Open for Comment
A proposal by the Federal Deposit Insurance Corp. to host an auction of legacy loans that could receive bids from public-private investment funds. The FDIC would guarantee debt issued by the funds to add leverage to the purchases from banks. Published March 26 on the agency's Web site. Comments due April 10.SAR Sharing
A proposal by the Financial Crimes Enforcement Network that would let banks share suspicious activity reports with certain affiliates. The proposal would permit sharing within a corporate organizational structure, provided the affiliate is subject to regulation by Fincen or the federal banking agencies. Published March 9 in the Federal Register, with comments due June 8.
An interim rule by the Federal Housing Finance Agency to reform the capital classifications of the Federal Home Loan banks. Under the rule, the banks are considered "undercapitalized" if their capital is between 3% and 4% of assets, "significantly undercapitalized" with ratios between 2% and 3% and "critically undercapitalized" if the ratio falls below 2%. Published Jan. 30. Comment deadline extended to May 15.
An interim rule by the FHFA to let Fannie Mae and Freddie Mac increase their mortgage portfolios to $850 billion by yearend. The proposal would also require the government-sponsored enterprises to slash their portfolios, starting at the end of next year, until they reach $250 billion. Published Jan. 30. Comments due June 1.
The Office of the Comptroller of the Currency and the Office of Thrift Supervision published a report April 3 that found modifications that cut monthly payments have a lower redefault rate but are far outnumbered by loans that left payments unchanged or higher. Comptroller John Dugan said his agency would reiterate to national banks the importance of reducing mortgage payments.Fair-Value Accounting
The Financial Accounting Standards Board issued final rules April 2 that are designed to reduce the scale of other-than-temporary impairment charges and help institutions comply with mark-to-market accounting rules for illiquid assets.
Under the rules, if a company planned to hold assets until prices recovered or the holdings matured, a charge would be recognized only in the event of an expected credit loss. Even then, the charge would amount only to the credit loss.
The board also clarified that accountants do not have to look simply at the price at which an asset last traded to determine value. They may also consider cash-flow models that give a sense of how much an asset might earn.
The FDIC's inspector general released a report April 3 that gave the regulator poor marks for its oversight of Silver State Bank in Henderson, Nev., which failed in September. The report said the FDIC "could have exercised greater supervisory concern" about the $1.9 billion-asset Silver State. Even though concerns about high-risk loan strategies were raised as early as 2005, the FDIC gave Silver State a Camels rating of 2 as late as May 2007 and did not lower it until July of last year, the report said.
The FDIC announced April 2 that it had released its fourth-quarter report of state-by-state banking and economic conditions. The most recent version of its State Profiles summed up regional banking trends — including asset quality, earnings and loan concentrations — in all 50 states, Puerto Rico and the Virgin Islands.
Money Market Guarantee
The Treasury Department announced March 31 that it would extend its liquidity program for money market mutual funds until Sept. 18. The program was set to expire on April 30. Mutual funds must submit a program extension payment, an extension notice and other documentation. The amount of the liquidity for the extension period will be based on the fund's net asset value as of Sept. 19, 2008.
The Government Accountability Office released a report March 31 that said the Treasury has not established a sound process for collecting dividend payments it is owed under the Troubled Asset Relief Program.
Eight banks that took Tarp money failed to declare $150,000 of dividends due to the Treasury, the GAO said. It did not name the banks. The report noted that the Treasury has yet to follow through on a promise to hire asset managers to oversee the dividend payments or to deal with the warrants it has purchased from banks.
The FDIC's inspector general released two reports in late March that said the regulator could have been more aggressive in responding to problems at the $1 billion-asset Integrity Bank in Alpharetta, Ga., and the $726 million-asset Columbian Bank and Trust Co. in Topeka, Kan.
The reports blamed the August failures of the two institutions on aggressive growth strategies, which focused on risky construction and development loans. But even though FDIC examiners spotted weakness in their portfolios early on, the reports said, the agency was slow to impose supervisory action.
