President Barack Obama said today marks a “significant turning point” for U.S. consumers with the start of compliance with credit card reform laws he enacted last May to combat “deceptive and unfair tactics.” In the nine-month “grace period” since he signed the Credit Card Accountability, Responsibility and Disclosure Act, major credit card issuers have fortified their positions by raising rates, re-introducing annual fees and cutting credit limits.
The Obama Administration will allocate $1.5 billion to state housing agencies to help “underwater” borrowers and those unemployed facing foreclosures in the hardest-hit states of California, Arizona, Nevada, Florida and Michigan. The funds are to be re-directed from the government’s primary bailout program, the Troubled Asset Relief Program, TARP. And the state agencies can use the additional aid to help troubled homeowners move into the government’s mortgage reduction program.
This nation’s second-largest bank and top credit card issuer made a bold move into commodities today with the announced acquisition of RBS Sempra Commodities’ global oil and metals division, and it’s European power and gas assets. The investment arm of JPMorgan Chase is expected to pay $1.7 billion pending regulatory approval in a deal that will virtually double JPMorgan’s corporate clients served in the commodities business to about 3,000.
It is a proposal that has sparked one of the most contentious debates within financial reform: An independent watchdog agency mandated to protect consumers from unfair practices by the providers of credit cards, mortgages and other financial products. The agency’s decisions on new laws would undoubtedly affect just about every American’s pocketbooks.
The Consumer Financial Protection Agency, CFPA, is a keystone of President Obama’s financial reform initiatives. And it is fighting for its life in the Senate.
Surprising to many, Chase Chief Executive Jamie Dimon led Wall Street’s big financial firms in 2009 compensation packages for top executives with a deal worth about $16 million in mostly restricted stock and options – no cash. But the biggest stunner Friday was the announced $9 million bonus – also consisting of stocks – for Goldman Sachs Chairman and Chief Executive Lloyd Blankfein, who was anticipated to receive a package in the $40-$50 million ballpark. Blankfein got a $68.5 million payout in 2007 – one of the last sky-high payouts before the financial crisis fully erupted.
President Obama today formally launched his already-controversial proposal to re-direct $30 billion in bailout funds into community banks to bolster small business lending. “The more loans these banks provide to credit-worthy small businesses, the better a deal we’ll give them on capital from this fund,” Obama said in prepared remarks. The program would provide better rates on risk-related capital to banks that boost lending to small businesses.
A somber and pessimistic assessment of the government’s bailout program has been issued by the official overseer of the $700 billion Troubled Asset Relief Program (TARP) – concluding that the fundamental problems in the U.S. financial system are still in place for another crisis. The report also looks pessimistically to the re-focused future role of TARP funds for increasing small business lending and helping desperate homeowners avoid foreclosures as outlined in recent weeks by President Obama and U.S. Treasury Secretary Timothy Geithner. But the “leverage” U.S. officials had over the major banks is now gone, putting in doubt the effectiveness of a new lending pipeline to small businesses.
Clearly making his mark as the chief proponent of separating big banks from their lucrative-but-riskier speculative investment operations, former Federal Reserve chairman Paul Volcker said “structural changes” are needed to avoid repeating history with another crippling financial crisis. In an opinion piece – “How to Reform Our Financial System” – published today on the New York Times website, Volcker gave his rationale for supporting capital markets trading restrictions on the biggest commercial banks where a significant portion of Americans keep their money.
In his State of the Union speech, President Barack Obama proposed taking $30 billion out of the bailout money returned by big banks and injecting the funds into community banks to generate more small business loans. But the plan will likely fall short in a lending arena where low demand matches low access to credit. Moreover, the small-biz bailout has already generated enough opposition to place it in doubt – particularly if a full vote by Congress is required.
While President Obama blasted major banks in his radio address for mobilizing to stop his fee on financial firms with $50 billion in assets, a top lobby group for Wall Street was doing just that, a media report says. The Securities Industry and Financial Markets Association (SIFMA), the top lobbying group for financial markets participants, is currently considering challenging the constitutionality of Obama’s Financial Crisis Responsibility Fee, according to a report in the New York Times.