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Elizabeth Duke, Fed Governor, Plans to Step Down

July 11, 2013 by Leave a Comment

Ms. Duke, just the seventh woman to serve on the Fed’s board, has also been a quiet but consistent supporter of Ben S. Bernanke, the Fed chairman, and of the central bank’s economic stimulus campaign.

In a letter of resignation submitted to President Obama, Ms. Duke, 60, said that she was “proud to have contributed” to those efforts.

“I am especially gratified to have brought my own practical banking experience and community banking perspective to the massive overhaul of financial system regulations,” Ms. Duke wrote.

She did not offer a reason for leaving, nor did she describe her plans. Her term ended last January, but governors can remain in office until a replacement is nominated, and the Obama administration had not sought her departure.

“President Obama is grateful to Elizabeth Duke for her years of valued service,” a White House spokeswoman, Amy Brundage, wrote on Twitter.

Ms. Duke, a Virginia banker who ran a series of community banks and served as chairwoman of the American Bankers Association, was nominated to the Fed in May 2007 by President George W. Bush and joined the board the following year. Her experience as a lender set her apart in a group mostly composed of academics and policy makers, and led her to focus on the reconstruction of the housing finance system, working to strike a balance between stronger safeguards and broad access to homeownership.

“New mortgage regulations will provide important protections to borrowers but may also lead to a permanent increase in the cost of originating loans to borrowers with lower credit scores,” she cautioned in a May speech surveying the changed landscape.

The White House is considering replacements for Mr. Bernanke, who is expected to step down from the Fed when his term ends in January. Ms. Duke and Mr. Bernanke are the last remaining members of the Fed’s board initially nominated by Mr. Bush, although Mr. Bernanke was subsequently nominated to a second term by Mr. Obama.

Ms. Duke praised Mr. Bernanke’s leadership in her resignation letter.

“I would like to express my admiration for Chairman Bernanke’s courage and extraordinary intellect,” she wrote. “His considerable personal strengths proved to be invaluable during very difficult economic times.”

Mr. Bernanke returned the compliment in a statement. “She brought fresh ideas grounded in her deep knowledge of the banking industry and the real-world dynamic between borrowers and lenders,” he said. “I wish her the best in her future endeavors.”

Article source: http://www.nytimes.com/2013/07/12/business/economy/fed-governor-to-resign.html?partner=rss&emc=rss

Filed Under: Economy News Tagged With: , ,

DealBook: Amid Wall Street Protests, Smaller Banks Gain Favor

November 4, 2011 by Leave a Comment

Vince Siciliano, the head of New Resource Bank in San Francisco, says his business is growing.Peter DaSilva for The New York TimesVince Siciliano, the head of New Resource Bank in San Francisco, says his business is growing.

Vince Siciliano — a Birkenstock-wearing, organic food-eating, public transportation-riding sympathizer of Occupy Wall Street who earns $240,000 a year — is far from a banking baron.

But as the chief executive of New Resource Bank in San Francisco, Mr. Siciliano has managed to pull off what his bigger rivals have not: turn a profit and stay out of the line of fire.

“Our business has tripled this month,” said Mr. Siciliano, 61, referring to October. “We have had nonstop, all day long, people moving their money.”

New Resource, a small community bank that focuses on sustainable and “planet-smart” small businesses and nonprofits, is one of the many community-based lenders benefiting from the criticism of Wall Street.

In recent weeks, big banks, already barraged by flagging profits and widespread layoffs, have been a focus of global protests and disparagement over new fees. A $5 monthly debit card fee introduced by Bank of America provoked enough outrage that the company retracted its decision. An online campaign, called Bank Transfer Day, that encourages clients of the nation’s largest banks to park their money elsewhere, has attracted more than 75,000 Facebook commitments from angry customers of big banks.

On the margins, customers are seeking out alternatives like community banks and credit unions. Without the obligations to generate huge returns for public shareholders, these smaller banks often can charge lower fees and pay higher interest rates than their bigger competitors. More than 650,000 people have joined credit unions since Sept. 29 — the day Bank of America announced its debit card fee — and have brought in an estimated $4.5 billion in new deposits, according to a survey conducted by the Credit Union National Association.

“I think it’s a last-straw thing,” said Bill Cheney, the association’s chief executive. “Even though banks are backing up on some of their fees, there’s a sense that if it’s not this fee, its going to be something else.”

