Truliant CEO to advise CFPB

The CEO of Winston-Salem's Truliant Federal Credit Union has been named to the Consumer Financial Protection Bureau's credit union advisory council.

Marcus Schaefer joins 14 other credit union executives on the panel. They're expected to weigh in on the new federal regulator's proposed rules.

Schaefer was a strong advocate for the creation of the CFPB. He testified to the Senate Banking Committee last summer that the regulator was necessary, according to the Credit Union Times.

Non-banks set for more federal scrutiny

Welcome to the morning roundup. Here's a look at what's news in banking and finance.

Non-banks to be named 'systemically important.' The Financial Stability Oversight Council will soon name the first non-banks to be declared systemically important and subject to increased regulation, Bloomberg reports. Such companies could include AIG and GE Capital.

Judge rejects racial bias suit against Merrill. A lawsuit filed by black Merrill Lynch brokers objecting to a bonus program instituted when the company was bought by Bank of America was rejected by a federal appeals court, Reuters reports. The brokers could still win a similar case from 2005 claiming systematic racial bias in hiring and promotion.

Wells Fargo bid for Discover would be 'win-win.' Rumors are still swirling that Wells Fargo could acquire Discover Financial, and Forbes magazine says it would be a good deal for both sides. The magazine says it makes sense in Wells' growth model and would give the fourth-largest card payment processor a broader base.

New repurchase rules could affect Bank of America

The federal agency overseeing Fannie Mae and Freddie Mac announced Tuesday new rules governing mortgage put-backs that could help head off the type of protracted battle that the mortgage giants have had with banks like Bank of America.

One of the biggest provisions is that the government-sponsored entities would no longer make repurchase demands on loans where the borrower had made 36 months of "consecutive, on-time payments," according to a statement.

Mortgage putbacks occur after a bank sells a mortgage to another party. If the buyer thinks that the bank that originated the mortgage misrepresented its quality, the buyer can try to force the bank to buy it back. They're often called rep and warranty claims.

These have been a particular bone of contention between Bank of America and Fannie and Freddie in recent quarters. In the second quarter, putback requests reached $22.7 billion, up from $16.1 billion the quarter before. Bank of America had set aside $15.9 billion. Investors have called Bank of America's exposure to repurchase demands their biggest concern.

Of particular contention were put-back requests on loans where the borrower had already made several years of payments. An industry standard is 25 payments.

Other parts of Tuesday's announcement:

• For HARP loans, putbacks end after 12 months of payments.
• Fannie and Freddie will review loans within 30 to 120 days of purchase, not when it goes into default.

"For the market to reclaim the strength it once had – and to provide a cornerstone for the mortgage market of the future – it is vital we consider ways to improve the representation and warranty model," Federal Housing Finance Agency head Ed DeMarco said in a speech to bankers in Raleigh on Monday, according to prepared remarks. "Lenders want more certainty about their risk exposure and the Enterprises want to ensure the quality of the loans that are delivered to them."

The new standards don't go into effect until Jan. 1, so they don't cover the loans currently in dispute. Bank of America CEO Brian Moynihan said in the bank's second quarter conference call that a large part of the loans they're dealing with now were originated in 2006 and 2007.

One bailout down, more to go

Welcome to the morning roundup. Here's a look at what's news in banking and finance.

AIG bailout finishing up, more still around. The Treasury's sale of about $18 billion in stock of insurance giant AIG the government bailed out in 2008 is a big step in unwinding one of the most unpopular crisis-era bailouts, The New York Times says. But Uncle Sam still has plenty more to do. The government still owns big chunks of General Motors, Ally Financial, and many smaller stakes in community banks around the country.

Hiding trading risk. Derivatives traders at banks like JPMorgan Chase and Bank of America are planning to skirt new rules designed to safeguard the financial system by allowing to post lower-quality collateral to back their trades, Bloomberg reports. The clients then receive a loan of higher-rated Treasuries to nominally meet the rules -- a process known as "collateral transformation."

Governments enjoy low rates. Savers aren't thrilled with low returns on their deposits, but governments are loving the low interest rate environment, The New York Times says. They're able to refinance debt and borrow cheaply, saving money. Added bonus: government policy helps set the rates.

Research department shakeup. Bank of America is changing things around in its research department after London-based Gary Baker, head of European equity strategies, left the bank, Bloomberg says.

Two more TARP investments in N.C. banks to be auctioned

The U.S. is scheduled to auction off the federal bailout investments in two more North Carolina banks today, the Treasury announced.

