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If you're a financial institution's compliance professional and you need some down-to-earth year-end advice and a stout buck-me-up, get it from Anthony Demangone, NAFCU's Director of Regulatory Compliance:
Your job is tough. But it is important. Some folks may not like to hear this, but life has rules. And those rules must be followed. You keep your credit union on the straight and narrow path. Our line of work is not easy, but it is rewarding.
Have a Happy New Year. That's an order.
Reuters columnist Rob Cox issued a hot business opinion in a column today. He called the community banker "the most endangered species in finance." Cox isn't talking merely about the community banks that have failed over the past several years, but the many community banks that "will disappear in the next few years — a consequence, unintended or otherwise, of government and regulatory decisions codifying the biggest banks as infallible."
With that set-up, you might think that Cox would bemoan this prospect. To the contrary, his "hot opinion" is that he thinks it's likely to be a good thing for regulators, shareholders, and "perhaps surprisingly, even consumers."
As proof of how great things will be, he points to our cousins to the north.
[H]aving a few, heavily-regulated banks might actually be safer. Canada has just five giant institutions. But because they were regulated like utilities, the country’s financial system averted the need for big bailouts. It’s also more profitable for shareholders. According to the FDIC’s third-quarter industry survey, big banks have better efficiency ratios and generate higher returns on assets and equity.
Finally, consumers might benefit from a smaller universe of stronger banks competing for their affections. At the very least, there might be more credit available to them. In the third quarter, for every dollar of deposits customers stowed in the vaults of big banks, 96 cents were extended to borrowers, according to SNL Financial. Smaller banks lent out just 84 cents for every dollar of deposits.
George Bailey may have been a nice banker. But he might have been even more effective working as a senior loan officer for Bank of America.
There's no question that life would be easier for regulators in one respect if they didn't have many banks to regulate. That's one reason why you don't see (and won't see for awhile) many de novo applications being approved by the FDIC. But would it be "safer" for the financial well-being of the banking system to have "five giant banks" in the US (or even 50, as former OFHEO head James Lockhart has proposed)? With that kind of concentration of power comes the very real risk of regulatory capture, a concern voiced by pundits on both ends of the political spectrum (albeit for different reasons).
Arguing that big banks have economies of scale, efficiencies of operation, and greater opportunities to deploy capital profitably, and, therefore, that's good for their shareholders does nothing to convince me that what's good for the shareholders of five giant banks translates into what's good for the rest of us. Why stop at five? Why not one giant bank, run by the US government, or perhaps one giant bank which runs the US government. Those who loved the bail outs handed to Wall Street will love that result. It certainly would be "efficient" and "easy to regulate."
As for the proposition that consumers will be better off because in the last quarter, large banks loaned out a greater percentage of deposits than did smaller banks, I'd point out that traditionally, smaller banks use deposits as a larger percentage of their total funding sources than do big banks. That was the principal reason that community banks liked, and large banks did not, the recent change to calculating FDIC insurance assessments on the basis of "assets" rather than "deposits." I don't think using deposits as the funding source for the comparison is support for the contention that big banks will be better lenders to consumers than will smaller banks. Also, community banks have had greater difficulty raising capital than large, publicly traded banks and, as a consequence, have had to be more conservative in making loans over the past two years than have big banks. Hank Paulson didn't call nine of the nation's smallest community banks to the White House in the fall of 2008 and shove TARP capital down their throats, did he?
Does anyone really believe that if the commercial banking business of this country is concentrated in a few large banks, US consumer and small business borrowers will be better served than they are when large banks compete with community banks? Apparently, Rob Cox does.
You can put me in the "extremely skeptical" camp.
The troubles of the Law Office of David J. Stern have led to some headaches for other law firms: those who are trying to take the tens of thousands of foreclosure cases that Stern's firm was handling and to "transition" them to new law firms. The largest lenders who dumped Stern's firm have appointed "transition counsel," law firms whose task it is to find competent substitute counsel to step into the shoes of Stern's firm, only without being investigated by the Florida Attorney General while they handle the foreclosures. Apparently, the transition counsel are finding the going to be slow and frustrating, and so are attorneys on the other side.
But the replacement law firms haven't found it easy to find enough qualified law firms to take the work, and the transition has slowed a system already clogged with overwhelming numbers of cases. Some judges are not willing to delay cases due to the change in attorneys as Stern files are turned over to new lawyers. More and more counties are requiring in-person rather than telephonic hearings.
"We are very frustrated," said Thomas Ice, a defense foreclosure attorney with Ice Legal in Royal Palm Beach. "We're having all these problems setting hearings. We call up Stern's office and say, 'You haven't withdrawn from the case.' They just don't show up. Sometimes the judges will go forward, but many times they won't reset it. We don't want delays. We want resolution.