In October, New Resource added 150 new accounts and $1.5 million in deposits. GreenChoice Bank, a company based in Chicago that describes itself as a “green community bank,” has opened at least 100 new accounts since Occupy Wall Street began, including one for a couple who drove from Darien, Ill., 25 miles away, to move their money.

“People vote with their deposits,” said Steve Sherman, GreenChoice’s chief operating officer. “It all points to a broader cultural shift in what people expect from their bank, and from the companies they’re doing business with.”

Many bankers at these smaller companies come from traditional finance backgrounds. Mr. Siciliano spent 10 years at Bank of America, where he worked in Asia on corporate finance projects, before decamping to community banking. His switch to New Resource in 2009 required a major attitude shift.

“I tell people, there’s slow banking and fast banking,” Mr. Siciliano said. “In fast banking, you say, how fast can I grow? How high are my prices? How high an internal rate of return can I generate? Whereas slow banking says, it’s not about an exit strategy. It’s about building a long-term franchise around the mission.”

When Mr. Siciliano arrived at New Resource, during the financial crisis, it was in a state of disrepair. Deposits had shrunk, and federal regulators had ordered the bank to clean up its balance sheet. But after the bank began marketing itself as a green alternative to mainstream bank, and it became certified as a B-corporation — a type of corporation that encourages businesses to focus on creating environmental and social benefits as well as profits — business began to thrive. Last quarter, New Resource made a profit of $196,000, compared with a loss of $433,000 a year ago.

“It’s a good time for us,” Mr. Siciliano said. “Midsized foundations and nonprofits and companies are being asked by their boards, ‘Why do we bank at Wells Fargo or Bank of America?’ And we’re able to step in and offer an alternative.”

Part of the appeal of smaller banks has always been their focus on local investments. New Resource’s clientele is West Coast-centric, and includes Bay Area small businesses like San Francisco’s Haight Street Market in addition to people in the area.

“It’s a way to put your money in an institution that is investing in your community, and holds that as one of its core values,” said Jeannine Jacokes, chief executive of the Community Development Bankers Association, a trade group.

There are drawbacks, too. Many smaller banks lack the expansive ATM networks and online banking services of larger companies. And it can take weeks to move an account and set up auto-pay bill systems and direct deposits and have checks clear.

Michael Radparvar, the co-founder of Holstee, a lifestyle goods company in New York, does the company’s banking at Bank of America. He and his colleagues were contemplating switching to a smaller bank but had not decided whether the hassle would be worth it.

“The whole purpose is beautiful, and it jibes really well with our personal values,” he said. “It’s a matter of us finding a way to switch systems that’s seamless and doesn’t mess with the flow of what we’re working on.”

For some customers, though, feeling connected to a local bank is all that matters. David Becker, president of PhilippeBecker, a design firm in San Francisco, and a Bank of America refugee, said he had found shelter in a small local credit union, which charged him fewer fees, even though it lacked some of the conveniences of a larger bank.

“What’s a pretty Web interface worth?” he said. “What are you really getting?”

Mr. Becker, who has been keeping his business accounts at the Bank of San Francisco, a small local bank, for years, said it would be difficult to go back to his impersonal, fee-laden life as a big-bank customer.

“I called my credit union up the other day, and someone answered the phone,” he said. “I was like, holy smokes! I’m on a different planet!”

Article source: http://feeds.nytimes.com/click.phdo?i=d2b6a6cc7e17fc5fbdf6fbb7af238c4a

Filed Under: Business News Tagged With: , ,

Bucks Blog: Debit Cards With Rewards Not Extinct (Yet)

October 19, 2011 by Leave a Comment

Even though debit card reward programs are getting harder to find, most of the programs remaining haven’t changed much — at least, not yet.

Banks are cutting back their loyalty programs, because of new caps on what they can charge merchants for processing debit card purchases. (Some banks are adding new fees for customers as a result of the rule, which took effect Oct. 1.) A survey by Bankrate.com found that the availability of the programs declined by about 30 percent from last year.

The study included the five largest banks and the five largest thrifts in 10 major markets, as well as the five largest credit unions.

But the findings weren’t all bad. Many of the remaining programs are still offered without charge, and the most common payout remained 0.5 percent back (or one penny for every $2 spent), with a range of 0.25 percent to 1 percent. Among banks that do charge for participation in their loyalty programs, fees ranged from $1.50 to $10 per month, the study found.

Also, most institutions still don’t place a cap on the rewards customers can accumulate.

