News
The FDIC's latest Quarterly Banking Profile includes a new section focused exclusively on community banks. Previously, detecting quarterly trends in community banking with the reports had been difficult because the actions of the largest banks distorted the results across the board. Although the FDIC counts 6,234 community banks, their trends were muted because they control just 14% of industry assets. Observers say the new section will further the debate over whether smaller banks should get regulatory exemptions. The report found that the community banking industry's overall profit suffered a 7.6% decline from its year-earlier total, although interest income growth, net interest margin and loan growth all outpaced the industry as a whole.
As part of Operation Chokepoint, U.S. officials have opened at least 15 civil and criminal investigations against banks and other payment-processing firms, according to newly released Justice Department documents. Operation Chokepoint, a Justice Department investigation into whether payment-processers helped enable fraudulent activity, has been criticized for punishing good actors along with the bad. Republicans say the government has pressured banks to stop handling payments for merchants deemed as high risk, including gun dealers, short-term lenders and credit-repair programs. Emily Pierce, a Justice Department spokeswoman, said banks are breaking U.S. law if they knowingly process illegal transactions or are "willfully ignorant" of fraud.
A U.S. Supreme Court decision in a Native American tribe’s casino case could stop online payday lenders that attempt to circumvent state laws by claiming affiliation with Native American tribes. The Court decided the case of Michigan v. Bay Mills Indian Community in favor of the tribe, which argued that the state could not sue the tribe directly for its off-reservation gambling activities. But the Court took the opportunity to sanction other avenues for restricting illegal off-reservation activities, including filing lawsuits against individual tribal officials and employees. Consumer advocates are optimistic that the ruling will provide an unambiguous method for states to take legal action against the lenders.
Virginia Community Capital has released an annual report covering the impact of their lending over the past year. The bank's lending was up 19% in 2013 and $61 million in new loans were approved. Also included in the report: How VCC helped construction firm J.R. Caskey Grading & Excavation withstand the recession; a renovation project which converted Lynchburg, Virginia's aging Armstrong Elementary School into new affordable housing; the modernization of a struggling medical facility in Patrick County, Virginia; and financing for Classic Creations screen printing company's new factory.
A new white paper by the National Federation of Community Development Credit Unions compares CDFI certified credit unions to mainstream credit unions. The paper finds that on average, CDFI credit unions outstrip their mainstream peers in financial growth and performance even though more of their loans and services are located in disadvantaged communities. CDFI credit unions are also more likely than mainstream peers to offer tech services. The report notes that the CDFI credit union sector has the potential to expand significantly: nearly half of all credit unions are concentrated in economically distressed census tracts that qualify as CDFI investment areas.
Programmer Patrick McConlogue stirred controversy last summer by staging a social experiment in which he offered to teach a homeless man, Leo Grand, to code. McConlogue believed the skill would enable Grand to escape homelessness. Grand eventually released an app called Trees For Cars which generated 15,000 downloads and a $10,000 profit. But Grand is unbanked and that money now sits unused in McConlogue's bank account. McConlogue has encouraged Grand to open an account to make the transfer, but Grand refuses. Mitchell Netburn, president and CEO of Project Renewal, says it's not uncommon for homeless people to be paranoid about banking. "They don't always understand how banks work. Who has access to them. Who can track them."
Preston Pinkett III has been appointed chairman of City National Bancshares Corp. Mr. Pinkett succeeds Eugene Giscombe, who been appointed chairman emeritus. Mr. Giscombe will remain on the board as a director. “We are very pleased with this transition," said City National Director Alfonso Carney. "Mr. Giscombe provided a level of leadership and guidance that helped the bank grow and expand into new markets. We believe now is the perfect time for Mr. Pinkett to add the role of chairman to his responsibilities of CEO. As a proven business leader, Mr. Pinkett set in motion the changes needed for City National to succeed in this new climate of community banking.”
New lending from Bank2 has allowed the Housing Authority of the Cherokee Nation to finance an ambitious affordable housing project. The project makes use of HUD's Section 184 Indian Home Loan Guarantee Program, which will provide a 100% guarantee on the loans. The Housing Authority of Cherokee Nation has closed on six loans with Bank2 so far, which will replenish the housing authority's revolving construction fund as more homes are built. “We are very excited to be working with the Cherokee Nation on their initiative to build homes for their citizens throughout the tribe’s jurisdiction,” said Ross Alan Hill, Bank2 president and CEO. “We believe this initiative will set a precedent for all of Indian Country.”
The Consumer Financial Protection Bureau has issued a report highlighting illegal actions by payday lenders, debt collection companies and consumer reporting agencies. CFPB examiners found instances of payday lenders deceiving consumers and illegally harassing borrowers to collect debts. The report also criticized debt collection agencies often used by those lenders, claiming the agencies misled consumers about litigation, made excessive calls to consumers and failed to investigate credit report disputes. CFPB examiners found that certain consumer reporting agencies were not handling consumer credit report dispute documents properly.
Panelists offer perspectives on the legacy of the bank bailout. Lee Sachs, former counselor to the Secretary of the Treasury, argues that the bailout was a success; higher capital requirements and new regulations have led to a substantially safer financial system. Other panelists critique that view, arguing that Treasury missed an opportunity to force the big banks to downsize to smaller, safer institutions. Several panelists argue that the bailout failed altogether in its primary mission of preventing another financial crisis by focusing too narrowly on banks while failing to reform mortgage refinancing or the mechanisms that spread financial contagion.