Bank Lawyer's Blog

There IS Rest For The Weary

The blog is on vacation until next week. Enjoy a snark-less week.

Then Again

A couple of follow ups to recent blog posts:

The New York Times ran a story last week about the strong fight that industrial banks are waging to preserve their form of charter in the face of an assault on it by the Obama administration. As EnerBankUSA CEO Louise Kelly succinctly put the problem, "We are talking about survival here."

The article summarizes some of the arguments that both critics and supporters are raising. The article also points out that some headway has already been made by the industry, with both Barney Frank and Sheila Bair promising that they would allow commercial enterprises that currently own industrial banks to keep them (although one of Ms. Bair's employees felt compelled to pen a letter to the editor of The Times that "clarifies" that Ms. Bair also believes that holding companies of industrial banks "should be subject to consolidated regulatory oversight, consistent with requirements imposed on other owners of depository institutions."). That's a good starting point for negotiations, but not an end point. As I noted three weeks ago, history has shown that "grandfathering" means a slow, rather than a quick, death, but it ensures eventual extinction. The industry has gathered its muscle and is slugging it out for survival. Don't count it out, not by a long shot.

A post I ran way back in March of this year caused an alert reader to remind me that Maxine Waters' shenanigans with respect to a bank in which her husband was involved finally made it to the level of a House Ethics Committee investigation. Given Ms. Waters previous experiences with the House Ethics Committee, which she's told to go jump in the lake when it cautioned her about her allegedly unethical behavior in the past, I'll refrain from waiting on pins and needles for a smackdown of Rep. Waters from her colleagues. She may be sleazy, but she appears to be coated with teflon when it comes to making any charges stick. Another reader also notified me that Ms. Waters and her spousal unit have an equally envious track record with respect for their neighbors and local housing codes.

Despite repeated assurances over the past five years, their out-of-district, multimillion dollar estate is still in a state of disrepair, a veritable construction site surrounded by a chain link fence, weeds, construction materials, gravel, debris, and dumpsters.

She's definitely a piece of work.

Ego and Ambition Got in the Way

We were just speaking about Angelo Mazilo, former Chairman of Countrywide, and darned if I didn't finally get around today to reading a recent profile about him in The Los Angeles Times, a newspaper that, according the article, Mazilo loathes. Buried toward the latter part of that article is one of the best observations I've seen yet about mortgage bankers who may not have been outright crooks, but were something else that doesn't engender admiration.

As the bubble inflated, competition intensified and lending standards grew ever more lax, Mozilo denounced what he characterized as competitors' recklessness but said his firm would continue to compete with them and put them out of business. "I've been doing this for 53 years, and I've never seen that situation sustained," Mozilo said during a February 2006 conference call, condemning as "irresponsible" his subprime rivals, New Century Financial Corp. and Ameriquest Mortgage Co. "Eventually they gag on it."

Although it lasted longer than the pure subprime companies, Countrywide nearly followed them into oblivion before BofA tossed out its $4-billion takeover lifeline last year.

"You have to make a choice -- to get out or not. And they stayed," said Cecala of Inside Mortgage Finance. "It's hard when you're following someone off a cliff to know when to stop."

Certainly, most lemmings know exactly when to stop: when they hit the ocean surface at the bottom of the cliff accelerating at 32 feet-per-second and drown.

After citing some Monday morning quarterbacks (which, as a blogger, I understand is an occupational requirement of all sound-bite donors) to the effect that Mozilo was kept in check by some powerful, more cautious, cohorts until 2006, when heir-apparent and risk-checker Stanford Kurland departed because Mozilo reneged on an earlier promise to retire and hand Stan the reigns, the article concludes with a line that could apply to many a bloated ego masquerading as genius in a land where any mama's baby boy can amass wealth beyond the dreams of Croesus and then blow it all on crack, hookers, and an Option/ARM: ""Angelo was the most charismatic leader I have ever seen," Flamholtz said. "If he had left as planned he would have gone out in a blaze of glory, but ego and ambition got in the way."