The OCC said March 27 that starting in June it will collect more information on derivatives at all banks whose assets exceed $10 billion. Agency officials said they are seeking information about counterparties and the amount and nature of collateral for derivative trades, so they can get a better gauge of the banks' credit risk.
Bank Failures I
Regulators shut the $980 million-asset Omni National Bank in Atlanta on March 27.
Omni had $796.8 million of deposits as of March 9 and about $2 million of uninsured deposits when it was closed, the FDIC said. It appointed SunTrust Banks Inc. to hold Omni's insured deposits and said it would pay the insured part of the bank's $320.1 million of brokered deposits directly to brokers. The failure was expected to cost the agency $290 million.
The OTS announced March 26 that Treasury Secretary Tim Geithner had removed Scott Polakoff as the thrift agency's acting director and selected John Bowman, its deputy director and chief counsel, to assume that role.
The decision appeared to be linked to questionable backdating of capital at thrifts, but the OTS would not comment beyond a terse press release. Sources said Polakoff was being accused of allowing BankUnited of Coral Gables, Fla., to overstate its capital.
The Treasury announced March 23 that it would implement plans to get toxic assets off bank balance sheets. In addition to the FDIC auction program, the Federal Reserve Board will accept "legacy" assets as collateral for loans under its Term Asset-Backed Securities Loan Facility.
Bank Failures II
On March 20 regulators closed the $670 million-asset Teambank in Paola, Kan., the $297 million-asset FirstCity Bank in Stockbridge, Ga., and the $123 million-asset Colorado National Bank in Colorado Springs.
The FDIC sold virtually all of Teambank's operations to Great Southern Bank in Springfield, Mo. Herring Bank in Amarillo, Tex., agreed to assume all of Colorado National's $82.7 million of deposits and buy 95% of its assets at a $3.2 million discount. The FDIC said the Colorado and Kansas failures are expected to cost $107 million. The FDIC could not find a taker for any of FirstCity's deposits. Instead, the agency will cover only insured deposits — totaling roughly $277 million — directly from the Deposit Insurance Fund. The FDIC estimated the failure's cost at $100 million.
The FDIC said March 20 that the banking industry suffered a wider loss in the fourth quarter than previously reported.
In its amended Quarterly Banking Profile, the agency said the industry's net loss was actually $32.1 billion, not the $26.2 billion originally reported. The industry's full-year net income dropped 37%, to $10.2 billion. The FDIC attributed the change to higher charges for goodwill impairments reported just after the original profile was issued Feb. 26.
The FDIC announced March 19 that it had closed its deal to sell the failed IndyMac Bank.
The agency unveiled its deal in early January to sell the Pasadena, Calif., lender to a consortium led by Steven Mnuchin for $1.6 billion in cash. Under the final terms of the deal, the FDIC said the thrift would become part of OneWest Bank, a newly formed Pasadena thrift organized by HoldCo LLC, the parent company founded by Mnuchin. Branches of IndyMac, which as of Jan. 31 had $23.5 billion of assets and $6.4 billion of deposits, became part of OneWest on March 20. The agency estimated the failure's cost at $10.7 billion.
Debt Guarantee Fees
The FDIC announced March 17 that it would raise the fees it charges to guarantee bank debt, and that it would use the money to reduce a planned special assessment on institutions. The surcharge will range from 10 to 50 basis points and will apply only to banks and holding companies that use the program after April 1 and issue debt that matures after a year.
Actions Expected Soon
FDIC Chairman Sheila Bair signaled April 1 that banks and thrifts may pay much less than the 20-basis-point special assessment her agency had proposed to fortify the Deposit Insurance Fund. FDIC officials had said the assessment could be cut in half if Congress passed a bill more than tripling the agency's borrowing authority, to $100 billion. But Bair indicated a bigger cut may be in the offing.