Deposits Op-Ed: Congress Should Extend TAG Coverage Congress should extend the ICBA-advocated Transaction Account Guarantee program by at least two years to help community banks lend to small businesses and thereby boost the economy, according to an American Banker op-ed. George Washington University Law School professor Arthur Wilmarth Jr. wrote that TAG accounts provide community banks with a crucial funding source for their loans to small businesses and other customers.
Wilmarth wrote that allowing the TAG program to expire at the end of the year will allow these deposits to quickly migrate to the biggest banks that are considered too big to fail. He wrote that investors expect the federal government to fully protect all deposits held by these megabanks because of the significant support they received during the financial crisis.
“In sharp contrast, the federal government provided relatively little help to community banks and allowed hundreds of them to fail,” he wrote. “Is it any wonder that investors expect uninsured deposits to be fully protected at megabanks but not at smaller banks?”
Wilmarth wrote that extending the TAG coverage would be a simple and effective way to help community banks fulfill their traditional role as the most reliable providers of outside credit to small firms.
ICBA continues working with lawmakers to procure an extension of this important deposit coverage. The association encourages community bankers to continue expressing their support for extending the program by urging their members of Congress approve an extension. Write Congress Today.
Lending Report: SBLF Participants Helping Boost Lending Community banks in the ICBA-advocated Small Business Lending Fund have fulfilled the program’s goal by increasing lending, according to an SNL Financial report. SNL reported Treasury data that found that the 277 lenders that received SBLF funds increased their qualified small business loans at an average rate of 55.9 percent over the course of the program through June 30.
Additionally, the participants’ aggregate qualified small-business loans stood at $41.7 billion at June 30, an increase of 17.7 percent over the $35.4 billion baseline. SNL reported that the aggregate loan data reported in their call reports reveal double-digit growth rates for all loan types in the second quarter over the baseline. Aggregate commercial and industrial loans were up 31.2 percent to $23.1 billion, and agricultural production loans were up 24.5 percent.
ICBA led the effort to work with policymakers to enact and implement the SBLF for community banks to provide another source of reasonably-priced capital. The program ultimately allocated approximately $4 billion to community banks.
Regulation CFPB To Oversee Debt Collectors The Consumer Financial Protection Bureau published a rule that will allow the agency to federally supervise large consumer debt collectors. The CFPB also released the field guide that examiners will use to ensure that companies and banks engaging in debt collection are following the law.
The consumer debt collection market covered by the rule includes three main types of debt collection: firms that buy defaulted debt and collect the proceeds for themselves, firms that collect defaulted debt owned by another company in return for a fee and debt-collection attorneys who collect through litigation.
Under the rule, any firm that has more than $10 million in annual receipts from consumer debt-collection activities will be subject to the CFPB’s supervisory authority. This authority will extend to about 175 debt collectors, which account for over 60 percent of the industry’s annual receipts in the consumer debt collection market.
The CFPB’s supervision authority over these entities will begin when the rule takes effect on Jan. 2.
Monetary Policy FOMC Stands Pat on Asset Purchases The Federal Open Market Committee announced no changes to its asset-purchase plans and said economic activity has continued at a moderate pace in recent months. Following a two-day meeting, the FOMC said growth in employment has been slow and that the unemployment rate remains elevated.
The FOMC said it will continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month and will maintain its “Operation Twist” program of extending the average maturity of its holdings of Treasury securities. It also will maintain its policy of reinvesting principal payments from its holdings in agency mortgage-backed securities. The panel said that these actions will increase the committee’s holdings of longer-term securities by about $85 billion each month through the end of the year to accommodate financial markets.
Additionally, the FOMC said it expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the economic recovery strengthens. It said it will keep the target range for the federal funds rate at zero to 0.25 percent and expects exceptionally low levels will be warranted at least through mid-2015.
Economy New-Home Sales Up 5.7 Percent New-home sales increased 5.7 percent in September to a seasonally adjusted annual rate of 389,000, the Commerce Department reported. Sales were up 27.1 percent from a year ago. The median sales price of new houses sold in September was $242,400, and the average sales price was $292,400. The seasonally adjusted estimate of new houses for sale at the end of September was 145,000, a 4.5-month supply at the current sales rate.
ICBA News ICBA Expands PSP Relationship with BancVue ICBA announced that it has expanded its Preferred Service Provider relationship with BancVue, which offers checking reward programs to community banks. The relationship now includes Kasasa, BancVue’s flagship offering. Community banks are able to offer rewards through the Kasasa program, such as a higher interest rate, cash back, automatic donations to the customer’s selected charity, digital music downloads and more. The agreement will continue to include BancVue’s REALChecking suite of products, which offers rewards designed to increase account retention. Read ICBA Release.