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Congress
New Legislation Takes Aim at Too-Big-To-Fail
A House Financial Services subcommittee chairman introduced legislation designed to eliminate the problem of too-big-to-fail financial institutions by increasing their capital requirements. Monetary policy subcommittee Chairman John Campbell (R-Calif.) introduced the Systemic Risk Mitigation Act
to require institutions with more than $50 billion in assets to hold a second layer of capital to minimize the economic impact of failure.
In the event of failure, investors would be repaid only after all other systemically important and secured debts are satisfied. The Federal Reserve would be required to monitor markets for signs of diminished confidence in an institution’s ability to satisfy investor claims.
Should a financial institution become undercapitalized, the Federal Reserve would be empowered to notify the institution of the deficiency, conduct stress tests and oversee the implementation of remediation plans. In the event that an institution is unable to raise sufficient capital, it would be placed into receivership.
“The
more concentrated our banking sector is, the less stable it is and the more subject to systemic risk it becomes,” Campbell said. “This legislation solves that problem by disconnecting the American taxpayer from the implicit guarantee currently perpetuating a system built on future bailouts.”
Congress
Senate Banking Panel Unveils Agenda for 113th Congress
Senate
Banking Committee Chairman Tim Johnson (D-S.D.) released his committee agenda for the 113th Congress, which he said will focus on strengthening and sustaining the nation’s economic recovery.
Johnson said the committee’s top priorities include continued oversight of Wall Street Reform implementation, building bipartisan consensus on the future of housing finance, reauthorizing expiring programs within the committee’s jurisdiction and considering presidential nominees expeditiously.
Regulation
FDIC Proposes Clarifying Coverage of Overseas Deposits
The FDIC board of directors approved a notice of proposed rulemaking to clarify that while deposits in foreign branches of U.S. banks can be deposits for purposes of the national depositor preference statute enacted in 1993, they are not FDIC-insured. The agency noted that money deposited in foreign branches of U.S. banks are not considered deposits unless the funds are payable in the United States.
The FDIC said that a recent proposal by the U.K. Financial Services Authority relating to the effect of national depositor preference laws makes it likely that large U.S. banks will change their deposit agreements to make their U.K. branch deposits payable in both countries.
The
proposed rule would not affect deposits in overseas military banking facilities governed by Defense Department regulations, the FDIC said. These funds will continue to be insured by the FDIC to the same extent that they have been.
Comments on the proposal are due within 60 days of publication in the Federal Register. Read the Proposed Rule. Read FDIC Fact Sheet.
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Regulation
Federal Reserve Bank Presidents Support MMMF Reform
The
presidents of the 12 Federal Reserve Banks submitted a joint letter in support of the Financial Stability Oversight Council's efforts to address the structural vulnerabilities of money market mutual funds. The Federal Reserve Bank presidents said they agree with the FSOC’s determination that MMMF activities and practices could create or increase the risk of liquidity and credit problems spreading through the financial system.
In the letter, the reserve bank presidents:
- discuss the risks associated with MMMF activities and practices,
- focus
on issues that should be addressed as part of any reform proposal, such as enhancing the accuracy of market-based net asset values (NAVs),
- present observations on each of the three reform alternatives in the FSOC proposal,
- discuss why they say standby liquidity fees and temporary redemption gates would not address financial stability risks, and
- concur with the FSOC that more than one alternative could address the financial stability concerns posed by MMMFs.
Economy
Net
Farm Income Forecast to Increase by Nearly 14 Percent in 2013
Net farm income is forecast to exceed $128 billion in 2013, rising nearly 14 percent from 2012’s revised forecast of $112.8 billion, according to the USDA. This would be the highest net farm income since 1973, though net cash income is forecast at $123.5 billion, down almost 9 percent from 2012.
Cash
receipts are expected to decline in 2013 as a result of more crops being held in inventories. The small projected increase in livestock receipts is not sufficient to offset increasing expenses. Nevertheless, net cash income is expected to remain high by historical standards.
Economy
Small-Biz Owners More Confident in January
Small-business owners were slightly more confident in January, according to the National Federation of Independent Business.
The NFIB Small Business Optimism Index rose 0.9 points to 88.9. Expectations for improved business conditions increased by five points, and job creation rose slightly.
Small Business
SBA Administrator Stepping Down
Small Business Administration Administrator Karen Mills this week announced that she will not stay on for a second term at the agency. Mills said she will stay on until a successor is confirmed. President Barack Obama in his first term elevated the role of SBA chief to a Cabinet-level position.
Blog
Fine: Too-Big-To-Fail No Laughing Matter
Executives of systemically risky financial institutions should back up their talk about the too-big-to-fail problem with action, ICBA President and CEO Cam Fine wrote in his latest blog post. Fine wrote that recent comments by JPMorgan Chase CEO Jamie Dimon calling for “Old Testament justice” on the “big dumb banks” that fueled the financial crisis appears to be empty talk. Read the Blog Post.
Poll
This Week’s Quick Poll
Take this week’s Quick Poll on the impact of new Federal Housing Administration rules on private mortgage insurance, and view results from the previous poll on the new FHA rules.
View the Archive.
Education
ICBA Audio Call on New Mortgage Rules Today
ICBA and BuckleySandler LLP today are hosting a free audio conference on new Consumer Financial Protection Bureau regulations affecting the mortgage market. “The New Mortgage Environment: Details on the CFPB's New Mortgage Rules,”
scheduled for 2 p.m. (Eastern time) today, will cover new rules on qualified mortgages, high-cost loans, loan-originator compensation, mortgage servicing, appraisals and escrow accounts. Register Now.
Education
CFPB Mortgage Reform Audio Call Next Week
ICBA is hosting an audio conference next week to outline a roadmap on the new Consumer Financial Protection Bureau mortgage requirements. The audio conference,
scheduled for 11 a.m. (Eastern time) Wednesday, Feb. 20, will address as many practical considerations as possible to help community banks begin rolling out new policies, procedures and practices. Register Online.
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