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Advocacy Alert- 03/04/2002

Speier holds privacy press conference

State Sen. Jackie Speier, author of SB 773, held a press conference on February 21 to unveil the results of a consumer survey which seemingly provided support for the privacy approach contained in SB 773.

Joining Sen. Speier was eLoan, an online lender, who commissioned the survey and also gave its official endorsement to the bill. For many reasons, eLoan’s support was not surprising. The most obvious reason: eLoan uses an opt-in system for its online business, and does not have the same concerns about compliance costs as more traditional financial institutions. Less obvious is that Wade Randlett, a member of eLoan’s Board of Directors and the advocate for eLoan’s support of SB 773, ran Speier’s failed bid for Controller in 1994.

As a result of Speier’s press conference, the San Francisco Chronicle ran an editorial supporting SB 773 and a syndicated Associated Press article ran in the Contra Costa Times. It is important to note that neither the Sacramento Bee nor the Los Angeles Times – both of which have written about this issue – covered Speier’s press conference.

CBA responded to both articles that ran in the Bay Area. A letter to the editor was submitted to the Contra Costa Times and an opinion-editorial is being drafted for submission to the Chronicle. Letters to both publications were also sent by Fred Main of the California Chamber of Commerce, one of the lead organizations in the Alliance for Fair Information Practices, of which CBA is also a leader.

CBA announces sponsored legislation

In a press release distributed on February 28, CBA announced its four pieces of sponsored legislation. For detailed information, please see the press release attached in the Monday Courier.

Unexpected FDIC board meeting to “evaluate” assessment rates rattles banking industry

With concern that the BIF ratio may contract below the 1.25 percent designated reserve ratio later this year (some believe it already has), the FDIC board scheduled a hasty meeting for Friday March 1 to evaluate the condition of the BIF and the possible need for premium assessments for the second half of 2002. Ordinarily, data is not available until approximately three months following the period being measured — in this case, year end 2001. But the Corporation’s staff obviously feels it knows enough to present a worrisome scenario. The BIF ratio was at 1.32% at the end of the third quarter, but FDIC has strongly hinted that the ratio is now perilously close to 1.25%. Why? A series of events — rapid deposit growth, higher than expected losses — reduced interest income and significantly increased reserving because of a growing number of Camel 4 and 5 ratings.

It is unlikely that FDIC will take action to raise BIF premiums at the March 1 meeting, if only because it does not yet have to act. Under present law, FDIC can increase premiums up to five basis points upon 30-day notice. Larger increases are also within FDIC’s present statutory authority but the Corporation would be required to go through a rule-making process. To keep its options alive, FDIC’s board could propose for comment a larger than five basis point increase. But more likely is that FDIC staff will present an analysis of the numbers as they know them today and a forecast of what might happen during the year, to prepare the industry for what could well be a resumption of premiums during the second half of the year.

The fact that the House Financial Institutions Subcommittee is tentatively scheduled to markup the Bachus Bill (see last issue of Advocacy Alert), on Wednesday, March 6 might also have entered into Chairman Powell’s thinking in scheduling this special meeting. The Chairman was quoted during the week as saying that Congress should have the benefit of FDIC’s latest figures before considering the legislation. He may have been speaking, as well, to a recalcitrant industry that is still not sold on all the particulars. Doubtless, banker attitudes will change with respect to the legislation if they, but not SAIF – insured thrifts have to begin paying premiums.

Meanwhile, the legislation picked up another very powerful backer this week when Senate Majority Leader Tom Daschle endorsed the bill introduced in the Senate by fellow South Dakotan, Sen. Tim Johnson.

Realtors break ranks, while 13 more House Members become co-sponsors

The avalanche continues to roll down the mountain as 10 more House Members (swelling the total to 177) became co-sponsors of the so-called “realtors’ bill” that would prohibit national banks and holding companies from engaging in real estate brokerage and management. Rep. Mike Honda was the only new co-sponsor from California, bringing the number of uncommitted Californians to 17.

But the most important news of the week was the split that developed within the realtor group when the Realty Alliance, a group representing 40 large, regional brokerage firms loudly protested the realtor effort. The group’s highly publicized letter to the National Association of Realtors itself, called the realtor position “hypocritical, fundamentally wrong and objectionable.” The industry would benefit from the competition, argued the Alliance. The letter also hit at the soft underbelly of the realtor effort – if banks are forbidden from entering the real estate business, why should realtors be able to act as mortgage brokers and bankers? Said the Alliance letter, “If federal banks were prohibited from engaging in real estate brokerage, how long would it be before the powerful banking lobby took steps to prevent real estate brokers from participating in the mortgage banking, insurance, and title insurance businesses?”

Administration back-tracks again on agency merger plan

There is yet another report that the Administration is seeking legislation to combine bank regulatory functions into a single federal agency, which is being followed up with the usual denials and clarifications. Both OCC and OTS are losing money, and they do perform a number of duplicative functions. In the private sector, this would indeed mean that the possibility of a merger would at least be considered to stop the bleeding. Obviously, some in the Administration consider consolidation to be a logical response to the dwindling number of institutions that both agencies supervise.

Not so, said the Treasury’s latest spokesman on the subject, Pat Cave, who was recently named Deputy Assistant Secretary for Financial Institution Policy at the Treasury. Cave, previously the top legislative assistant to Rep. Richard Baker, the chairman of the most powerful financial services subcommittee, has been named to head a study of ways to coordinate regulation of financial services companies. Cave indicated in an informal discussion with industry representatives in Washington this week, that he was well aware of the industry’s lack of receptivity to agency consolidation and that the Administration had no plan to go down a black hole.

He echoed his new boss, Sheila Baer, the Treasury’s Assistant Secretary forFfinancial Institutions, who indicated in a speech last fall that it might be necessary to increase the coordination of regulation of products and financial activities that are offered by institutions regulated in different agencies – as a natural outgrowth of Gramm-Leach-Bliley. But, she reassured her audience, the Administration has no plan to eliminate any financial agency. Were the industry to give even a feint sign that it might be receptive to agency consolidation, those plans could change quickly.

House bankruptcy negotiators give ground, but probably not enough

House bankruptcy negotiators gave a little ground to the Senate on two of the more contentious issues in the legislation – the state homestead exemption and a provision in the Senate bill that would not discharge debts of those found guilty of attacking health care facilities. It was the first sign of movement on this long-stalled legislation which has been approved, albeit in different forms, by both the House and Senate in the last two Congresses. But staffers on both sides say that a compromise is still not at hand, and won’t be unless Senate Democrats decide they want to enact the bill.