The agreement, reached by the Department of Justice, Department of Housing and Urban Development and 49 state attorneys general, called for the five largest mortgage companies to significantly revamp their procedures for dealing with distressed borrowers. It called on them to provide billions of dollars in aid to those borrowers and change the way they pursue home repossessions, in exchange for prosecutors dropping legal claims that the companies systematically violated borrowers’ rights when using faulty, so-called “robosigned” documents in foreclosure proceedings.

Consumer advocates have heralded the establishment of standards for how the companies would treat borrowers who fell behind on their payments as the settlement’s signature achievement. The new mortgage servicing provisions were supposed to “address the issues that led to the creation of the settlement,” according to Joseph Smith, the settlement’s official monitor.

The five banks — JPMorgan Chase, Wells Fargo, Bank of America, Citigroup and Ally Financial — collectively service more than half of all outstanding U.S. home loans. Since Oct. 2, 2012, they have had to comply with 304 mortgage servicing requirements, including offering struggling borrowers the opportunity to avoid foreclosure and approving or denying loan modifications within 30 days of receiving a complete application.

Schneiderman said Monday his office has uncovered 339 alleged violations of the settlement’s terms, 210 concerning Wells Fargo and 129 concerning Bank of America. He said he intends to sue the banks for “repeatedly violating” the settlement if the monitoring committee of representatives from various federal and state agencies declines to take action.

But it’s unclear whether Schneiderman could successfully bring such a lawsuit. The agreement does not specify whether he can independently pursue legal action against the banks without first allowing the Office of Mortgage Settlement Oversight, run by Smith, to determine whether they are complying, a process that could take months.

Smith’s office will make public by June 30 its first required report on the banks’ compliance with the mortgage servicing standards. The deal dictates that the companies shall have an opportunity to correct potential violations once they are identified. If the same violations continue, the monitoring committee could launch lawsuits and levy penalties totaling as much as $5 million for each violation.

Regardless, Schneiderman said the agreement allows him to enforce the settlement unilaterally. He said he warned his fellow regulators of his intent to sue on Friday, though some officials in the offices of other state attorneys general said they only learned of his plans in a Monday morning email from his office.

“Wells Fargo and Bank of America have flagrantly violated those obligations, putting hundreds of homeowners across New York at greater risk of foreclosure,” Schneiderman said. “I intend to use every tool available to my office to hold these companies accountable.”

Schneiderman said his lawsuit threat “obviously has implications” for the other three banks involved in the settlement. Housing organizations in New York said they had lodged similar complaints against the banks with Schneiderman’s office.

“I continue to believe there are areas in which the banks must improve their treatment of their customers,” Smith said in response. “I intend to use the full breadth of my power under the settlement to hold the banks accountable.”

Both Wells Fargo and Bank of America responded to the announcement as well.

“It is unfortunate that the New York Attorney General has chosen this route rather than engage in a constructive dialogue through the established dispute resolution process,” a spokesperson for Wells Fargo said. “We fully support the rules established under the Settlement.”

Bank of America said it will “work quickly” to address the 129 “customer servicing problems” that Schneiderman identified. The bank added that it has provided more than 10,000 New York homeowners with more than $1 billion in aid.

The settlement for the first time legally requires the five banks to meet a variety of timelines. In addition to the 30-day window to tell borrowers whether their applications have been approved, they must notify borrowers within three business days that they have received loan modification applications and within five days if the application is missing key details or documents.

Over the last few years, consumer advocates and government officials have repeatedly complained of banks losing borrowers’ documents and forcing them to wait months for basic decisions to be made on their applications for loan modifications.

In a February report, Smith said that he had received more than 600 complaints detailing shortcomings in the banks’ dealings with borrowers. The majority of them concerned issues such as failures to decide on loan modification requests within 30 days.

Smith said that of “particular concern” were reports that borrowers were having to submit documents multiple times to their mortgage servicers, sometimes with no response or followed by requests for the same documents yet again.