Equally frustrated are some of the judges.
According to a Nov. 23 hearing transcript obtained by the Daily Business Review, Edmund Whitson III, a Tampa-based Akerman attorney, pleaded with a Punta Gorda judge for a postponement on a 2-year-old foreclosure case, and the judge wasn't happy. Whitson explained his firm just took over the avalanche of cases "that have been pulled from David Stern's office." "We are now trying to digest and allocate resources to that many files on very, very short notice," he said. "I respectfully request and almost beg your honor to continue this." Circuit Judge George C. Richards responded: "What happens with every other case of David Stern's office that is set for trial? Am I going to have to continue every other one?" Replied Whitson: "Your honor, I can't speak to those. Our office is essentially trying to act as transition counsel right now to find other law firms to handle it."
The linked article is from Law.com, so, naturally, there's much discussion about some law firms going after the work, while other law firms disdain such "high volume, low paying" work. While I don't handle residential loan foreclosure work, I've been contacted by some attorneys as a result of my blogging activities over the past few years who are willing to do such work and who believe that they've been unjustly denied the work by Freddie Mac and Fannie Mae. Instead, as is obvious from the linked article, Fannie and Freddie chose to use a very small number of foreclosure lawyers in Florida, and are now seeing the consequences of concentrating so much work in one firm. If they'd spread it around more, they wouldn't be in the bind they're finding themselves in at present.
You have to ask the obvious question: how did one foreclosure firm get to the point that it handled so many cases for so many lenders that transition is such a painful process for all concerned? I'll bet there might be a movie-of-the-week in the answer to that question.
There are many things written by New York Times columnist Joe Nocera with which I do not agree, but his column in last Friday's edition that raked over the coals the report released last week by the four Republican members of the Financial Crisis Inquiry Commission was, in many respects, spot-on.
After a year and a half of hearings, including questioning over 800 witnesses, reviewing millions of pages of documents, and spending some $6 million in taxpayers’ money, its final report is due to be delivered in a month.
Except that in Washington these days, there is no such thing as bipartisan. On every major issue facing the country, Democrats and Republicans have competing narratives. Why should anyone expect anything different when it comes to the origins of the financial crisis?
Although commission members had long made a show of trying to work collaboratively, there was always a fair amount of underlying tension. Some of that tension had to do with the internal dynamics of the commission — the general sense of chaos, for instance, and the supposedly autocratic style of its Democratic chairman, Phil Angelides.
But more recently, it has had to do with the growing tug of war between the commissioners over which financial crisis narrative would win out. The Republican minority, fearing their view would get short shrift, pre-emptively put forward a CliffsNotes version of their theory of the case. In other words, they responded to a report that hasn’t even yet been written, much less read and voted on by the members.
One of the major consequences of this "presponse" (as Nocera whimsically names it) is that the final report, to be issued within a month, will not be taken seriously by anyone as a truly "bipartisan" effort, which was the purpose of creating the commission in the first place. I know, "realists" will argue that the real purpose was to give cynical politicians "cover," to appear to be doing something to determine the root causes of the collapse, while knowing full well that partisan bickering would derail any serious results. Still, a few of us hoped that perhaps some seriously hard looks would be taken at both dysfunctional public policies and private practices so that a serious discussion might take place about the proper role of government in the mortgage markets, the advisability of regulatory reform for both the regulated and the regulators, the culture of greed on Wall Street and its apparent spread to many street corners on Main Street, and the extent of the culpability of mortgage borrowers, including blog writers, in this systemic failure. A small hope was that perhaps the pain of this crisis might force all of us, even the ethically-challenged clowns we keep electing to public office, to take a serious look in the mirror.
Yes, you're correct: I am a putz.
As Lita Epstein at Housing Watch bemoaned last April about the bickering over the FCIC:
Once again, everybody is pointing fingers at everybody else, and likely no one will take responsibility for their actions. The only thing we'll probably ever know for sure is that the taxpayers will foot the bill for corporate greed and governmental mistakes in judgment.
At this point, I don't expect the Democratic majority of the FCIC to be any less partisan than the Republican minority, although we won't know for sure until the final report is issued, will we? Nocera may or may not be wrong about his disagreement with American Enterprise Institutes's Peter Wallison, who contends that the disastrous foray of Uncle Freddie and Aunt Fannie into Alt-A and beyond was motivated primarily by political pressure, not private market forces. I think both factors played a role and I frankly don't care which one might have been a qualitatively more lethal motivator. The people who ran Fannie and Freddie should have been made of "stuff" sufficient to resist the temptations to breach the public's trust from wherever those temptations came. Like me, however, Nocera's willing to concede that he might be wrong and Wallison right, but he also wants to wait and see what the FCIC has to say in its final report about it. The fact that he can concede that he's not infallible is a striking admission in an era when partisan opponents regard honest self-appraisal as a sign of weakness rather than strength.
