Invoking memories of Apple’s famed 1984 Superbowl commercial, a group called the American Action Network aired an anti-CFPB spot during last night’s Republican presidential debate. If nothing else, the spot should encourage further discussion of the role and impact of the Consumer Financial Protection Bureau.
The spot certainly portrays the CFPB in an evil light that is sure to please many in the banking industry, but its broader impact is less certain. A well-written piece by the American Banker offers several reasons why the ad could backfire, not the least of which is the hyperbolic nature ofRead More
Over the past several years reports of someone extending credit to a community bank holding company were similar to sightings of the Yeti in the Himalaya, you might hear about it but you never actually saw one. The number of bank failures and the consequent insolvency of many bank holding companies has led to a natural reluctance on the part of many lenders to provide such financing. The losses that many lenders suffered on such loans has raised some interesting questions about the loans were structured to begin with. The typical loan documentation for such a credit usually has traditionallyRead More
On June 29, 2010, Sarah Wallace, chair of the board of directors of First Federal Savings and Loan Association in Newark, Ohio, authored a passionate opinion piece in the Wall Street Journal titled “The End of Community Banking.” While I agree with many of Ms. Wallace’s points, I do NOT see the end of community banking in the foreseeable future.
I do think that we are going to see tighter regulations and tighter credit than we saw in the five years before the financial meltdown – 2002 through 2007. Those five years were the culmination of a world wideRead More
We’ve identified a number of stories that or posts that never quite made it into individual BankBryanCave.com posts. Rather than continuing to hold on to them, I’ve assembled them here.
The SimpsonsRead More
Short-Term Planning for Recovery and Survival
The grim economic prognoses we continue to hear about have an immediate impact in the bank board room. Boards must think about short-term planning for recovery and survival because virtually no bank is wholly immune from the current recession. Although the problems may have started with residential real estate in the Sunbelt, they have gone much beyond that now, impactingRead More
The front cover of the May 17, 2009 issue of the New York Times Magazine asked “Are Small Banks the Future?” As noted in the article, lending may have slowed at the largest banks, but at the other end of the financial system, there are 8,500 community banks, and most remain very strong.
In the midst of the worst banking crisis since the Great Depression, community banks have generally fared well. That’s because they typically shunned the lending practices that led to high default rates. They rarely participated in the securitization of loans, credit-default swaps and other overvaluedRead More
One issue that seems to be gaining traction is the need for banks to show how they are using TARP Capital, with a strong preference for the banks to be using TARP Capital to make loans. While the fungibility of bank capital makes it virtually impossible to directly tie any particular dollar of capital with any particular dollar lent, that fungibility also gives great leeway to community banks to demonstrate the lending impact of TARP Capital. Despite the political hot potato, we expect very few, if any, community banks to be criticized for their use of TARP Capital funds.
Whether to apply for or accept TARP Capital is a decision that each bank needs to make individually depending on its own markets and circumstances. However, as explained below, we believe each bank needs to prepare a realistic, worst-case scenario for the next three years. Unless your bank’s capital will remain strong, we think you should apply for TARP Capital.
In three years, your bank will likely be in position to redeem the TARP Capital. If that’s true, then the TARP Capital will have served as an inexpensive insurance policy that went unused, and you won’t be subject to any further governmentRead More
The ABA has noted that some banks are concerned with the reputational risk of participating in a bail-out. While some customers may have this concern, it does not change our belief that all eligible banks should strongly consider participating. Having said that, we also think banks should be prepared to deal with this issue and should be proactive with their customers. The emphasis should be on supporting the Government’s program to strengthen the entire banking system in order to enable banks to continue supporting their local community through this economic downturn. The program is designed to earn a returnRead More