Reform Reading: FDIC gets tough, banks may get bigger dividends

Introduction

Former top executives and board directors of failed banks are being pressured to settle fraud allegations soon or fight them in court. The Federal Deposit Insurance Corp. has authorized filing lawsuits that would seek to recover more than $2 billion from some 80 or so former bank execs, reports Scott Reckard of the Los Angeles Times. The agency, which is eager to use settlement money to replenish its insurance fund, could end up suing or settling with former execs of about one-quarter of the more than 300 banks that have collapsed since the start of 2008.

So far the FDIC has filed only two civil suits – a July complaint against former IndyMac Bank executives seeking $300 million and a November case against former Heritage Community Bank insiders.

Coming soon: Bigger bank dividends?

The Fed will soon issue guidance allowing some banks to boost their dividend payments to shareholders, Fed Governor Daniel Tarullo said in a speech today. But first, the banks have to detail to the Fed exactly how well prepared they are to face tough economic conditions and remain well capitalized. Banks that received capital injections from the Treasury Department’s bailout program during the crisis were required to halt or cut dividend payments.

Big banks blitz bureaucrats

Big banks and financial services companies shifted some lobbying from Congress to the federal agencies that are writing regulations to carry out the Dodd-Frank law. Third quarter lobbying data showed 723 companies and groups lobbied on the financial reforms that were signed into law in late July, according to the Center for Responsive Politics.

Of that group, 123 companies or groups specifically targeted the Securities and Exchange Commission for lobbying while 93 mentioned the Commodity Futures Trading Commission, according to information submitted on the quarterly disclosure forms. That marks a substantial double-digit increase over the second quarter, the center said.

Fed won’t wait for consumer agency on money transfers

One of the first consumer-oriented regulations to spring from the Dodd-Frank law is shaping up to be stricter disclosure rules for Western Union Co., MoneyGram International Inc., and other remittance companies. Bloomberg, citing unidentified sources, says the Fed is already looking at how to force the money transfer companies to tell consumers more about fees and exchange rates. If the Fed doesn’t get the regulation done by July, the Consumer Financial Protection Bureau will take over and finish it.

NYU professors publish Dodd-Frank book

For reform readers who just can’t get enough about the Dodd-Frank law, several New York University business professors have published a new book examining what they say are flaws in the reforms. Viral Acharya, Thomas Cooley, Matthew Richardson, and Ingo Walter collaborated to write “Regulating Wall Street: The Dodd-Frank Act and the New Architecture of Global Finance.” Their biggest criticism: the new law does not “deal directly enough” with systemic risk to the financial system. The authors of the 592-page book also worry that Dodd-Frank fails to address future threats that will come from Wall Street’s rapid innovations to skirt the new law.