As much as my personal political and economic preferences lean toward those of Wallison, I support Nocera's concluding paragraph.
I’m all for reforming Fannie and Freddie. Who isn’t? But at this stage of the game, you can’t reform the G.S.E.’s without reforming the private market too. That may not be where the Republicans’ theory of the case takes them. But it happens to be true.
Although Elizabeth Warren left the principal task of the Congressional Oversight Panel to Ted Kaufman, Ted's been an able successor to Liz and has kept the COP focused on its primary mission: making Tim Geithner's existence hell-on-earth.
Earlier this week, the COP issued what Housing Wire described as "a scathing report" of the underwhelming performance of the Treasury's HAMP loan modification program. There's no question that HAMP hasn't helped as many people as Treasury initially hoped, which, I believe, was "eighteen thousand gazillion."
When COP released its report earlier in the week, Sen. Ted Kaufman (D-Del.), chairman of the panel said, "The program is turning out to have a lot less impact on the market than we thought it would have."
I think Kaufman's still cranky over the fact that he was looking forward to having the future junior senator from Delaware be a former witchcraft-dabbler and now all he's got joining him in January is a former communist. I'd be a might disappointed in that, too.
Geithner responded that a lot of the people they wanted to help simply didn't look like a good bet for a home loan modification, no matter how low Treasury set the qualification bar.
Geithner said there is a gap between the 5 million homeowners currently in delinquency, and the roughly 2 million who are eligible for HAMP and the Federal Housing Administration's modification program. The others, he said, fall into other programs, but many are individuals who took out loans on expensive houses, can afford to stay in their house based on debt-to-income ratios, and some were investors who bought another house.
"You have to decide to extend the benefits of these programs to these Americans," Geithner said. "We did not think that was a good use of tax-payer money."
I think that it's great that Treasury's finally worrying about "a good use of tax-payer money." That's a refreshing change, and one we'd like to see continued.
And speaking of a good use of tax-payer money, Tim was happy to defend the much-maligned TARP.
Geithner touted TARP, and continued to implore its necessity to a financial market in crisis.
That's nice Tim, but whatever the facts might be about TARP, to the public (and the politicians whose fingers are always pointed upward to catch the public wind's direction), TARP is just a four letter word. Nobody really cares that TARP might have pulled the country back from the edge of the abyss. At this point, publicly defending TARP gives the appearance of putting lipstick on a pig.
Geithner did make a stronger case that a nationwide foreclosure freeze (being touted by a number of folks currently "off their meds") would rank as one of the worst of the really bad ideas of a decade that's been full of them.
Geithner said the Treasury's policy has always been that banks not foreclose until they are "certain of their ability to do so on a legal basis," but he scorned any consideration of a full-scale moratorium.
"As demand for housing slows, people will be unwilling to buy, and people sitting in their neighborhoods will see prices drop further because the market sees a much longer time of recovery," Geithner said.
Unfortunately, too many have been sitting in our neighborhoods watching prices drop further for some time now, even without a foreclosure freeze. Anything that prolongs this agony is not likely to sit well with the vast majority of homeowners who have continued to make their monthly house payments, regardless of whether they're sitting above or under water. To that extent, Geithner got it right.
From a narrowly selfish standpoint, that of a blogger who enjoys reading fodder to feed his need for posting, the fact that Rep. Spencer Bachus is turning out to be as much of a mock-worthy politico as his Democratic counterpart Barney Frank is a glad tiding to ring in this holiday season. As a citizen of a country that could use intelligent leadership, however, especially when it comes to the banking grease that keeps the economic wheel turning (albeit slowly these days), he fills with me with inertia.
Last month, he was in a lather about the "threat" of US banks moving to Botswana, Chad, or some other offshore banking havens because of the Volcker Rule. Last week, he gave an interview to a home-state (Alabama) newspaper in which he made a statement akin to "I come not to regulate banks, but to serve them." Democrats (rightly) jumped "his stuff" over that one, including his clown college roommate Barney, who bloviated that Bachus' remarks revealed "a seriously flawed view of the relationship that should exist between financial institutions and those who set the rules governing safety and soundness." Well, Barn, when it comes to "seriously flawed views of the relationship that should exist between financial institutions and those who set the rules governing safety and soundness," all we can say is "it takes one to know one." For entirely different reasons, you and you Republican buddy are two peas in a pod.
Unfortunately, it's a "pod" from the movie "The Pod People," and you're both worthy of being forced to answer the question posed by Crow T. Robot in an episode of MST3K dedicated to mocking that movie: "What is it about the Gates of Hell that compels people to walk through them?"
