Bank Lawyer's Blog

Drilling Down On De Novos

After reading one of my recent posts on the headwinds faced by those who are thinking of starting a new (de novo) bank, David Rice, the Senior Editor of the Federal Reserve Bank of Richmond's Econ Focus, kindly sent me links to a couple of recent articles from that publication that address the same issue. The first is "Who Wants to Start a Bank?," by Tim Sablik. Sablik explores the possible reasons for the dearth of de novos since 2008. Many of those reasons have been discussed here, but the article is an excellent compilation of the potential reasons and research (especially Federal Reserve Bank research) on the issues. Although I'd recommend that any interested reader review the actual article, here's a bullet point list of the reasons cited by Sablik:

• Regulatory burden on banks of all sizes that has grown like marigolds since Franken-Dodd was hatched by Barney, Chris, and Those Who Only Lizzie Loves.
• FDIC roadblocks to the formation of de novos during the period following the Great Recession's onset in 2008 until very recently (more on that in a future post).
• Low interest rates since 2008, and the resulting narrow interest rate spread, which makes it tough to make a buck in the banking business, especially when you're the new kid on the block.
• Competition form nonbanks.

Although regulatory burden is often given top billing by the biased, it's only part of the story. As the research cited by Sablik demonstrates, and as is the case with most things in life, problems are often more complex than those who like their story lines simple might like to acknowledge, including those who blog. Whatever the various causes, the article ends on a chipper note via Chip Mahan, who has started two de novos, the last one in 2007, when he had to have a face-to-face meeting with Shiela Bair, then FDIC Chairman, to sell her on why his proposed bank should receive insurance of its deposit accounts from the FDIC. Although Mahan does not disclose it in the article, our investigative reporters have informed us that he attended the meeting with The Care Bair armed with five cloves of garlic, a portable flame thrower, a mirror, and a Vampira® model hammer-and-stake combo he picked up at Walmart (gratis, given Walmart's love affair with Bair).

Mahan thinks the future is bright for new banks — if they're willing to adapt to changing consumer demands. "You've got to be focused on technology and deliver products and services with a beautiful user experience," he says. "Because at the end of the day, who wakes up and thinks about their bank?"

At the end of the day, I don't wake up. That's usually what I do at the beginning of the day. On the other hand, when I do wake up, I wake up thinking about my bank. Maybe that's because they pay me obscene amounts of moola to do so. May be it's because I've always been what my elderly neighbor, Mrs. Scooter, characterized as "such an odd boy." Maybe its because I confuse "my bank" with "Tyra Banks." Maybe it's all of the above.

At any rate, whatever Mahan's smoking, I want a toke, because the second article by Mr. Sablik to which Mr. Price linked discusses the practical challenges of steering your new bank barque through the storm-tossed shoals off the FDIC's shoreline. Among the eye-popping (to the uninitiated) obstacles are the length of time (6 months to a year) and cost ($1 million is not an outrageous estimate), as well as the necessity to prove to people who don't currently, and likely never have, run banks that the community in which you'll locate the bank is not already adequately served by the banks operating in the community, and the fact that you'll have to raise and keep in place enough capital to fund a year's worth of cross-border smuggling activities for the Sinaloa Cartel ($15 million to $30 million). I recall when $2 million might allow you to blow and go with a de novo, but then, that was when folks thought bell bottom pants, Nehru jackets, and Madras shirts were cool.

This article ends with a less rosy view of de novo prospects from Fred Green, CEO of the South Carolina Bankers Association.

It can be challenging to recruit executives and directors for a new bank. "Historically," Green says, "a lot of folks aspired to be on a bank board and be part of a founding group. Serving on a bank board was an honor." Today, the hurdles to starting a new bank seem higher and the rewards less enticing. From 2006 to 2010, the average return on assets for community banks less than five years old was negative, according to a 2012 FDIC report. Older and larger banks managed to earn positive returns on average during that period, though they too suffered a hit.

"It’s harder to find people that would have the energy and desire to be involved in a startup today," says Green.

Following November's election results, you might have a better chance of finding them in Belize than in the U.S., because whichever of the two front runners for the Oval Office wins, the dearth of de novos will not be the only cause of community bankers seeking a warmer clime, especially one where English is the first language, taxes are extremely low, Cuban cigars are duty-free, and you're upwind from air currents that might carry nuclear fallout from D.C.

