Banking Law

The Senate version of the small business lending bill that passed the Senate last week didn't contain even the watered-down version of the commercial real estate loss amortization provisions that the House version of the bill contained. As I noted in June, banks that would be able to take advantage of the amortization provisions of the House version would have to be banks that are not on the FDIC's troubled institutions list (not rated 4 or 5). In other words, if you were the type of bank that needed the assistance of loss amortization, you wouldn't have been able to receive it.

The Senate version of the legislation never contained the CRE loss amortization provision from the get-go and it was not added by amendment. Although House Democrats are apparently miffed that some of their pet provisions do not appear in the Senate bill, Nancy Pelosi has vowed to adopt the Senate version " because small business can?t wait another day for this legislation to be passed.? Imbuing that phrase with a bit more "truthiness," what Speaker Pelosi meant to say is that Democrats better get something passed that gives the appearance of helping small businesses because the mid-term elections are coming up in another six weeks and things look grim for her party. At least, they appear to be grim for anyone not running against Christine ("Hasn't Everyone Dabbled in Witchcraft?") O'Donnell.

Another potential relief measure for a number of community banks hanging on by their fingernails flushed down the drain. Ah, well, if only you were a bank that got "special treatment." I'll bet any one of the six community banks that bit the dust last Friday wishes they had friends like Barney Frank and Maxine Waters In Congress and that the FDIC had been looking for loopholes to justify their counting prospective capital as capital before it was actually received. Remember when OTS officials were handed their heads for doing just that for IndyMac and some other thrifts that later failed?

It's nice that The Washington Post has brought into the clear this list of banks that might cause "unnecessary press or public relations" problems for the FDIC and how the FDIC acted in this case. Even the FDIC's inspector general wasn't aware of the list. It now "causes him some concern." Apparently, banks on this "double secret probation" list of banks whose failure might cause "adverse publicity" for the FDIC get a helping instead of a boot up the behind like the bad boys in Animal House, who were on a similar list. My response is, so what? Will anything change in our nation's capitol as a result of this "concern"? Will politicians be less corrupt or bank regulators less hypocritical in the future because the FDIC's IG is "concerned"?

[Sound of crickets chirping]

As one long-time banking attorney e-mailed me about this latest revelation, "This is about as ugly as it gets."