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Inside Washington (06/10/2009)
* WASHINGTON (6/11/09)--The Federal Reserve Board will not have sole responsibility to handle systemic risk, said Treasury Secretary Timothy Geithner Tuesday (American Banker June 10). The job is too big for one agency, he told a Senate Appropriations financial services subcommittee. Geithner hinted that he might support an idea suggested by Federal Deposit Insurance Corp. Chairman Sheila Bair to create a regulatory council. Geithner also said during the hearing that the Obama administration’s regulatory revamping plan could be announced next week--but wouldn’t have a framework to revamp Fannie Mae and Freddie Mac. Sen. Dick Durbin (D-Ill.), who has pushed for legislation to reform mortgage bankruptcy proceedings and place rate caps on consumer credit products, asked Geithner during the hearing if a voluntary loan modification program would be enough to stem foreclosures. Geithner, who said he opposes rate caps, told Durbin that the Obama administration’s proposal will be much different than the previous administration’s, and that regardless of the plans, homeowners may still have a few challenging years ahead ... * WASHINGTON (6/11/09)--Rep. Carolyn Maloney (D-N.Y.) said she supports a recommendation to continue stress-testing the nation’s larges financial institutions. Elizabeth Warren, who chairs the oversight panel of the Troubled Asset Relief Program, said the stress tests were helpful but limited (American Banker June 10). The tests should be repeated as long as banks hold toxic assets on their balances sheets, Warren said. Maloney agreed, saying the tests should be extended beyond next year, especially given concerns in the commercial real estate market ... * WASHINGTON (6/11/09)--Critics question what the Treasury Department will do once it receives $68 billion from 10 banks slated to repay their government capital from the Troubled Asset Relief Program (TARP). After the funds are repaid, TARP will have $270 billion left. The funds could be used to offset the national deficit, or be placed into a reserve for future use, said President Barack Obama (American Banker June 10). The money, by law, will go into the Treasury’s general fund, said Treasury Secretary Timothy Geithner. However, critics question if the repayment could cause backlash from institutions that cannot repay the funds--such as Bank of America Corp. and Citigroup Inc. Of the 10 institutions that announced their repayments Tuesday, JPMorgan Chase and Co. was cleared to repay the largest amount at $25 billion ... * WASHINGTON (6/11/09)--The House Oversight Committee Tuesday subpoenaed the Federal Reserve Board for documents regarding the purchase of Merrill Lynch and Co. by Bank of America ( June 10). Bank of America Corp. CEO Kenneth Lewis said he was pushed by federal officials to complete the purchase after he became aware of significant losses at Merrill Lynch. In prepared remarks for testimony today, Lewis said the Treasury and Fed asked Bank of America to delay any action to slow the transaction because of Merrill’s losses. The government and Bank of American knew that if Merrill Lynch collapsed, it could trigger a crisis, Lewis said ... * WASHINGTON (6/11/09)--Senate Banking Committee Chairman Christopher Dodd (D-Conn.) encouraged the Federal Reserve Board to require credit card companies to get their customers’ permission before enrolling them in overdraft programs (American Banker June 10). The opt-in approach provides better consumer protection because the default then would be on overdraft service or fees, while the opt-out just continues the status quo, Dodd said. He also noted his concern that banks may start hitting consumers with other fees since new credit card standards--the Credit Card Accountability, Responsibility and Disclosure Act--were signed into law recently ...


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