BankThink

Consumers are regularly disappointed when they are drawn into accounts portrayed as "free" and then wind up being socked with fees and charges. Then they tell all their friends.

A compliance checklist for CEOs? That almost sounds like an oxymoron. Traditionally, bank CEOs did not give much thought to regulatory compliance unless something went wrong. However, as the regulatory environment continues to be enforcement-focused, bank CEOs must scan not only the economic landscape, but the regulatory one as well.

Mortgage securitization blew up the home price bubble and detonated the financial crisis. How?

Despite new threats of legal challenges or hopes for structural changes, this agency cannot be wished away. But banks can still influence the size and nature of the role the CFPB will play.

Receiving Wide Coverage ...Fight at Recess! President Obama defied Congressional opponents and made good on an earlier threat to make a recess appointment of Richard Cordray as the first director of the Consumer Financial Protection Bureau. His legal grounds for doing so are a matter of dispute (hinging, apparently, on whether Congress is truly “in recess”) and a court challenge seems likely. But media outlets called Obama’s move politically savvy, following Senate Republicans’ filibustering of Cordray’s nomination. “In one fell swoop, Obama managed to tap into voter frustration with Washington, distance himself from an unpopular Congress, buck up the liberal base and reassert himself as a latter-day Teddy Roosevelt, fighting for a ‘fair deal’ for the middle class,” Politico wrote. The headline of the Journal’s editorial pretty much summed up the writers’ take: “Contempt for Congress.” An analytical story in the Times led with the upshot for nonbank financial firms such as payday lenders: they’re fair game for the bureau now that it has a permanent head. But wait … some on the right are arguing that the CFPB’s authority over the shadow lenders doesn’t actually kick in unless the director is confirmed by the Senate. Oboy. It seems like there will be peace in the Middle East before this fight is settled. Additional coverage: Wall Street Journal, New York Times, Washington Post.

Presidential elections historically turn on the condition of the economy, and economic recovery has historically relied on a housing market recovery.

Customers might think banks are giving them great deals when they’re actually getting ripped off. Upfront charges, however annoying, are far preferable to hidden costs.

There’s a difference between projecting confidence and ignoring risk. In their public handicapping of mortgage litigation, bank executives have done the latter.

Receiving Wide Coverage ...Bane of America: The Los Angeles Times reports that Bank of America is calling in the credit lines of struggling small-business customers. "If they can't pay in full, they are being offered new repayment plans for as long as five years, but with far higher interest rates than their original credit lines had." How many customers is this happening to? The Times interviewed "several" and quotes two by name; a spokesman for Bank of America tells the paper the total number is less than six figures. The bank claims these clients were notified a year in advance that their lines would be cut off, though some of the business owners say they didn't get the memo. Whatever the scope of the bank's tightening, it reflects an underlying tension that many bankers will probably find familiar: regulators are on B of A's case to reduce risk, but there's also a perceived moral imperative to support small enterprises in a weak economy. "If small businesses are going to lead the way out of the economic doldrums we now face in this country, they must have access to capital," the Times quotes a small-business advocate as saying. Are small businesses going to lead the way? It's debatable. But if so, it's fortunate that B of A is an outlier here; according to the Times article, "most other banks, having tightened lending standards in the aftermath of the financial crisis, had eased credit last year as competition for small-business customers heats up, bank analysts say." Indeed, a Journal story cites data showing that, overall, small-business lending is up. Hey, speaking of outliers, we know a way B of A can console its aggrieved clients: give them complimentary front-row seats at the next Malcolm Gladwell success seminar! … In other Bank of America news, the lender suffered a setback in its litigation with the bond insurer MBIA. A New York state judge ruled that to claim damages, plaintiff MBIA need only prove that Countrywide, now a part of B of A, misrepresented the mortgage-backed bonds the insurer provided a credit "wrap" for. It needn't show the misrepresentations caused its losses. The Journal's "Heard on the Street" column notes that MBIA didn't get everything it asked for (the judge denied the argument that B of A should have to repurchase loans that are still performing, for example), but concludes that the insurer has "new leverage" in settlement talks.

The Federal Reserve Board and the Office of the Comptroller of the Currency issued announcements with respect to the mortgage consent orders stating that consumers who believe they were financially harmed during the mortgage foreclosure process by specific financial institutions in 2009 and 2010 can potentially receive compensation.