The CFPB's Worst Nightmare: The US Constitution

A couple of months ago, we discussed the possibility that a case involving the CFPB and PHH Mortgage might go against the CFPB, including a potential finding that the CFPB's very existence (as created by the Franken-Dodd Monster) is unconstitutional. The prior blog post linked to a Forbes article by former White House official Susan Dudley in which Ms. Dudley listed the various arguments on which a finding of unconstitutionality could be based.

Long-time bank lawyer (and current Dorsey & Whitney partner) Joe Lynyak gave his analysis of the same topic in an article in the Westlaw Journal's "Bank and Lender Liability" entitled "The Constitutionality of the CFPB —An Exegesis." That's an imposing title, but at only four pages, it's worth a read, especially if, like this blogger, you've been wishing upon a star that the CFPB might, at best, take a long walk off a short pier, or, at worst, get its extremely large, flapping wings clipped.

Joe lists a number of the same arguments against the CFPB that Ms. Dudley also discussed, including:

• All authority is vested in a single director with extraordinarily broad power, no oversight by a board or commission, and tenure that can be shortened only by removal by the president "for cause."
• Unique existence as a bureau" within the Federal Reserve, an independent entity whose budget (and, therefore, the CFPB's budget, which the Federal Reserve is mandated to fund) is immune from Congressional oversight or control or, for that matter, any oversight or control by the FRB.
• "Broad administrative authority to examine and supervise a wide range of consumer financial firms, with administrative hearing authority to enforce orders requiring corrective measures. Favorable hearing determinations by an administrative judge can be summarily reversed by the director."
• The ability of the bureau to exercise such broad enforcement authority over any "unfair, deceptive, or abusive act or practice," which "need not be illegal; instead, it may be merely unfair in the view of the bureau."
• The ability of the CFPB ignore the due process rights of people and entities subject to its jurisdiction by regulating via enforcement orders — a practice that in many cases obviates the responsibility to extend the protections afforded by the Administrative Procedure Act (the In every instance
  governmental agency power has remained subject to acceptable levels of oversight by the three branches of the federal government —at least until now. APA affords the opportunity for public comments and dialogue prior to the exercise of an
  agency rulemaking)."
• The CFPB's"position that statutes of limitation do not apply to its enforcement activities, with the result being that targeted institutions have been sanctioned for conduct occurring well beyond the five-year federal agency statute of limitations governing agency enforcement actions that seek monetary penalties."

As to the PHH case, Joe does what many weak-kneed commentators often fail to do: he offers an actual opinion.

As to whether the CFPB’s current structure can withstand a constitutional challenge¸ it is suggested that the correct answer to that question is no. Although the necessities of a federal agency’s administrative mission concededly require flexibility, in the CFPB’s case the outer parameters of permissible agency boundaries have been far exceeded.

A review of the somewhat patchwork set of judicial decisions addressing this issue indicates that courts balance several factors against an infringement on the president’s right to dismiss agency officials without cause.

[...]

In light of the clear efforts of consumer proponents of the CFPB to statutorily insulate the bureau from any meaningful oversight, it is very probable that the CFPB will be found to be unconstitutionally structured.

After dropping that "hot sports opinion" on his audience, he then offers some insight into what festivities might ensue as supporters and opponents of The Adjustment Bureau attempt to either resurrect it or to decapitate it, drive a stake through its heart, and set the remains on fire.

Importantly, should the CFPB’s structure be struck down, the bureau’s prior actions and interpretative pronouncements (now spanning more than five years in length) arguably will become void. Also (and absent judicial mischief that might create a solution to the absence of a reasonable degree of executive oversight), any corrective measures to remedy a constitutional infirmity relating to the CFPB must be considered and adopted by Congress.

Finally, if the CFPB is found to be operating on a constitutionally infirm basis, legislative efforts to defend the bureau will encounter an interesting role reversal.

In the past few years, critics of the CFPB have attempted to amend the bureau’s statutory structure. These attempts have been soundly defeated by supporters who have effectively filibustered any such efforts. (The most frequent attempts for statutory changes have involved proposing a commission form of agency governance, as well as imposing congressional oversight through the budget process.)