When I read this interview with Elizabeth Warren last week, I saved it for a later "fisking," but before I even got started, Anthony Demangone at NAFCU Compliance Blog beat me to it with a "Whoah, Nelly" summation that cut to the heart of what Ms. Warren's all about: "credit cards are bad."
Anthony also analyzes some comments of Ms. Warren that were put out by the US Treasury Department in the form of a question and answer session. Again, Ms. Warren's observations offer insight into her agenda and what banks and other financial institutions can expect from the CFPB as long as she's in charge of it whether de facto or de jure). In addition, Anthony's self-confessed "snark" happens to resonate with this purveyor of the same. Among my favorites:
Man, she hates credit cards. Forget payday lenders, fly-by-night "credit repair companies, and auto-title loan companies. Credit cards are front and center on her agenda.
In the words of my man Snoop Dog: "Fo shizzle."
One more point made by Anthony that touches on a tune I've long been singing: We agree with Ms. Warren's desire to have "clear" disclosures so that consumers (which even we minions of the Dark Side of The Force happen to be) can make "apples-to-apples" comparisons of consumer loan products. People like the OCC's Julie Williams and this pathetic blogger have been yakking about that need for years. As Anthony also notes, however, this is a task that's easier said than done.
Keep in mind that many regulators have gone before you with this same task in hand. The Federal Reserve has spent a good deal of time on consumer issues and consumer testing of financial disclosures. No matter how much work you throw into this, keep in mind that you'll run into one basic problem: many consumers simply do not attempt to read disclosures. I agree that some credit card agreements are complex, but the Schumer Box gives consumer more than enough information to compare credit card products. And to say that the mortgage problems we face today are due to poor disclosures while not talking about broker misrepresentations, predatory lenders, and consumer responsibility is simply not telling the whole story.
There aren't many people in D.C. of any political persuasion who are interested in "telling the whole story." You'd have a better chance of finding a Marxist on Fox News or a disciple of Russell Kirk on MSNBC. Ms. Warren has an agenda and her narrative serves the agenda. Spreading the responsibility for the consumer credit mess we're equally among the participants does not serve the agenda of building another large federal bureaucracy to protect us from ourselves. "The whole story" will have to be pieced together from other sources.
It used to be that bank tellers with their wits about them would, when staring down the barrel of a gun and slipping wads of cash into a bank robber's sack, slip in an exploding die pack. Of course, that would often result in the robber becoming explosively coated with die at the most inopportune time, perhaps while speeding down an expressway, and could result in carnage on the highway and an unpleasant "fouling of the footpaths" with body parts and defaced currency of the realm. In addition, in these politically correct times, one must select a die color that won't offend the professionally aggrieved, and even blue might cause those seven-foot tall Na'vi from Pandora to go all violently atavistic, so it's been obvious for some time now that a better way of marking and tracking bank robbers simply had to be found.
Hand it to those folks at Bank of America: they might not be able to foreclose on the right house, but when it comes to employing space-age technological solutions to defeat modern-day Dillingers, America's largest bank takes a back seat to no nerd.
On Friday afternoon, police say a woman stuck up the Bank Of America branch on East Delavan Avenue in Buffalo.
The alleged robber, 24 year old Angelique Guillory of Buffalo, walked out of the bank with $2,500, and something else: a GPS device, probably about the size of a credit card that was hidden in the money.
Once the bank notified Buffalo police of both the robbery, and the existence of the GPS device, police were able to track her and found her shortly thereafter, hiding in a garbage tote just a few blocks away.
Angelique doesn't sound like a rocket scientist, and hiding in a garage tote doesn't sound like she actually put the police through a maze-like course of misdirection. Although the report doesn't mention what type of garage tote in which she might have been attempting to conceal her body, it wouldn't surprise me if it was a clear plastic one from The Container Store. Nevertheless, you have to admit that "LoJacking" Angelique's stack of cash is pretty slick.
In typical big-bank/-government/-NFL executive fashion, a BofA spokesman refused to confirm or deny to the reporter that BofA is using GPS devices. I guess the bank assumes that the average bank robber who reads the newspaper or watches television news on a regular basis (we assume this is not a large number) would understand that when the police confirm that the bank conceals a GPS device in its money stacks, that doesn't mean a thing unless the bank also confirms its use. If I were the bank, I'd tell the reporter that sometimes the bank uses a GPS device, sometimes a howler monkey in heat, and sometimes a vial of Ebola virus. "Keep 'Em Really Guessing," that's my motto.
As for die packs, I'm afraid we'll have to bring in singer Toni Braxton to sing you a final farewell seranade:
Say, you, you are so yesterday
Wont let you rain on my parade
Dont wanna hear a thing you say
So yesterday
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