Amen.

Singing The No-Perp Walk Blues

CNNMoney.com's Colin Barr asks, "Where are the subprime perp walks?" and expresses dismay that, three years after the advent of the subprime mortgage crisis, not one major case has been brought by criminal prosecutors against senior executives tied to the subrime meltdown. A picture of everybody's favorite poster child and subprime villain, Angelo ("The Tan Man") Mazilo is prominently featured floating left of the story's text. Criminology expert Steven Ramirez doesn't believe that the dearth of prosecutions is do to the lack of targets of opportunity. "I don't think it's because of a lack of criminal activity," says the law school professor.

Another critic of the lack of high profile prosecutions is criminology professor Henry Pontell.

"We really have learned no lessons from the savings and loan crisis," he said, referring to the wave of bank failures in the 1980s that led to a number of notable fraud convictions. "The most germane one is that fraud plays a central role in these episodes. It acts as an accelerant for financial bubbles."

Based solely upon anecdotal evidence and gut feeling, I agree with Ramirez and Pontell that there was a great deal of outright fraud connected with the scope and depth of the collapse of the subprime and "exotic" residential mortgage markets, which collapse plunged the country and a good chunk of the world into a recession unlike any I've experienced in over 35 years in the workforce (if you call practicing law "work"). Unlike the last round, when the savings and loan industry went into a tailspin, proving that CEOs and other senior executives knew about and encouraged, much less actively participated in, the fraud is tougher to prove in connection with the subprime mortgage mess. I recall a number of instances involving failed Texas thrifts in the late 1980s where there was ample evidence that thrift owners and senior executives were swapping dead horses for dead cows, making stock loans to an owner of another thrift to purchase 100% of the stock in his own S&L in return for the borrower causing his S&L to purchase a bunch of participation interests in the lender's portfolio of exquisitely ripe carcasses known as acquisition and development loans (in which the lender funded 100% of the acquisition and developments costs AND all of the interest reserve, leaving the borrower with as much equity in the collateral as a US congressperson's integrity). This time around, the CEO's and Chairman's muddy paw prints aren't stamped all over the lender's records.

"The problem is finding the executives' fingerprints on the consumer files," said Peter Henning, a law professor at Wayne State University. "Angelo Mozilo may have set the tone at Countrywide, but there is no way you're going to find his fingerprints on any of those mortgages."

Even Marg Helgenberger of CSI couldn't find enough CEO DNA in these files to make a case. I'd like to watch her try, though.

The article also cites a lack of resources allocated to federal prosecutors to pursue these complicated cases as another factor that has slowed down pursuit of subprime CEOs. That may be the case, but even well-funded pursuit runs into what proved to be an effective defensive factor for S&L executives: the sheer complexity of the facts, and the need for an understanding of how banks and thrifts actually work. I was involved in more than one case in the early 1990s where former CEOs beat the rap because their experts actually knew something about the business, and were able to craft effective defenses based upon that knowledge. Money does buy happiness, especially where expert assistance is available for sale to the highest bidder.

Eventually, perhaps, the Eliot Nesses of this generation will uncover a pile of CEO subprime malefactors and send them to the pokey. If so, the task will take time and money, and at the moment, money seems to be in short supply.

By the way, while we're at it, let's not forget to focus on the other nest of vipers: Congress.

Colorado Not Grading On A Curve

The situation in Colorado for independent mortgage brokers gets tougher every day. When we posted earlier this month about the decision of Colorado Director of Real Estate Erin Toll to deactivate the licenses of over half of the state's licensed mortgage brokers, due to the fact that those brokers hadn't taken 40 hours of continuing education and passed a written test, we didn't know how difficult a test it was to pass. In an article in last week's Denver Business Journal, Toll was quoted as saying that of the 4,560 brokers whose licenses she yanked, only 85 even took the test and every last one of them flunked it. You'd think that would be a sign of how tough the test was, but there are 4,252 active brokers left in Colorado who, I assume, also had to take the test and who must have passed it. That's a 98% pass rate, so how tough could the test have been? I mean, the California bar examination: now, THAT'S a tough test!