“The striking thing about the timeline violation is that they’re so pervasive. It’s the exception rather than the rule when modifications requests are addressed without delay,” said Joseph Sant, staff attorney with the Staten Island Legal Services Homeowner Defense Project.

Last month, The Huffington Post reported that Schneiderman has complained to key Democratic lawmakers on Capitol Hill that the Obama administration has not aggressively investigated the kind of dodgy mortgage deals that helped trigger the financial crisis. Schneiderman critics allege that he, too, has compiled a lackluster enforcement record against Wall Street.

His threat to sue Wells Fargo and Bank of America comes a few days after he withdrew his objection to a separate proposed $8.5 billion settlement between Bank of America and a group of mortgage investors over soured loans. In 2011, Schneiderman asked a state judge to reject the pact on the grounds that a party to the settlement had committed fraud and had failed to act in the best interests of the investors.

Source: http://www.huffingtonpost.com/2013/05/06/new-york-ag-wells-fargo-bank-of-america_n_3223181.html

Because such debt carried top credit ratings from firms such as Standard & Poor’s, few financial executives paid attention to the potential dangers.

“If someone had elevated to my level that we were putting, on a $2 trillion balance sheet, $40 billion of AAA rated, zero risk paper, that would not in any way have excited my attention,” Prince told the Financial Crisis Inquiry Commission, according to a transcript of his testimony released in 2011.

Mortgage securities granted top grades started souring in 2007, leading to ballooning losses. Citigroup required a $45 billion federal rescue, the largest of the bank bailouts that put taxpayer money at risk. The Justice Department sued New York-based S&P and parent McGraw-Hill Cos. last week over the damage caused by the practices allegedly behind the inflated rankings that contributed to the biggest financial crisis since the Great Depression.

Some of the biggest losers were banks, including Citigroup and Bank of America Corp., which created and purchased collateralized debt obligations. Many of these investments — created by packaging mortgage-backed bonds, derivatives and other CDOs and dividing them into new securities with varying degrees of risk — imploded within a year after they were sold, even though they had pristine credit ratings.

Buffett’s Bank

Smaller financial institutions were also ruined by mortgage-backed debt. Western Federal Corporate Credit Union failed after its executives employed an improperly “aggressive investment strategy” that had no limits on highly rated mortgage bonds, according to a regulatory report on its collapse.

Even Warren Buffett was affected. The Justice Department case identified Buffalo, New York-based M&T Bank Corp., whose shareholders include Buffett’s Berkshire Hathaway Inc., as one of the buyers of failed CDOs. Berkshire of Omaha, Nebraska, is also the biggest shareholder of Moody’s Corp., owner of the second-largest ratings firm after S&P.

S&L Law

The world’s leading financial institutions suffered more than $2.1 trillion of writedowns and losses after soaring U.S. mortgage defaults caused the credit crunch.

In the complaint filed Feb. 4 in U.S. District Court in Los Angeles, the Justice Department is invoking a law created in response to the savings-and-loan crisis of the 1980s that was designed to offer easier victories when damage has been done to institutions with federally insured deposits.

Success is “far from clear,” Jeffrey Manns, an associate professor at George Washington University Law School, said Feb. 7 in a telephone interview. S&P may argue it believed in its ratings or the statute doesn’t apply to the case.

“We start with proposition that we deny there was any fraud,” Floyd Abrams, the Cahill Gordon & Reindel LLP lawyer for S&P who represented the New York Times in the 1971 Pentagon Papers case, said in a telephone interview on Feb. 7. Fraud claims have “a high burden of proof,” he said.

Ed Sweeney, a spokesman at S&P, declined further comment.

Shares Slide

McGraw-Hill’s market capitalization, which reached a five- year high of $16.2 billion at the start of the month, has plunged since the company said it anticipated the lawsuit would be filed, reaching $11.9 billion at the end of last week.