Even though it might be relatively simple to minimally modify the CFPB’s structure in order to pass constitutional muster, opponents of the bureau could filibuster any attempt to cure the statutory difficulties without obtaining the concessions demanded by critics. Although this result seems highly likely if the CFPB is found to be unconstitutional, the belief that the bureau has brought about a paradigm shift in consumer protection may prevent consumer advocates from both anticipating this result and compromising sooner rather than later.

I'd pay for tickets and movie theater popcorn prices just to see all that unfold.

On Independence Day, it's pleasant to contemplate the possible demise of a tyrannical overlord, especially one whose minions clothe themselves in the mantle of "doing god's work," the US Constitution be damned.

Countrywide: Closed For Good

Maybe it's the fact that in another six months or so, the regime change here in the Land of the Free will lead many of the the current crop of enforcers in D.C. out the revolving door and into the loving arms of Big Law, where those wet behind the ears begin the learning curve with 15 grand a month of pocket money. Maybe it's the fact that they knew all along that they were pushing the envelope and, when called on it, they simply shrugged, smiled, and said "Ya' got me!" Whatever the reason, the U.S. Justice Department appears to be throwing in the towel several years earlier than my initial expectation, as a result of the US Second Court of Appeals decision that squashed the Justice Department's fraud claims against Bank of America that arose out of the former Countrywide Mortgage's so-called "Hustle" subprime loan program.

According to The Wall Street Journal, this week, the Justice Department sent letters to various former officers of Countrywide, including the infamous Angelo Mozilo (aka "The Tan Man"), that told them that Justice would do some justice by not filing any civil law suits against them.

Government lawyers sent letters within the past week to Mr. Mozilo and other Countrywide executives advising that the investigations against them were closed, and thanking them for their cooperation, these people said.

“We are pleased to see this investigation concluded without any further claim against Mr. Mozilo,” said his lawyer David Siegel.

I'll bet they are pleased. Mr. Siegel was sufficiently courteous to refrain from thanking the Justice Department back for providing years of legal work for defense counsel that has now resulted in the close of the investigation without criminal charges or civil lawsuits being pursued. For litigation attorneys, this is called "stroking the long ball." And, as ESPN's Sport Center loved to tell us, "Chicks dig the long ball."

To the "Occupy [Insert Venue Here]" crowd, this latest outrage will be further proof that the system is rigged in favor of fat cats and the bureaucrats who stroke them. On the other hand, those of us with actual experience in this area saw this coming years ago. From a September 22, 2009 blog post that discussed the outlook for folks like Angelo ever doing the perp walk:

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.

If you want to become completely bent out of shape about the relative lack of suffering inflicted on Wall Street and its cronies over their role in the meltdown, consider the fact that no one in Congress has had their wrists slapped, either. Barney Frank and Friend-of-Angelo Chris Dodd even managed to get their names emblazoned on a piece of "financial reform" legislation for all eternity, masking for future generations (who seem to have short memories in any event) the major roles those two actors played in the drama. When it comes to skating, it seems to me that most of the culprits had their blades finely honed.

Let's hope that the late British physician, Havelock Ellis, was wrong when he said “Every society has the criminals that it deserves.”

No Mystery Why CUs Not Filing More SARs

A recent post on the allegations by FinCEN director Jennifer Shasky Calvery that credit unions are lackadaisical about filing suspicious activity reports led not only to noisy "un-subscriptions" to this blog by some apparently offended credit union readers (usually, only a post bashing Elizabeth Warren causes that reaction), but an actual thoughtful and civil response from long-time credit union attorney Hal Scoggins. Mr. Scoggins failure to adopt the usual "shoot-the-messenger" approach to blog reading marks him as a man of taste and discrimination, as does, obviously, his interest in reading the deep thoughts of Jack Handy this blog's author, a man who a once received an email from a New York-based think tank that advised him that he could be a "thought leader" if only he weren't so flippant. Dream on!

