Financial Crisis News Center

Obama Administration Proposes Executive Compensation Law

By Richard Roth, J.D., Editor, the CCH Federal Banking Law Reporter, CCH Bank Compliance Guide and Bank Digest.

Another piece of proposed legislation has been forwarded by the Obama administration to Congress as part of the effort to reform the regulation and supervision of the financial services industry. The draft bill deals with independence for compensation committees and say-on-pay provisions.

Treasury Official Comments on Regulatory Reform

This story appeared in Bank Digest.

“We cannot be complacent; the history of major financial crises includes many false dawns and periods of optimism even in the midst of the worst downturns,” stated Assistant Secretary for Financial Institutions Michael Barr in comments on regulatory reform to the Exchequer Club Washington, D.C. According to Barr, financial markets “require clear rules of the road, consumers rely on the trust and fair dealing of financial institutions, and regulation must be consistent, comprehensive and accountable. The President's plan lays a new foundation for financial regulation that will once again help to make our markets vital and strong.”

Regulation Approved to Implement Credit CARD Act Provisions

This story appeared in Bank Digest.

The Federal Reserve Board has approved an interim final rule amending Regulation Z to require creditors to increase the amount of notice consumers receive before the annual percentage rate (APR) on a credit card account is increased or a significant change is made to the account's terms, and also to allow consumers to reject such increases and changes by informing the creditor before the increase or change goes into effect. The rule implements the provisions of the Credit CARD Act that go into effect on Aug. 20, 2009. These provisions require creditors to provide written notice to consumers 45 days before the creditor increases an account's APR or makes a significant change to the terms of an account. Creditors must inform consumers in the same notice of their right to cancel the account before the increase or change goes into effect. If a consumer does so, the creditor generally is prohibited from applying the increase or change to the account. Creditors generally must mail or deliver periodic statements for credit cards and other open-end consumer credit accounts at least 21 days before payment is due.

May Monthly Bank Lending Survey Released

This story appeared in Bank Digest.

The Treasury Department has released results from its monthly bank lending survey for May with data from the top 21 recipients of government investments through the Capital Purchase Program (CPP). The May survey found that outstanding loan balances were flat in May and there was modest growth in new loan originations in the 21 banks surveyed.

Financial Crisis Commission Members Named

This story appeared in Bank Digest.

Democrat and Republican congressional leadership have announced appointments to the 10-member Financial Crisis Inquiry Commission, established by Congress to examine the domestic and global causes of the financial crisis.

The Commission will conduct a comprehensive examination of, and hold hearings on, more than 20 specific areas of inquiry related to the financial crisis including: fraud and abuse in the financial sector; state and federal regulatory enforcement; tax treatment of financial products; credit rating agencies; lending practices and securitization; unregulated financial products and practices; and corporate governance and executive compensation. The Commission will also examine the causes of major financial institutions that failed or were likely to fail had they not received exceptional government assistance. The Commission will provide its findings and conclusions in a final report due to Congress on Dec. 15, 2010.

Bachus Comments on S.A.F.E. Act Progress

This story appeared in Bank Digest.

According to Spencer Bachus, R-Ala., Ranking Member of the Financial Services Committee, the Secure and Fair Enforcement for Mortgage Licensing Act (S.A.F.E. Act) “will protect consumers as they navigate the home financing process.” Bachus expressed encouragement “that State regulators have so quickly begun using the new tools Congress provided to protect homebuyers from unscrupulous mortgage originators.”

Towns Calls on BofA CEO to Compensate Government

This story appeared in Bank Digest.

Oversight and Government Reform Committee Chairman Edolphus Towns, D-N.Y., sent a letter to Bank of America (BofA) CEO Kenneth D. Lewis regarding recent reports that BofA is not planning to repay the financial protection it was provided against its toxic assets. According to Towns, Bloomberg Newshas reported that BofA is refusing to compensate the federal government for the $118 billion in financial protection it was provided in January 2009. Towns asserts that, by all accounts, the announcement of the so-called “ring-fencing” of BofA’s  toxic assets provided financial stability to the bank at a very crucial time for the company.

Towns states in the letter to Lewis, “This agreement was obviously beneficial to Bank of America. You reported it to the public in your earnings press release issued on January 16, 2009, and it was discussed by you personally on a Bank of America earnings conference call with investors on the same date. In addition, documents that this Committee uncovered through its investigation of the Bank of America-Merrill Lynch acquisition suggest that Bank of America requested this backstop.” Towns requested that Lewis provide him with an update on the dispute by July 16, 2009.

Domestic Policy Subcommittee to Examine Consumer Debt Collection Arbitration

This story appeared in Bank Digest.

The House Subcommittee on Domestic Policy has announced that it will hold a hearing entitled, “Arbitration or ‘Arbitrary’: The Misuse of Arbitration to Collect Consumer Debts.” The hearing is intended to evaluate contractually mandated arbitration of disputes between businesses and consumers in the context in which the vast majority of those disputes occur—the collection of debts from consumers. The hearing will evaluate whether consumer debt collection arbitration, as currently administered, produces results that are fair and legitimate.

April Foreclosure Prevention Efforts Announced

This story appeared in Bank Digest.

The Federal Housing Finance Agency has released the latest Foreclosure Prevention Report detailing actions taken by Fannie Mae and Freddie Mac to prevent unnecessary foreclosures and keep people in their homes. The report includes loan modification data under FHFA’s Streamlined Modification Program, which was initiated in November 2008 but ended in April 2009. This report does not include data on refinancings or modifications from the Making Home Affordable Program announced in March 2009.

Foreclosure Rescue and Loan Modification Scams Targeted

This story appeared in Bank Digest.

Federal Trade Commission Chairman Jon Leibowitz, joined by California Attorney General Jerry Brown, has announced “Operation Loan Lies,” a coordinated national law enforcement effort to crack down on mortgage modification scams. The operation involves 189 actions by 25 federal and state agencies against defendants who deceptively marketed foreclosure rescue and mortgage modification services. The FTC actions, which affect consumers throughout the nation, are being announced in southern California, where the scams originated.