Cosponsors are urgently needed for an important bill about to be introduced by House Financial Services Committee Chairman Barney Frank (D-Mass.) and Financial Institutions Subcommittee Chairman Paul Gillmor (R-Ohio) that would block corporate conglomerates like Wal-Mart and Home Depot from exploiting the ILC loophole to get into banking.  

It is vital to demonstrate strong support in Congress for legislation to close the ILC loophole.  Please call your House member at once and urge him or her to co-sponsor the Frank-Gillmor bill.  Call 202-225-3121, and ask for your representative by name.

The FDIC Board is scheduled to meet on January 31, the day the moratorium on ILC actions expire, to consider "Matters relating to the Moratorium on Deposit Insurance Applications and Change in Bank Control Notices Submitted by, or with Respect to, Industrial Loan Companies."  The FDIC could extend the moratorium for some or all applications, it could decide to move on pending applications, or take other action. 

If the FDIC perceives congressional indifference regarding the ILC issue, it could act quickly to approve the Wal-Mart and Home Depot applications.  We can't allow that to happen.  We need to ensure that the Frank-Gillmor bill has a substantial list of bi-partisan co-sponsors to let the FDIC know that Congress intends to act, and to let the Senate know that the House is united on this issue.  The ILC issue is an important public policy issue that should be decided by Congress, not the FDIC.  But if Congress doesn't, the FDIC will.  Please do your part to keep this from happening.  Call your representative today.

More than 30 community bankers from 13 states came to Washington this week to lobby key lawmakers on ILC issues and the FCS Horizons Project—two of community bankers' top priorities.

The bankers—who were briefed at ICBA headquarters Tuesday morning—urged lawmakers to support an extension of the FDIC moratorium on ILC applications and to co-sponsor legislation to close the ILC loophole.  Bankers also asked legislators to stop the expansion of Farm Credit System institutions into non-farm lending.

The timing of this fly-in was critical, since the ILC moratorium expires on January 31 and work is intensifying on the credit title of the farm bill.

Bankers met with new committee leadership, including Senate Banking Committee Chairman Chris Dodd (D-Conn.) and House Financial Services Committee Chairman Barney Frank (D-Mass.). 

Other key lawmakers visited were Senators Bennett (R-Utah), Allard (R-Col.), Enzi (R-Wy.), Hagel (R-Neb.), Crapo (R-Idaho), Martinez (R-Fla.), Brown (D-Ohio), Casey (D-Pa.) and Tester (D-Mont.). 

In addition to Chairman Frank, bankers met with the ranking minority member of the House banking panel, Spencer Bachus (R-Ala.), and the ranking Republican on the Financial Institutions Subcommittee, Paul Gillmor (R-Ohio).

Nearly 300 community bankers are expected to meet with their legislators in Washington in April during ICBA's annual spring lobbying event.

Bank of America's CEO stated this week that the bank would no longer lobby Congress to raise the 10% deposit concentration cap found in the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994.  The cap sets a limit on the share of domestic deposits that any single U.S. bank can control following an acquisition.

BofA had started a quiet campaign to persuade lawmakers to increase the deposit cap, The Wall Street Journal recently reported, arguing that the cap hinders large U.S. banks from competing with foreign banks.  But as the only bank near the 10% limit, BofA realized fairly quickly that it had few allies on the issue.  For example, JP Morgan Chase, the next largest deposit holder, could acquire all but the five biggest banks and still remain under the federal cap. 

ICBA President and CEO Camden Fine told the American Banker that ICBA would fight "tooth and nail" any move to raise the deposit cap.  When BofA announced its fourth quarter earnings this week, BofA Chairman and CEO Ken Lewis announced the bank was backing off on its lobbying campaign.

ICBA was instrumental in 1994 in getting the concentration cap inserted into the Riegle Neal Act.  Since that time, ICBA has opposed any attempt to raise the threshold.  Most recently, ICBA testified at the Federal Reserve hearing in Boston concerning the BofA/Fleet merger that ICBA would "resist any attempt to increase the 10% cap imposed by the Reigle-Neal Act or to broaden the definition of 'deposit' under that Act."  ICBA noted that consumers, small businesses and local communities are often adversely impacted when large banks merge and dominate the banking industry and, furthermore, such large mergers pose systemic risks to our financial system.

