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Financial Services Update – March 11, 2011

OCC Criticizes Durbin Amendment

Last Friday, John Walsh, the Acting Comptroller of the U.S. Currency who oversees regulation of the nation’s largest banks, sent a letter to the Federal Reserve criticizing the Fed’s proposed rule to implement the Wall Street Reform Act’s “Durbin debit card swipe fee” amendment. In the letter, Walsh said the Durbin amendment “takes an unnecessarily narrow approach to recovery of costs that would be allowable under the law and that are recognized and indisputably part of conducting a debit card business. This has long term safety and soundness consequences – for banks of all sizes – that are not compelled by the statute.”

Locke to Leave Commerce for China

On Thursday, President Obama announced that he had chosen Commerce Secretary Gary Locke to succeed Jon Huntsman as U.S. Ambassador to China. While the President has yet to announce Locke’s replacement, speculation has centered on the former Mayor of Dallas and current U.S. Trade Representative Ron Kirk.

Attorneys General Mortgage Settlement Stalled

The proposed settlement by state attorneys general with the five biggest U.S. mortgage servicers leaked out this week. The proposal, which calls for a dramatic increase in loan modifications, is intended as the basis for settling allegations of widespread wrongdoing by the big loan servicers in handling millions of foreclosures. The settlement would be with Bank of America Corp, Wells Fargo & Co, JPMorgan Chase & Co, Citigroup and GMAC/Ally Financial Inc. In a press conference earlier this week, Iowa Attorney General Tom Miller, who led an investigation on behalf of the 50 states’ attorneys general, predicted that a broad settlement could be reached within about two months. Miller said the agreement was worked out jointly with federal agencies including the Federal Deposit Insurance Corp, the newly created Consumer Financial Protection Bureau and Justice Department. On Tuesday, Brian Moynihan, chief executive of Bank of America, the largest U.S. servicer, said at a meeting with analysts and investors that he opposes widespread principal reductions for homeowners in default. On Thursday, Rep. Spencer Bachus (R-AL) and Sen. Richard Shelby (R-AL), the top Republicans on the House and Senate banking committees, also criticized the proposed settlement as a “regulatory shakedown.”

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Financial Services Update – March 4, 2011

February Unemployment Falls to 8.9%

On Friday, the Department of Labor reported that the nation added 192,000 jobs in February, up from a gain of 63,000 in January. The unemployment rate was down to 8.9 percent, falling below 9 percent for the first time in nearly two years. Altogether, 13.7 million people are unemployed and actively looking.  A broader measure of unemployment, which includes people working part-time because they could not find full-time jobs and those so discouraged that they have given up searching, was listed at 15.9 percent in February, down from 16.1 percent in January.

Congress Passes Stopgap Funding Measure

This week the House and Senate passed a continuing resolution funding the government until March 18, thereby avoiding a government shutdown and cutting $4 billion from current fiscal year spending. House Majority Leader Eric Cantor (R-VA) said Thursday that House Republicans plan to keep cutting spending at a rate of $2 billion a week, through two-week spending bills, until the Senate makes clear its position on a budget for the rest of FY 2011. House Republicans last month passed a bill to finish out the fiscal year, cutting $61 billion from 2010 levels. However, President Obama has issued a veto threat on that bill, saying House Republicans’ cuts are unacceptable. Senate Democrats have said that the non-spending “policy” provisions of the House Republicans’ bill regarding the environment and healthcare will also have to be struck before an agreement can be reached.

SEC Votes to Restrict Bonuses

On Thursday, the Securities and Exchange Commission voted to pass new restrictions on bonuses at large brokers and investment advisers, including hedge funds. The new restrictions are nearly identical to rules proposed by the Federal Deposit Insurance Corp. (FDIC) last month that apply to the banks that the FDIC oversees. The Dodd-Frank Wall Street Reform Act, which mandates the bonus rules, requires seven federal banking regulators to write the rules jointly. The SEC’s proposal will require brokers and advisers with more than $1 billion in assets to disclose the bonus arrangements of their executives, directors and lower-rung employees to the SEC annually. The proposal will also require firms with at least $50 billion in assets to hold half of the bonuses of top executives and heads of business units for three years. Any bonuses would have to be adjusted for losses at the firm after the pay was awarded. A 45-day public comment period follows Wednesday’s vote. A second vote by the commission is required before the proposal can be made final.

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Financial Services Update – February 25, 2011

Government Shutdown Looms

On Friday, House Republicans are expected to release a two-week stop-gap funding measure that would cut $4 billion in spending from the current fiscal year’s budget. While Senate Democrats have indicated they will likely not support the proposed $4 billion in cuts, momentum has shifted towards reaching an agreement to avoid a March 5th shutdown when the current funding measure expires. The new Republican spending measure will come on the heels of the just passed House Republicans’ seven-month appropriation bill that would have slashed $61 billion from the current fiscal year spending. The yet to be released House Republican spending plan is expected to make the cuts in the two-week spending bill proportional to the levels in the measure passed last week.

However, if House Republicans and Senate Democrats are unable to reach an agreement, the federal government shutdown would be guided by the Anti-Deficiency Act, which mandates that the only government activities allowed in the absence of a funding plan are those connected to “the safety of human life or the protection of property.” Programs and agencies that would be likely exempt from the shutdown are Social Security, uniformed military personnel, the Federal Reserve, the U.S. Postal Service, the Federal Aviation Administration, the Transportation Security Administration, and border security. However, among the most likely high profile federal government activities that would be shutdown are applications for passports and visas, accepting visitors at national parks, new patients at the National Institutes of Health, disease surveillance at the Centers for Disease Control, and toxic waste clean-up by the EPA.

Federal Reserve Closes Comment Period on New Debit Card Rules

On Tuesday, the Federal Reserve closed its comment period on its proposed rules to implement new interchange regulations and other debit card provisions of the Dodd-Frank financial-reform law’s Durbin Amendment. The Fed is expected to issue its final rules in April.

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Financial Services Update

Financial Services Update

October 25, 2010

Authored by: Matt Jessee

G20 Finance Ministers Meet in South Korea

On Friday and Saturday, global finance ministers from the G20 countries were to meet in South Korea to discuss international currency tensions, exchange rates, and broader concerns about the global economy.  The meeting comes just two weeks after the G20 met in Washington but were unable to resolve currency differences.  At the outset of the meeting, U.S. Treasury Secretary Timothy Geithner called for limits on trade imbalances, in an effort to broker an international compromise on exchange-rate tensions.  Britain, Canada and Australia expressed immediate support, as well as France and Japan, but Germany and China have yet to formally weigh in.  Geithner’s plan called for the biggest industrialized economies to keep their current-account balance — whether a surplus or a deficit — below 4 percent of gross domestic product.

Federal Probe into Mortgage Servicers

On Wednesday, Housing and Urban Development Secretary Shaun Donovan announced that a federal probe investigating five large mortgage servicers has found improper foreclosures, but officials have yet to find systemic, “structural” problems with processing.  HUD’s 5-month probe of the Federal Housing Administration-insured loans acknowledged that the agency has been aware of problems at some servicers for months and that HUD will “take actions” against those firms to ensure that homeowners are made “whole and protected.”  While Donovan declined to give specifics on which specific servicers were identified, Donovan said the lack of evidence of widespread structural problems reinforces the Administration’s decision to oppose a nationwide moratorium on foreclosures.  Pressure has been mounting to figure out whether banks, processors and courts have improperly foreclosed on thousands of homeowners.  All 50 state attorneys general have already announced investigations, and the FHA probe is expected to be completed in nine weeks.

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