BankThink

It has taken me three days to respond to your April 27, 2009 article titled "FIs Won't Do Well on Treasury 'Stress Test'." I must be an idiot because I do not see the validity of these comments as it relates to my credit union!

With the unpredictable financial markets, credit unions are poised to significantly grow their share of residential mortgage lending activity in 2009. In the past, borrowers were bombarded with telemarketing calls, junk mail, and TV advertising from brokers and retail lenders. Today, however, that "noise" is getting quieter, and borrowers are growing wary of working with big banks and mortgage lenders in the wake of the current market volatility.

The Senate Banking Committee is holding a hearing on how to regulate institutions that are too big to fail. The first panel, on which Federal Deposit Insurance Corp. Chariman Sheila Bair and Federal Reserve Bank of Minneapolis President Gary Stern testified, addressed the timing and composition of a systemic resolution authority. Now the second group of witnesses has assembled at the table.

This morning witnesses from federal bank regulatory agencies and from academia will take questions from the Senate Banking Committee on ways to regulate "too big to fail" institutions. Committee members have recently expressed wariness over the Federal Reserve's ability to handle a job as a systemic risk monitor, and today's hearing should further illuminate the committee's intentions to address the regulation of systemically important firms.

Bank stocks´ movement ahead of Thursday´s planned release of the Treasury Department´s stress tests results is giving new meaning to the familiar adage, "buy on the rumor; sell on the news." The financial press this week plunged full force into its speculation on which banks "passed" the government´s test and which did not. Despite the variety of guesses they´ve made, news outlets have been able to agree on a few likely tidbits, such as Citigroup´s apparent need for billions of dollars in additional capital. But Citi´s stock is up for the second day in a row. Why?

Since late last year, state and federal regulators have concluded in separate reports that current loan modification plans aren´t working, but it´s amazing how long they´ve taken to look for a reason why. As they bickered, however, private sector monitoring of loan mods accelerated.

The banking industry expressed grave fears over the mortgage cramdown legislation that failed in a Senate vote last week, but a post-mortem on the scene makes that anxiety seem a little overhyped. With so many different groups vying to kill the legislation, the vote last week was never a nail-biter.

They may have beat analyst expectations last week, but Visa Inc. and MasterCard Inc. aren´t quite in hog heaven.

First, there were rumors of planned leaks this weekend, then anticipation grew that the big news would come Monday or Tuesday, but now the truth is out: The stress tests "results," whatever they may "be," aren´t going to be released until Thursday. And not until after the market closes, at that. For the better part of the week, bankers and other market participants will have to distract themselves from the anxiety of the wait with the antics on Capitol Hill. The House is planning to vote on Rep. Barney Frank´s mortgage reform and predatory lending bill, while the Senate hopes to vote on Sen. Chris Dodd´s legislation increasing the FDIC´s borrowing authority. Dodd also wants to bring his card bill to the Senate floor.

Editor's Note: Credit Union Retired Executives (CURE), a resource for free, confidential management advice, is offering Credit Union Journal readers a glimpse into its files for CU Journal's new "Advice from the Brain Trust" feature. CURE will select from among its user questions and publish the advice that was offered in response. CURE responses are put together by the group's think tank of retired credit union leaders.