Does your institution still offer a debit rewards program? For a look at a couple of the most generous programs, see Ron Lieber’s recent column about PerkStreet and Kasasa. Some banks only offer the high-interest checking version of Kasasa, but there are also debit rewards programs that its parent company offers through community banks and credit unions.

Article source: http://feeds.nytimes.com/click.phdo?i=7de43f251f9e841a328bf9da557501ce

Filed Under: Your Money Tagged With: , ,

You’re the Boss: Big Banks Shrinking as S.B.A. Lenders

August 10, 2011 by Leave a Comment

The Agenda

How small-business issues are shaping politics and policy.

The Small Business Administration’s guaranteed business loan program is back. Nudged by stimulus provisions that reduced fees and increased guarantees, American banks made a record amount of S.B.A.-backed loans in 2010 (measured in dollars), reversing a demoralizing four-year slide. But there’s something noteworthy about who was doing that lending: while banks as a whole loaned more government-backed money than ever, the biggest banks loaned less.

The 25 American banks with the most deposits in 2010 underwrote $3.6 billion in S.B.A. general business, or 7(a), loans. That is just more than 20 percent of all 7(a) loans approved that year, down nearly a third from the share these same banks loaned in 2006. The decline cannot be tied to a decline in deposits. In that same period, these banks grew to control $5.8 trillion in deposits, 61 percent of all bank deposits in 2010.

In other words, in 2010 the 25 biggest banks held 32 percent more in deposits than those banks did in 2006 — but approved 30 percent less in S.B.A. loans.* The decline appears to be related to losses the banks suffered when borrowers defaulted on one type of 7(a) loan during the crisis, and perhaps as well to the difficulty large banks have in making profits on smaller loans in general.

Steve Smits, the S.B.A. associate administrator who supervises lending programs, said that one reason big banks lost 7(a) market share was that during the recession, many community banks joined — or rejoined after a long absence — the S.B.A. program as a way to keep lending despite their weakened balance sheets. This was possible because S.B.A. loans permit a bank to keep less cash in reserve and can be sold on a secondary market to generate still more cash for the bank. “We definitely saw north of a thousand lending partners use our programs for the first time in years during the depths of the recession, and many of those institutions were the small community banks,” Mr. Smits said.

But the big banks didn’t just lose share of total S.B.A. lending; their dollar volume fell absolutely as well — 15 percent from 2006. Bank of America, the largest bank and one of the top 7(a) lenders in 2006, saw its loan volume plummet 89 percent by 2010. Loans at PNC Bank and RBS Citizens (which operates as Citizens Bank in the Northeast and Charter One in the Midwest) fell by 82 and 83 percent, respectively. At Capital One, which had moved aggressively into the S.B.A. market only a few years earlier, 7(a) lending has almost completely collapsed: the bank, which approved $228 million worth of 7(a) loans in 2006, green-lighted only $551,000 in 2010.

The figures here (and in the chart below) represent loan amounts approved by either the bank or the S.B.A. — a higher amount than the money actually distributed to borrowers, since some loans are canceled before they are issued. They were compiled by the loan brokerage firm MultiFunding, using deposit data from the Federal Deposit Insurance Corporation and loan information from the S.B.A. (which was provided by Coleman Publishing). The loan figures are for calendar years, though the S.B.A. itself tracks its lending by the government’s fiscal year, which begins Oct. 1 and ends Sept. 30.

“I did expect to find that the big banks currently are making a lot less loans to small businesses than smaller banks are,” said Ami Kassar, who is chief executive of MultiFunding. “I didn’t expect to find that the big banks commitment had decreased.”

The big banks simply are not well suited to make S.B.A loans in particular, or small-business loans in general, said Barry Sloane, chairman and chief executive of Newtek Business Services, a large 7(a) lender that is not a bank. “The larger institutions have a much higher cost structure, and they have a harder time making a million-dollar loan profitable,” Mr. Sloane said. “Larger banks, when they lend, want to lend more money, to a larger borrower, and they want to secure a depository arrangement. S.B.A. loans don’t necessarily go along with a significant amount of deposits. And they are much more labor-intensive than a conventional loan.”

To induce large banks to make S.B.A. loans, the agency developed a 7(a) program especially for them, S.B.A. Express. This program lets lenders use their own application forms and credit-scoring models to make smaller loans, which they can approve themselves, and banks don’t have to take any more collateral than their regular loans require. It allows those banks to incorporate government-guaranteed loans seamlessly into their lending operations — borrowers who don’t qualify for a bank’s conventional loan can automatically be considered for an S.B.A.-backed loan without having to start the paperwork all over again. Because they take on more responsibility for underwriting the loan, the banks must also shoulder more of the risk, in the form of a lower guarantee.