The company’s stock price declined 27 percent in the five- day period ended Feb. 8 to $42.67, the biggest weekly drop in data compiled by Bloomberg going back to August 1980. The yield on its 2017 bonds leapt 69 basis points to 2.69 percent. The cost of insuring its debt against non-payment through five-year credit-default swaps jumped 135 basis points to 225.5 basis points, according to data provider CMA. McGraw-Hill owns CMA, which compiles prices quoted by dealers in the private market.

Citigroup underwrote at least eight of the 12 CDOs from 2007 named in the government’s complaint for which it’s listed as a victim. That included Bonifacius, an issue among the last of its type named for a general called the “last of the Romans” by historian Edward Gibbon because he fought and died for a fading empire.

Prince, who was forced out over New York-based Citigroup’s mortgage losses, didn’t return an e-mail last week.

Different Departments

Charlotte, North Carolina-based Bank of America, the second-largest U.S. lender by assets, hired S&P to grade two of the three CDOs for which it’s named as a victim, including one overseen by Bear Stearns Cos.’s Ralph Cioffi, the manager of two hedge funds whose collapse in June 2007 signaled the end of the boom in mortgage-tied CDOs. Bear Stearns collapsed in 2008 and was bought by JPMorgan Chase & Co., the largest U.S. bank, with assistance from the Federal Reserve.

Underwriters of CDOs typically signed off on the contents of the deals and the nature of disclosures regarding their risk. Pressure from such firms pushed S&P to weaken its standards and to put off changes in ratings methods that could have made it tougher to receive top rankings, the Justice Department said.

Even though the Justice Department lawsuit relies on examples where the same banks sold and bought their own toxic securities, saying they were harmed by S&P “isn’t a totally ridiculous assertion,” said Bert Ely, an Alexandria, Virginia- based bank consultant.

Big Organizations

“One of the things you’ve got to realize about large financial institutions is that they’re big organizations, they’ve got lots of different departments,” he said in a telephone interview. “So the left thumb doesn’t know what the right finger is doing, much less the right big toe.”

While no bank or regulator should have had a “blind reliance on ratings,” the correct, lower grades might have prevented risks from building, Thomas Stanton, a former senior staff member at the financial crisis commission, or FCIC, said Feb. 7 in a telephone interview.

“If we were in an era where rating agencies were simply incompetent and the investors failed to do due diligence, that’s one thing,” said Stanton, a Washington attorney and fellow at Johns Hopkins University’s Center for the Study of American Government. “But what seems to be coming out is a potentially higher level of culpability at S&P.”

Federal Allegations

Federal prosecutors allege that S&P didn’t adjust its analytical models or take other steps it knew were necessary to reflect the risks of the securities. The claims are tied to whether the company accurately represented the care it took in providing credit grades and avoiding conflicts, not how incorrect its ratings later proved. E-mails and other internal documents show executives were concerned that tougher standards would cause issuers to take their business elsewhere.

High ratings were critical to encouraging banks to invest in mortgage securities, Chris Whalen, executive vice president at Carrington Investment Services LLC, said Feb. 7 in a telephone interview.

“A bank could not have bought the securities but for the rating” said Whalen, a former managing director at Institutional Risk Analytics, which evaluates banks for investors. That’s because their capital rules “were totally ratings driven.”

Credit Unions

Western Corporate Federal Credit Union, or WesCorp, was seized by its regulator in 2009 after almost $7 billion in losses from investments in mortgage bonds with AAA or AA ratings.

Like other so-called corporate credit unions that provide services to credit unions that deal with consumers, it was “only allowed to invest in highly rated securities,” according to a regulatory report on its failure.

While the Justice Department called San Dimas, California- based WesCorp a victim of S&P, the National Credit Union Administration said in 2010 in a lawsuit against 15 of its former directors and officers that they had been “grossly negligent” in overseeing the bank. There had also been improper payments from certain executive retention plans, according to the lawsuit filed in federal court in Los Angeles.

Robert A. Siravo, its former CEO, agreed to pay $600,000 and was banned from working at credit unions to settle NCUA claims, the regulator said in October. He didn’t admit liability or fault.