Ms. Toll thinks it's all a matter of consumer protection, and that the people who took the test and failed it are all poorly eductade in the ways of mortgage banking.

"The bottom line is that we are here to help consumers," Toll said. "It’s our job to ensure that loan originators are properly educated so they can act in the best interest of the consumer."

Others feel that "Teacher" Toll is being too tough on the class.

Chris Streiff, director of the Society of Mortgage, Affiliate, Real Estate and Title (SMART) Professionals, attended Thursday’s hearing in support of the brokers.

She said that the study materials don’t adequately prepare brokers for the exam and that the state should do more to help people who don't pass.

"People I know who have been in the industry for 30 years flunked that test," Streiff told the Denver Business Journal after Thursday’s hearing.

Streiff, who teaches a mortgage broker education course at Red Rocks Community College that is designed to help people pass the exam, blamed the testing company chosen by the Division of Real Estate.

No wonder Chris is put out. She runs a society called "SMART" and some of it's members are...well...not so much, really. Do you think any of her students asked for a refund?

The education issue is really a side issue to the main story, which concerns Toll's issuance of a subpoena for bank records of a licensed mortgage broker as part of her investigation of a complaint made against the broker. The broker claims the subpoena of such records is unconstitutional and a hearing on a motion for a permanent in junction is set for later next month. Ms. Streiff is irritated that Ms. Toll is going after a licensed broker rather than an unlicensed one. I'm not sure what that has to do with the validity of Ms. Toll's action, but for some reason it irks the living snot out of Ms. Streiff. In fact, she accuses Ms. Toll of "terrorizing" the industry. I can't see the public being overly concerned with that problem, but I don't live in Colorado anymore, so perhaps I'm wrong.

I'm certain about one thing, however: there must be some consumers who wish the federal banking agencies acted with the aggressiveness of Erin Toll when they file complaints concerning a supervised bank or thrift.

Hindsight Is Always 20/20

Francine McKenna of re: The Auditors fame wrote a post on Clusterstock today that irritated at least one anonymous commenter to the post. I get a kick out of the bravery that's fostered by anonymity.

Francine wondered why the financial statements of Wells Fargo seem not to disclose much, if anything, about repurchase risk associated with mortgage banking activities. As she kindly points out with a link to a nearly four year-old post of mine, that risk was well known to those of us who represented mortgage bankers and was being blabbed about by know-nothings in the blogosphere years before the subprime meltdown turned the promised land into a waste land. It's a valid question, notwithstanding some a snarky comment or two to the contrary, and one to which I surely don't have an answer. On the other hand, so many supposedly knowledgeable people missed so many warning signs that finger-pointing is an activity that need to be pursued judiciously. Francine's got the "street cred" to ask the tough questions, so I'l leave those to her.

I guess what struck me most about that old post was the fact that in the fall of 2005, well before Sheila Bair was appointed to head the FDIC, former OTS director John Reich was warning thrifts about the dangers of exotic mortgages and warning them to "go slow" if at all. He also warned that the OTS would look at such activities critically. Popular mythology that I've read recently has it that Sheila Bair was the first regulator to warn about the dangers of subprime and its ilk, but here we have John Reich sounding the alarm bell before the public even knew that Sheila existed. Of course, the fact that Mr. Reich warned about the dangers makes it even more damning for the OTS that exotic failures like Washington Mutual, Downey, Countrywide (absorbed before it imploded), IndyMac, World Savings (also absorbed prior to melting down but dragging its white knight through the mud), Bank United, and others made their missteps on Mr, Reich's watch. Watching closely doesn't do much good if you don't actually do something about what you see.

"We'll be watching you! We won't be DOING anything, but we WILL be watching!"

