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Your Mostly Banking Policy Week in Review, By Liz Ryan Murray

November 10, 2010

Financial Facts of the Week

  • Bank closures for 2010 up to 143 as of today – 3 more than all of 2009. While the big banks continue to thrive, small and community banks continue to struggle.
  • Speaking of thriving, quarterly earnings for the big guys came out in the last couple of weeks. Here’s the breakdown:Wells Fargo – Record net income of $3.34 billionCiti – Third-quarter net income was $2.17 billion

    JPMorgan Chase – “the bank’s net income was $4.4 billion, up a staggering 23% from the same period last year”

    BofA – Okay, this is kind of fascinating. B of A actually made $3.7 billion however – they’re reporting a $7.3 billion dollar loss due to a $10.4 billion “Goodwill Impairment Charge” on the basis that they’re going to lose income from not being able to charge fees on debit cards anymore under the new financial legislation.

  • All is not going that well for the big guys though. The ‘robo-signing’ foreclosure problems are mushrooming with more and more investors including Regional Federal Reserves and Federal Home Loan Banks suing them for misrepresenting the mortgages (poor underwriting, etc.) in the securities they sold.
  • “Citigroup Inc. (C), Wells Fargo & Co. (WFC) and Bank of America Corp. (BAC) are facing multiple lawsuits over alleged misstatements or omissions in their underwriting of residential mortgage-backed securities, the banks disclosed Friday in quarterly regulatory filings…..Analysts have generally estimated banks could lose $26 billion to $55 billion if forced to buy soured mortgages back from private investors. J.P. Morgan fixed-income strategists said such losses could climb as high as $120 billion industrywide.”
  • “Don’t Get Mad Get Even” Fact of the Week: This week the OCC announced that Bank of America had received their 7th “Outstanding” CRA rating in a row.

Post Election Congressional Fun

New Leadership on banking committees: Richard Shelby (R-AL) is likely to be the new House Financial Services Chair and Tim Johnson (D-SD {which in this case means ‘Depressingly Deep in the bank’s pockets}).

Republicans have their sights set on Fannie and Freddie. Both new Chairs have stated they want to get to work on GSE reform. The Republicans are salivating at what they see as an easy way to score points by taking down Fannie & Freddie. Johnson says he would like a ‘bi-partisan approach to reform’

In related news Fannie Mae lost $3.46 billion during the third quarter, as it paid a $2.12 billion dividend payment to the government. The loss was slightly greater than the $3.13 billion loss in the second quarter, but a far cry from the nearly $20 billion loss a year earlier. Freddie lost $2.5 billion. This caused several Republicans to faint with joy.

Keith Ellison’s New BFF = HUD. HUD has given their latest crack at transforming rental assistance (turning public housing into Section 8 housing that can be mortgaged) to Keith Ellison (D-MN) to carry. Keith’s a nice guy, but not really a subsidized housing heavy hitter. This thing is going to be introduced the week of the 15th and there will be nothing done on it.

The lame duck session of Congress that opens on February 16th will feature at least two hearings on the foreclosure crisis. One is scheduled for Senate Banking on for the House Judiciary committee. Talk of a House Financial Services hearing sponsored by Maxine Waters (D-CA), but nothing confirmed.

Overall Economic News

Unemployment is stuck at 9.6% with almost 15 million Americans unemployed and with “4 in 10 of those out of work and searching for a job for at least six months”

3rd Quarter foreclosures hit a record. “…foreclosure filings — default notices, scheduled auctions and bank repossessions — were reported on 937,840 properties in the third quarter …. One in every 136 U.S. housing units received a foreclosure filing during the quarter — the highest quarterly foreclosure rate since RealtyTrac began issuing its report in the first quarter of 2005.”

Liz Ryan Murray is the Director of Policy for National People’s Action. Stay tuned for her next Banking Policy Week in Review, posted every Tuesday.

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