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Inside Washington (11/19/2009)
* WASHINGTON (11/20/09)--The House Financial Services Committee approved an amendment Wednesday that would prevent large financial institutions from receiving Federal Home Loan Bank (FHLB) advances and raise large institutions’ funding costs. The amendment was one of several pieces the committee voted on, but financial observers said the FHLB amendment would have the largest impact because it would allow the Federal Deposit Insurance Corp. (FDIC) to impose a 20% haircut on secured creditors when resolving failed systemically important institutions. Lawrence Kaplan, partner at Paul, Hastings, Janofsky and Walker, said the move will ultimately raise credit costs (American Banker Nov. 19). Cutting off advances to some institutions from the FHLBs also may prevent the FHLBs from lending to those institutions, said Alfred DelliBovi, president of the Federal Reserve Bank of New York. Rep. Brad Miller (D-N.C.), one of the amendment’s authors, said he drafted the legislation at the suggestion of the FDIC and proposed it as a way to save taxpayers from bailing out banks ... * WASHINGTON (11/20/09)--Banks need to increase their lending, Treasury Secretary Timothy Geithner said Wednesday during an Obama administration summit on credit flow. Limits on credit availability for small businesses will slow the nation’s economic recovery, he added (American Banker Nov. 19). Geithner said there needs to be more positive figures in banks’ earnings for the economy to recover, but Federal Deposit Insurance Corp. (FDIC) Chairman Sheila Bair said credit losses will continue to affect banks’ earnings ... * WASHINGTON (11/20/09)--Senate Banking Committee Chairman Christopher Dodd (D-Conn.) is sparring with members of the Republican Party over legislation that would freeze interest rates until the Credit Card Accountability, Responsibility and Disclosures (CARD) Act takes effect in spring. Dodd asked the Senate to quickly begin considering his bill. Republicans filed an objection to his request, which prevents the bill from coming to a quick vote (American Banker Nov. 19). Dodd’s bill responds to credit card companies that are hiking their rates before the CARD Act goes into effect ... * WASHINGTON (11/20/09)--“Systemic risk” can be broadly defined as unsafe amounts of leverage at a bank, the possible failure of a large financial firm that could adversely impact the financial system, or breaks in regulatory oversight, Federal Reserve Board Chairman Ben Bernanke said in a letter to Sen. Bob Corker (R-Tenn.) Systemic risks threaten the stability of the nation’s financial system as a whole, Bernanke said (American Banker Nov. 19) ...


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