* WASHINGTON (11/5/09)--The Federal Deposit Insurance Corp. (FDIC) issued a financial institution letter
regarding the way FDIC administers its statutory restrictions on the deposit interest rates paid by banks that are less than well-capitalized. A final rule, effective Jan. 1, redefines the national rate as an average of rates paid by all insured depository institutions and branches for which data are available. Once the rule takes effect, an institution that believes it is operating in a high-rate area can use the rates in its market area only if it seeks and receives a determination from the FDIC that it is operating in a high-rate area. The FDIC said it would issue another letter explaining how banks can request such a determination. During the interim period ending Jan. 1, institutions can use national rates and rate caps on the FDIC’s website ... * WASHINGTON (11/5/09)--Debate in the House Financial Services Committee on a bill that would create a systemic risk regulator was expected to begin Wednesday. Several issues regarding the bill need to be addressed, according to financial observers (American Banker
Nov. 4). Issues include whether the Federal Reserve Board should have powers over other regulators, how to create a resolution fund to handle systemically important firms, and how high a proposed risk retention requirement for securitizations should be set. The debate will likely be contentious, said Mark Calabria, director of financial regulations studies at the Cato Institute. Rep. Barney Frank (D-Mass.), House committee chairman, said he doesn’t expect a final vote on the bill for at least one week due to amendments. The 379-page bill would designate the Fed as systemic regulator, combine the Office of Thrift Supervision and the Comptroller of the Currency, create a resolution process to help systemic institutions and create an interagency council to help the Fed advise the institutions. The Credit Union National Association sent a letter Tuesday to House Financial Services Committee Chairman Barney Frank (D-Mass.) and ranking member Spencer Bachus (R-Ala.), asking that credit unions not be entangled in the legislation because they do not pose any systemic risk to the financial system ... * WASHINGTON (11/5/09)--If Federal Reserve Board Chairman Ben Bernanke’s plan to stop purchasing mortgage-backed securities (MBS) fails, he will likely face pressures from Congress to extend credit programs for consumers and small business programs, and maintain support for housing, financial observers said (American Banker
Nov. 4). If Bernanke is pressured by Congress to carry out these tasks, it would undermine the Fed’s ability to control independent money policy. Bernanke has already been pressured to help car companies and extend more credit to the commercial real estate market. William Poole, former president of the Federal Reserve Bank of St. Louis, said Congress may ask the Fed to invent a new program when a sector has difficulties, The Fed is the biggest purchaser of securities from Fannie Mae and Freddie Mac, and Bernanke hopes to stop purchasing the MBSs by March. The Fed has maintained that the securities have helped to stabilize the housing market ...