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VOL. 124 | NO. 130 | Monday, July 06, 2009

Banking Community Awaits More Scrutiny From Washington

By Andy Meek

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TRICKLE-DOWN: U.S. Treasury Secretary Timothy Geithner speaks from a rooftop ceremony in New York recently. He and others in the Washington establishment could pass along new rules for an already chafing financial community, not to mention consumers. -- AP PHOTO/CRAIG RUTTLE

Lawmakers in Washington are talking about new rules for a broad swath of financial companies and their transactions with customers.

Memphis bankers such as Hunt Campbell, president and CEO of First Alliance Bank, and Will Chase, CEO of Triumph Bank, are leery about what they’ll come up with. Both men regard the Washington establishment’s general response to new wrinkles in the credit crisis as regulatory overreach.

“I think that it is really bad policy to continue to (find new ways to) regulate people that are already regulated heavily who did not cause any of these problems,” Chase said.

The U.S. Treasury Department unveiled a proposal last week that would create something called the Consumer Financial Protection Agency to be responsible for most every kind of consumer financial product. It would be funded in part by the financial industry.

There’s also a move afoot to regulate small banks and national institutions with federal charters that arguably had more of a hand in feeding last year’s credit crisis.

Chase and Campbell stressed lumping all those institutions together is a mistake – akin to bringing something like the national Wendy’s restaurant chain and the local Huey’s restaurants in Memphis under the same model and the same rules.

“The Independent Community Bankers of America group is trying to figure out how to deal with this at the moment,” Campbell said. “The question is, how do we deal with that? Do we fight the whole thing or chew it down a little bit? Those are the kinds of questions being fleshed out right now.”

Chewing it over

That legislative debate will include what might seem to outsiders like an alphabet soup of obscure federal agency acronyms and the humdrum minutiae of economic policy.

“I think that it is really bad policy to continue to (find new ways to) regulate people that are already regulated heavily who did not cause any of these problems. ”
– Will Chase
CEO, Triumph Bank

But such details belie the fact that under the microscope in the nation’s capital at the moment are potential policy changes that would affect nearly everyone now reading these words.

Those people include anyone who pays a mortgage, uses credit cards, owes student loans, is shopping for a car or has any other tie to the world of finance. And it’s not just the rule changes that would affect most American consumers.

The way banks are reshaping themselves is having just as broad of an impact.

Bank of America, one of the megabanks relying on federal bailout cash, recently hiked the maximum number of times it can charge customers an overdraft fee in a single day from five to 10.

Regions Financial Corp. over the past few days has knocked down speculation the credit crunch may force it to sell its Memphis-based investment bank unit, Morgan Keegan & Co. Inc. The bank denies a sale is in the making.

Christopher Marinac, managing principal and research analyst for FIG Partners LLC, said a sale of the unit will look harder to pass up as Regions continues to exhaust varying sources of capital.

“But it’s still uncertain,” he said. “Regions needs a high enough price to justify letting the unit go, while the buyers – which I agree should include an employee group – are not in the position of paying an extraordinary price.”

Bad with the good

Fitch Ratings last week cut its credit ratings on Georgia-based Synovus Financial Corp. to a dismal BB-. Synovus is the parent company of Trust One Bank in Memphis.

Fitch blamed the parent bank’s exposure to slumping housing markets in the southeastern U.S.

On a positive note that reflects bank strategy reaching down to the individual level, First Tennessee Bank has been mailing out flyers encouraging consumers to open free checking accounts to get a $100 bonus. First Tennessee is the banking arm of Memphis-based First Horizon National Corp., which announces its second quarter financial results in about two weeks.

Many banks in Memphis – as well as across the country – are preparing to absorb an anticipated increase in the fees they pay into the Federal Deposit Insurance Corp.’s insurance fund, the pot of money the government uses to cover losses at banks that collapse.

“The normal increase everybody is paying, it almost doubled for pretty much everybody this year,” said Tim Amos, senior vice president and general counsel of the Tennessee Bankers Association. “I had a community banker tell me that his base deposit insurance cost last year was $60,000 and that with the basic increase in the cost, he had budgeted for his premiums to cost $100,000.”

Bank of Bartlett has combed over the lion’s share of its assets, reappraising things and taking hits where needed. Like many banks, the company is trying to find any hidden financial landmines, particularly ones that relate to commercial real estate exposure.

“We have 12 percent of our asset base in construction and real estate and development lending,” said Bob Byrd, chairman of the bank. “That’s a pretty low percentage, comparatively speaking. But almost whatever you have in that is problematic right now. And it’s going to take basically the rest of this year for most banks to finally get all those positions recognized.”

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