Hal gave me permission to post his response here, so here it is (edited to remove an favorable comments about me, since I am currently positioning myself as the "Anti-Trump" foretold in the Book of Revelations):

A quick comment on your 9/17 post about Jennifer Shasky Calvery’s comments on CUs that haven’t filed SARs or CTRs.  I read her comments and initially thought, “Wow, that’s scary." A “statistically significant” number of credit unions have not filed any SARs or CTRs.”  But it’s a little less scary when one considers a couple of points about credit unions: 

* The NCUA’s call report data for June 2013 shows that there are 6284 credit unions in the United States.

* The same call report data shows that 1892 of those credit unions have total assets under $10 million.   (30% - that’s statistically significant.)

* Average asset size of those 1892 credit unions is just over $4 million.

* Average number of members:  826

* Average number of employees:  1.4 FT and 1.2 PT

I could not pull pure cash data from the NCUA data, but I looked at a couple of random CU’s call reports; one $2.5 million and one $1.5 million.  They had cash on hand of $26,000 (yes, thousand) and $15,000, respectively.  I would guess that a statistically significant number of those credit unions do not offer checking accounts.  Only 287 offer credit cards, and I was shocked the number was that high. 

When the CU has only $4 million in total assets, 800 members with an average account balance of about $5000, and there is probably only $40,000 in cash in the entire CU, there are probably not going to be any times where someone is bringing in or taking out $10,000 in cash (no CTRs).  Plus, you don’t offer enough services to be that useful for criminal activity, and there are probably not many times where the member is doing a transaction that the credit union doesn’t have enough knowledge about to take it out of the realm of suspicious activity (no SARs).  If 30 percent of CUs in the country fit that profile (and it appears they do), it is a lot easier to see how a “statistically significant” number haven’t filed any SARs or CTRs for a couple of years.

Valid points, and they ought to be considered by all fair minded folks without an axe to grind, which, I think, leaves out 99% of commercial bankers and at least one bank law blogger who is more interested in eliciting a drive-by guffaw than being a "thought leader" (whatever the hell that is).

In a later email, Hal made the following additional point, which is also telling.

My reaction now (after doing that tiny bit of research) is – you’re the director of FinCEN, and you can’t have one of your flunkies do 10 minutes of research to provide some context before you make a speech like that? Or better yet, require the flunkie to do 10 minutes of research to provide some context at the time they actually provide you with the info for your little sound bite?

Research? We don't need no stinkin' research! We're the federal "guhment" and we've just been making it up as we go along since 1789.

Besides, Calvery needs food for FinCEN's pet goat and she wants all financial institutions, taxable and tax-free, to get on the stick and start winnowing the forests. SARs: it's what for dinner!

It’s Not Your Daddy's Bank Anymore (Or Yours Either, For That Matter)

After an entire summer blissfully not blogging, what better way to ease back into the humdrum routine of enraging and/or boring my jaded readership than by letting my friend, former community banker Pat Dalrymple, do the heavy lifting for me with a guest post.

Pogo Possum, in Walt Kelly’s classic comic strip, once intoned, “We have met the enemy, and he is us”.

In 1973, I was lucky to be hired to run a de novo thrift in Aspen Co. Our chairman was a young guy, a graduate of the Wharton School of Business at Penn, who was fortunate enough to retire at 40 and fill his time with interesting projects.

While I was getting the doors of the business open, he attended the Colorado state S&L convention. Upon his return, my friend Mike paraphrased Pogo: “I’ve met the enemy, and it’s us”.

Not much has changed in 42 years, especially at the community banking level.

But, some leaves are rustling. We’ll see if it develops into a wind of change.

It’s noteworthy that, almost to a man (and there are precious few women in the job) all of the CEO’s of small banks were comfortably ensconced in the position before the Great Recession. Now, they’re riding off into the sunset, or going to that Great Loan Committee in the Sky. Maybe traditional bank think will go with them.

Here are a couple of revealing conversations I’ve had in the past month or so:

A banker that I respect who’s at the top of the depth chart for his position recounted an anecdote from the security line at Denver International Airport. Going through this procedure is an experience that he detests, so he was miffed to see a young man ahead of him in line chatting up and laughing with the TSA agent. “Who has a friendly tete a tete with a TSA apparatchik?”

Then, he realized that the kid grew up with 21st century airport security. He’d never experienced wandering an airport at will, and greeting friends at the gate, so it never occurred to him to get all worked up over a normal situation. So it will be, my friend realized, with banking. The excessive angst of bankers over regulatory risk and oversight will fade with the older generation.

