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Inside Washington (12/16/2009)
* WASHINGTON (12/17/09)--The Federal Deposit Insurance Corp. (FDIC) Tuesday delayed a proposal to put new restrictions on securitizations. John Bowman, Office of Thrift Supervision acting director, and John Dugan, Comptroller of the Currency, convinced the board to issue an advance notice of proposed rulemaking asking for comment on how to proceed (American Banker Dec. 16). The proposal’s goal is to curb improper mortgage underwriting before mortgages are sold into the secondary market, but Dugan and Bowman said the proposal could hurt the securitization market and conflict with other regulatory reform legislation. Chairman Sheila Bair, Vice Chairman Martin Gruenberg and board member Thomas Curry supported the proposal. The proposal stems from a Financial Accounting Standards Board rule, which takes effect next year and requires lenders to report securitized assets on their balance sheet in the event of failure. Normally, FDIC would not touch those assets. However, with the new rule, FDIC must have a plan to handle the assets ... * WASHINGTON (12/17/09)--House Financial Services Committee Chairman Barney Frank (D-Mass.) said the panel likely would tackle the issue of creating a covered-bond market in the U.S. next year (American Banker Dec. 16). The committee met Tuesday and briefly talked about the bond market. Rep. Scott Garrett (R-N.J.) introduced legislation this year aimed at enhancing the market for covered bonds, which add liquidity for loans without securitization risks. In an interview after the meeting, Garrett said Congress needs to act quickly or investors could lose interest before covered bonds become an option. Covered bonds are popular in Europe but have not caught on in the U.S. ... * WASHINGTON (12/17/09)--Troubled Asset Relief Program (TARP) funds should be used to help community banks, said Sen. Carl Levin (D-Mich.) in a letter to Treasury Secretary Timothy Geithner. Treasury needs to provide help for small banks so they can offer credit to small businesses, Levin said. TARP has only helped large financial firms, and financial institutions with assets of $100 billion or only accounted for 22% of small business lending, Levin added. Credit Union National Association President/CEO Dan Mica has urged lawmakers to lift credit unions’ caps on business lending because credit unions have money to lend to the businesses, which would create jobs and help the economy ...

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