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Inside Washington (11/03/2009)
* WASHINGTON (11/4/09)--The Community Development Advisory Board of the Community Development Financial Institutions (CDFI) Fund will meet Nov. 16 in Washington, D.C. Fifty seats are available. Members of the public can attend the meeting on a first-come, first-served basis. To attend, individuals must contact the CDFI Fund’s office by Nov. 11. The CDFI issues community development grants to financial institutions, including credit unions, to help the underserved access affordable financial services ... * WASHINGTON (11/4/09)--The Federal Home Loan Banks continue to be hurt by losses, despite changes by the Financial Accounting Standards Board (FASB) in March to stop the fallout of other-than-temporary impairment (OTTI) charges at the banks. During the third quarter, the system’s credit-related charges were $1.042 billion, more than half of the $1.995 billion charges the system has had this year. Last week, the system said it lost $165 million during the quarter. Despite the losses, financial observers said the situation could be worse, as noncredit-related charges were $84 billion during the first nine months of this year. Before the FASB changes, the banks would have had to deduct that amount from their earnings also (American Banker Nov. 3). Some said the models the banks use to determine charges are too conservative and actual losses are lower. There are potential recoveries because the charges may result from front-end accounting losses, said Jim Vogel, head of fixed-income research at First Horizon National Corp. However, Brian Harris, analyst at Moody’s Investors Services, said the losses are real ... * WASHINGTON (11/4/09)--When FBOP Corp.’s nine subsidiaries collapsed last week, the Federal Deposit Insurance Corp. (FDIC) brought back an old method, cross guaranty, to charge two viable banks--Park National, Oak Park, Ill., and Citizens National Bank, Teague, Texas--for the resolution costs incurred by the other institutions (American Banker Nov. 3). The action reduced the cost of the subsidiaries’ failures and may be a move the FDIC will use again to handle insolvencies. Using cross guaranty “could be a wake up call” for some banks, said Kip Weissman, partner at Luse Gorman. Under the law, the FDIC can use its cross guaranty power when it believes the assessment would be the least costly resolution. Usually, the amount of the assessment against viable institutions is equal to what the FDIC would lose in its Deposit Insurance Fund for a failure. Park National and Citizens could not pay the full amount of the resolution costs, so the Office of the Comptroller of the Currency closed them. Neither would have failed without cross guaranty, but observers said the move was justified. Richard Herring, finance professor at Wharton Business School, said the FDIC’s move was “perfectly logical,” because a bank holding company may not deserve “the benefit of a doubt if they’re running some dodgy banks and some better banks” ...


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