BankThink

Calls from various constituencies in the business to establish a single mortgage-backed security are sensible. But why stop there?

Receiving Wide Coverage ...Mixed Bag: The FDIC's quarterly banking profile showed loan growth (encouraging), continued loan-loss reserve releases (nice, but unsustainable) and continued squeezing of net interest margins (not so good) for the second quarter. "The lack of wind in banks' sails ... helps explain why [stock] valuations are downbeat," says the Wall Street Journal's "Heard on the Street" column. Straight news stories in the Journal and Washington Post.

The political game in Washington might not be one former SIGTARP Neil Barofsky was willing to play, but it suits Wall Street lobbyists perfectly. What are we, citizens and taxpayers, supposed to do now?

OK, here at DFRW we may get wonkish about the nuts and bolts of the Dodd-Frank Act, but let’s face it, the topic unlikely to fire up passion in the average Joe. It’s unlikely we'll hear much about the legislation at the Republican convention in Tampa this week. "Instead, count on hearing in more general terms about overregulation and the burden it imposes on small business," writes American Banker’s Kevin Wack.

Midsize banks will most likely not have to go through stress tests mandated by Dodd-Frank until September 2013. The rulemaking on the tests has yet to be finalized and regulators want to make sure those banks have enough time to prepare.

Bain Capital's relationship with auditor PricewaterhouseCoopers, though not necessarily inappropriate, is still too casual and in need of more monitoring.

Issuers should develop strategies to make their account the primary one in a consumer's existing wallet and on new payment tools offered by companies like PayPal or Square.

Receiving Wide Coverage ...The M&T-Hudson City Deal: It's the biggest bank merger announced this year, and one of the biggest since the dark days of 2008 (either No. 7 or No. 11, depending on whether you rely on the Journal or the FT, respectively). M&T, based in Buffalo, will pay $3.7 billion in stock for the struggling Hudson City in Paramus, N.J. … And it still feels kind of weird to describe Hudson City as "struggling." Remember, this was the mortgage lender that, after the bubble burst, received widespread praise for having just said no to subprime and stuck to old-timey, fuddy-duddy practices like verifying borrowers' incomes. (In 2008 Jim Cramer proclaimed Hudson City CEO Ron Hermance "the George Bailey Banker of the Year.") But mortgage lending entails hazards other than the borrower not paying you back, such as the borrower paying you back sooner than expected, and interest rate risk has bedeviled Hudson City of late. Aaron Elstein of Crain's New York Business recaps how forces largely beyond management's control (the Fed's zero interest rate policy, the expansion of Fannie and Freddie into the lower reaches of Hudson City's jumbo mortgage market) led to "a sad end" for this local savings bank. … The Journal has a short profile of M&T Chief Executive Bob Wilmers, another stalwart old-school banker. The Times' Peter Eavis notes that the all-stock deal will help the buyer build its regulatory capital ratios, which have lagged those of other regional banks. Reuters' BreakingViews raises the possibility of an unsolicited counter-bid. And The Washington Post places the deal within the broader trend of consolidation among small and midsize banks. Lastly, we had to chuckle at the anticlimactic headline for this press release: "Hudson City Bancorp, Inc. Board of Directors Under Investigation [gasp!] … by Glancy Binkow & Goldberg LLP." It's a plaintiffs' law firm, fishing for clients among Hudson City shareholders who may have been upset by Hermance's revelation on the conference call that M&T approached his bank and "it was not a bidding process at all." Fair enough, in any company the board certainly has a fiduciary responsibility to seek the best value for shareholders, but for a second there we thought it was the SEC announcing that "investigation." Sensationalism is unbecoming, counselor.

Thrift holding companies, industrial loan companies and other limited-charter financial institutions will be subject to a rule, mandated by Dodd-Frank, that will require parent companies to act as a "source of strength."

The Dodd-Frank Act gives the Securities Investor Protection Corp. a new role in unwinding failed financial companies.