Barney Frank as Bernanke's Pen Pal and Minneapolis Fed's Next Too Big to Fail

This is both funny and sad at once.

Barney Frank wrote Ben Bernanke to ask him to lay off of banks, claiming that the Fed's over-regulation is spooking them into not lending. LMFAO! The Fed! Over regulating banks into submission!! LOLOLOLOLOLOL


Politicians are putting pressure on regulators to go easy on small community banks across the U.S., a move some say could increase the cost of cleaning up the financial crisis.

Last week, House Financial Services Committee Chairman Barney Frank (D., Mass.) sent a letter to the country's top bank regulators, including Federal Reserve Chairman Ben Bernanke and Federal Deposit Insurance Corp. Chairman Sheila Bair, urging them to "show some temperance in their regulation of traditional banks." One common complaint from lawmakers is that regulators' tough examinations are making banks reluctant to lend.

"A self-fulfilling prophecy of community bank failures, shrinking credit availability and a slower economic recovery can all result from a regulatory overreaction to the current crisis," said the letter, which also was signed by Rep. Walt Minnick (D., Idaho).

Federal bank regulators have hit hundreds of banks with formal and informal sanctions this year, ordering them to boost capital requirements -- reserves set aside to cover possible losses -- and sometimes to shake up management. Regulators have closed 115 banks since January, and bankers across the country are complaining examiners are criticizing the health of even the strongest banks.

Consider this my letter to Barney Frank: STFU

Community banks need help and Barney Frank should do them a favor and find some other cause to intervene in. Like helping his friend Chris Dodd as a Wall Street Mafia operative (that's hard work, after all, and we all could use a friend on the same mission) or sucking GSE dick. Productive use of his time depends on whose agenda we're talking about here, maybe he really is just blowing them and not doing anyone any favors, who cares, he needs to keep quiet.

Besides, the Fed is going to cockblock this and hard. Fed independence, right? Neutral and neutered like Ken dolls with smooth plastic instead of the large cojones needed to get us out of this mess.

The real predators against community banks are not the impotent regulators (please, what threats?) but the beasts that barely limped through D-day and are now devouring the wreckage. Case in point, US Bancorp (sorry, I am actually impartial to US Bank and have banked with them in some previous lifetime when I still trusted banks).

Shame on you, Minneapolis Fed, Gary Stern isn't gone for longer than a month and you're already letting TBTF fester up there.

Is US Bancorp becoming too big to fail?

Last Friday, regulators seized nine banks, the most on a single day since the financial crisis began more than two years ago. Sure, it was a sign of just how sick many financial institutions have become, but it wasn't all bad news. That's especially true for U.S. Bancorp (USB), the Minnesota-based regional bank picked by the Federal Deposit Insurance Corp. to take over all nine of the failed banks' branches and deposits.

U.S. Bancorp has emerged as the past year's biggest buyer of failed banks. And Friday's haul was its largest yet. It took over California, Texas, Illinois and Arizona-based subsidiaries of FBOP Corp., a privately owned bank holding company with headquarters outside Chicago. The deals bring U.S. Bancorp some $18 billion in assets and 150 branches -- and raise an interesting question: Just how big can it grow by feeding on failed banks' remains?

Investors seem to be happy with last week's deals, pushing U.S. Bancorp's stock up 1.64 percent on a day when the S&P 500 is basically flat. And most analysts who follow the company are applauding the acquisitions, which will give it 3,000 branches across 25 states. That's the fourth-biggest network among U.S. banks.

All told, deals to take over failed banks from the FDIC have brought U.S. Bancorp some $27 billion in deposits in the past year. Some quick arithmetic suggests its total deposits, including the FBOP banks, are somewhere in the vicinity of $168 billion, sixth most after Bank of America (BAC), Wells Fargo (WFC), JPMorgan Chase (JPM), Citigroup (C) and PNC Financial (PNC).

I really hope one of those big scary regulators is watching this.

Oh wait, this has been going on for quite some time. Let's go back to 2001, k? (Inner City Press has the entire US Bancorp bloody glove list if you want it)

Well, on February 12, the Federal Reserve Board approved the U.S. Bancorp - Firstar merger, in a 57-page Order. The Fed's footnote "addressing" the U.S. Bancorp - New Century connection is more than half a page long, single-spaced. It states:

"One commenter contended that New Century Financial Corporation, Irvine, California ('New Century'), a nondepository mortgage company, is a subsidiary of U.S. Bancorp and that it engages in predatory lending by making subprime loans and imposing prepayment penalties more frequently that its competitors. The commenter also alleged that New Century engages in a higher level of subprime lending to African Americans in certain metropolitan areas than its competitors. U.S. Bancorp has indicated that it currently does not own or control, in the aggregate, 25 percent or more of the shares of New Century, or otherwise control New Century. Consequently, New Century is not a subsidiary of U.S. Bancorp for purposes of the BHC Act. The Board, however, has carefully considered these comments in light of the relationships between New Century and U.S. Bancorp.

"The Board has forwarded copies of the comments regarding New Century to the Department of Housing and Urban Development ('HUD'), the Department of Justice, and the Federal Trade Commission, which have responsibility for fair lending law compliance by nondepository companies like New Century. The Board also has consulted with these agencies. In addition, the Board has considered information submitted by U.S. Bancorp on New Century's consumer lending practices, including the processes by which New Century makes credit available to consumers, the compliance procedures established by New Century, the methodology employed by New Century in setting risk-based interest rates, and the relationship of New Century with loan brokers and correspondents."

Months after applying to merge with Firstar, months after denying, to community groups and to the press, that it owned or controlled over 25% of New Century, in January 2001, U.S. Bancorp "forfeited" warrants in New Century. Only that way could the Fed recites that "U.S. Bancorp has indicated that it currently does not own or control, in the aggregate, 25 percent of more of the shares of New Century." This is similar to the semantics, much focused on by the press, when then-President Clinton stated, on national television, "this IS no relationship" -- that is to say, it's a non-responsive answer. Since, until the January 2001 forfeiture of warrants, U.S. Bancorp DID "control" New Century, it is simply not enough, to "refer" New Century to the DOJ, HUD and FTC. Nor is it enough to "consult with these agencies" -- the last two of which have few staff, to oversee the thousands of "nondepository lenders" in the United States. And what of U.S. Bancorp's misstatements, to the press, community groups, and to the Fed, that it didn't, pre-warrant forfeiture, control New Century?

Similarly, the Fed in another long footnote (64) "addresses" the issues of U.S. Bancorp's other connections with subprime lenders:

"One commenter alleged that U.S. Bancorp has indirectly supported predatory lending through the business relationships of U.S. Bank with a number of subprime lenders that the commenter characterized as predatory lenders. According to the applicant, U.S. Bancorp's and Firstar's lending and trust affiliates have corporate loans to non-affiliated subprime lenders and act as trustee, registrar, and/or paying agent for securitization transactions. Some trust clients have securitizations that may have subprime assets as collateral. Firstar and U.S. Bancorp have represented that neither has a role, formal or otherwise, in the lending practices and review processes of the loan and trust customers nor has any knowledge of the lending practices followed by the party originating the loans."

Hey -- that's some great due diligence there, not having "any knowledge of the lending practices" of the subprime lenders you do securitizations and trust work for, and even (warehouse) lending to... This U.S. Bancorp Watch will continue...

Well that sounds like quite the mess up there in Minneapolis. I sincerely hope this US Bancorp thing doesn't turn out to be a disaster and still wish Barney Frank would STFU.

Jr Deputy Accountant

Some say he’s half man half fish, others say he’s more of a seventy/thirty split. Either way he’s a fishy bastard.