move the CFPB under the Treasury Department, subjecting it to the same appropriations process (H.R. 1355); remove the bureau’s director from the FDIC Board (H.R. 2081); and preserve the attorney-client privilege for information submitted to the CFPB (H.R. 3871). ABA has not taken a formal position on the measures. 
Hunter was testifying on bills that would move the CFPB under the Treasury Department, subjecting it to the same appropriations process (H.R. 1355); remove the bureau's director from the FDIC Board (H.R. 2081); and preserve the attorney-client privilege for information submitted to the CFPB (H.R. 3871). ABA has not taken a formal position on the measures.
He noted that H.R. 1355 and H.R. 2081 are two of many options to address concerns about the bureau’s role and how it exercises power. There are numerous ways to assure the CFPB’s accountability, Hunter explained. “ABA has long advocated the use of a commission or board structure to accomplish this,” he said, and the House passed a bill last year that would create a five-member bureau board.
Hunter also emphasized the critical need for banking industry representation on the FDIC Board. “Banks bear the full cost of the FDIC without any taxpayer assistance, yet have no voice in the priorities, policies, and staffing of the agency,” he said. “We would be happy to work with the subcommittee on how this might be accomplished.”
He added ABA also wants to work with Rep. Bill Huizenga (R-Mich.) on H.R. 3871, which is intended to clarify the bureau’s protection of confidential information. “While the [CFPB] has expressed its willingness to address this issue through regulation, ABA believes it is appropriate to add certainty by enacting the same, express rules regarding privilege of information for the bureau as those already established for other federal banking supervisors,” Hunter said.
ABA Evaluating Mortgage Agreement
ABA is evaluating this week’s $26 billion foreclosure-abuses settlement between the five largest mortgage servicers, state attorneys general and the Justice Department “to ensure its enforcement does not further constrain credit availability and that its terms are not applied outside [the] agreement,” ABA President and CEO Frank Keating said in a statement.
The agreement “marks an important milestone in resolving mortgage concerns, allowing these five institutions -- essential providers of mortgage services across the country -- to look to the future with clarity and commitment to customers,” he said.
Under the agreement terms, mortgage debt would be reduced for about 1 million homeowners, while another 300,000 would have their loans re-financed at lower interest rates. About 750,000 people who lost their homes to foreclosure between September 2008 and year-end 2011 would each receive about $2,000 for their loss.
“This settlement addresses a distinct group of mortgages offered during a specific time frame,” Keating said. “It would be a mistake to regard the settlement as applying to mortgage practices industry-wide.”
ABA: Withdraw Proposal Requiring FHLBs to Assess CRA Compliance
ABA in a comment letter urged the Federal Housing Finance Agency to withdraw a proposal that would require the Federal Home Loan Banks to monitor and assess their members’ eligibility for long-term advances based on compliance with the Community Reinvestment Act and first-time homebuyer standards.
“To impose such an obligation on the FHLBs creates a conflict of interest making them both lenders to, and regulators of their member institutions.” ABA said. “Moreover, moving the oversight responsibility from the FHFA to 12 separate Banks increases the risk of inconsistency.”
The association also opposed a provision in the proposal that would eliminate the probationary period for FHLB members who receive a “Needs to Improve” CRA rating. In addition, ABA urged the FHFA to apply CRA monitoring to state-chartered credit unions in states that impose CRA obligations on them. For more information, contact ABA's Joe Pigg.
ABA: Don’t Use GSE G-fee Increase to Offset Payroll Tax Cut
ABA urged House and Senate conferees on the payroll tax-cut extension not to use an increase in the Fannie Mae-Freddie Mac credit-risk guarantee fees to offset the extension.
ABA President and CEO Frank Keating said in a letter that ABA supports a G-fee increase to better reflect the true value of the guarantee Fannie and Freddie provide, and to encourage the private sector’s return to the secondary mortgage finance market.
He noted, however, that year-end 2011 legislation enacted to extend the payroll tax cut for two months used a 10-basis-point G-fee increase -- for a 10-year period -- to offset the extension. Keating explained that ABA is concerned that using any part of the G-fees for this purpose creates an expected decade-long revenue stream from Fannie and Freddie.
“Given that [Fannie and Freddie] are in federal conservatorship … it is troubling to create any expectation of long-term revenue from them, because it greatly complicates the already significant task of ending the conservatorship and enacting meaningful GSE reform,” he said.
ABA to Co-Host Forum on Volcker Rule
ABA on Thursday, Feb. 16 will co-host a free luncheon forum at the National Press Club in Washington, D.C., to explore the impact of the Volcker Rule, which seeks to ban proprietary trading by commercial banks. Advocates and critics will discuss the value of the rule itself and the regulators’ proposal to implement it. Speakers will include Sarah Miller, a former ABA staffer who is now CEO of the Institute of International Bankers, and Mark Van Der Weide, the Federal Reserve’s senior associate director of banking supervision and regulation.
ABA, ICBA Urge House to Oppose Raising CU Business-Lending Cap
ABA and the Independent Community Bankers of America strongly urged all House members to oppose -- and reject any efforts to move forward -- a bill (H.R. 1418) that would raise the member business-lending cap for qualifying credit unions from 12.25 percent to 27.5 percent of total assets.
