Proposed Legislation Would Allow Banks To Cook Their Books (Even More)
Apparently, the prior change in accounting rules to myth-to-market, plus the purchase of 'toxic" assets by the Federal Reserve, TARP, Homebuyer Tax Credits, a near 0% discount rate, selective prosecution of REMICs' tax laws by the I.R.S., and the assumption of ninja loans by Fannie and Freddie are just not enough to satisfy the banks' balance sheets.
U.S. Rep. Bill Posey (R-FL) has issued a press release announcing the introduction of H.R. 1723 titled "The Common Sense Economic Recovery Act of 2011." The press release and text of the bill are posted below this article.
Rep. Posey spins his bill by stating, "We’re trying to help homeowners, small business owners and our local community banks stay afloat....regulators should not force banks to foreclose on property owners asking for a modification or consider your loan to be in non-accrual status."
Rep. Posey repeats the tired sales pitch that has been used to justify giving banks money hand-over-first for the last three years - that helping banks would help them lend to small business. But data shows that banks are not lending more even after the industry benefited by over $1 trillion in the last three years thanks to Uncle Sam's policies and programs.
Rep. Posey repeats the tired sales pitch that has been used to justify giving banks money hand-over-first for the last three years - that helping banks would help them lend to small business. But data shows that banks are not lending more even after the industry benefited by over $1 trillion in the last three years thanks to Uncle Sam's policies and programs.
In reality, the proposed legislation would help big banks as well as 'local community banks' cook the books by allowing a different formula to be used to calculate the financial strength of a financial institution. Specifically, the bill would change the status of some mortgage loans from non-accrual to accrual status on banks' balance sheets.
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Rep. Posey's Press Release:
Posey Legislation Would Halt Overzealous Regulators from Arbitrarily Penalizing Banks Working With Businesses and Homeowners
Washington, May 5 - Congressman Bill Posey (R-FL) was joined by 17 of his House colleagues in introducing legislation to aid economic recovery by preventing federal bank regulators from arbitrarily penalizing community banks for working with borrowers to modify their loans or accepting mortgage payments from someone other than the borrower. Since the 2008 financial crisis, federal bank regulators have been unnecessarily obstructing the ability of community banks to make and modify loans to small businesses and mortgage recipients.
“We’re trying to help homeowners, small business owners and our local community banks stay afloat,” said Congressman Posey, who serves on the House Financial Services Committee. “Common sense says if you are making your loan payments on time – including instances where your local bank has revised the terms of your loan – then regulators should not force banks to foreclose on property owners asking for a modification or consider your loan to be in non-accrual status. As long as payments are being made, your loan should be considered in good standing, particularly in this economy. My colleagues co-sponsoring this legislation represent Americans across the country, confirming that this is a national problem. That must be addressed.”
The Common Sense Economic Recovery Act of 2011 (H.R. 1723) would stop regulators from assigning of performing loans to non-accrual status, which can impair the bank’s financial health and choke ability to lend, and lead them to foreclose on borrowers. The legislation would treat any loan as a performing loan if it is 1) current, 2) no more than 30 days delinquent in last 6 months, 3) an amortizing loan, and 4) not funded through an interest reserve account. The bill also directs regulators to report to Congress ways to prevent contradictory guidance from the financial regulators. The bill would sunset two years after enactment.
“We’re trying to help homeowners, small business owners and our local community banks stay afloat,” said Congressman Posey, who serves on the House Financial Services Committee. “Common sense says if you are making your loan payments on time – including instances where your local bank has revised the terms of your loan – then regulators should not force banks to foreclose on property owners asking for a modification or consider your loan to be in non-accrual status. As long as payments are being made, your loan should be considered in good standing, particularly in this economy. My colleagues co-sponsoring this legislation represent Americans across the country, confirming that this is a national problem. That must be addressed.”
The Common Sense Economic Recovery Act of 2011 (H.R. 1723) would stop regulators from assigning of performing loans to non-accrual status, which can impair the bank’s financial health and choke ability to lend, and lead them to foreclose on borrowers. The legislation would treat any loan as a performing loan if it is 1) current, 2) no more than 30 days delinquent in last 6 months, 3) an amortizing loan, and 4) not funded through an interest reserve account. The bill also directs regulators to report to Congress ways to prevent contradictory guidance from the financial regulators. The bill would sunset two years after enactment.
Bill Text:
1st Session
To permit certain current loans that would otherwise be treated as non-accrual loans as accrual loans for certain purposes.
Mr. Posey (for himself, Mr. Paul, Mr. Westmoreland, Mr. Issa, Mr. Webster, Mr. Jones, Mr. Manzullo, Mr. Miller of Florida, Mrs. Hartzler, Mr. Pitts, Mr. Flores, Mr. Gohmert, Mr. Bartlett, Mr. Pearce, Mr. Gingrey of Georgia, Mr. McCotter, Mr. Luetkemeyer, and Mr. Thompson of Pennsylvania) introduced the following bill; which was referred to the Committee on Financial Services
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,
This Act may be cited as the “Common Sense Economic Recovery Act of 2011”.
SEC. 2. Treatment of certain loans.
(a) In general.—For purposes of determining capital requirements or measuring capital of an insured depository institution under section 38 of the Federal Deposit Insurance Act (12 U.S.C. 1831o) or any other provision of law or regulatory guidance, an insured depository institution that would otherwise be required to treat a loan as a non-accrual loan may treat such loan as an accrual loan, if—
(1) the loan is current;
(2) during the previous 6-month period, no monthly payment on the loan has been more than 30 days delinquent;
(3) the loan is an amortizing loan; and
(4) the payments being made on the loan are not being funded through an interest reserve account.
(b) Equality of treatment for modified mortgage loans.—Subsection (a) shall apply to modified mortgage loans, including those loans that meet the criteria for troubled debt restructuring, to the same extent as non-modified mortgage loans, as long as the modified mortgage loans also meet the requirements under paragraphs (1) through (4) of subsection (a).
(c) No additional adverse treatment.—With respect to a loan held by an insured depository institution and treated as an accrual loan by reason of subsection (a), an appropriate Federal banking agency may not impose any additional accounting requirements on such institution with respect to such loan compared to the requirements that would otherwise have been placed on such institution with respect to such loan if such loan were not being treated as an accrual loan by reason of subsection (a), if the result of such additional requirement would adversely impact the measurement of capital of the institution.
SEC. 3. Study.
(a) In general.—The Financial Stability Oversight Council shall conduct a study of how best to prevent contradictory guidance from being issued by appropriate Federal banking agencies to insured depository institutions with respect to loan classifications and capital requirements.
(b) Report.—Not later than the end of the 60-day period beginning on the date of the enactment of this Act, the Financial Stability Oversight Council shall issue a report to the Congress containing—
(1) all determinations and conclusions made by the Council in carrying out the study required under subsection (a); and
(2) legislative recommendations that the Council believe will prevent contradictory guidance from being issued by appropriate Federal banking agencies to insured depository institutions with respect to loan classifications and capital requirements.
SEC. 4. Definitions.
For purposes of this Act, the terms “appropriate Federal banking agency” and “insured depository institution” shall have the meaning given those terms, respectively, under section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813).
SEC. 5. Sunset.
Effective after the end of the 2-year period beginning on the date of the enactment of this Act, this Act shall cease to have any force or effect.