The second conversation involved a leading banking consultant who asked one of his small town bank clients if he was leaving the business, like many of his peers, in disgust as a result of Dodd-Frank and the CFPB.

“Why would I do that?” , was the response. “I’m hiring smart young people who never knew how it was. They’re taking the heat for me, and they think it’s just another day at the office.”

Whether us old fogies are riding into the west, or, more appropriately, sinking like mammoths into the swamp, there’s a new generation that will hopefully not be bound by the inherited thinking of several generations of bankers.

Maybe they’ll understand what community bankers have missed since Bonnie and Clyde were making premature withdrawals: The business of banking isn’t lending money; rather, it’s the function of making a profit on the movement of money.

Nothing illustrates this disconnect better than recent meeting I had with an account exec for a national factoring firm. His firm has been frustrated for years by the failure of the banking system to capitalize on his company’s ability to serve banking customers that either don’t meet the banks’ lending criteria or the financing format isn’t offered by the bank. He said he’s suggested setting up a consortium of banks to funnel un-fundable business to his firm, and has urged individual banks to use the resource, all to no avail.

Non-institutional lenders like this aren’t asking for freebies. They pay very well for referrals, and they do all of the work. It’s about the easiest way to make money on money movement imaginable.

At the end of the meeting, he casually dropped a comment that encapsulates the whole sad state of banking’s perception of itself. His company got a bank referral, and duly paid for it. But, he said, “We had to pay the fee to the banker’s wife, because it was against regulations for him to accept it.”

What?

Sure, this was motivated to some degree by greed on the gentleman’s part, but probably the situation was due more to a cultural mindset than to avarice. It simply didn’t occur to the banker that he had a profit center at his fingertips, nor, most likely, would it ever.

Every bank should have a Non-Conforming Lending Division to move money from other sources at a profit. When a customer doesn’t qualify, that potential source of revenue should be ushered across the hall to the bright young lady that runs the NLD, to tap one of a stable of non-institutional lenders.

And every community bank should have a robust mortgage brokerage operation (yup, I used the “B” word, right here in front of bankers). Today, the playing field is absolutely level; mortgage wholesalers have exactly the same rates and programs as the big players, such as Wells and Chase, and when the loans are funded by the lender, rather than the broker, there’s little regulatory risk, and, of course, no asset risk.

If a bank CEO would take the trouble to total up the money left on the table for, say, the prior 12 month period, it would be hard to explain to the stockholders why so much revenue was spurned. And, I assure you, it’s inevitably a big number.

We continue to hear about the mass extinction of community banks. Maybe it’s true.

After all, if you stand long enough in the swamp, you’ll sink into fossilization, no matter how big your tusks are.

Sabbatical

Other than holidays and brief vacations, I have not taken a break from this blog in over a decade. It's time. This blog is going on summer vacation.

Have a great summer.

The Mistress of Spin

A reader recently emailed that she was surprised by how brazenly Elizabeth Warren speaks out of both sides of her mouth. The specific event that caused her incredulity was Warren's initial public support of regulatory relief for community banks and her subsequent assertion that community banks didn't need regulatory relief because they were doing just fine financially.  After telling her that speaking out of two sides of a mouth is a gift commonly demonstrated by those born with a forked tongue, I pointed out that Ms. Warren's been stretching the boundaries between lies and damned lies for, literally, years.

Back in 2008, she went on the warpath (this was in the days before anyone called her questionable claim of Native American ancestry) over what she claimed on her blog (yes, Liz was a blogger) was a proposal by national banks to claim preemption from all state foreclosure laws. The fact that those banks were claiming preemption only over extended foreclosure moratorium and similar laws, not the general binding nature of each state's foreclosure process law requirements, didn't enter her discussion. Instead, she made this spurious allegation as to the position of the banks:

State laws are pre-empted whenever a national bank holds the mortgage, so the states can't make them follow the local rules. Pre-emption has been used successfully by the credit card companies to fight off state regulation, so now the banks want to escape local restrictions on foreclosure as well.

