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New Chance to Become Too Big to Fail

Adam Rust's picture

Posted August 29, 2011

Capital One's intentions to acquire the US subsidiary of ING Group means that the Federal Reserve will have to show that it wants to make sure that our financial system does not become even more highly concentrated in the hands of a just a handful of banks.

Critics of the deal are going to say that if Capital One gets another $82 billion in deposits held by American consumers, it will hurt small businesses when they try to get loans. It is an argument that

How A Small Town Kept their Bank Open

Adam Rust's picture

Posted April 18, 2011

Editor's note: This is an account, written by a local businessman, about how a small town was able to keep a bank. Lake Lure, North Carolina is a forested community in the mountains of Western North Carolina.

They once had two banks. In 2010, one branch closed as part of an effort by a regional

community bank to shore up its balance sheet. Last year, following the acquisition of their other local bank (Carolina First) by Canadian banking giant TD North, they received the word that their bank would be closed. TD North suggested that customers that still wanted the services of a branch bank should drive 20 miles to Hendersonville, North Carolina.

OCC: More Outstanding Banks!

Adam Rust's picture

Posted April 28, 2010

The Office of the Comptroller of the Currency has just released its latest CRA exam results. The news is hardly surprising - everyone passed!

In fact, of the 35 banks evaluated, 4 were given an "outstanding" and 31 were recognized as satisfactory. There were no "needs to improve" or "substantial noncompliance" ratings.

Grade inflation has run amok at the OCC for some time.

The OCC gave an outstanding rating to First National Bank of Audrain, located in Mexico, Missouri. This is in spite of the fact that FNB Audrain made no loans (zero) to low-income borrowers. There were plenty of low-income people in Mexico, Missouri. The OCC reports that it can characterize 16 percent of families in the area as low-income. FNB of Audrain made no loans in low or moderate income census

More about MetaBank

Adam Rust's picture

Posted December 22, 2009

Jackson Hewitt's expanded partnership with MetaBank, a small thrift in Storm Lake, Iowa, adds one name to the short list of banks that provide liquidity to national tax prep chains for their refund anticipation loans. But, what or who is MetaBank?

  • MetaBank has $652 million in deposits, with 13 branches, in two states (Iowa and South Dakota)
  • MetaBank has faced two enforcement orders since 2001 from its primary regulator, the Office of Thrift Supervision. The most recent, in June of 2009, involved an employee who absconded with $4 million in deposits.
  • MetaBank received a satisfactory for its last Community Reinvestment Act exam in 2007.
  • MetaBank has less than $1 billion in assets. As an intermediate small institution, it will not have another exam until 2011.
  • MetaBank made two mortgage loans to low-income borrowers in 2007, and only 5 to moderate income borrowers.
  • The bank made three loans to borrowers in low-income census tracts in 2007. In the period from 2005 to 2007, MetaBank made a total of 5 mortgage loans to borrowers in low-income census tracts.
  • Low-and-moderate income census tracts make up 25.2 percent of census tracts (with 20.8 percent of housing units) in the four MSAs where the OTS examines MetaBank. Only 7.5 percent of mortgage loans made by MetaBank went to borrowers in low-and-moderate income census tracts. Median family incomes for census tracts in those MSAs are such that a moderate income is less than $54,160.
  • MetaBank made two qualified Community Development investments, both in bonds to Urbandale, Iowa for economic development. Each bond was for $95,000.  The bank made about $31,000 in donations to local community organizations.
  • The bank claimed that a fair amount of small business lending should qualify as a community development loan - with 87 small business loans and 330 small farm loans in low and moderate income census tracts. The bank did not report any community development activity in three of its four assessment areas.  The OTS said that it had a "good record," of community development lending, but "poor responsiveness" to community development needs.  Odd.

This information is relevant for groups that want to work with MetaBank.  The institution is going to be

Mobile Banking in the Third World

Adam Rust's picture

Posted December 9, 2009

How do these folks bank?

  • carpool
  • Mobile banking?
  • Internet banking?
  • ATM/point of purchase banking
  • Branch banking?

OK...ha ha.  But there is a our banking system is duplicated in other countries, what assumptions about US banking are relevant, and what notions should be dropped?

I believe that mobile banking is the way of the future.  Already, mobile banking is the preferred mode of banking for new customers in India and China.