Turnabout Is Not Fair Play

The FDIC's practice of "loss sharing" with acquirers of "bad assets" of failed banks and thrifts reached another level with the recent sale of a mixed bag of loans from the failed Franklin Savings of Austin (30% of which are nonperforming) in a "test" of the PPIP. The FDIC provided sweet, government-backed cheap purchase money financing, and owns 50% of the underlying "vehicle" being used to hold the loans. The other 50% was sold to a Texas-based (where else?) outfit formed by subprime mortgage veterans. Unlike the RTC, which sold the assets of failed thrifts at then-current depressed prices and walked away (which, by the way, was its legislative-directed mandate), the FDIC seems determined to share in the "upside" as the loans are "worked out" and paid off over time (or otherwise increase in value as the economy recovers and are sold). That's the theory at least.

A couple of weeks ago, Matt Stichnoth at Seeking Alpha noted the irony in this desire to ride the upside train.

Good heavens. Sheila Bair has actually stumbled onto a sensible policy. She somehow understands that “fair-market value” might materially understate the NPV of cash flows the assets will eventually generate, and that it can make more sense to manage those assets over the long-term. I await the FDIC’s jihad against mark-to-market accounting. . . .

Matt then points out an inconvenient truth. Just a few months ago, Ms. Bair took a contrary position when discussing what commercial banks ought to do with such assets.

From the Washington Post this past June:

But FDIC Chairman Sheila C. Bair said yesterday that the best course for banks, and for the broader economy, remained a combination of raising new capital and shedding old problems. . . .

"It is preferable to get them to sell assets in combination with raising capital in order to get the banks to be in a better position to start lending again," Bair said in an interview. "Getting them off the books is a cleaner posture for the banks."

It’s too much to expect she realizes she’s endorsing two policies that are diametrically opposite one another, I suppose. . .

Yes, I suppose it is. As we've noted previously, as far as Ms. Bair's concerned, only borrowers (and, apparently, the FDIC) are entitled to forbearance. Commercial banks are entitled to bupkis. They have to liquidate at current depressed prices, raise more capital (and pay another round or two of special assessments to save the FDIC), and pray for manna to rain down from Heaven.

Time For A Break

I was going to post about something serious this evening and I just don't have the heart. No, that's not right. I just don't have the time. Well, I have neither. So, for something completely off-topic, and off-the-wall, here's an updated list of Deep Thoughts I first posted over four years ago on a now-defunct personal blog. This has absolutely nothing to do with "commentary on banking law." For that brief break in the action, be ever so grateful. I'll be back boring the pants off all of you tomorrow, just as soon as I shake the hangover.

DEEP THOUGHTS

"I can picture in my mind a world without war, a world without hate. And I can picture us attacking that world, because they'd never expect it."
--Osama Bin Laden, as told to Jack Handy.

"It takes a big man to cry, but it takes a bigger man to laugh at that man."
--Arnold Schwarzenegger, as told to Jack Handy.

"Maybe in order to understand mankind, we have to look at the word itself: 'Mankind'. Basically, it's made up of two separate words - 'mank' and 'ind'. What do these words mean ? It's a mystery, and that's why so is mankind."
--Joe Biden, as told to Jack Handy.

"If you define cowardice as running away at the first sign of danger, screaming and tripping and begging for mercy, then yes, Mr. Brave man, I guess I'm a coward."
--Vin Diesel, as told to Jack Handy.

"It's true that every time you hear a bell, an angel gets its wings. But what they don't tell you is that every time you hear a mouse trap snap, an Angel gets set on fire."
--Pope Benedict XVI, as told to Jack Handy.

"Whether they find a life there or not, I think Jupiter should be called an enemy planet."
--George W. Bush, as told to Jack Handy.

"I hope life isn't a big joke, because I don't get it."
--Jessica Simpson, as told to Jack Handy.