That was not the position of the banks regarding foreclosure laws at the time. It was also not the position on national bank preemption of either the OCC (which issued preemption regulations and opinions) or of the federal courts. In fact, the then-applicable OCC regulation specifically stated that state debt-collection and foreclosure laws were not preempted. Warren's characterization that the banks were arguing that they were preempted from all state foreclosure laws and, therefore, could, apparently, seize homes at will, was false. Of course, as a practical matter, some national banks did, in fact, seize homes without due process (even those on which they did not hold a mortgage), and even the owner's pet parrots, but that was through incompetence, not intent.

While intellectual dishonesty has served her, and will continue to serve her, well as a US Senator, Ms. Warren's ability to let no fact stand in the way of a populist narrative should come as no surprise to anyone who's been paying attention to her public pronouncements for any length of time. I mean last year, she blamed the 2008 financial meltdown on Ronald Regan. Next up: ISIS was created by Billy Graham.

Jamie Takes His Shots; Sheila Gets Constructive

I guess Jamie Dimon just got tired of taking shots from people he considers to be, intellectually speaking, a few fries short of a Happy Meal. While sometimes criticized for being an apple polisher for the left, he recently made it clear to an audience in Columbus, Ohio, that he's an equal opportunity "disparager" of politicians from both sides of the aisle.

He earned applause for comments on the importance of improving urban public schools, and the political ineptitude in Washington, D.C., hammering policy-makers on several occasions for "reams of bad policy."

"I don't blame Republicans or Democrats," he said. "I blame them all."

I guess Jamie's still bent about being kicked around in a House hearing a few years ago. He's usually treated with kid gloves by most pols, so it's understandable that he was shocked when someone actually threw a high hard one at his head in public. Still, his blame game has a lot of players.

He also had blunt advice about building a strong company.

"Fire the a--holes," he said to laughs. "They will destroy your companies."

OK, so if you fired all the a--holes in Congress, you'd have a barren wasteland. Come to think of it, that sounds pretty much like what we have with all the a--holes still in place. I guess that also applies to most big banks, as well, though, doesn't it?

A--holes: We're what made America great.

While Dimon's remarks didn't come as a shock, recent remarks by another character who made her bones during the last banking meltdown did stun this observer, because they actually made sense (paid subscription required).

[Sheila Bair] [t]he former chairman of the Federal Deposit Insurance Corp. is calling for a legislative solution she argues could significantly diminish regulatory burden on community banks: giving regulators the power to exempt institutions with less than $10 billion of assets from existing and new regulations.

Community bankers are lobbying for specific exemptions from specific provisions of law. Bair thinks that approach is too narrow.

Bair said bankers should push for a broader solution, one that could fix many of those problems and future ones that arise. She said too often regulators feel like they have to start applying regulations geared for larger institutions to smaller ones.

"There is this fear that if you don't do something you are going to look weak if you aren't dealing with the small banks the same way as big banks," she said.

But if Congress provided an explicit directive to regulators to consider granting small banks an exemption from rules they implement, that trend could begin to turn around. It would allow regulators to craft streamlined rules for small banks, effectively giving a stamp of approval to a two-tiered regulatory system, a concept that many lawmakers already endorse.

 "This might inform more of a two-tiered approach," Bair said. "It's clean, simple, easy to write… I don't know why anyone would object to it."

It would also empower regulators to act rather than having them return to Congress asking for an exemption. That is currently the case with the Volcker Rule, a Dodd-Frank provision that places limits on bank investment in private equity and hedge funds. Fed officials have asked Congress to exempt small banks from the rule.

As Bair also points out, her suggested approach seems to take the subject of community bank regulatory relief out of bitter partisan arguments over "rolling back" the "reforms" of Franken-Dodd. Even Princess Fauxcahontas might support such an approach, especially if she's on her meds when it comes up for a vote.

Critics raise legitimate concerns, including whether $10 billion is too low a threshold, and whether exempting broad swaths of regulations from such legislative coverage could gut the effectiveness of the "relief" intended to be granted to smaller institutions. Other commentators raised my major concern: regulatory discretion means that regulators can decide not to act or to act ineffectively. They could also use their discretion to act in ways that promote something other than what objective observers would consider a proper goal (such as punishing gun dealers, online dating services, porn stars, payday lenders, or that annoying guy in the back of the bus who won't give up his seat to an obviously expectant mother).

