Community Bankers Association of Illinois
Community Bankers Association of Illinois Community Bankers Association of Illinois Community Bankers Association of Illinois
 
     A Bi-Weekly News Bulletin for CBAI Members              December 3, 2008 Graphic
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Community Bankers Association of Illinois
Community Bankers Association of Illinois Community Bankers Association of Illinois


  • Highlights of FDIC Final Rule on TLGP
  • Too-Big-To-Fail Banks Should Be Made Smaller!
  • Giving GMAC Aid Would Be Big Mistake
  • FDIC Expands Bidder Pool for Failing Banks
  • FDIC: Community Banks’ Capital Levels Remain Strong
  • FDIC’s Third-Quarter Banking Profile Now Available Online
  • Insured Banks and Thrifts Earned $1.7 Billion in the Third Quarter
  • GAO Says Rescue Plan Needs Better Oversight
  • Baker Market Update
  • Treasury Releases Economic Update
  • Chicago Fed Releases Midwest Manufacturing Index for October
  • Bernanke Addresses Fed Policies in the Financial Crisis
  • Community Bank Directors’ Conference on December 10
  • ICBA Calls for FHLBank Risk-Weight Decrease
  • FDIC Releases Survey Results on Overdraft Programs
  • FDIC Issues First Quarter Examination Schedule
  • OCC Announces Fees for 2009
  • Fannie Mae Releases October Summary
  • Fannie Mae To Suspend Foreclosures Until January 2009
  • Governor Appoints Dean Martinez as Deputy Governor
  • Advice for Protecting Customers after Bankcard Data Breaches
  • The New News About Hotel Key Card Fraud
  • Collaboration as the Key to Fraud Prevention
  • Magstripe Fraud: Old Technology Still Valued by ID Thieves
  • Volunteer Tax Prep: Encouraging E-Payments for Federal Benefits


  • Highlights of FDIC Final Rule on TLGP

    The FDIC issued a final rule on the Temporary Liquidity Guarantee Program (TLGP) which has two components: the Debt Guarantee Program which guarantees senior unsecured debt with a term greater than 30 days of eligible entities, and the Transaction Account guarantee Program, which fully guarantees noninterest-bearing transaction accounts an NOW accounts with interest rates of 50 basis points or less.
    See ICBA Summary. See Hinshaw & Culbertson Summary.

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    Too-Big-To-Fail Banks Should Be Made Smaller!

    Both CBAI and ICBA are espousing the position that Congress, in its analysis of the underlying causes of the financial crisis, should break up the TBTF banks so they no longer pose a threat to undermine our financial and economic system. ICBA President Cam Fine
    addressed this issue in a recent commentary.

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    Giving GMAC Aid Would Be Big Mistake

    Professor Art Wilmarth, a highly-respected expert on banking law at George Washington University Law School in Washington, D.C., recently expressed his concerns about GMAC obtaining a bank holding company to receive TARP funds. CBAI shares Professor Wilmarth’s concerns that providing Treasury funds to GMAC would extend the safety net to commercial firms and potentially lead to a combination of banks and commercial firms. He urged Congress to close the ILC loophole, a position strongly shared by ICBA and CBAI.
    See Full Article.

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    FDIC Expands Bidder Pool for Failing Banks

    The FDIC is expanding the pool of qualified bidders for the deposits and assets of failed banks to include institutions that don’t currently have bank charters. However, they must have conditional approval for a charter from an applicable agency and meet FDIC bid criteria.
    See Announcement.

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    FDIC: Community Banks’ Capital Levels Remain Strong

    The FDIC
    announced that community banks began to show stresses similar to those affecting the overall banking industry, but their capital levels remain stronger than the industry average. Releasing the agency’s third-quarter Quarterly Banking Profile, FDIC Chairman Sheila Bair said community banks are a steady source of credit for Main Street America and encouraged them to participate in the government’s economic stabilization programs.

    Overall, FDIC-insured banks and thrifts reported net income of $1.7 billion in the third quarter, down 94 percent from third quarter 2007. The agency cited higher provisions for loan losses—up nearly $34 billion from a year ago—as the primary reason for the drop in industry profits. Insured institutions charged off $27.9 billion in troubled loans in the third quarter, and the amount of noncurrent loans and leases increased 13.1 percent.

