Archive for the ‘FDIC’ Category

One Voice - A Community Banking Voice

Friday, July 31st, 2009

There are some bankers that believe our industry would be better off politically with a single, unified voice.  One does not have to venture any farther than the halls of Congress to dismiss that belief as a tired old myth.

Who, after all, wants to shackle their hands and ankles to the “too big to fail” banks and their unregulated affiliates and subsidiaries and jump off the 14th Street Bridge into the Potomac?  But that’s precisely what some bankers and their trade associations would have you do; dismissing the efforts of the community banking lobby as nothing more than a “distraction” and chastising us for our divide and conquer mentality to protect our unique interests. They would go as far as making claims that a unified industry with a unified message is the only true way to move a political football.

Tell that to Barney Frank, Chairman of the House Financial Services Committee.  In a recent Washington Post article describing how community banks are central to the current regulatory reform proposal, Chairman Frank describes the big bank lobby this way:  “The larger financial institutions have the opposite of political clout today.  They’re radioactive. The only way the big banks can win is if they get the community banks to be their troops.”  And the Chairman is not unique in his views.  Texas’ Congressional delegation understands it too.  I know because I hear it in every office we visited in Washington this week and every time we make calls in the wake of this whole economic mess.  “You guys are the good guys in the industry,” they tell us.  “We would like to find a way to make sure we don’t disenfranchise the community banks as we debate this.”

The current Obama regulatory reform proposal is enough to scare the crap out of any of us.  All we need is another regulator to get a broad legislative mandate to regulate products and services in the name of consumer protection, relegating us to “cookie cutter” and “plain vanilla” products and services.  That proposal, courtesy of the unregulated “shadow” banking industry would translate into nothing more than socialized banking designed to eliminate customer convenience and choice while raising costs. That’s not how the greatest economic system in the world has evolved, nor how it will be strengthened in the future.  You can bet if we can carve community banks out from under this Consumer Financial Protection Agency, we damn sure will do it.

So don’t tell us to get in line and leave the lobbying to groups that have divided interests and hope that somehow you will fairly represent the interests of community banks.  We didn’t cause this mess and we are tired of helping the big banks clean it up in the form of higher regular and special FDIC assessments, suffocating new regulations and bad industry public relations.

We will continue speaking with one voice…a community banking voice.

Posted in Barney Frank, Consumer Financial Protection Agency, FDIC, ICBA, Independent Bankers Association of Texas, Texas Community Banking, bank regulators, community banks, special assessment, systemic regulator, too big to fail, wall street | No Comments »

Preserving the Dual Banking System

Thursday, May 28th, 2009

Early this month I had the opportunity to hear Treasury Secretary Tim Geithner speak to the ICBA Washington Policy Summit. He was clear in his intent at that time that this administration was in the final planning stages in releasing their recommendations for reconstituting the bank regulatory system.

Yesterday’s Wall Street Journal article by Paletta writes “the new bank regulatory agency could prove controversial because it would consolidate the Office of the Comptroller of the Currency and the Office of Thrift Supervision and strip supervisory powers from the FDIC and the Federal Reserve.” The Federal Reserve would likely be deemed “the systemic regulator” and the FDIC would be relegated to receivership and insurance.

Another set of eyes?

Paletta goes on to report that the Administration has no intent to eliminate the dual banking system and stir controversy among the more than 5,000 state chartered banks. State charters and state regulators would be preserved but a single federal regulatory agency would have jurisdiction rights to examine the state banks and provide what the administration calls “another set of eyes. This approach would also prohibit “financial institutions from “shopping” for the best regulator.

Wait a minute. What would be the point of having a state charter and a state regulator if you also have to open your doors to the new OCC? Our dual banking system has served this country well for decades. One has to ask if this isn’t a back handed approach to create one super regulator for all banks who are systemically unimportant. Charter choice is not about “shopping” for the best regulator. It is about personal choice.

The Administration instead should be focusing on is preserving the existing regulatory structure as we know it and establishing a bifurcated regulatory system by establishing a community bank state or national charter and a commercial state or national charter along permissible banking power activities. Regulatory structure should be commensurate with risk depending on which charter choice you choose. Our current financial crisis was not caused by community financial institutions sticking to basic banking principles. It was caused by large commercial banks that expanded their reach into risky commercial enterprises.

A single federal regulator with jurisdiction over all systemically unimportant national and state banks would destroy, in this bloggers eyes, the dual banking system as we know it. It is not the current system that is broken, just the current one size fits all application of bank regulation.

Let’s all hope the Administration goes back to the drawing board, or in the event they advocate this new plan, Congress will see fit to ensure community banks are not further penalized for the sins of others.

Posted in FDIC, IBAT, ICBA, Independent Bankers Association of Texas, Texas Community Banking, Timothy Geithner, bank regulators, community banks, comptroller of the currency, federal reserve, office of thrift supervision, state bank charter, systemic regulator, systemically important, systemically unimportant, too big to fail, treasury | No Comments »

Battle Won. War May Have Just Begun

Monday, May 25th, 2009

Friday, May 22 was a historic day for the community banking industry.