Other Victims

Credit unions now pay special assessments to cover the losses on failures of institutions including WesCorp. Those costs may translate to lower savings rates to consumers.

Other victims named by the Justice Department included Eastern Financial Florida Credit Union, which was created for Eastern Airline Transport Co. employees and their family members in 1937 and failed in 2009. Also identified were units of M&T Bank, the lender that repaid more than $700 million in Troubled Asset Relief Program, or TARP, funds in 2011, and Chicago-area First Midwest Bancorp Inc.

The Financial Institutions Reform, Recovery, and Enforcement Act of 1989 that the Justice Department is using to sue S&P stemmed from the savings-and-loan crisis of the 1980s, when the failure of about 750 thrifts cost taxpayers almost $90 billion.

“Firrea was the Dodd-Frank of its day,” Cliff Rossi, executive-in-residence at the University of Maryland’s Robert H. Smith School of Business, said Feb. 7 in a telephone interview, referring to the financial-overhaul law enacted in 2010.

Tougher Enforcement

Because Citigroup and Bank of America created some of the CDOs, Rossi said he “found it a little surprising they would try to come at it like these were some unfortunately aggrieved institutions.” Still, the history of why Firrea included tougher enforcement powers reflected the view at the time that thrift executives had often worked with other parties to put their own firms and, ultimately, taxpayers at risk, he said.

“A lot of what happened had had nothing to do with looking after the best interest of shareholders and instead about looking after the best interest of senior executives,” Rossi said.

The FCIC, which was created by Congress with a 10-member bipartisan board in 2009, said in its final report that Citigroup’s “willingness to use” its bank “to support the CDO business had the desired effect” of boosting it from the 14th ranked underwriter in 2003 to second place in 2007.

Bubble Bursts

In a 2008 letter to Vikram Pandit, Prince’s successor, the Federal Reserve Bank of New York criticized how Citigroup offered its various units “largely unchallenged access to the balance sheet to pursue revenue growth.” Pandit was ousted in October by Citigroup directors.

In turn, “what was good for Citigroup’s investment bank was also lucrative for its investment bankers,” the FCIC said. The co-heads of its global CDO business each made about $6 million in 2006, while a co-CEO of the investment bank earned more than $34 million in salary and bonus.

Taxpayers were forced to offer the bank the $45 billion bailout, later repaid, as part of the $700 billion TARP.

“I know it sounds like the bank robber who gets held up by someone else,” said Ely, the banking consultant. “But bad guys can still be victims of a crime.”

The case is U.S. v. McGraw-Hill, 13-00779, U.S. District Court, Central District of California (Los Angeles).

Source: http://www.bloomberg.com/news/2013-02-11/credit-rating-victims-didn-t-know-s-p-s-toxic-aaa-born-of-greed.html

Officials leading the debate, including Federal Reserve Governor Daniel Tarullo, Dallas Fed President Richard Fisher and Senator Sherrod Brown, share the view that the 2010 Dodd-Frank Act failed to curb the growth of large banks after promising in its preamble to “end too big to fail.”

Strategies under consideration range from legislation that would cap the size of big banks or make them raise more capital to regulatory actions to discourage mergers or require that financial firms hold specified levels of long-term debt to convert into equity in a failure.

The push for revisiting the law or writing new rules “is absolutely driven by a sense that Dodd-Frank did not end too big to fail,” said Mark Calabria, director of financial-regulation studies at the Cato Institute in Washington and a former aide to Senator Richard Shelby of Alabama when he was the ranking Republican on the Banking Committee.

Three of the four largest U.S. banks — JPMorgan Chase & Co. (JPM), Bank of America Corp. and Wells Fargo & Co. (WFC) — are bigger today than they were in 2007, heightening the risk of economic damage if one gets into trouble. JPMorgan’s 2012 trading loss of more than $6.2 billion from a bet on credit derivatives raised questions anew about whether the largest institutions have grown too complex for oversight.