    The Deposit Insurance Fund reserve ratio fell to 0.76 percent from 1.01 percent the previous quarter, but the agency’s DIF restoration plan anticipated further losses before it begins to replenish the fund next year. The agency’s “problem bank” list grew from 117 to 171.

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    FDIC’s Third-Quarter Banking Profile Now Available Online

    The third quarter 2008 FDIC
    Quarterly Banking Profile (QBP) is now available online. It includes Call & Thrift Financial Reports, an Institution Directory, and Statistics on Depository Institutions. For more information and links, click here.

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    Insured Banks and Thrifts Earned $1.7 Billion in the Third Quarter
    PROVISIONS FOR LOAN LOSSES CONTINUE TO BE HIGH, BUT CAPITAL LEVELS REMAIN STRONG

    Commercial banks and savings institutions insured by the Federal Deposit Insurance Corporation (FDIC) reported net income of $1.7 billion in the third quarter of 2008, a decline of $27.0 billion (94 percent) from the $28.7 billion that the industry earned in the third quarter of 2007. With the exception of the fourth quarter of last year, the latest earnings were the lowest for the industry since the fourth quarter of 1990. For the full report,
    click here.

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    GAO Says Rescue Plan Needs Better Oversight

    In its first official review of the $700 billion financial rescue plan, the General Accounting Office (GAO) concluded that Treasury needs more staff, better management, an improved transition effort and facilities to ensure banks are using the new capital effectively. The report said Treasury lacks sufficient oversight methods to make sure banks comply.
    See Highlights.

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    Baker Market Update

    The Federal Reserve has announced that it will spend up to $800 billion in a dual-program initiative to help revive the beleaguered U.S. economy. The Fed’s favored gauge of inflation core personal consumption expenditures, showed priced in October remained flat, whereas the year-over-year figure slowed from 2.3% to 2.1%, the lowest since February. This week, reports for November vehicle sales are expected to show a weakening economy discouraged purchases of big-ticket items. For more details,
    click here.

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    Treasury Releases Economic Update

    On November 26, 2008, the Treasury Department
    released its summary economic data for October which revealed that employment fell by 240,000 during the month, and the unemployment rate climbed to 6.5 percent.

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    Chicago Fed Releases Midwest Manufacturing Index for October

    The Chicago Fed Midwest Manufacturing Index (CFMMI) declined 1.0% in October to a seasonally adjusted level of 98.6 (2002 = 100). The CFMMI is a monthly estimate of manufacturing output in the Seventh Federal Reserve District of Illinois, Indiana, Iowa, Michigan, and Wisconsin. It is a composite index of 15 manufacturing industries that uses hours worked data to measure changes in regional activity.
    See Release.

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    Bernanke Addresses Fed Policies in the Financial Crisis

    In a speech before the Austin (Texas) Chamber of Commerce on December 1, 2008, Fed Chairman Ben Bernanke discussed the Fed’s responses to the economic and financial challenges confronting the U. S. He again noted that regulators and lawmakers must address the problem of too-big-to-fail institutions. CBAI is encouraged that the Fed Chairman publicly recognizes TBTF institutions as a problem. Both CBAI and ICBA advocate making the TBTF banks smaller by breaking them up.
    See Full Speech.

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    Community Bank Directors’ Conference on December 10

    Entitled “Preparing for the Road Ahead,” the
    Community Bank Directors’ Conference looks at the issues that have surfaced as a result of the big-bank and mortgage-brokers’ subprime- lending debacle which precipitated the current financial crisis. The day begins with a panel of regulators discussing The Economic Stabilization Act of 2008, and its impact on community banks, capital, liquidity, asset quality, and more. Then, Phil Stenseth from THE BAKER GROUP provides an up-to-the-minute overview of the economy and financial markets and investment strategies specific to the current environment. Afterward, a series of experts discuss lending, capital, and technology strategies for the regulatory and economic environment. These community-bank experts include Jeff Judy of Jeff Judy & Associates presenting “Make Lemonade — The Credit Cycle,” as well as Mike Keeley and Charles “Stormy” Greef from Hunton & Williams on “Enhancing Shareholder Value and Capital Issues.” Finally, Lee Wetherington from Goldleaf Financial Solutions takes a thoughtful, practical, and comedic look at the technology issues in “Convergence, Crisis & Change: Wisdom for the Road Ahead.”

