Financial Crisis News Center

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.

Fed and OTS Approve Holding Company Applications for Insurance Companies

The Federal Reserve Board has approved an application by Protective Life Corporation Birmingham, Ala., to form a bank holding company by acquiring all the shares of Bonifay Holding Company, Inc., and its subsidiary bank, the Bank of Bonifay, both of Bonifay Fla. In a separate matter, the Office of Thrift Supervisions approved the application of The Phoenix Companies, Inc., Hartford Conn., to acquire American Sterling Bank, Sugar Creek, MO. Both of these approvals were an initial step for the insurance companies to become eligible for funds under the Emergency Economic Stabilization Act.

Approval of proposal by Protective Life: http://www.federalreserve.gov/newsevents/press/orders/orders20090115a1.pdf

Approval of holding company application of The Phoenix Companies, Inc., Hartford Conn. http://files.ots.treas.gov/690003.pdf

 

SEC Unveils Its Indexed Annuities Rulemaking Release

The SEC posted the final release adopting new rules 151A and 17h-7, previously approved at its December 17 open meeting. Rule 151A prospectively defines the terms “annuity contract” and “optional annuity contract” under the 1933 Act. The rule is intended to clarify the status under the federal securities laws of indexed annuities, under which payments to the purchaser depend on the performance of a securities index. New Rule 17h-7 exempts insurance companies from filing reports under the 1934 Act with respect to indexed annuities and other securities registered under the 1933 Act, provided that certain conditions are satisfied, including that the securities are regulated under state insurance law, the issuing insurance company is subject to supervision and examination by a state insurance regulator, and the securities are not publicly traded. See Release No. 33-8996 at http://www.sec.gov/rules/final/2009/33-8996.pdf.

SEC Votes to Regulate Most Indexed Annuities

The SEC adopted a new rule, despite substantial opposition from the insurance industry and over a dissent from Commissioner Troy Paredes, that defines the terms "annuity contract" and "optional annuity contract" under the Securities Act. New Rule 151A is intended to clarify the federal securities law status of indexed annuities, under which payments to the purchaser are dependent on the performance of a securities index. Under the rule, certain indexed annuities would be defined as not being "annuity contracts" or "optional annuity contracts" if the amounts payable by the insurer under the contract are more likely than not to exceed the amounts guaranteed under the contract. Under this definition, these securities would not fall within the statutory insurance exemption set forth in Section 3(a)(8) of the Securities Act.