By 2007, S.B.A. Express had grown into an important component of the 7(a) program, constituting almost a quarter of the loan volume and more than two-thirds of the total loan numbers. But big banks put the brakes on S.B.A. Express lending in late 2007, a year before the full-on credit crisis that saw most lending come to a halt. At the time, Mr. Smits’s predecessor at the S.B.A. explained that banks were seeing higher defaults than they originally anticipated, so they were raising their credit standards. Since then, many appear to have in fact pulled out of the program. Bank of America, RBS Citizens, and Capital One — the three banks showing the sharpest drop in S.B.A. lending — had all specialized in S.B.A. Express loans. Mr. Sloane and Tony Wilkinson, president of the National Association of Government Guaranteed Lenders, both attribute the decline in big-bank 7(a) lending to big losses in Express lending.

The S.B.A.’s Mr. Smits said he was not able to explain the decline in S.B.A. lending among big banks. “I think you have to look at each lender on its own and see whether they’ve actually had a drop in activities to small business lending in general, or whether it was just S.B.A. in specific,” he said. “You have to look at what their model is, and what their average loan sizes are.”

The banks contacted by The Agenda were for the most part reluctant to say much about their S.B.A. lending. All insisted that S.B.A. loans are just one of many ways they provide credit to small businesses and that they are broadly making more credit available to those companies.

Robb Hilson, an executive in Bank of America’s Global Commercial Banking division, was the most explicit. “Admittedly, we made mistakes, and we ended up losing a lot of money, even on the S.B.A.-guaranteed portfolio, because we were too aggressive at a time where it was not appropriate,” he said. “We were looking at borrowers who at the end of the day unfortunately in too many cases did not have the ability to repay the loan.”

Several years ago Bank of America suspended its traditional 7(a) program, with the higher guarantees and additional paperwork, because “we thought it wasn’t customer-friendly,” said Mr Hilson. Last year the bank reintroduced it, and Mr. Hilson vowed that the bank would rebuild — carefully — its Express program. And he added that Bank of America remained a leading lender in another popular S.B.A. program, which guarantees loans made by nonprofit community development companies that partner with banks.

In an e-mail, a PNC spokesman, Fred Solomon, attributed some of that institution’s lending decline in 2009 and 2010 to its efforts to combine with National City Bank, which PNC bought in 2008. But, he added, “other factors do play a role, including our determination not to rely on the S.B.A.’s guarantee when qualifying potential borrowers.” A spokesman for Capital One, Steve Schooff, said in an e-mail message, “We are reevaluating our strategy and opportunities in the current environment relative to S.B.A. loans to determine the best approach.”

Mr. Kassar, for his part, acknowledged the limitations of his analysis of which banks are supporting small businesses. “I don’t think the S.B.A. is the only indicator, or a perfect indicator,” he said. Still, he added, “it does seem like a reasonable indicator of Main Street lending.”

Not all of the big banks have struggled with S.B.A. lending. Despite the overall downward trend, several  actually made more 7(a) loans over this time period. SunTrust posted the biggest growth: through 2008, its 7(a) lending hovered around $34 million. In 2009, it grew to $44 million — and then soared to $155 million in 2010. SunTrust has gone from being purely an Express lender to an S.B.A. “generalist,” said Jeff Nager, a SunTrust senior vice president and its S.B.A. Division Executive. “We have made it a focus of the bank.”

Mr. Nager acknowledged that SunTrust’s S.B.A. lending effort was buoyed by the generous government incentives established by the 2009 Recovery Act. “It didn’t change our desire to play or not play, but it stimulated a lot of knowledge in the S.B.A.,” he said. “The borrowers and the clients learned a lot more about the S.B.A. in a short amount of time because of the stimulus. It became a more prevalent part of the discussion in the market place.”

The stimulus provisions have since expired, but Mr. Nager predicted further growth for S.B.A. lending at his institution.

*Eight of the top 25 deposit-holding banks did not participate in the 7(a) program at all between 2006 and 2010; these banks are chiefly credit card lenders or investment managers.

Article source: http://feeds.nytimes.com/click.phdo?i=0e6e9bd89b576c551852643c94f137dc

Filed Under: Small Business Tagged With: , ,