A collective sigh of relief was heard when word came down shortly after lunch time of the FDIC board action to reduce the proposed special assessment premium to restore the Bank Insurance Fund to 5 bp.  The original proposal was to impose a one time special assessment of 20 bp on insured deposits.

Since late February when the interim rule was put out for comment, the industry has worked vigorously to suggest alternatives to mitigate the countercyclical effect the assessment would have on all insured financial institutions in these challenging economic times.  The industry weighed in with over 14,000 comment letters.

Perhaps most significant for community banks, the Board adopted an asset minus Tier 1 capital basis for the assessment, which would benefit 8,141 community banks and transfer the “lion’s sare” cost of recapitalization to the large mega too big to fail banks who have for far too long escaped paying on certain liabilities. Only 165 banks will pay more under the new assessment base, the vast majority of those are in excess of 20 billion in assets.

Clearly, a great victory for the industry.  But closer examination of the final rule has us all wondering if the war has just begun.  The FDIC board left open the option to assess another 5bp at the end of each of the third and fourth quarters without further public comment.  Further assessments can be levied at the discretion of the FDIC board if they determine that public confidence in the fund is eroding or the fund balance approaches zero.   A bitter pill to be sure.

For now, we will celebrate the action of the FDIC board.  But it is no time to lay down our shields or swords.  Something tells me this is far from over and the added uncertainty only confounds community bank management who are already confounded by having to bear the burden for any of this mess in the first place.

Posted in FDIC, IBAT, Independent Bankers Association of Texas, Texas Community Banking, bank insurance fund, community banks, special assessment | No Comments »

Breaking Up The Behemoths

Thursday, April 23rd, 2009

“And David  strikes Goliath in the head with a stone from his sling; the Philistine fell on his face to the ground. “

It was music to all community bankers ears this week to hear three respected economists, one a 2001 Nobel prize recipient, tell a Joint Economic committee of Congress to break up the too-big-to-fail institutions and disassemble the oligarchy they have created.  I say Amen, too.

Breaking up the behemoth banks would mean recalibrating the disproportionate influence they have had on public policy.  Translated for community bankers…a bifurcated banking regulatory system just might be within our reach.  Community bankers are tired, and rightfully so, for paying for the sins of Wall Street in the form of higher FDIC insurance costs, and their owned tarnished credibility in the eyes of the general public and lawmakers.

There are obvious immediate benefits that will accrue to all community banks if Congress has the guts to set about a systematic plan to break up the big banks.  Deposits will funnel back to local communities where they were extracted and rightfully belong into the hands of the more than 8,000 community banks to be put to work for the local folks.  More money will be available for small business and consumers.

But perhaps the most significant benefit that could result from this is a reduction of the many hidden costs of regulatory burden…a burden that has most community institutions drowning in cesspool of paperwork.

Last month I heard one of the more sensible solutions to reducing the regulatory burden on community banks.  It was sensible to me because it is precisely what my colleagues and I have been advocating for the past ten years.  And, it came from a bank regulator no less.  He advocated that two charter types should be created; one a commercial charter for those institutions that choose to venture out of traditional banking services into exotic and risky product lines, and  a community bank charter for those institutions that wish to operate more on traditional banking product and service lines.  Each would be subjected to different regulatory and examination specifications proportionate to risk.

We are a long way from realizing the dream that one day community bankers would be rescued from over regulation…regulation that has largely been created thanks to the greed and corruption of the mega banks.  The testimony of  the three economists this week however was a good start.  It is nice to see that someone is hurling the stones precisely where they need to be hurled.

You never know when one just might bring the mighty behemoths down.

Posted in FDIC, Independent Bankers Association of Texas, TARP, bank regulators, default category, federal reserve, systemically important, systemically unimportant, taxpayer, treasury, wall street, zombie bank | 1 Comment »

Zombie Banks

Tuesday, March 10th, 2009

The early morning flights always creep me out somehow. There is an eerie quiet about them…businessmen lost in their morning papers; half the plane pretending they can sleep on airplanes. Others like me, working on laptops or looking busy.

This morning I boarded a flight in Austin at 6:00 am en route to DC with several of IBAT’s executive committee members. There has been a lot of talk about zombie banks.  Those are the banks that have already failed but are too big to close. You know, banks like Citicorp. Why is it so hard for bank regulators and politicians to be honest?  To say that ‘Citi has failed, but we just can’t close them because of the “systemic risk” they would pose to the financial system?’ Systemic risk is a fancy phrase for hand grenade…pull the pin on that sucker and watch all  around it to go down. But I digress.

DC is not my favorite place in the world. Oh, I love the hustle and bustle of the city, but trying to get work done in this town is difficult at best. Whoever said “if you need a friend in Washington DC, get a dog,” got it right. This is no place to search for people that care about your problems or your industry’s problems, because solving your problem will likely create problems for someone else. But still, we plug along believing in what we know and have proof of…that government is run by the people that show up.

All community bankers throughout the country are still numb from the events of the past eight months. We watch as the Treasury and the Administration search for answers to the financial crisis, and hope that there is still a place for local community banks when all is said and done.