The Federal Housing Finance Board has issued an interim final rule establishing procedures for selecting directors to fill a number of long vacant public interest director seats on the boards of the FHLBs.  FHLB boards consist of directors elected by membership (constituting a majority of seats) and independent public interest directors appointed by the Finance Board.  The rule creates a more transparent director selection process and relies on a skills-based method of choosing directors.  Each FHLB will nominate director candidates for appointment by the FHFB and anyone can recommend candidates to a FHLB for consideration.

According to the rule, each FHLB must assess the appropriate experience and abilities its board needs in order to operate effectively.  In identifying potential appointive directors, the FHLBs must do a preliminary assessment of the candidates' qualifications before nominating them.  The assessment should be based on information from a new director application form as well as the candidate's reputation in his or her community.  The application form includes information describing the business, financial, housing, community and economic development or other leadership experience that qualify the candidate to serve on the board.  Individuals nominated to serve as a community interest appointed director should be assessed for their experience in serving the consumer and community interests specified by statute.

Each FHLB must submit a list of two candidates for every open seat to the Finance Board by March 31.   Anyone can recommend a candidate—including themselves—to a FHLB for consideration.  If the Finance Board rejects candidates and there are still open seats, the FHLB is to submit a new list.  The Finance Board will be appointing directors for terms that end in 2008 and 2009.  Going forward, candidate lists are to be submitted by October 1 of each year.

In approving the interim final rule, Finance Board member Geoff Bacino said that FHLB public interest directors should not  be selected by popularity contests or because of personal friendships or political patronage.  He noted that the process spelled out in the interim final rule is designed to result in the appointment of highly competent public interest directors. 

ICBA was pleased to see that in issuing the final rule, the Finance Board took an important step toward filling appointed directors' seats that it had left open, pending passage of regulatory reform legislation for the housing government sponsored enterprises.  "We are happy to see that the FHLBs will soon have the full complement of directors needed to oversee their operations to ensure that these institutions remain a safe, sound and stable source of funding for community banks to rely on for business, commercial and residential loans," said Terry J. Jorde, ICBA chairman and president/CEO of CountryBank USA, Cando, N.D.

Community bankers should consider submitting to their FHLB the names of individuals that are bona fide residents of their districts and have the skills and experience suggested by the interim final rule and application form.  View the rule and application form.  Comments can be submitted for 30 days.  

An $8.3 billion package of small business tax cuts will remain in Senate play as part of a push to raise the federal minimum wage. An effort to move a "clean" Senate minimum wage bill without attaching small business tax relief was unable to secure the needed 60 Senate votes to advance.

On January 24th, a 54-43 Senate vote was not enough to advance a House-passed bill that would lift the wage floor from $5.15 to $7.25 an hour without any accompanying tax cut. Raising the minimum wage is one of the new Democratic Congress' top priorities. The vote sent a message to the House that only a hybrid tax-relief and minimum wage package could succeed in the Senate. But tax breaks in any bill from the Senate would still have to be reconciled with the House, since the Constitution requires all tax measures to be initiated in the House.

The Senate pairing of the minimum wage effort with the Small Business and Work Opportunity Act of 2007 will help advance ICBA-backed tax relief, especially community bank Subchapter S tax provisions. Nearly one-third of all U.S. banks, some 2,400, are structured under the S corporation tax-advantaged status. Key ICBA-backed Subchapter S reforms in the Senate tax package include:

• excluding capital gains from passive investment income;
• improving the treatment of bank director shares;
• improving the tax treatment for bad debt reserves;
• reforming the treatment of sale of interest in a qualified subchapter S subsidiary; and
• expanding eligible beneficiaries of an electing small business trust.

