Pacific Capital Bancorp (PCBC) is on the ropes.  With it rides some of the legitimacy of the TARP program. Recently, there has been news of some successful exits by large banks from TARP.  What we haven’t heard is the story of bank that can’t survive, in spite of help from TARP.  Pacific Capital might be that bank.

Pacific Capital, the parent of Santa Barbara Bank & Trust, received $180.6 million in TARP funding last fall.  While the Treasury seems willing to stand by and watch scores of banks fail, it found something worth redeeming in PCBC.

That’s hard to understand, since PCBC makes most of its money off of refund anticipation loans.  These are dubious products that extract high fees from (more…)

You cannot regulate it if you can’t regulate it.

The four financial regulator agencies accepted comments up to Thursday afternoon on a proposed rulemaking to apply the Community Reinvestment Act to the private student loan industry.  The proposed rule asked commenters for suggestions about how CRA credit could be designed to encourage the supply of low-cost student loans to low-income students.

We made the following comments (pdf) 11 pages.

(more…)

Its a maxim that regulators can never quite catch up with the changes made by practitioners.  Mobile banking threatens to become the next example of that concept.  It very well could lead to undermine the Community Reinvestment Act (if unwittingly) unless some kind of regulatory fix occurs first.

The new Community Reinvestment Act Modernization bill (HR 1479) seeks to help that legislation catch up with the set of financial innovations that have occurred since the bill was last modified in 1993.  A lot has happened.  There is a lot of catching up to do.

That bill was drafted this spring.  Even now, though, it appears that the market is changing so fast that there could be a need for new amendments to the bill’s language before it is heard by the House Financial Services committee in the fall.

Today, there is news out of Charlotte than Bank of America is going to close one out of every ten of (more…)

There is an illusion out there that small town banking is done by small town bankers.

It is a nice image. As the sun sets, a local businessman leaves through the front doors of the headquarters of a small bank in a rural county.  The local banker shakes his hand as he exits.  They are friends, the banker and this businessman.  They have known each other for years.  Their kids went to high school together.  They see each at little league, maybe even at church.

Well, if only that was reality.  The truth could hardly be much different.  Yes, small town banks (more…)

If a bank offers a low or no-fee checking account, does it matter? It matters if people sign up for accounts, leaving the ranks of the unbanked, and join the modern financial system.

One new idea – the Bank On program -  is coming to your community.  It will aim to get the unbanked to walk into banks and away from check cashers and payday lenders.

Still, the broader question remains unanswered.  How can policy makers, beyond just the implementers of Bank On, design programs to reach the unbanked? The answer is very much up for discussion.  (more…)