This latest tremor is one of seismic proportions, and the future of our community banks is at the epicenter. The Federal Deposit Insurance Corporation (FDIC) announced that the insurance fund was running out of money and it would need to tap all banks with an increase to 20 cents for every $100 of insured deposits to replenish. It didn’t take bankers long to do the math…  and for most it would hit their earnings this year anywhere from one-third to one-half. How smart is that at a time when we are trying to get banks to lend again? It is pretty hard to lend money when you have to cough it up to the government so they can bail out the very banks that have depleted the fund.

We’re wondering just how much thought was put into this interim ruling by the FDIC. There are so many other ways to replenish the fund without causing unfair hardship on the only banks that didn’t create this mess in the first place. Sure, bankers, not taxpayers should accept responsibility for replenishing the fund. And we shall. But let’s look at the dozens of alternatives that have already been suggested.  These alternatives would soften the earnings blow to our community banks, the only banks still lending money.  Our community banks played by the rules and made nice while the zombies succumbed to distortion and greed.  Makes us all wonder if there is some sinister plot to make all community banks zombie-like too.

So we shall walk the halls of the Congress spreading the word to anyone who will listen. Our message will be a simple one…yes we have a crisis, but don’t make the community banks irrelevant in the efforts to restore and rebuild the financial system. Small business and agriculture need community banks. Today our country needs them like never before.

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Posted in FDIC, IBAT, Independent Bankers Association of Texas, TARP, Texas Community Banking, bank regulators, zombie bank | No Comments »

Must We Bear the Burden?

Tuesday, March 3rd, 2009

Hello Friends

I have received tons of e-mails and phone calls from you about the FDIC’s announcement last week to increase the assessment on insured deposits by 20 BP… and I totally understand.  What I am hearing is that too many of you are projecting that this assessment would impact somewhere from 30% to 50% of your bank earnings forecasted in 09.

On Monday afternoon, I participated in a conference call with FDIC Chairman Sheila Bair.  The ICBA Board of Directors and other state association directors also sat in.  Chairman Bair told us the FDIC rationale of the assessment, with some detail, and also explained all the other options that were available to the FDIC Board before they took that vote.  I found this session very productive with a lot of questions answered.

This week I am meeting with the IBAT Board of Directors in Dallas to consider options for mitigating the negative earnings impact on our member banks.  And I must reiterate here, what upsets me the most is our banks are not the banks that caused or in any way contributed to the irresponsible practices of the Wall Street banks.  I think we all can agree that our banks, the Texas community banks, should not be penalized by this unbearable FDIC assessment.

I still need your imput too.  I’m asking for your suggestions.  We need collective action options for the IBAT Board to consider.  And please share with me what you have determined to be the potential financial impact of this 20 BP assessment on your bank.  You may do so by simply commenting to this blog or by emailing me at cwilliston@ibat.org.

Remember that the FDIC vote take last Friday was an interim decision that has been left open for comment for the next thirty days.  I am moving quickly, with your IBAT Board, to determine appropriate steps on behalf of all of you.  So please post your feedback and let me know what you have determined the impact to your bank will be from this decision.  If you have already taken the time to e-mail me, then don’t post a comment here.

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Posted in FDIC, IBAT, Independent Bankers Association of Texas, TARP, Texas Community Banking, bank regulators | No Comments »

Real Hope For A Change

Wednesday, February 25th, 2009

Hi friends:

There is nothing like getting out in the real world to gain real perspective relative to what is really going on in with the economy across Texas.

I am in Day two of the second round of regional meetings with chief executive officers and other senior personnel of community banks.  IBAT Chairman Milton McGee and I will see over 625 bankers in Austin, Shiner, Corpus Christi, Houston, the Rio Grande Valley, Longview, Sulphur Springs and Dallas this week.

I have to tell you I sense an incredible spirit of optimism about the financial events of the day despite the constant media battering that continues to spread a word of doom and gloom and pessimism.  True, it is not all Pollyanna… but community bankers have seen this all before having lived the hard times of late 1980’s which fell disproportionately on our great State.

What’s different this time is the diversification of the Texas economy.  We are not reeling from hyper-inflated real estate values and energy prices, and agriculture meltdowns. There is clearly a softening of credit demand, but community banks in Texas are liquid and ready to lend and help their customers through these challenging times.  We don’t need the government to tell us to lend.  Community bankers do it intuitively as they know they must do to leverage their resources and generate a decent return for their shareholders.

Everyone acknowledges that there will be bumps along the way.  But community bankers have always had one strategic competitive advantage over their mega bank competition…they know their customers and their communities.  If there is pessimism and anxiousness, community bankers fear the backlash of bad laws and government overreaction to fix everything by imposing new levels of regulation that will do nothing but stifle their ability to do what they do best…serve the customer.

I’m confident that community bankers will lead the recovery if government will just get out of their way.  That’s the message we are hearing and so it is our responsibility to spread the good word of optimism and hope.

And so we shall.

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Posted in FDIC, IBAT, Independent Bankers Association of Texas, TARP, Texas Community Banking | No Comments »