The Indian experiment

India is a developing country, but it is one that is rapidly adding to its currency reserves.  India remains a country with too much of its population living in villages.  The village in India is a bit like the family farm in

More CRA Grade Inflation at the OCC

Adam Rust's picture

Posted November 20, 2009

Minutes ago, the Office of the Comptroller of the Currency demonstrated once again why no one takes their CRA exams very seriously.

The OCC released evaluations for 27 banks.  All of the evaluations were made from October 15th through November 14th.  No banks were given any grades that would reflect shortcomings in service, lending, or investment to their local areas.  Twenty-five passed, and two passed with "outstanding" colors.

How good is an "outstanding?"  Well, the people who run your credit card are apparently doing an outstanding job at making you happy.  Citibank (South Dakota) NA received an outstanding.  Did they do an outstanding job? Sure, maybe they are charging millions of Americans up to 29.9 percent on their credit card debt, but they did it well, right?

Drilling down to Citibank's evaluation, it is easy to see some of the reasons for why the CRA needs to be

OCC Sees No Evil

Adam Rust's picture

Posted September 18, 2009

The latest round of exam scores are out for the OCC's Community Reinvestment Act examinations.  Surprise!  Everyone is a winner! The OCC handed out all A's and B's.  Wouldn't you love to take that class?  Last month, they handed out all A's and B's, too!

This time, five banks got outstanding, and thirty got satisfactory.  No one earned a score that would require any kind of a strategic plan to improve their service.

One large bank, Fifth Third,  dropped from Outstanding! to Satisfactory.  The OCC decided not to examine any of Fifth Third's service, investment, or lending for North Carolina.  That is in spite of the fact that Fifth Third acquired First

Live Blogging the CRA Hearing (III)

Adam Rust's picture

Posted September 16, 2009

Rep. Hensarling is up to examine the testifiers next.  He is having fun with words:

  • If banks are not required to make unsustainable loans, are they required to make sustainable loans?
  • If the CRA is simple, then why is it, in the view of small banks, expensive?  (Earlier, he mentioned how banks spend between $20,000 and $90,000 reporting on CRA.)

Taylor asks him why he is mixing up lending based on race with lending based upon income.  It's a pretty good response.

Other questions:

  • Why is Josh Silver looking off to the right? What is over there?
  • Where are the rest of the Congressmen?  The first three rows of seats are largely empty.

White is back, courtesy of a question for Rep. Neugebauer.  He wants to do it through funding from taxpayers.  He thinks

CRA Modernization Act Hearings On Tap

Adam Rust's picture

Posted September 15, 2009

The Obama administration is finally getting around to reforming our financial system, right when the underlying anger about banking may be relenting.

The experts who judge our economy believe that we may be about to exit this recession.  Ben Bernanke said as much today during a talk at the Brookings Institution.  He believes that unemployment has reached its peak, that we can expect moderate growth, and that consumer confidence is coming back.  All of that would point to a rebound.  Granted, the evidence is still not visible on Main Street - unemployment tops 10 percent in much of the country. In North Carolina, unemployment is currently 11 percent.  In foreclosure-rich states like California and Florida, unemployment has increased approximately 60 percent from July 2008.

Today is significant for a few reasons - for one, it marks the one year anniversary of the collapse of Lehman Brothers. 

CRA Evaluations Out from OCC: More Grade Inflation

Adam Rust's picture

Posted August 27, 2009

The OCC announced results on 20 CRA evaluations today. Not surprisingly, 19 of the 20 banks got a "satisfactory" and the other received an outstanding.

It has been our feeling for some time that the CRA exams are a charade.  They are supposed to uncover a lack of performance in low or moderate-income census tracts. In any year, more than 2,000 banks are evaluated. In 2008, 2,051 institutions were evaluated.  Twenty-nine were deemed "needs to improve," and four received a "substantial non-compliance.  That won't lead to much change, because it doesn't take a rocket scientist to realize that the regulators are avoiding conflict.  In fact, the market appears to be a stronger enforcement agent - the two largest lenders to get anything below satisfactory were Countrywide and AIG.

This cycle's outstanding score went to Ephrata National Bank.  (Ticker - ENBP) Here is the pdf of the exam.  Ephrata


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