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Current Events - 07/24/2000

ATM Progress — The City Attorney for Santa Monica has drafted a proposed resolution for the City Council to consider at its next meeting on July 25. The resolution language would purport to suspend the portion of the ordinance that allows for private citizens to bring lawsuits to enforce the ATM access fee ban. This is definitely the result we want and the one the Court ordered on June 30. The only question we have now is whether a mere resolution to suspend a more formally adopted ordinance is sufficient to allow banks to comfortably begin offering ATM services to non-account holders through the collection of access fees. We are looking at this issue right now and will continue to proceed with caution. Santa Monica has not made this latest piece any easier. The City Attorney has elected to recommend the Council adopt a resolution rather than an ordinance to suspend the private enforcement provisions of their ATM access fee ban. It is an uncertain proposition what the legal effect will be for a resolution which purports to suspend an ordinance that has been declared unconstitutional by a federal court. A resolution is not law. Why our continued caution?  If you collect $1.50 as an access fee for a transaction, but face a potential of $250 per transaction in damages for violating the ordinance we have to be awfully sure the ordinance has been effectively suspended before banks will turn their machines back on. Nothing in this case has been easy, but it has all moved steadily in the right direction. I will bring more news on this case next week.

Deja vu — Don’t stop me. I know you have already heard this one before. Last year the SEC was criticizing banks and their regulators for maintaining high loan loss reserves. During this long running battle, the SEC accused banks of holding excess reserves in order to “manage” their earnings. The banking regulators maintained that reserves should be maintained at or above current levels to preserve safety and soundness. This feud resulted in a July 12, 1999-joint guidance letter from the regulators and the SEC, largely favorable to the banking industry and the need to maintain adequate loan loss reserve flexibility. Now comes the American Institute of Certified Public Accountants, a trade group of accountants, with a proposal to severely restrict banks’ loan loss reserves claiming they would otherwise mask an institution’s true financial condition. Among other things, the proposal would bar banks from holding any unallocated reserves and would require written documentation of a specific loss to accompany each addition to reserve accounts. The regulators have blasted this proposal (as they should), noting that it would produce loan loss allowances that are understated, particularly as the condition of borrowers weakens in periods preceding an economic downturn. And while we have all enjoyed basking in  the wonderful period of economic prosperity we are currently enjoying, I have yet to talk with a banker who feels that business cycles are a thing of the past. The strong formal letter from the regulators (signed by the Fed, OCC, OTS, and FDIC) clearly shows their frustration over the AICPA’s actions. It is still early in this whole process, but we will remain watchful and put our oar in the water if it will help.

CRA Sunshine Amendment Comment Letters — July 21 was the deadline for submitting comments to the federal banking agencies, but they will continue to accept comments for two more weeks as banks struggle to meet that date. Banks should take the opportunity to encourage the federal banking agencies to trim the bloated proposal, regulatory overkill at its finest, which does nothing to advance the goals of the CRA. Without your input, the industry could be saddled with yet another paperwork production regulation, this one intended to expose purported coercion by CRA community groups. CBA’s comment letter is attached and can be used to serve as a model for your own bank’s response. Remember, the more individually tailored your letter, the more effective it will be.

Goodbye To A True Friend — As many of you already know, Judy and Ron Reinartz will be retiring with the merger of Bank of Santa Clara into Greater Bay Bancorp. Judy asked me if she could send a farewell letter to the industry and I welcomed the opportunity to give her a forum. She has been active with CBA for many years. Most recently, she chaired our State Government Relations Committee and served on our Board of Directors. Never one to be shy about stating her views, Judy has always been a tireless advocate of banker political involvement through the PAC process and in direct lobbying of legislators. She has lead by example in this regard and I am proud to count her among my friends in the banking industry. Her message is attached to Current Events this week and on behalf of the staff I want to express my thanks and gratitude for what she has to say. Goodbye, Judy...don’t be a stranger!
 

Chris Chenoweth
CBA COO & General Counsel
On behalf of the entire staff
07/24/00