“H.R. 1418 would help [a] new breed of large, growth-oriented credit unions by allowing them to abandon their tax-subsidized mission of serving people of modest means. This was not Congress’ intent when [it] implemented a business-lending cap on credit unions and we urge you to reject any attempts to remove the cap,” the trade groups said in a letter.
The facts show that the bill is simply not necessary because the current congressionally mandated business-lending cap of 12.25 percent of assets mostly affects only the largest credit unions that want to be “bank-like” without paying taxes. In fact, only 29 credit unions of nearly 7,200 are at or near the statutory business-lending limit, ABA and ICBA explained.
“In other words, 99 percent of credit unions have more than enough authority and lending capacity to make additional loans to small businesses today, yet have chosen not to do so,” they said. “And … all credit unions can make as many business loans as they desire that are not subject to any cap -- including all loans of $50,000 or less and any Small Business Administration loan.”
In related news, Reps. Peter King (R-N.Y.) and Brad Sherman (D-Calif.) this week introduced a bill (H.R. 3933) that would permit the National Credit Union Administration to allow qualified credit unions to accept supplemental capital. The legislation would require such capital to be uninsured and subordinate to other claims against a credit union. The measure also would authorize the NCUA to set maturity limits on it. ABA is adamantly opposed to granting credit unions access to secondary or supplemental capital. For more information, contact ABA's Keith Leggett.
ABA: Withdraw, Re-propose Credit Ratings Proposal
ABA in a comment letter Friday urged the federal banking agencies to withdraw their market-risk ratings proposal and then re-propose it concurrently with revisions to the generally applicable capital rules.
The agencies’ proposal would establish alternative standards to replace credit ratings in determining the capital requirements for certain debt and securitization positions covered by the market-risk capital rules.
But while the proposed rule would apply explicitly only to a few large banks, ABA explained that its alternatives to using the ratings are likely be expanded to all banks that are subject to the generally applicable capital rules.
“The agencies must not start discussing a fundamental shift in capital regulation that will effectively apply to all banks in a proposal that is purportedly applicable to just a few,” ABA said. For more information, contact ABA's Hugh Carney.
ABA Backs Amendment to Block Nonresident-Alien Rule
ABA and a coalition expressed support for an amendment to prevent the IRS from implementing its proposal requiring banks to report deposit interest paid to nonresident aliens. The amendment was sponsored by Sen. John Cornyn (R-Texas) as part of the Senate Finance Committee’s consideration of a highway funding bill.
“Many foreign nationals would withdraw their deposits and close their U.S. accounts rather than be subject to a rule requiring that details pertaining to their personal accounts and investments be reported to the IRS and shared with their home governments,” the trade groups said in a letter to Cornyn. “For many financial institutions, the resulting outflow of deposits will significantly reduce funds available for lending and investment purposes.”
ABA, which has strongly opposed the IRS proposal in letters, testimony and meetings with policymakers over the past year, will continue to urge its withdrawal. For more information, contact ABA's Larry Seyfried.
ABA to Host Free Telephone Briefing on Winding Down CPP
ABA on Tuesday, Feb. 14 will host a free telephone briefing for bank members on the Treasury Department’s strategy for winding down the Capital Purchase Program. Sloan Deerin, director of equity asset management at Treasury’s Office of Financial Stability, and Matt Pendo, chief investment officer at the OFS, will provide a short briefing on the agency’s plans. The remainder of the session will be devoted to bankers’ questions.
Bankers are encouraged to submit questions on the CPP’s future and Treasury's exit strategy before the briefing. Please e-mail questions by close of business this Friday to ABA's Cathy McTighe.
GR Summit to Feature Discussions With Top Regulators
Acting FDIC Chairman Martin Gruenberg, Acting Comptroller of the Currency John Walsh and the Consumer Financial Protection Bureau’s Richard Silberman, who is acting associate director for research, markets and regulation, are the latest confirmed speakers for the ABA Government Relations Summit, March 19-21 in Washington, D.C.
The regulators are part of a stellar lineup of speakers that includes Rep. Shelley Moore Capito (R-W.Va.), the lead sponsor of the ABA-backed exam fairness bill (H.R. 3461), Sen. Mark Warner (D-Va.), Indiana Gov. Mitch Daniels (R) and NBC political pundit Chris Matthews. ABA strongly encourages bank CEOs, employees and directors to attend the summit, which is the largest gathering of banking leaders in the nation’s capital. Registration is free.
ABA will host a Women’s Leadership Forum on March 21 -- immediately after the ABA Government Relations Summit -- at which women in CEO and other senior-level positions will discuss their banking-industry challenges and opportunities.
Dorothy Savarese, president and CEO of Cape Cod Five Cents Savings Bank, Orleans, Mass., will moderate the networking forum, which will include a luncheon address by consultant Selena Rezvani, author of “The Next Generation of Women Leaders: What You Need to Lead but Won’t Learn in Business School.”
Janet Bodnar, editor of Kiplinger’s Personal Finance magazine, Harvard University professor Bridgitte Madrian, and Laurie Stewart, president and CEO of Sound Community Bank in Seattle will participate in a panel discussion on consumers’ financial behavior. Registration is free and connected to the ABA Government Relations Summit.
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