Financial Crisis News Center

Obama Urges Banks to Make “Extraordinary Commitment” to Economy

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

President Obama said financial institutions must make an “extraordinary commitment” to help build the economy by reconsidering their lending practices to small- and medium-sized businesses.

“We expect some results,” said President Obama, after meeting with the heads of the nation’s 12 largest banks. “Given the exceptional assistance banks received to get them through a difficult time, we expect them to explore every responsible way to help get our economy moving again,” Obama stressed. He added that the situation banks faced a year ago was “a predicament largely of their own making.”

Administration Kicks off Mortgage Modification Conversion Drive

This story appeared in Bank Digest.

The Treasury Department and Department of Housing and Urban Development (HUD) kicked off a nationwide campaign to help borrowers who are currently in the trial phase of their modified mortgages under the Obama Administration's Home Affordable Modification Program (HAMP) convert to permanent modifications. The modification program, which has helped over 650,000 borrowers, is part of the Administration's broader commitment to stabilize housing markets and to provide relief to struggling homeowners and is a primary focus of financial stability efforts moving forward. Roughly 375,000 of the borrowers who have begun trial modifications since the start of the program are scheduled to convert to permanent modifications by the end of the year.

“We are encouraged by the pace at which trial modifications are now being made to provide immediate savings to struggling homeowners,” said the new Chief of Treasury's Homeownership Preservation Office (HPO), Phyllis Caldwell. “We now must refocus our efforts on the conversion phase to ensure that borrowers and servicers know what their responsibilities are in converting trial modifications to permanent ones.”

White House Creates Financial Fraud Enforcement Task Force

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

The White House announced the creation of an interagency Financial Fraud Enforcement Task Force, led by the Department of Justice, to investigate and prosecute significant financial crimes and help prevent a repeat of last year’s financial meltdown.

“We will be relentless in our investigation of corporate and financial wrongdoing, and will not hesitate to bring charges, where appropriate, for criminal misconduct on the part of businesses and business executives,” Attorney General Eric Holder said November 17.

Issa Calls on President to Appoint FHFA Inspector General

This story appeared in Bank Digest.

House Committee on Oversight and Government Reform Ranking Member Darrell Issa, R-Calif., has sent letters to White House Counsel Gregory B. Craig, Deputy Assistant  Attorney General for the Office of Legal Counsel (OLC) Daniel Koffsky, General Counsel for the Federal Housing Finance Agency (FHFA) Alfred M. Pollard and FHFA Associate Director for Internal Audit Edward Kelley expressing concern regarding the lack of an Inspector General at the FHFA, the federal agency responsible for overseeing Fannie Mae and Freddie Mac. In his letter to White House Counsel Craig, Issa wrote, “We are now eleven months into this Presidency. The President’s failure to act has left the agency charged with overseeing two of the most irresponsible government sponsored entities—Fannie Mae and Freddie Mac—without any inspector general. In light of the Democratically-controlled, filibusterproof Senate, the President’s failure to act is unacceptable and reckless.”

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.

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.

Senate Restoring American Financial Stability Act Mandates Say on Pay and Strong Compensation Committees

By James Hamilton, J.D., LL.M., Principal Analyst, CCH Federal Securities Law Reporter; and CCH Derivatives Regulation Law Reporter.

The Obama Administration and the G-20 have determined that corporate governance failures, including compensation that encouraged short-term risk taking, were significant causes of the financial crisis. Bonuses that rewarded short term profits over the long term health and security of the firm, and other incentive-based compensation for executives to take big risks with excess leverage, threatened the stability of their companies and the economy as a whole. Thus, the draft legislation gives shareholders a say on pay and proxy access, ensures the independence of compensation committees, and requires companies to set clawback policies to take back executive compensation based on inaccurate financial statements as important steps in reining in excessive executive pay and helping shift management’s focus from short-term profits to long-term growth and stability.

“Too Big To Fail” Plan Highlighted in Treasury Official's Remarks

This story appeared in Bank Digest.

In remarks before the Remarks to ALI-ABA Conference on Life Insurance, in Washington, D.C., on Nov. 5, 2009, Assistant Treasury Secretary Michael S. Barr discussed the Obama Administration's comprehensive plan for regulatory reform and focus in particular on the problem that has come to be known as “too big to fail.”

New Efforts to Improve to Small Businesses Credit for Announced

This story appeared in Bank Digest.

The Obama Administration has announced new measures as part of an ongoing effort to help small businesses access credit and create jobs. These measures include:

• Taking further steps to provide small businesses with access to credit by supporting community bank lending through the Financial Stability Plan.
• Seeking legislation to increase maximum SBA loan sizes to allow more businesses to access the credit they need to expand and create new jobs.
• Convening a Treasury/SBA Small Business Lending Conference to work with regulators, lenders and congress to ensure credit is available to small business

House Speaker Nancy Pelosi, D-Calif, commended the plan, stating, "Providing incentives for community banks and community development financial institutions to lend in low- and moderate-income communities will help create jobs, fueling our economic recovery."

Obama Speech Spells Out Goals for Consumer Financial Protection

On Friday, October 9, 2009 President Obama spoke to the press from the Washington East Room laying out his agenda for consumer financial protection.  The entire video is avaiable below.