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    ICBA Calls for FHLBank Risk-Weight Decrease

    ICBA
    urged federal banking regulators to adopt a 10-percent risk weight for Federal Home Loan Bank debt, in addition to the proposed risk-weight reduction for Fannie Mae and Freddie Mac. Lowering FHLBank debt securities risk weighting with that of Fannie and Freddie will enhance credit availability and prevent capital markets from penalizing the banks and increasing their cost of funds, ICBA said. If the regulators do not lower the risk weighting for FHLBank debt securities when they do so for Fannie and Freddie, the markets may incorrectly perceive that FHLBank securites are riskier.

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    FDIC Releases Survey Results on Overdraft Programs

    In 2006 the FDIC initiated a study of overdraft programs to help policymakers make better-informed decisions regarding the programs and enable banks to develop more effective overdraft programs to better serve customers.
    See Executive Summary.

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    FDIC Issues First Quarter Examination Schedule

    The exam schedule reflects the effects of a bank’s size and CRA rating on exam frequency. Without reasonable cause, a bank with $250 million or less in assets and a Satisfactory CRA rating can be subject to an exam no more than once every 48 months; the frequency for an Outstanding rating is no more than once every 60 months.
    See Full Release.

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    OCC Announces Fees for 2009

    On December 1, 2008, the OCC informed all national banks of the fees the regulator will charge effective January 1, 2009.
    See Assessment Schedule.

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    Fannie Mae Releases October Summary

    FNMA released its October information on monthly and YTD activities for its gross mortgage portfolio, mortgage-backed securities and other guarantees, interest rate risk measures, and serious delinquency rates.
    See Summary.

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    Fannie Mae To Suspend Foreclosures Until January 2009

    FNMA
    announced a temporary suspension of foreclosures and evictions on occupied single-family properties scheduled to occur from November 26, 2008 to January 9, 2009. It will allow affected borrowers to retain their homes while Fannie Mae works with mortgage servicers to implement the streamlined modification program scheduled to begin December 15.

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    Governor Appoints Dean Martinez as Deputy Governor

    On December 1, 2008, Governor Blagojevich named Dean Martinez as Deputy Governor to oversee the state’s economic development, infrastructure, business regulation and environmental agencies. Martinez previously served as Secretary of the Illinois Department of Financial and Professional Regulation (IDFPR) which houses the Division of Banking.

    Michael McRaith was appointed as Secretary of IDFPR. He previously served as director of the Division of Insurance within IDFPR. Both positions are effective immediately.
    See Full Release.

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    Advice for Protecting Customers after Bankcard Data Breaches

    The Independent Community Bankers Association (ICBA) has published
    information to give banks direction in the event of a credit- or debit-card data breach.

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    The New News About Hotel Key Card Fraud

    A recent news report from Las Vegas indicated that prostitutes and addicts there are being arrested with hotel key cards in their possession. And, according to the report, these key cards do have credit-card information on them. For the full report,
    click here.

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    Collaboration as the Key to Fraud Prevention

    Reducing fraud across the banking enterprise depends on rich, high-quality data and sophisticated analysis. While many organizations have point solutions to help them identify potential fraud within specific channels or transaction types, the ideal solution would make stolen customer information completely useless to a would-be fraudster. The very heart of this strategy is to gain access to as much information as possible about the customer and his or her banking behavior. For the full article,
    click here.

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    Magstripe Fraud: Old Technology Still Valued by ID Thieves

    Consisting of magnetized particles embedded on a thin band, the black stripe on the back of all credit and debit cards illustrates the decades-old technology that makes the billions of daily credit, debit and gift card transactions possible. In addition, magstripe technology is still widely used on employee access cards, public transit passes, phone calling cards, even hotel card keys.

    Unfortunately, the magstripe continues to be a favorite tool of identity thieves. The only difference now compared to several years ago is the advanced innovativeness of card fraudsters.
    Click here for more information.

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    Volunteer Tax Prep: Encouraging E-Payments for Federal Benefits

    The Internal Revenue Service and U.S. Department of the Treasury are working together to promote the benefits of electronic payments for both federal tax refunds and federal benefits. As the 2009 filing season approaches, consider including information about Go Direct® and the new Direct Express® Debit MasterCard® at free tax preparation sites in your area. For more information,
    click here.

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