BankThink

The United States needs a new, 21st-century model for identifying, monitoring and reporting risk at banks. The model must be forward-looking, not backward-looking as the Camels ratings are.

Receiving Wide Coverage ...AIG vs. B of A: The battle over Countrywide's bad mortgage-backed securities continues as the New York State Supreme Court is set to hear arguments on Monday over whether the $8.5 billion settlement Bank of America reached with investors over the soured investments should be approved. Insurer AIG is leading opposition to the settlement, believing its sum should be much higher. The Journal calls the hearing "part of a broader battle … over which company should bear the brunt of losses suffered during the financial crisis." AIG is also pushing B of A to settle its separate $10.5 billion claim over mortgage-backed securities losses and "people familiar with the matter" tell the paper the insurer would drop objections to the investor settlement if the bank were to negotiate deal on those claims. The FT, which makes a point of noting that AIG and B of A collectively received $225 billion in government bailouts during the financial crisis, says denial of the settlement could ultimately saddle B of A with a bigger bill while approval, though "an important step forward" in the "subprime mortgage mess," is likely to be met by an appeal from AIG. This Lex column elaborates on what settlement approval would mean for the bank: "B of A faces other cases, but if this settlement stands, it will go a long way to clearing out the crisis-related clouds that have followed the bank."

Credit Union Journal's Frank J. Diekmann discusses rare words, the other board issue, privacy and more.

Jim Hawk, president of IWS Group, explains why you should not let online self-service tools take away from the member interaction experience.

John Matonis explains why credit unions are rightly worried over Foreign Account Tax Compliance Act.

Liberty Deserved? A number of the comments on AmericanBanker.com and BankThink this week were strikingly sympathetic to digital currency issuer Liberty Reserve, which was indicted for alleged money laundering, and its customers. These readers were outraged that the authorities came down so hard on the Costa Rican outfit after serving megabank HSBC with a mere fine for similar money laundering charges. They were also skeptical of the government's explanations of its stance on virtual currencies and fearful for Bitcoin entrepreneurs and users who feel increasingly threatened by government encroachment. Commenting on American Banker Washington Bureau Chief Rob Blackwell's Q&A with Financial Crimes Enforcement Network Director Jennifer Shasky Calvery, one reader questioned her description of Liberty Reserve as the biggest money laundering operation ever. "Did you ask about her selective memory? HSBC's 'pervasively polluted' culture involved more money than Liberty Reserve, for instance." Another commenter saw ulterior motives in the prosecution: "The action against LR [had] nothing to do with money laundering. It was to undermine the growth of Bitcoin which [the government] considers more of a threat than the much greater money laundering by the likes of HSBC (which has more blood on its hands than a 1,000 LRs)." Our own "Monetary Future" columnist, digital currency expert Jon Matonis, noted that Liberty Reserve has been around since 2001, and wondered why the U.S. waited so long to prosecute the company. "Why are their 'crimes' of providing a neutral value transfer service more egregious than they were before?" But at least one reader found the government's position eminently reasonable, writing, "money transmitters need to identify people they transfer money for, and to report suspicious activity...we will either remain serious about money laundering/terrorist financing issues, or we can revert back to our pre-Sept 11 head-in-the-sand mentality." In his own column, Matonis talked to a venture capital fund dedicated to Bitcoin startups that's hired former Treasury officials as advisors, underscoring the increasing importance of compliance smarts to such businesses.

Under the Dodd-Frank Act, the Consumer Financial Protection Bureau had to outline requirements to ensure lenders adequately assessed a borrower's ability to repay a loan and create ultra-safe "qualified mortgages" that were protected from legal liability. Despite the challenge, the mortgage rule revisions the agency provided were able to please both bankers and consumer groups.

The 2010 Dodd-Frank Act gave responsibility to the Financial Stability Oversight Council to identify several nonbank financial companies as systemically risky.

The threat posed by Google's new Gmail money transmission feature will put the onus on banks to deliver the ultimate person-to-person payments experience, which only they can provide.

Receiving Wide Coverage ...More Time for Mortgage Modifications: The Obama administration's announcement Thursday that it will extend the Making Home Affordable Program for another two years comes "despite signs of revival in housing," the Times notes. The program, which gives financial incentives to lenders to modify the loans of eligible borrowers, "did not come near to fulfilling the administration's promise of relief for several million homeowners," according to the publication. As of March 31, the program had helped 1.1 million borrowers, although the administration initially had anticipated aiding three million to four million homeowners. The new deadline for the program, Dec. 31, 2015, aligns it with other mortgage relief that has been extended, including the Home Affordable Refinance Program and the Streamlined Modification Initiative, for mortgages that are guaranteed by Fannie Mae and Freddie Mac, the Times notes. New York Times, American Banker