"He was a cowboy, mister, and he loved the land. He loved it so much he made a woman out of dirt and married her. But when he kissed her, she disintegrated. Later, at the funeral, when the preacher said, 'Dust to dust,' some people laughed, and the cowboy shot them. At his hanging, he told the others, 'I'll be waiting for you in heaven--with a gun.' "
--Billy Bob Thornton, as told to Jack Handy.

"The face of a child can say it all, especially the mouth part of the face."
--Angelina Jolie, as told to Jack Handy.

"Most people don't realize that large pieces of coral, which have been painted brown and attached to the skull by common wood screws, can make a child look like a deer."
--Martha Stewart, as told to Jack Handy.

"If a kid asks where rain comes from, I think a cute thing to tell him is 'God is crying.' And if he asks why God is crying, another cute thing to tell him is 'Probably because of something you did.' "
--Lindsay Lohan, as told to Jack Handy.

"I bet it was pretty hard to pick up girls if you had the Black Death."
--David Hasselhoff, as told to Jack Handy.

"If trees could scream, would we be so cavalier about cutting them down? We might, if they screamed all the time, for no good reason."
--Ralph Nader, as told to Jack Handy

"If I ever get real rich, I hope I'm not real mean to poor people, like now."
--Tim Geithner, as told to Jack Handy

"I believe in making the world safe for our children, but not our children's children, because I don't think children should be having sex."
--Rev. Pat Robertson, as told to Jack Handy 

"Before you criticize someone, walk a mile in their shoes. That way, you'll be a mile from them, and you'll have their shoes."
--Dr. Phil, as told to Jack Handy

"Is there anything more beautiful than a beautiful, beautiful flamingo, flying across in front of a beautiful sunset? And he's carrying a beautiful rose in his beak, and also he's carrying a very beautiful painting with his feet. And also, you're drunk."
--Dennis Hopper, as told to Jack Handy

"I guess I kinda lost control, because in the middle of the play I ran up and lit the evil puppet villain on fire. No, I didn't. Just kidding. I just said that to help illustrate one of the human emotions, which is freaking out. Another emotion is greed, as when you kill someone for money, or something like that. Another emotion is generosity, as when you pay someone double what he paid for his stupid puppet."
--Sean Penn, as told to Jack Handy

"Too bad when I was a kid there wasn't a guy in our class that everybody called the "Cricket Boy", because I would have liked to stand up in class and tell everybody, "You can make fun of the Cricket Boy if you want to, but to me he's just like everybody else." Then everybody would leave the Cricket Boy alone, and I'd invite him over to spend the night at my house, but after about five minutes of that loud chirping I'd have to kick him out. Maybe later we could get up a petition to get the Cricket Family run out of town. Bye, Cricket Boy."
--Sheila Bair, as told to Jack Handy

"If you're in a war, instead of throwing a hand grenade at the enemy, throw one of those small pumpkins. Maybe it'll make everyone think how stupid war is, and while they are thinking, you can throw a real grenade at them."
--John F. Kerry, as told to Jack Handy

"Sometimes I think I'd be better off dead. No, wait, not me, you."
--Courtney Love, as told to Jack Handy

"When you die, if you get a choice between going to regular heaven or pie heaven, choose pie heaven. It might be a trick, but if it's not, mmmmmmm, boy."
--Rev. Franklin Graham, as told to Jack Handy

"We used to laugh at Grandpa when he'd head off and go fishing. But we wouldn't be laughing that evening when he'd come back with some whore he picked up in town."
--Gov. Mark Sanford, as told to Jack Handy

"If you saw two guys named Hambone and Flippy, which one would you think liked dolphins the most? I'd say Flippy, wouldn't you? You'd be wrong, though. It's Hambone."
--Henry Kissinger, as told to Jack Handy

"To me, boxing is like a ballet, except there's no music, no choreography and the dancers hit each other."
---Mike Tyson, as told to Jack Handy

"If you ever catch on fire, try to avoid seeing yourself in the mirror, because I bet that's what REALLY throws you into a panic."
--Richard Pryor, as told to Jack Handy