Even with those concerns, her proposal is worth considering. Since, in the past, we've dumped on her like a DFW public works dump-truck with a load of sand-and-salt barreling down an icy freeway in February when she acts in ways we think may be "unwise" (Can you say "industrial bank moratorium"? I knew that you could!), we'll give her her props when she casts a pearl before this swine.

All The Mail That's Fit To Print

It's been awhile since I dipped into the BLB mailbag. It's about time to see what kind of flack I receive.

First up is an email I received from a gentleman who referred to himself as the Director of Public Relations for Citi. Without hurling a single epithet, he informed me that the dispute with a lawyer/house renovator whose home was broken into by contractors for CitiMortage was "resolved" on December 10, 2014. He did not indicate what that "resolution" might have entailed, but we assume, based upon the nature of the dispute ("Show Me The Money!"), it involved coin of the realm passing from Citi and/or its contractor to the homeowner/attorney. While Toni Braxton may yearn for her heart to be unbroken, we aren't aware of any way in which you can unbreak into a house.

Another recent blog post on a scholarly article written by University of Alabama Law Professor Julie Anderson Hill on the legal cunundrum for banks trying to bank state legal - federal illegal marijuana-related businesses in Colorado, I received an email from Professor Hill. She corrected me on the nature of the "Mary Jane" credit union formed in Colorado, Fourth Corner Credit Union. I thought that it was the first special purpose "Cannabis Cooperative" authorized under Colorado law. Instead, Fourth Corner is a state chartered credit union. Because of quirk's in Colorado law, it may open its doors prior to receiving deposit insurance from the NCUA (a processes that could take years), although its still needs approval by the Federal Reserve System of a master account. The organizers think that this approval process by the Fed is a sure thing, but neither Professor Hill or I are as confident. On the other hand, it's not that there is any precedent on which to base an opinion, so we're just going to have to wait and see. The organizers had, according to press reports, hoped to be up and running by January 1, 2015, but that hasn't occurred. Stay tuned.

Finally, a financial institution trade official asked if I thought that Maxine Waters had personally drafted the press release that contained the following words, allegedly spoken by her:

“The disparate impact standard is absolutely essential to providing for fair housing throughout our nation. I sincerely hope that the Supreme Court will make the right decision in this case by affirming that the Fair Housing Act unequivocally prohibits actions that have the effect of disproportionately denying housing to marginalized communities,” Waters said Friday.

“Failure to do so would be contrary to congressional intent; it would overturn decades of major progress in fair housing; and would be particularly devastating for minority individuals and communities,” she added.

Waters said unchecked discriminatory housing practices, such as subprime lending to minority communities, in the time leading up to the mortgage crisis continue to prevent working class families from joining the middle class.

“The disparate impact standard under the Fair Housing Act has been effectively used for decades to weed out practices that create barriers to housing for people on the basis of factors like race, color, religion and gender,” she said.

Given her previous problems in the socialization/nationalize arena, we are both doubtful that Rep. Waters wasn't acting as a mere sock puppet for the guiding hand of a professional PR hack. Then again, we could be wrong. Either way, we're rooting for the visiting team in the disparate impact game being played before the SCOTUS.

Surprisingly, there were no anonymous emails threatening my life or worse, regulatory retaliation. Perhaps with the spring thaw, the wombats and trolls will again be out in force.

Hiatus

While there is plenty of blog-fodder to bleat about, including the latest overreach by The Adjustment Bureau, whose rationale for exercising control over American businesses has broad implications for industries well beyond banking, I've decided to take off the next two weeks.

March 1, 2015 will mark eleven years of offending various attorneys, bankers, bureaucrats, cockroaches, 1/32 Native American wannabes and the bank-haters who love them, and other assorted fruits and (wing)nuts, both foreign and dometic. That's a long run of non-stop snark for someone who, notwithstanding the occasional angry email accusation, actually practices law for a living. Also, I have a nephew who's a New York City police detective, and this weekend's assassination of two NYPD police officers and the public response to it from both sides of the political spectrum makes me want to take a break during the season of Advent (and Chanukah), to decompress and reassess, and to refocus on what is actually important in life.

In the spirit of Christmas, here's a story about another heartless bank in the heartland and the unsuspecting public that it abuses.

Have a wonderful holiday season.