ICBA appreciates the strong bipartisan efforts to advance small business tax cuts and ICBA's S corporation reforms by Senate Finance Committee Chairman Max Baucus (D-Mont.), Ranking Minority Member Charles Grassley (R-Iowa) and Senators Orrin Hatch (R-Utah) and Blanche Lincoln (D-Ark.). Additional information on the ICBA tax relief provisions are available at www.icba.org and http://finance.senate.gov/ under "Legislation."

Legislation to relieve financial institutions from having to file Currency Transaction Reports (CTRs) for seasoned customers passed the House this week by voice vote.  The ICBA-backed bill, HR 323, was sponsored by House Financial Services Committee Chairman Barney Frank (D-Mass.) and Ranking Republican Spencer Bachus (R-Ala.), along with 24 co-sponsors. 

Similar legislation passed the House twice last year, but was not taken up in the Senate.   CTR relief also is expected to be part of ICBA's package of tax and regulatory relief measures, the Communities First Act (CFA), which will be re-introduced in the 110th Congress.

The House-passed bill enables banks to exempt seasoned customers from CTR filing requirements for transactions of more than $10,000.  A seasoned customer is one who has had an account at the bank for at least a year and engages in multiple currency transactions that are subject to CTR filing requirements. 

"Over regulation and under regulation are both unwise, and excessive regulations can hinder the ability of law enforcement to do its job by hampering resources and overburdening personnel," said Chairman Frank. 

A Treasury Department study revealed that more than 30% of CTRs filed in 2005 were to report the transactions of recurring customers that would be exempt under this bill.  "By eliminating superfluous reports, CTR reform will reduce unnecessary costs borne by financial institutions, while making it easier for law enforcement professionals to pinpoint suspicious activity," said Rep. Bachus.

ICBA appreciates the work of Chairman Frank, Rep. Bachus and others to push this important legislation through the House.  We encourage the Senate to take it up quickly. 

In a January 15th speech at the Farm Credit Council's annual meeting, Farm Credit Administration Chairman Nancy Pellett reported that the Farm Credit System witnessed "unprecedented loan and asset growth" last year.  She also opined about the FCS's Horizons project and FCA's pending agenda.  Pellett said that FCS assets grew during the year ending September 30, 2006, by $19.3 billion to $154.7 billion—a 14.3% increase.  Capital grew by $1.5 billion to $24.2 billion—a 6.7% increase.  Although increasing less than assets, System capital remained strong at 15.7% of assets as of September 30.  The System's combined net income was $1.8 billion year-to-date as of September 30 and will again exceed $2 billion for 2006, she noted. 

Pellett dismissed banker objections to the FCS's Horizons agenda, claiming banker complaints "are more of a reaction to 95 associations and five banks with over $150 billion in assets operating as a unified and effective financial entity rather than to possible small changes to the Farm Credit Act or changes in regulations.  The real significance of the Horizons project is the realization of the potential for real cohesiveness within the Farm Credit System," Pellett said.

Pellett said FCA plans to finalize a regulation expanding FCS lending for processing and marketing loans later this year (banker comments are due Feb. 26th).  She also encouraged FCS lenders to "continue to develop affiliations with commercial banks and Farmer Mac ... that are mutually beneficial."  She added, "There seems to be an opportunity to work with commercial banks and other commercial financial providers to more broadly meet the needs of all agricultural producers."

ICBA Comments: FCS's "unprecedented growth" in loan volume and assets. and their continually rising net profits, verifies that FCS already has adequate lending authorities and does not need new lending powers to shift into non-farm lending.  Chairman Pellett's comments that FCS lenders now have greater "flexibility" and should remain mindful of their mission suggests FCA is implementing another FCS agenda item—allowing FCS lenders to make their own decisions regarding which borrowers are eligible for FCS lending.  Also on FCA's agenda this year are proposals that would expand FCS non-farm lending (scope and eligibility); consideration of new programs that FCS could offer; and a regulation to expand "financially related services" that FCS lenders could offer. 

