Today (Friday, May 15th) is the last day to comment on the proposed re-organization of Bank of America, specifically with how it introduces Countrywide into is larger corporate framework.

The address for comment is:

regs.comments@federalreserve.gov

The comments are due by 5 pm, EST.

Comments should focus on how the re-organization will accommodate the needs of the public.  Its an important opportunity, and while the regulatory invitation is not specific in what will be reorganized, it is safe to bet that it involves Countrywide and perhaps First Franklin (a subprime lending operation owned by National City and later by Merrill Lynch).

Comments could include concerns about credit cards, about consumer protections, about small business lending, or about the lack of publicly-available data to help regular people participate in this change.  Moreover, there are safety and soundness issues relative to why B of A needed so much money to make up its capital requirements.

Here is a form letter.

Adam M. Drimer
Assistant Vice President
Federal Reserve Bank of Richmond
P. 0. Box 27622
Richmond, VA 23261
RE:   Bank of America Corporation, Charlotte, North Carolina, and NB
Holdings Corporation, Charlotte, North Carolina; to acquire 100 percent
of the voting shares and thereby indirectly acquire Bank of America
North Carolina, National Association, Charlotte, North Carolina (in
organization).

Dear Mr. Drimer,   This letter is to comment on the proposed reorganization of Bank of America and to request an extension of time so that we can understand the purpose of this reorganization.  I represent (INSERT NAME OF ORGANIZATION AND DESCRIPTION HERE).  As Bank of America seeks internal reorganization it is out hope that this will facilitate better relationships with it customers and the communities and neighborhoods impacted by its decisions.   We have a number of concerns related to Bank of America’s business practices that we feel should be addressed before this reorganization is approved.   Bank of America fared poorly on the recent stress test.  We feel this will result in unnecessary and unwarranted reduction of credit to small businesses across the country and will contribute to increased unemployment throughout the country, leading to increased foreclosures.

Bank of America has cut off lines of credit to small business owners who have not defaulted on their payments who have excellent credit but serve tough markets.  We have seen a number of small locally based homebuilders who could benefit from the ARRA but who need that line of credit to pay employees until the contracts are signed and payment for the work comes in.

We are concerned that this “reorganization” does not address the performance of Bank of America, Countrywide, First Franklin, Home Service Loans and Wilshire as it related to home retention and loan modifications.  There are clear inefficiencies and we believe intentional efforts to stall home retention efforts for borrowers who are trying to avoid foreclosure.  It takes 10-30 days to get information that has been faxed to these divisions of BOFA into the system.  This delays the ability of housing counselors to keep delinquencies and retention costs manageable for their clients and to ensure that a SUSTAINABLE workout option is available.    We want to know how this “reorganization” will address the following questions.

How will this restructuring of Bank of America ensure fair and equitable capital flows to low-to-mod and communities of color?

How will this restructuring of Bank of America address sustainable homeownership for low-to-mod and communities of color?

How can we ensure that Bank of America develops models for pricing, securitizations, and regulatory/economic capital that considers on the front-end the impact on low-to-mod and communities of color and that efforts are recorded to show they mitigated any disproportionate impact on these communities.

Thank you for your consideration of this comment.

The more comments, the better.  Each comment counts as one additional concern.  Quantity is more important than depth.

The Florida Attorney General, Bill McCollum, will prosecute Angelo Mozilo, former CEO of Countrywide, for deceptive lending practices inside the Sunshine State.

Housers recently presented a slideshow on the impact of subprime lending in one Florida community.  HMDA analysis shows that Countrywide was the leading lender in that city, Lehigh Acres, in 2007.

Its a civil case, so there is no chance that Americans will have the satisfaction of seeing Angelo Mozilo lose his suntan while cooling out in a Florida prison for a few years.  However, McCollum can still look forward to having a chance to get Mozilo where it will hurt him – in his wallet.

McCollum will charge that by systematically pricing loans beyond where consumers had a reasonable ability to repay their debts, that he has met the criteria for violation of the state’s Deceptive and Unfair Trade Practices Act.

Like in all cases involving mortgages and responsibility, Mozilo immediately filed to have his trial heard in the friendly oases of federal court.  McCollum asserts that since these mortgages caused damage in Florida, that the case should be heard and tried within Florida.  A judge from the Southern District of Californa, U.S District Court, agreed, and the suit has been remanded to state court.

This will be an interesting case, and its implications should go well beyond Mozilo. If he is found guilty, then a variety of other CEOs (Kerry Killinger, Michael Perry…) could be looking over their shoulders.

Cigarettes are slowly being taxed out of American way of life.  In some places it can cost more than $7 to buy a pack of cigarettes.  In New York, it can cost more than $9.  Federal and state taxes are increasing on cigarettes.  It’s so steep that people have largely abandoned the habit of sharing cigarettes in polite company.

