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Keith LeggettABA Vice President & Senior Economist

Washington Update

Or Welcome to the New Normal

National Association of Chinese American

Bankers

April 14, 2011

• Angry Populist

• Bad Economy

• TARP = Bailout

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Atmospherics

• 294 Required Regulations

• Estimated 5,000 Pages of New Rules

• 2,319 Pages to the Bill

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Impact of DFA

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Dodd-Frank Act: 2,319 Pages

0 500 1,000 1,500 2,000 2,500

Number of Pages

Dodd-Frank Act (2010): 2,319 pages

Gramm-Leach-Bliley Act (1999): 145 pages

Sarbanes-Oxley Act (2002): 61 pages

Riegle- Neal Interstate Banking Act (1994): 61 pages

The Glass-Steagall Act (1933): 37 pages

Federal Reserve Act (1913): 31 pages

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Dodd-Frank Act Regulations

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•Transfer Date is July 21, 2011

•Smaller banks, under $10 billion in assets, are

not exempt from the Consumer Financial

Protection Regulator – the only “exemption” they

got was who will do CFP exams.

•The CFPB has the authority to determine if the

consumer products you offer are suitability.

Consumer Financial Protection

Bureau

• Small Business Data Collection

• Race, Sex, and Ethnicity of Borrower; Census

Tract of Borrower; Amount Applied for; Amount of

Credit Granted; Type of Loan; and Other Data

• To facilitate enforcement of fair lending laws

and … to identify business and community

development needs and opportunities of

women-owned, minority-owned, and small

businesses.

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More CFPB

• Applies to FIs with assets greater than $1 bil. • must file annually a report that details the structure of

its incentive-based compensation plans.

• FIs with over $50 bil. in assets• provides a succinct description of any specific

incentive compensation policies for executive officers and others who may expose the institution to possible losses that are substantial in relation to the institution’s size, capital, or overall risk tolerance.

• The rule requires that at least 50% of incentive-based payments be deferred for a minimum of three years for designated executives .

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Executive Compensation

Debit Card Issues

• Durbin Amendment

• Cap Interchange from Debit Cards Between 7 and 12 cents Per Transaction

• Exempted FIs Under $10 Billion in Assets

• Two Tier System Is Unlikely to Work

• Gutierrez v. Wells Fargo

• Can State Law Dictate the Order a FI Post Debit Card Transactions

• Does Posting from High to Low Violate CA law

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• Interest on Business Checking Starts on July

21, 2011

• IRS Proposal – Report Annually the Interest

Paid to Nonresident Aliens

• IRS Will Share Info with Home Country

• Negatively Impact U.S. Economy by Inducing a

Flight of Foreign Capital

• Could Reduce Funds Available for Lending

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Issues You Need to Prepare For

• Minority and Women Inclusion

• Diversity in Workforce – Agencies Hire Adequate

Number of Women and Minorities

• Every Entity that Enters Into a Contract with

Regulators Are Subject to Requirement

• Remittances

• Disclosure on Pricing Information

• Error Resolution – Waiting for Proposal

Free ABA Member Benefit: Frontline Compliance Training

Issues You Need to Prepare For

• Applies to only banks with automated

overdraft programs.

• Offer less costly alternative to borrowers that

overdraw account more than 6 occasions

where a fee is charged in a rolling 12 month

period.

• Impose daily limits on cost and transactions

are not processed in a manner to maximize

cost to customer.

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FDIC Overdraft

“The primary imperative

going forward has to be

increased regulatory

capital and liquidity

requirements on banks…”

New World of Banking: Higher

Capital and Liquidity Requirements

Alan Greenspan

March 18, 2010

Speech at the Brookings Institution

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Long-term Concern

The Federal Budget

($2,500)

($2,000)

($1,500)

($1,000)

($500)

$0

$500

2001 2004 2007 2010 2013 2016 2019

Federal Budget Deficit

Source: CBO, Concord Coalition

CBO Baseline

Concord

Coalition

-$729

Bil

-$1.9 Tril

2021

WH 2012

Budget

Source: CBO, Concord Coalition

Federal Debt Held By the Public as

Percent of GDP

0%

20%

40%

60%

80%

100%

120%

1940 1949 1958 1967 1976 1985 1994 2003 2012 2021

President's 2012 Budget CBO Baseline Concord Coalition

0%

5%

10%

15%

20%

2009 2011 2013 2015 2017 2019

Source: Congressional Budget Office

Interest on US Debt Threatens AAAIn

tere

st

on

De

bt

as

% o

f R

eve

nu

e

AAA Debt Rating Limit: 18%

0%

20%

40%

60%

80%

100%

120%

2006 2008 2010 2012 2014 2016 2018 2020

Greece USA

Source: IMF, Auerbach-Gale projections of US Budget.

US on the Same Path as Greece?D

eb

t as %

of

GD

P

• Incorrectly believe more is

spent on defense and

foreign aid than Medicare &

Social Security.

Source: Terrance Group

Public Doesn’t Get It

63%

Source: Terrance Group

Public Doesn’t Get It

• Incorrectly believe the

budget can be fixed by just

eliminating waste & abuse.

60%

Source: Terrance Group

Public Doesn’t Get It

• Think Medicare and Social

Security are a major source

of the problem

44%

Social Security, $73

0 B, 20%

Medicare, $492 B, 13%

Medicaid, $271 B, 7%

Other Mandatory, $607 B, 16%

Interest$250 B, 7%

Defense$846 B, 23%

Non-Defense Discretionary,$530 B, 14%

2011 Budget

Source: OMB

Entitlements:

56% of Budget

Entitlements +

Interest: 63%

Source: Gallup, Rasmussen Reports

Public Wants Mostly Spending Cuts, But

Doesn’t Support Realistic SpecificsRasmussen Poll: Only 20% of respondents are willing to pay

higher taxes to fix the deficit, compared to 71% who are not.

Gallup Poll: Neither are people willing to make these cuts:

Cut: Favor Oppose

No

Opinion

Aid to Farmers 44% 53% 3%

Military Spending 42% 57% 1%

Anti-Poverty Programs 39% 55% 6%

Medicare 38% 61% 1%

Social Security 34% 64% 2%

Education 32% 67% 2%

Reality

There has to be either large, broad based tax increases, or large cuts to

the entitlements and defense, or some combination of the two.

"They literally think you can just balance it, you know, (by cutting) waste, fraud

and abuse, foreign aid and NPR. And it doesn't work like that.”

Congressman Paul Ryan, House Budget Committee Chairman

“We’re going to get rid of all earmarks, all waste, fraud and abuse, all foreign

aid, Air Force One, all congressional pensions… That’s just sparrow belch in the

midst of the typhoon. …So, I’m waiting for the politician to get up and

say, there’s only one way to do this: you dig into the big

four, Medicare, Medicaid, Social Security, and defense.”

Former Sen. Alan Simpson, Co-Chair of Obama Deficit Commission

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