The FCS is lobbying all farm groups in every state, seeking to have the Horizons agenda added to their farm bill proposals.  FCS also has asked members of Congress to write the chairmen of the House and Senate Agriculture Committees requesting that the Horizons agenda be added to the credit title of the farm bill.  Bankers should call their state farm organizations and their representatives and senators to strongly object.  Also, please contact ICBA (mark.scanlan@icba.org) for a detailed, step-by-step plan to combat FCS's Horizons project.

The retail corporation that operates T.J. Maxx, Marshalls, HomeGoods and A.J. Wright stores reported on January 17 that a hacker broke into its information system and stole customer data, including an unknown quantity of debit and credit card numbers.

TJX Companies Inc. (NYSE:TJX) did not provide many details about the breach, which they reported as occurring in mid-December of 2006. The impact of such an occurrence is "disturbing from many perspectives," said Linda Echard, president and CEO of ICBA Bancard. "Just as we tend to find fault with the messengers that announce these compromises (i.e. the major card associations), many community bank customers may in turn blame their community banks."

To prevent such a backlash, Echard noted, it is important for community banks to be informed of all of the facts and respond proactively to customer concerns. ICBA Bancard recommends community banks consider the following steps in response to a breach or compromise:

• Bankers should emphasize in all their communications with customers that cardholders enjoy zero liability protection from the major card associations.

• Stress that your bank uses state-of-the-art fraud monitoring safeguards such as FALCON, eNFACT, and/or VISA AA to proactively protect cardholders.

• Encourage cardholders to monitor their accounts regularly and call the bank whenever they have questions. For example, ICBA Bancard's online account access program ( www.mycardstatement.com) for community bank cardholders allows users to set up transaction alerts to monitor their accounts for unusual activity.

• Before taking any action that would lead to a mass reissue of every exposed account, bankers should carefully consider the risk posed by the breach against the impact it will have on the psychology of their cardholders. In most instances, vigilant monitoring of cardholder accounts by the bank results in less disruption for customers and less expense for the bank than would a mass reissuing.

• Bankers should stay informed about the latest industry resources. For example, Visa's new compromised account compliance program and ICBA Bancard's Fraud Loss Protection Plan can help protect your bank and provide partial or total reimbursement of the costs associated with fraud losses.

• Lastly, it is important to keep bank frontline staff involved and informed regarding compromise events. An informed staff can better answer questions and reassure customers.

For more information on the T.J. Maxx breach or the protections and resources offered by ICBA Bancard to participating community banks, visit www.icbabancard.org/risk or call 1-800-242-4770.

Agriculture Secretary Mike Johanns this week announced plans to propose $1.6 billion in new funding for renewable energy, with a focus on cellulosic energy research and production, as part of the administration's 2007 farm bill proposals.  This funding will support President Bush's goal of reducing gasoline usage by 20% in the next ten years and compliment an array of renewable energy-related efforts underway at the U.S. Department of Agriculture.

"With biofuels coming to the forefront, American agriculture faces the greatest opportunity of a generation to lead a future in which we get our energy by the bushel and not by the barrel," Johanns stated.  More information on the proposal will be available when Johanns unveils the administration's full package of 2007 farm bill proposals sometime in the next few weeks.

In his State of the Union address this week, President Bush announced his vision for our nation's energy independence, including $2 billion in cellulosic production loan guarantees.  The President's proposals also include a new Alternative Fuels Standard, which contains a requirement for sources produced by American farmers and ranchers as well as an automatic "safety valve" to protect against unforeseen increases in the prices of alternative fuels or their feedstocks.

The Pension Protection Act of 2006 provides Americans with several new tax-advantaged retirement savings opportunities this year, including expanded contribution allowances for IRA, 401(k) and education savings plans.

ICBA has created Saving Has Never Been Easier, a statement stuffer to help community banks remind their customers to ask about the new savings options.  The statement stuffer is a great resource to inform your customers, and remind them that your community bank can help with their saving and investment goals.  Review and order the statement stuffer online today.

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Order ICBA's Statement Stuffer on Pension Protection Act Savings Options