Restructuring Megabanks

That loss is among events that “have proven ‘too big to fail’ banks are also too big to manage and too big to regulate,” Brown, an Ohio Democrat, said in a Jan. 22 e-mail. “The question is no longer about whether these megabanks should be restructured, but how we should do it.”

Brown and fellow Banking Committee member David Vitter, a Louisiana Republican, are considering legislation that would impose capital levels on the largest banks higher than those agreed to by the Basel Committee on Banking Supervision and the Financial Stability Board, which set global standards. Brown also plans to reintroduce a bill he failed to get included in Dodd-Frank or passed in the last Congress that would cap bank size and limit non-deposit liabilities.

The two senators have asked the Government Accountability Office to look into the economic benefits including lower borrowing costs that banks with more than $500 billion in assets receive as a result of federal deposit insurance, access to the Fed’s discount window and investor perceptions that they’ll be rescued in times of trouble.

No Consensus

Momentum for revisiting Dodd-Frank, whose Democratic authors Senator Christopher Dodd and Representative Barney Frank are no longer in Congress, is driven by both parties. Still, lawmakers are nowhere near consensus on what approach to take — whether raising capital standards, limiting the size of institutions or curbing subsidies.

The push by regulators may encourage Congress to take another look at the law, said Camden Fine, chief executive officer of Independent Community Bankers of America, which represents about 5,000 small lenders.

“I think there’s going to be a synergy here between the regulators and Congress,” said Fine. “If regulators call for new authority, Congress will look for that. I would say that between now and probably the end of 2015 or 2016 you’re going to see some significant step by both Congress and regulatory agencies to rein in the big banks.”

Fisher’s Bull

The Dallas Fed’s Fisher, who keeps a breeding bull named “Too Big to Fail” on his Texas ranch, proposed in a Jan. 16 speech that regulators be explicit about what kinds of banking the government will backstop. Deposit insurance and discount- window loans would be available only to a firm’s commercial and consumer-banking operations. Fisher’s proposal would push other risk-taking businesses, such as investment banking, away from government support, raising their cost of funding.

Fisher said reaction to his speech and bipartisan interest in limiting the safety net for banks make him think Congress may act on the issue.

“I believe deep in my heart, in the way that speech has been received” that lawmakers “will move on this front,” he said in an interview with Kathleen Hays on Bloomberg Radio’s “The Hays Advantage.”

While Senators Brown and Vitter want to limit bank size, “I’m a little uncomfortable about that,” Fisher said. “But it may be necessary from a transition standpoint.”

Liquidation Alternatives

House Financial Services Chairman Jeb Hensarling said his panel will look at alternatives to the so-called liquidation authority in Dodd-Frank, which gives the Federal Deposit Insurance Corp. power to take over failing financial groups. He and fellow Republicans on the committee have argued that the plan keeps taxpayers on the hook for bailing out large banks because it lets the FDIC borrow from the Treasury to purchase a failing bank’s assets and pay off its creditors.

“There is something fundamentally wrong in our nation if there are financial institutions that are deemed too big to fail and others too small to matter,” Hensarling, of Texas, said in an interview.

Living Wills

Dodd-Frank and the nation’s banking regulators already have taken steps aimed at limiting the risk that a large bank will fail. The Fed conducts annual stress tests on the 19 largest financial firms to determine whether they need to boost capital and limit dividends. Banks file “living wills” to the FDIC describing how they could be wound down. The Fed also is focusing on how boards monitor risk and set compensation.

Big banks and their representatives in Washington say such initiatives are evidence that Dodd-Frank is working and doesn’t need an overhaul.

The notion that banks are “still somehow protected from market discipline” is “demonstrably false,” Rob Nichols, CEO of the Financial Services Forum, a Washington-based lobbying organization, wrote in a rebuttal to Fisher published Jan. 28 in the Dallas Morning News.

