Regulators Testify on Capitol HillFederal regulators testified on a number of banking and regulatory issues on Capitol Hill on Thursday - including the potential re-organization of the regulatory agencies themselves.
Top of mind topics for the entire industry were laid out in testimony from Comptroller of the Currency John Dugan, who spoke to the Committee on Banking, Housing and Urban Affairs on the restructure and reform of the financial regulatory system. His and other testimony comes after a week of heated talk surrounding the AIG bonuses and Fannie Mae bonuses being given out during great financial turmoil and economic recession.
Dugan says OCC supports establishing a systemic risk regulator, most likely the Federal Reserve Board. He cautioned, though, not to concentrate too much authority in a single government agency. OCC also supports stabilizing and winding down non-banking entities that hold great systemic risk, such as AIG. OCC sees that new regulatory structure should have tools and oversight of these types of entities similar to what the FDIC has for resolving bank failures.
His testimony comes at a time when lawmakers are considering regulatory reform that may include the restructuring of the federal banking agencies and what agencies hold oversight responsibilities of banks and credit unions.
Dugan also adds that if reduction of banking regulators happens, the OCC recommends a role of a dedicated prudential banking supervisor that does nothing but bank supervision, but also leave space for the Federal Reserve to step in on a supervisory role because of its experience with capital markets, payment systems and the discount window.
Dugan also stressed that Congress should establish national standards for mortgage regulation. He also says best way to implement consumer protection regulation of banks is through continued supervision of banks and corrective action against compliance weakness and failure.
Testimony by FDIC's Division of Research director Arthur Murton to the Subcommittee on Financial Institutions addressed the current issues in deposit insurance. Morton outlined the reasons why the FDIC's board increased the deposit insurance premiums and reasons why those increases should be made permanent.
Similar testimony was given by NCUA's executive director David Marquis to the Senate Banking, Housing and Urban Affairs committee on NCUA's deposit insurance arm, NCUSIF. Marquis says the $250,000 insurance protection should be made permanent and the NCUSIF replenishment be extended to 5 years and its borrowing authority increased, as well as the need to give system risk authority to the NCUA.
NCUA Chairman Michael Fryzel spoke to the Senate Banking Committee and called for the preservation of the independence of NCUA and NCUSIF, saying it benefits consumers to have cooperative alternatives in the marketplace. Fryzel also called for unique and distinct regulation of the credit union industry.
The NCUA's Sheila Albin, associate general counsel for the credit union regulator, testified before the House Financial Services Subcommittee on Financial Institutions and Consumer Credit on legislation designed to aid consumers. She says the NCUA has the proper controls and oversight in place to insure against abuse of consumers by credit card issuing institutions. The two laws were written to stop or restrict unfair, deceptive and anti-competitive consumer credit card practices. Albin cites as proof a study by the Woodstock Institute that showed federally-insured credit union card products tended to have fewer fees, lower fees and clearer disclosures.
FDIC Finalizes Sale of IndyMac
The FDIC says it completed the sale of IndyMac Federal Bank to OneWest Bank, FSB, on Thursday. With the finalization of the sale, OneWest takes over all deposits of IndyMac, and the 33 branches of IndyMac Federal opened as OneWest branches today. The bank had signed an agreement to buy IndyMac from the FDIC at the end of 2008.
OneWest bought the deposits and $20.7 billion in assets at a discount of $4.7 billion. OneWest will continue the FDIC's existing loan modification program, and is agreed to enter a loss share transaction on the bank's single family home portfolio.
IndyMac was taken over by the FDIC last summer. It was one of the first larger banks to fail because of the subprime mortgage meltdown in 2008 and was the testing ground for FDIC's new loan modification program. IndyMac had specialized in underwriting Alt-A type mortgages and other non-traditional mortgages before it failed in July, 2008.
The FDIC says IndyMac Federal last $2.6 billion in the fourth quarter 2008 because of the deteriorating real estate market. FDIC estimated the loss to its Deposit Insurance Fund is $10.7 billion.