Financial Crisis News Center

CCH Briefing Paper Examines House Legislation

The CCH Editorial Staff of banking and securities law analysts has authored a detailed overview titled, "House Passes Wall Street Reform Act." From the introduction:

On December 11, 2009, the U.S. House of Representatives passed legislation to restructure the financial services regulatory system, the Wall Street Reform and Consumer Protection Act of 2009 (HR 4173), by a vote of 223-202. As discussed below, the sweeping array of reforms includes the Financial Stability Improvement Act, which would create a systemic risk regulator, strengthen regulation of depository institutions and bank holding companies, improve the asset-backed securitization process, and provide for an enhanced dissolution authority. The legislation also would create a Consumer Financial Protection Agency, reform the over-the-counter derivatives market, subject hedge funds to stricter scrutiny, impose new corporate governance mandates, adopt heightened requirements for credit rating agencies and expand regulatory enforcement powers. Among other measures, the legislation features expansive consumer mortgage protections and creates a Federal Insurance Office.

Download the briefing paper

Problem Bank List Rises Despite Earnings Improvement

By Gregg D. Killoren, J.D., CCH State Banking Law Reporter, Bank Digest and Individual Retirement Plans Guide.

The Federal Deposit Insurance Corp. has reported that the number of institutions on its “Problem List” rose to its highest level in 16 years. At the end of September 2009, there were 552 insured institutions on the “Problem List,” up from 416 on June 30, 2009. This is the largest number of “problem” institutions since Dec. 31, 1993, when there were 575 institutions on the list. Total assets of “problem” institutions increased during the quarter from $299.8 billion to $345.9 billion, the highest level since the end of 1993, when they totaled $346.2 billion. Fifty institutions failed during the third quarter, bringing the total number of failures in the first nine months of 2009 to 95.

FDIC Deposit Insurance Fund Drops Below Zero; Problem Banks Rise

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

The Federal Deposit Insurance Corp’s deposit insurance fund balance dropped to negative $8.2 billion in the third quarter of 2009, while the number of banks on its “problem list” rose to the highest level in 16 years.

The last time the DIF fell below zero was in the third quarter of 1992, the FDIC said, noting that the decline was primarily due to $21.7 billion in additional provisions for bank failures. The FDIC noted that the negative $8.2 billion already reflects a $38.9 billion contingent loss reserve set aside to cover estimated losses over the next year, so that total DIF reserves actually stand at $30.7 billion.

Towns Hails BofA “Ringfencing” Settlement

This story appeared in Bank Digest.

House Oversight and Government Reform Committee Chairman Edolphus “Ed” Towns, D-N.Y., issued a statement on Sept. 21, 2009, noting that he was pleased with a $425 million settlement between Bank of America and the federal government over “insurance” or “ringfencing” the bank received as part of its January 2009 bailout. “I hope this is an indication of the bank's intention to fully repay the taxpayers for the bailout. I look forward to working with Bank of America to make sure that happens,” said Towns in the statement.

GAO Reports on TARP Funds Used to Support AIG

By Gregg D. Killoren, J.D., CCH State Banking Law Reporter, Bank Digest and Individual Retirement Plans Guide.

The Government Accountability Office has released a report concluding that the federal supports, including a portion of the Troubled Asset Relief Program, used to prop up American International Group Inc. (AIG) are helping to stabilize the company. However, the GAO states in the report, it is too early to tell whether AIG can restructure its businesses and repay the taxpayers.

FDIC Considers Borrowing to Replenish DIF

This story appeared in Bank Digest.

During her question and answer portion of her September 18 speech at the Future of Global Finance Conference, Georgetown University McDonough School of Business, Washington, D.C., Federal Deposit Insurance Corp. Chairman Sheila Bair said that the agency is considering borrowing from the Treasury Department in order to replenish the FDIC deposit insurance fund. The chairman’s speech focused on the need for transparency in response to the current economic crisis and steps that should be taken to avoid a similar crisis in the future.

http://www.fdic.gov/news/news/speeches/chairman/spsept1809.html

FDIC Considering Borrowing from Treasury to Replenish Insurance Fund

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

Federal Deposit Insurance Corporation Chairman Sheila Bair said September 18 that the agency is considering borrowing from the Treasury Department in order to replenish the FDIC deposit insurance fund.

Bair, taking questions following a speech at Georgetown University, said “we are carefully considering all options, including borrowing from Treasury. I never say never.” The FDIC board will meet at the end of this month to consider the various options, Bair said, which also include prepayment of assessments and issuing debt.

SEC Files, Settles Charges of Accounting Violations at AIG

This story appeared in Bank Digest.

The Securities and Exchange Commission has announced charges against former American International Group (AIG) Chairman and CEO Maurice “Hank” Greenberg and former Vice Chairman and CFO Howard Smith for their involvement in numerous allegedly improper accounting transactions that inflated AIG's reported financial results between 2000 and 2005. In its complaint, the SEC alleged that Greenberg and Smith were liable as control persons for AIG's alleged violations of the antifraud and other provisions of the securities laws. Smith also was charged with direct violations of the antifraud and other provisions of the securities laws. Without admitting any wrongdoing, both individuals have agreed to settle the charges, with Greenberg agreeing to pay a total of $15 million and Smith agreeing to pay $1.5 million.

Insurance Industry Seeks Inclusion in Systemic Risk Oversight Plan

By Sarah Borchersen-Keto, CCH Washington News Bureau, Contributing Author, the CCH Federal Banking Law Reporter, June 16, 2009.

As the administration prepares to unveil its plans for financial regulatory reform, key players in the insurance sector are calling for including the industry in whatever broad systemic risk oversight is applied to the banking and securities sector.

“Only ostriches can now deny the need for establishing a federal insurance resource center and a basic federal insurance regulatory structure,” said Rep. Paul Kanjorski, D-Pa., chairman of the House Financial Services Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises, at a June 16 hearing (webcast).

Chairman Urges Replenishment of National Credit Union Share Insurance

This story appeared in Bank Digest.

In his first public speech since the conservatorship of two corporate credit unions in March, NCUA Chairman Michael E. Fryzel called on credit unions to support legislation proposed by the NCUA to replenish the National Credit Union Share Insurance Fund. The proposal is "completely consistent with the admirable credit union tradition of taking care of our own problems," Fryzel told the Texas Credit Union League's 75th Annual Meeting in Austin, Texas.