“Fisher and other breakup proponents overlook major provisions of the Dodd-Frank Wall Street Reform Act that effectively end the problem of ‘too big to fail,’ as well as significant action taken by large banks that has dramatically strengthened the U.S. financial system,” wrote Nichols, whose group includes the heads of some of the world’s largest banks, including Credit Suisse Group AG and Goldman Sachs Group Inc. (GS)

Competitive Disadvantage

Breaking up large banks would put U.S. financial institutions at a competitive disadvantage, according to a report being published today by Hamilton Place Strategies, a Washington-based consulting firm founded by Tony Fratto, a White House and Treasury Department spokesman during the administration of George W. Bush.

“Ultimately, breaking up U.S. banks will not improve the safety of the global financial sector and would reduce U.S. influence over the financial sector globally,” the firm wrote.

Jamie Dimon, CEO of JPMorgan, told clients in Germany Jan. 21 that regulators and banks should develop systems to let lenders go bust without damaging the world economy.

“We have to ensure big banks can be taken down without harming the public and at no cost to them,” Dimon, 56, said at a panel discussion in Koenigstein, near Frankfurt.

Breakup Powers

European regulators also are seeking ways to structure riskier activities outside of more traditional banking. U.K. Chancellor of the Exchequer George Osborne said for the first time regulators will get the power to break up banks, hardening legislation aimed at making lenders safer. The breakup powers will be added to a bill to be presented to Parliament this week, Osborne said in a speech today. Authorities will be able to split up an institution that doesn’t abide by rules to insulate retail operations from investment-banking activities.

“My message to the banks is clear: If a bank flouts the rules, the regulator and the Treasury will have the power to break it up altogether — full separation, not just a ring- fence,” Osborne said in Bournemouth, England, according to a text released by his office.

The 848-page Dodd-Frank Act, passed in 2010, sought to reduce the risk of a major bank failure in two ways. It orders the Fed to design higher capital and liquidity requirements and stress test bank portfolios, while also establishing a resolution regime that gives the FDIC wide latitude to wind down a failing institution if bankruptcy isn’t an option.

The impact the collapse of Lehman Brothers Holdings Inc. had on world financial markets and the U.S. economy gives regulators reason to avoid future bankruptcies.

Friday Nights

The alternative, using the FDIC’s liquidation authority, has its drawbacks. The law requires the approval of the Treasury secretary to shut down a large bank, bringing politics into the decision. It also would allow any failure of a large bank to be paid for using Treasury funds, with the cost recouped through fees on the industry. Republicans oppose any use of Treasury funds even if repaid.

“Do you think there is a Treasury secretary ever born or yet to be born that would bring down — like they do a community bank on a Friday night — bring down Wells Fargo or Bank of America?” said the ICBA’s Fine. “Hell no. They would do exactly what they did four years ago.”

The resolution regime also could be overwhelmed if several large banks got into trouble at once, said Harvey Rosenblum, research director at the Dallas Fed.

Isolated Failure

Dodd-Frank’s bank-liquidation rules “could work in one isolated large failure, but anything beyond that would be extremely difficult,” said Rosenblum, who has worked at the Fed since 1970. “We either have to cap their size or force these institutions to break themselves up.”

JPMorgan’s assets rose to $2.36 trillion at the end of 2012, from $1.48 trillion in the third quarter of 2007, according to company filings. Bank of America’s stood at $2.21 trillion compared with $1.58 trillion in the third quarter of 2007. Both New York-based JPMorgan and Charlotte, North Carolina-based Bank of America rescued failing financial companies in the crisis, becoming larger as a result.

Dodd-Frank seeks to curb the size of banks by prohibiting mergers that result in a company whose liabilities exceed 10 percent of the industry’s aggregate liabilities. That built on a 1994 law prohibiting a bank holding company from making an acquisition if it would result in an entity holding 10 percent or more of the total insured deposits of the U.S.

Brown’s Ceilings

Neither statute stops banks from getting bigger. They can expand their balance sheets beyond these limits through non- deposit liabilities such as repurchase agreements and commercial paper, or by increasing deposits and other liabilities through internal growth. Brown’s bill would set the ceiling on deposits and liabilities at 10 percent regardless of how it was reached.