"If you ever drop your keys into a river of molten lava, let'em go, because, man, they're gone."
--Gollum,as told to Jack Handy

"Consider the daffodil. And while you're doing that, I'll be over here, looking through your stuff."
--Bernie Madoff, as told to Jack Handy

"Sometimes you have to be careful when selecting a new name for yourself. For instance, let's say you have chosen the nickname "Fly Head."Normally you would think that "Fly Head" would mean a person who has beautiful swept-back features, as if flying through the air. But think again. Couldn't it also mean "having a head like a fly"? I'm afraid some people might actually think that."
--Jeff Goldblum, as told to Jack Handy

"If you ever reach total enlightenment while you're drinking a beer, I bet it makes beer shoot out your nose."
--The Dali Lama, as told to Jack Handy

"As the light changed from red to green to yellow and back to red again, I sat there thinking about life. Was it nothing more than a bunch of honking and yelling? Sometimes it seemed that way."
--Deepak Chopra, as told to Jack Handy

"I think a good product would be 'Baby Duck Hat.' It's a fake baby duck, which you strap on top of your head. Then you go swimming underwater until you find a mommy duck and her babies, and you join them. Then all of the sudden, you stand up out of the water and roar like Godzilla. Man those ducks really take off! Also Baby Duck Hat is good for parties."
--Bill Gates, as told to Jack Handy

"I think the mistake a lot of us make is thinking the state-appointed shrink is our friend."
--Charles Manson, as told to Jack Handy

"To me, clowns aren't funny. In fact, they're kind of scary. I've wondered where this started and I think it goes back to the time I went to the circus, and a clown killed my dad."
---Stephen King, as told to Jack Handy

"I hope that someday we will be able to put away our fears and prejudices and just laugh at people."
--Barack Obama, as told to Jack Handy

"When the chairman introduced the guest speaker as a former illegal alien, I got up from my chair and yelled, "What's the matter, no jobs on Mars?" When no one laughed, I was real embarrassed. I don't think people should make you feel that way."
--Lou Dobbs, as told to Jack Handy

"If you get invited to your first orgy, don't just show up nude. That's a common mistake. You have to let nudity 'happen.' "
--Bill Clinton, as told to Jack Handy

"Sometimes when I feel like killing someone, I do a little trick to calm myself down. I'll go over to the person's house and ring the doorbell. When the person comes to the door, I'm gone, but you know what I've left on the porch? A jack-o-lantern with a knife stuck in the side of it's head with a note that says 'You.' After that I usually feel a lot better, and no harm done."
--Kevin Funnell as told to Jack Handy.

Tone Deaf Player Ejected From Band

When I read this story from The Los Angeles Times late last week, I thought to myself that there has to be a limit to how tone deaf a person can be to public sentiment and still keep his or her job. Wells Fargo takes a deed to a $12 million Malibu beach house owned by victims of Bernie Madoff's Ponzi scheme who conveyed it to the bank to satisfy a debt and the next thing the neighbors know, wild wing-dings are being thrown at the beach pad by none other than Wells Fargo's head of commercial real estate. I mean, let's turn aside from the appearance of impropriety argument and just concentrate on the public relations disaster-in-the-making. How dumb can you be? Did you really think that no one would notice and, even if they did, they'd give you a pass? Really?

Colony residents said the woman they believe to be [Wells Fargo Senior Vice President Cheronda] Guyton, along with her husband and two children, took up occupancy in home No. 106 in Malibu Colony shortly after Lawrence Elins turned it over to Wells Fargo Bank on May 13.

The residents said the family spent long weekends at the home and had guests over, including a large party the last weekend of August that featured a waterborne arrival.

"A yacht pulled up offshore, with one of those inflatable dinghies to take people back and forth to the shore," said Roman's wife, Elaine Johnson. "About 20 people got taken over in the dinghy."

Way to fly in under the radar, Cheronda.

