Financial Crisis News Center

Oversight’s Ranking Member Calls for FHFA-IG Clarification

This story appeared in Bank Digest.

Oversight and Government Reform Committee Ranking Member Darrell Issa, R-Calif., has raised questions about whether the Federal Housing Finance Agency has an effective Inspector General. Press reports have indicated that the agency's chief has questioned the authority of the existing IG. Issa called for the former IG of the Federal Housing Finance Board to be empowered to continue to act until a permanent appointment is made, and he questioned whether Fannie Mae and Freddie Mac should receive any additional government support until then.

COP to Hold Hearing on TARP Effectiveness

This story appeared in Bank Digest.

The Congressional Oversight Panel has scheduled a hearing at which economists will testify on the effectiveness of the Troubled Asset Relief Program. The November 19 hearing is intended to give the panel a better understanding of the Obama administration's financial stabilization efforts and help with the panel's December TARP report.

GSE Loan Limits Unchanged for 2010

This story appeared in Bank Digest.

The Federal Housing Finance Agency has announced that the maximum conforming loan limits for mortgages originated in 2010 will remain unchanged from the maximum levels for 2009. The maximum loan limit for one-unit properties in most of the contiguous United States has been left unchanged at $417,000. Loan limits for two-, three-, and four-unit properties in 2010 also will remain at 2009 levels: $533,850, $645,300, and $801,950 respectively for homes in the contiguous U.S. Loan limits are higher in certain areas where median home prices are high and in certain statutorily designated locations, including Alaska, Hawaii, Guam and the U.S. Virgin Islands.

SIGTARP to Audit PPIP Fund Manager Selection, Conflict of Interest Procedures

This story appeared in Bank Digest.

Special Inspector General for the Troubled Asset Relief Program Neil Barofsky has announced two audits. The first, an audit of the internal controls in place for the Treasury Department and the Public-Private Investment Fund, will examine the mitigation of conflicts of interest and fund managers' compliance with internal control requirements. The second, an audit of the process used by the Treasury to select PPIP fund managers, will look at the selection criteria used, the consistency with which those criteria were applied, the Treasury's compliance with appropriate regulations and its efforts to prevent conflicts of interest.

Study Shows FHA Reserves Should Remain Positive

This story appeared in Bank Digest.

An independent study announced by the Federal Housing Administration shows that the agency “has sustained significant losses from loans made before 2009, and the capital reserve ratio has fallen below the congressionally mandated threshold, but concludes that under most economic scenarios considered FHA's reserves would remain above zero.” The agency currently holds $31 billion in total reserves, which are more than 4.5 percent of its insurance-in-force.

House Financial Services Committee Ranking Member Spencer Bachus, R-Ala., said that “Today's report is troubling and shows just how fragile the financial position of the FHA is.” He called for the Obama administration to take “immediate action” to strengthen the agency to avoid the need for another taxpayer-funded bailout.

Congress Urged to Move Further Than Fed on Overdraft Protection

By Sarah Borchersen-Keto, CCH Washington News Bureau, Contributing Author, the CCH Federal Banking Law Reporter.

Consumer groups and lawmakers said the Federal Reserve Board’s announcement of new rules giving customers the right to "opt in" to overdraft protection for automated teller machine and one-time debit card transactions was an important first step, but said more needs to be done to combat abusive practices.

The Fed rules, which go into effect July 1, 2010, will provide consumers with a notice that explains the overdraft services, including the associated fees. Fed Chairman Ben Bernanke called the rules “an important step forward in consumer protection.”

FDIC Votes to Require Prepayment of Assessments

By Sarah Borchersen-Keto, CCH Washington News Bureau, Contributing Author, the CCH Federal Banking Law Reporter.

With the pace of resolutions continuing to put downward pressure on its cash balances, the Federal Deposit Insurance Corp. voted November 12 to require insured institutions to prepay their estimated quarterly risk-based assessments for the fourth quarter of 2009, and for all of 2010, 2011 and 2012. Annual assessment rates will also rise by three basis points starting in 2011.The move is expected to yield approximately $45 billion.

The FDIC will return any unused portion of the prepaid assessment on June 30, 2013, rather than Dec. 30, 2014, as originally proposed. A bank can seek an exemption from the prepayment requirement if it can show that the prepayment would significantly impair its liquidity or otherwise create significant hardship. The FDIC does not believe that the exemptions that will be granted will prevent it from meeting its current liquidity needs.

Too Big to Fail Discussed at International Banking Conference

This story appeared in Bank Digest.

"It's time we changed the rules of the game,” stated FDIC Chairman Sheila Bair in comments on strengthening the banking system before the Institute of International Bankers Conference in New York, N.Y., on Nov. 10, 2009. According to Bair, “It's time we closed the book on the doctrine of too big to fail. Only by instituting a credible resolution process and removing the existing incentives for size and complexity can we limit systemic risk, and the long-term competitive advantages and public subsidy it confers on the largest institutions.”

At the same conference, Federal Reserve Board Governor Daniel K Tarullo stated, “Resolution mechanisms must be understood not as silver bullets, but as critical pieces of a broader agenda directed at the too-big-to-fail problem.” According to Tarullo, “In light of what has happened over the past 18 months, it is imperative that governments convince markets that they can and will put large financial firms into a resolution process rather than bail out its creditors and shareholders...Measures such as strengthening capital standards and bringing all systemically important firms within the perimeter of regulation are other essential elements of that agenda.”

New Data on Making Home Affordable Program Released

This story appeared in Bank Digest.

The Obama Administration has released the next monthly report for the Making Home Affordable (MHA) loan modification program. As part of an ongoing commitment to transparency, the report includes for the first time state-specific trial modification numbers. The Treasury Department noted that, with more than 650,000 modifications under way across the country, the program is on track to meet its goals over the next several years.

Section 105 Congressional Report Released

This story appeared in Bank Digest.

The Treasury Department has released the Section 105(a) Troubled Assets Relief Program Report to Congress for October 2009. The report provides the latest developments on efforts to stabilize the financial system, current status of TARP investments, and background information on all TARP programs.