“There is a strong and ongoing public debate going on whether or not the institutions should be broken up as a better solution or preferred solution,” Thomas J. Curry, who leads the U.S. Office of the Comptroller of the Currency, told the U.K. Parliamentary Commission on Banking Standards Joint Committee on Jan. 24.

Democrats and the administration of President Barack Obama may be loath to re-open the Dodd-Frank debate. Representative Maxine Waters of California, the House Financial Services Committee’s ranking Democrat, issued a statement in January taking issue with Hensarling’s assertion that Dodd-Frank “enshrined a ‘too-big-to-fail’ bailout scheme into law.”

Orderly Liquidation

On the contrary, Dodd-Frank “mandates the orderly liquidation” of a failed institution, “in which its executives are dismissed and its shareholders are wiped out,” Waters said in an e-mailed statement. “The point of this process is to allow institutions to fail without causing catastrophic damage to the larger economy.”

One dissenting member of her committee is Brad Sherman, a fellow California Democrat, who said he plans to reintroduce a bill requiring the Treasury secretary to compile a list of banks considered too big to fail and a year later break them up.

“It’s not enough for current governmental leaders to declare we’re not going to bail them out,” Sherman said. “If an institution can credibly argue to some future president or some future Treasury secretary that if it goes down, it is going to take the economy with us, there’s a significant possibility they’re going to get bailed out.”

Populists United

Karen Shaw Petrou, who keeps track of legislation and regulation for the world’s largest banks as a managing partner at Federal Financial Analytics in Washington, said she can’t rule out the possibility of legislation. Beating on the big banks is one of the few areas where Republican and Democratic populists unite, she said.

“This is going to be one of those instances where the left wing, of which there are a lot among House Democrats, and the right-wing Republicans join together,” Petrou said. “I don’t think potential legislation can be discounted.”

Regulators such as the Fed may be motivated to do more, if only to preserve their powers. Dodd had so little confidence in the Fed’s ability to oversee large banks that he sought, in a draft of his legislation in 2009, to strip the central bank of its supervisory authority.

Tarullo, the Fed governor in charge of supervision and regulation, has overhauled the central bank’s approach. He created a task force known as the Large Institution Supervision Coordinating Committee, which draws on economic forecasters, computer modelers, payment-systems specialists and supervisors to look across several financial institutions at once to spot clusters of risk. As a result of the stress tests, the Fed now has more loan and trading-book information on the largest banks than ever before.

Tarullo’s Discomfort

Still, Tarullo has expressed discomfort with large banks getting larger, saying in an October speech in Philadelphia that there’s a case to be made “for specifying an upper bound.”

While not mentioning a specific limit, Tarullo said he would recommend a “presumption of denial for any acquisition by any firm that falls in the higher end of the list of global systemically important banks.” He also said Congress could limit large-bank growth by capping non-deposit liabilities.

Fisher of the Dallas Fed said in an interview that his Jan. 16 speech caused an unusual stir in banking circles.

After the text of his talk, “Ending ‘Too Big to Fail’: A Proposal for Reform Before It’s Too Late,” was posted on the bank’s website, Fisher said he was “flooded with notes from bankers around the country.”

There was so much demand for the speech that the website crashed, he said. “This has never happened.”

Source: http://www.bloomberg.com/news/2013-02-04/too-big-to-fail-too-hard-to-fix-amid-calls-to-curb-banks.html

Woodall’s bill, H.R. 25, would replace the current tax system with a 23  percent consumption tax on all new goods and services. He said Thursday that  this change would eliminate the need for a complicated tax code, and would be  the kind of tax reform that helps reinvigorate the economy.

Read more: http://thehill.com/blogs/floor-action/house/275697-house-gop-seeks-to-abolish-irs-replace-income-tax-with-consumption-tax#ixzz2IAFMBUNV