In a prepared statement, the bank said it would investigate the matter thoroughly and that an employee's use of property that had been surrendered by a borrower to satisfy a debt to the bank would be a violation of the bank's code of ethics. I know what you cynics are thinking: The term "bank's code of ethics" is an oxymoron. That may be so, but violating it can still get you in hot water. As Ms. Guyton discovered, post-haste.

On Monday, Wells Fargo & Co. said it terminated an employee for misconduct at a bank-owned property in one of California's most well known celebrity enclaves.

Cheronda Guyton, senior vice president in charge of commercial foreclosed properties, had been seen using the property to host weekend guests and throw private parties, according to published reports.

[...]

Wells Fargo said an internal investigation into the matter had found that "a single team member was responsible for violating our company policies" and that "employment of this individual has been terminated."

"We deeply regret the activities that have taken place as they do not reflect the conduct we expect of our team members," Wells Fargo said.

I'll bet they regret those activities. Think of all the time, effort, and expense that Wells Fargo pours into its branding, public relations, and advertising, all of it is designed to build trust with the public, particularly consumers for a bank with the focus of Wells Fargo. Along comes one employee with a tin ear and the whole effort comes a cropper. At least you can't accuse Wells Fargo of dilly-dallying about taking action. The story hits the press on Friday and by Monday the subject of the story is gone. Of course, it will take a while for the bad smell she left behind to dissipate, so the bank will have some fond memories of her to cherish as her yacht's wake disappears over the banking horizon.

On the other hand, in this day and age, you can rest assured that some other numbskull associated with some other financial institution will soon pull an equally bone-headed PR move and take the heat off Wells Fargo. It's darn near inevitable.

Other Federal Bank Regulators To FDIC: Thanks, But No Thanks

FiCri Advisor followed up a post of last week about the FDIC's new policy for de novo banks (which prompted my thoughts on the matter here) with another post over the weekend. They asked the remaining federal commercial bank regulators if they intended to increase the period during which they subjected de novo institutions to increased regulatory oversight and additional restrictions on capital and operations to seven years. They all said "Nyet."

OCC, OTS and Federal Reserve officials have confirmed to FinCri Advisor that their rules on the issue will not change.

"We feel very good about the policies that are in place," says the OCC's Kevin Mukri.

"We're not considering a change in the policy," says the Fed's Barbara Hagenbaugh.

"We think the current time frame is adequate," says the OTS' William Ruberry.  "We don't see any reason for change."

It's apparent that the FDIC has filled its regulatory brethren with inertia. Well, inertia for clamping down on new bank charters. In fact, OCC spokesman Kevin Mukri indicated that when it comes to new national bank charters, the OCC's all charged up and ready to go.

Unlike the FDIC, the OCC has a set timetable for approving new bank applications: 120 days. "We're very clear about what we are going to be looking for. We always encourage de novos to come meet with us," Mukri says. "We feel it's a great time for banking. We continue to approve applications, and we continue to get applications."

But here's the catch: Lawrence Kaplan correctly observes that whether the OCC, the Federal Reserve, or the OTS are receptive to de novo charter applications, as long as the FDIC is down on them, the organizers could still be left sitting on their thumbs.

"The FDIC really has the last laugh here," notes attorney Lawrence Kaplan of Paul Hastings in Washington, D.C. "The question is: Do they get insurance? It's a separate approval. As a result, they can put in whatever conditions they want."

As I said last week, that's what I eventually think will happen. Although the revised policy on de novo charters applies, by its terms, only to state-chartered, non-FRB-member banks, I think it's highly likely that the FDIC will apply the same policy to all applications for insurance of accounts for de novo banks and thrifts, regardless of the charter sought. Otherwise, as long-time Dallas banking attorney "Stormy" Grieve asserts, we'd be in for a wave of "charter shopping" by organizers trying to do an end run around the FDIC. That makes no sense, if the FDIC seriously believes its rationale for the dangers posed by de novo institutions.