Often, cigarette taxes are collected in the name of some kind of social good.  For example, in North Carolina, new taxes on cigarettes are going to pay medical costs.  A large share of those costs are actually income-targeted, too.  They go to pay state shares of Medicaid.

Lotteries, by the way, often have the same model.

Let’s look at payday lending.  It deserves some of the same treatment as cigarettes, undoubteldy.  Many might call payday lending a cancer on the communities where it is practiced.  Most of the public dialogue on what to do about payday lending focuses on either shutting it down, or on curbing its costs.

The latter aims often try to get the price of payday lending below some notion of usury.  In North Carolina, that price level is 36 percent.

In effect, legislation forces payday lenders to tone down the toxicity of their business model.  It is as if Monsanto agreed to create a roundup that only killed half your weeds.  It would be pretty certain that the weeds would come back, no?

What if — legislation required that payday lenders not be allowed to charge anything below an absolutely stratospheric price by enforcing high taxes on each payday loan transaction?  What if the cost of taking out $50 was attended by the fees for the payday lender, plus another $25 in fees for the state?  Or maybe another $50 in fees?

This might be a bust.  Conceivably, the desperation that attends the use of payday loans might not be extinguished by another round of levies.  If that was true, then the policy would merely transfer resources from the poorest individuals into state coffers.  That would be very unfortunate policy.

That said, it might force a new parsimony upon the industry.

In the last administration, the action of regulators could be summed up like this:

1) We reserve the right to regulate, and we deny states the right to regulate within their state.

2) We choose not to regulate.

It was a nice one-two punch.  In North Carolina, some good anti-predatory lending laws were enacted that should have shielded our residents from many problems.  When in place, the state rules worked.  State-regulated institutions (including BB&T, the largest) followed those rules.

Still, national banks argued that they didn’t need to heed states.  It was too hard to follow rules in 50 places.  Better to follow one rule.  Even better, if the one rule was essentially saying that “there should be no rules.”

In Wachovia v. Watters, the Court emphatically ratified this regulatory principle into law.

Fast forward to today’s hearing, though.  In Cuomo vs. The Clearinghouse Association, the Justices will hear arguments related to New York Attorney General Eliot Spitzer’s investigation into mortgage pricing.  Spitzer was denied the ability to issue subpoenas after he used publicly available data to find discrepancies in lending prices to minorities.

Spitzer had to move on to pursue other opportunities.  Andrew Cuomo has gladly filled in for him, though, and he is the author of the filing heard today.

Bankers have traditionally argued that the publicly available data, from the Home Mortgage Disclosure Act, paints a false picture because it does not contain all of the relevant data that goes into underwriting decisions.  That is true.  Credit scores are omitted, as are loan-to-value ratios.  That said, the banks will not assent to having that data in the HMDA reports, and they declined to make it available to Cuomo.

Cuomo’s petition is here.  The attorneys represent the Clearinghouse Association have presented this brief.

Today, we will get a hint if this case is going to find traction.

The Community Reinvestment Act will be fully examined on Tuesday at a special forum, hosted by the Boston and San Francisco branches of the Federal Reserve, at the Mandarin Oriental Hotel in Washington, DC on Tuesday.

The event will coincide with the publication of “Revisiting the CRA: Perspectives on the Future of the Community Reinvestment Act.”

There are a lot of interesting ideas in the 21 papers contained within the publication.  Ideas have been contributed from across the spectrum of politics and market positions.  The American Bankers Association has a comment, as does the former CRA officer from JP Morgan Chase.  A representative of AON, the largest insurance broker in the country, weighs in against proposals to expand CRA to her industry.  Former heads of the OTS and the OCC have things to say on behalf of the CRA.  A “conservative with a concious,” as he identifies himself, finds three relevant areas for the CRA to be re-entrenched – in home lending, in payment services, and in consumer education.

Some of the issues that appeared in many papers include:

• More types of financial institutions, beginning with independent mortgage brokers, should come under the review of the CRA.
• Data in the Home Mortgage Disclosure Act database and the CRA small business and community development lending database need to be updated.  Those updates should become the basis for a redefinition of the goals of the CRA exam.
• Banking as an industry has changed.  More financial institutions have become national or even global.  The notion of a local commitment must accordingly be updated.
• The scale of some banks, as a result of mergers, makes them relatively insensitive to the CRA exam.  This, coupled with grade inflation on the exam scores, means that very few CRA exams bring to bear any kind of direct response from a financial institution.  A redesign of the CRA look at how it can adjust for these very large institutions.

Some urgent questions remain unsettled:

What is the purpose of CRA? Does it have an implicit, but not stated, understanding that extends to race? Does the CRA require banks to make unprofitable loans or to establish unprofitable branches.  How well do CRA loans perform?  Are loans in low-income communities best percieved as a public good, for which their under-supply is only mitigated by government intervention?

Is there a quid pro quo because of deposit insurance, the discount window, and TARP?

What is the proper role for community groups?