Order of The Day

While one bank regulator recently expressed support for the Obama administration’s proposed Consumer Financial Protection Agency, at least three financial trade groups and one federal regulator voiced concerns. Meanwhile, nearly 90 actions were taken by bank regulators against U.S. financial institutions.

In testimony last month before the House Financial Services Committee, Federal Deposit Insurance Corporation Chairman Sheila C. Bair said the proposed regulator would eliminate regulatory gaps between depository institutions and non-bank providers of financial products and services.

But Bair also noted that although the proposed regulator would be the sole rule-making authority for consumer financial protection statutes, “It would set a floor on consumer regulation and supervision and would guarantee the ability of states to adopt and enforce stricter laws for institutions of all types, regardless of charter.”

Comptroller of the Currency John C. Dugan testified that banking supervisors won’t have enough input in formulating rules under the proposed regulator and called for more banking supervisors on the board of the new regulator. He also expressed concern that federal preemption would be abandoned and states could impose their own rules — leaving no uniformity.

Dugan told lawmakers that he supports designating the Federal Reserve Board as the consolidated supervisor of systemically significant financial firms. He also said that consumer protection examination and enforcement responsibilities should not be assigned to the new agency as proposed, but instead should be left with banking agencies.

“Moving these banking agency functions to the CFPA would only distract it from its most important and daunting implementation challenge: establishing an effective examination and enforcement regime for the ‘shadow banking system’ of the tens of thousands of nonbank providers that are currently unregulated or lightly regulated, like the nonbank mortgage brokers and originators that were at the heart of the subprime mortgage problem,” he said.

The Consumer Mortgage Coalition told lawmakers in a letter to step back and analyze what the costs to consumers will be from the proposed regulator. The group said that it is still unclear what type of companies would be covered by the regulator and what the benefits to consumers will be.

“Both of these shortcomings raise a very real probability that there will be significant dangerous, unintended consequences if the legislation is enacted in its current form,” the group said. “We strongly urge you to delay your committee’s consideration of H.R. 3126 until after the August recess in order to provide due time for all stakeholders and decision-makers to fully understand the legislation’s scope and its potential economic and legal impacts.”

Last month, both the Mortgage Bankers Association and the American Bankers Association expressed their opposition to the proposed regulator during Congressional testimony.

The Colonial Bankgroup Inc. consented to a cease-and-desist order with the State of Alabama State Banking Department, according to a copy of the order (Docket No. 09-086-B-HC) filed with the Federal Reserve Board on July 22. Such orders often precede bank failures.

The FDIC reported Friday that it processed 66 regulatory orders during June, including the following 27 cease-and-desist orders.

During June, the FDIC terminated cease-and-desist orders against Columbus Bank and Trust Co. in Columbus, Ga.; Southern Community Bank in Fayetteville, Ga.; American Southern Bank, Kennesaw, Ga.; Herrin Security Bank in Herrin, Ill.; Great Basin Bank of Nevada, Elko, Nev.; Israel Discount Bank of New York in New York; and Cooperative Bank of Wilmington, N.C.

Final order number FDIC-09-169OA for $300 was issued against Community Bank, National Association, in Mobile, Ala., on June 5. The order was issued pursuant to Section 8(h), 12 U.S.C. § 1828(h).

The FDIC said it issued civil money penalties against the following banks.

The FDIC entered a formal written agreement on April 20 with Michigan Commerce Bank in Ann Arbor, Mich.

Also recently announcing several formal written agreements was the fed. Among other things, written agreements generally require institutions to preserve capital, improve operations and compliance, and even sometimes replace management.

The fed said it issued a prompt corrective action directive (Docket No. 09-087-PCA-SM) on July 28 against Warren Bank in Warren, Mich. Also hit with a prompt corrective action directive, on July 21, was Bank of Elmwood in Racine, Wis. (Docket No. 09-090-PCA-SM).

Prompt corrective actions were taken by the FDIC against Temecula Valley Bank in Temecula, Calif. (order number FDIC-09-280PCAS) on June 15 and Security Bank of North Fulton in Alpharetta, Ga. (order number FDIC-09-310PCAP) on June 30.

An order (number FDIC-08-407p) was issued on June 2 against National Motors Bank FSB in Fort Washington, Penn., by the FDIC.

The FDIC also issued an adjudicated decision and order (number FDIC-07-252e and FDIC-08-016k) to prohibit Brenda J. Vikre of Boston’s Commonwealth Co-operative Bank from further participation.

The fed issued a July 27 a consent order of prohibition (Docket No. 09-078-E-I) against Ronnie A. Jenkins, a former loan officer with Middleburg Bank in Middleburg, Va.

Removal and prohibition orders were issued by the FDIC against the following seven firms.

The National Credit Union Administration Board announced Friday that it issued several prohibition orders, including one against former Southern Delaware Postal Employees Federal Credit Union employee Rebecca Andino, who was convicted of theft, sentenced to six months supervised work release and 12 months supervised probation, and ordered to pay $54,800 in restitution.

Rhonda Campbell, a former employee of North Star Federal Credit Union in Lima, Ohio, faced a prohibition order because she was convicted of embezzlement. Campbell was sentenced to eight months in prison and ordered to pay $105,000 in restitution.

Former Capital Power Credit Union employee Richard James Ditzel — who was convicted of embezzlement, sentenced to 33 months in prison and ordered to pay $478,992 in restitution — faced an NCUA prohibition order. Capital Power operates from Sacramento, Calif.

The agency issued a prohibition order against Richard A. Lange, the former president of Columbia Heights, Minn.-based Financial One Credit Union. Lange was convicted of embezzlement and filing false tax returns, sentenced to 21 months in prison and ordered to pay $249,691 in restitution.

Sharon Quattrone, who previously worked at CCSE Federal Credit Union in Salamanca, N.Y., also faced a prohibition order. She was convicted of a false statement to a federal credit union and sentenced to 3 years supervised release.

In addition, former Mid Island Federal Credit Union manager Hyacinth Richardson signed an order of prohibition. Richardson, who agreed to the order to avoid the time and cost of litigation, didn’t admit or deny fault. Mid Island is located in St. Croix, Virgin Island.