The first is Elkin-based Yadkin Valley Financial Corp., which received $49 million through preferred stock sales through the Troubled Asset Relief Program. The bank announced last month that it had evened up with the government on missed dividend payments.

The second is Salisbury's F & M Financial Corp., which had $17 million in bailout money and had been paying dividends.

The Treasury has announced numerous auctions over the past several weeks as the government seeks to extricate itself from the unpopular program. The government will also be selling $18 billion in shares of AIG today.

Bank of North Carolina's TARP investment was auctioned off last month. It was sold at an 8 percent discount, but including dividend payments, the government did not take a loss.

Some big banks rethinking CEO pay

The morning roundup is back after a week-long DNC hiatus. Thanks for bearing with us.

Banks considering new CEO pay structure. JPMorgan Chase and Citigroup directors are considering changes to how they pay their CEOs after shareholder unrest over last year's, the Wall Street Journal reports. JPMorgan's Jamie Dimon is expected to get a smaller bonus after the 'Whale' loss. Citigroup shareholders voted"no this year in their annual "say on pay" vote.

White House could get more financial regulatory power. Republicans in the U.S. Senate are pushing a bill that would give the White House more control over how financial regulations are put into place, a tactic which could delay and weaken financial reform, The New York Times reports.

Fiduciary standard for brokers on hold. The SEC has apparently pressed pause on a rule that would hold brokers to the same fiduciary standard for clients as investment advisers, Bloomberg reports. No action is scheduled for the rest of the year.

Wells Fargo cleans out wrong house. An elderly couple in California lost a number of their possessions after Wells Fargo contractors mistakenly cleaned it out, ABC News reports. The bank had foreclosed on a nearby house and the contractors broke in to the wrong one. The house, in fact, had been paid for in cash.

U.S. selling AIG stock. The government is set to become a minority shareholder in insurance giant AIG by selling $18 billion in stock acquired in the 2008 bailout, the Wall Street Journal says. The U.S. will likely still have a 20 percent stake in the company.

Mooning will get you fired. In what's just a bizarre story, a court turned down the appeal of an investment analyst at a Bank of America subsidiary who argued that mooning his boss was not a just cause for being fired, Time magazine says. The employee was trying to get money from his separation agreement. Be sure to read the court document. It's not every day you see "The 'Mooning'" as a subhead in a judge's opinion.

Barney Frank 'disappointed' in American Bankers Association

U.S. Rep. Barney Frank told the Observer he is "very disappointed" in news that the American Bankers Association plans to create a fund to donate to super PACs targeting close Senate races involving pro-industry candidates.

"I think the ABA aught to be ashamed of itself," Frank said in a brief interview on the Time Warner Cable Arena concourse late Wednesday.


"I think they will do themselves a lot of harm with the public, pursuing the right to make the same kinds of mistakes they did before," Frank said. "It kind of reminds me of what was said with the kings of France, when they returned to power after the revolution. Someone said, 'Well, they don't seem to have, they seemed to have forgotten everything.' Reply was, 'No, they didn't forget anything, they didn't ever learn anything in the first place.'"

The comments were in response to a Bloomberg report that the ABA seeks to raise several million dollars to influence six to 12 Senate races. House Republicans have sought a roll-back of provisions in the Dodd-Frank financial reform law, but have been largely blocked by the Senate, where Democrats hold a slim majority.

The American Bankers Association described the fund as an “education and advocacy” initiative similar to those that many trade groups set up. “The board approved the proposal so that ABA can more effectively serve its members in today’s environment,” spokesman Jeff Sigmund said in an email.

Frank is the ranking member on the House Financial Services Committee and is the "Frank" in the reform law. He has said he will retire at the end of this term, his 16th.

Frank said in the interview that he has met with several financial industry leaders during the convention in Charlotte, but hasn't made a particular effort to.

"Brian Moynihan lives in my district, in the commonwealth of Massachusetts," Frank said. "I don't have to come to North Carolina."

He also said holding the convention in Charlotte, a major financial center, does not pose a problem for the Democratic Party as some have suggested. Later Wednesday, Senate candidate Elizabeth Warren was critical of banks and Wall Street in her speech.

"It's only in the minds of the media," Frank said. "I don't know any citizen who cares about that. Where people have the conventions is irrelevant."

He said his party's financial industry priority in the next session is to "consolidate" and make sure financial reform is carried out by having the "right people in place" and keeping regulators fully funded.