Cent 1
We need to let our legislators know, for our rural, LMI and high-minority-serving bank, the most help would come by following the recommendation of Chairman Jelena McWilliams:
The common-sense solution to solve many of the funding and liquidity issues of banks is to take the advice of Chairman McWilliams as presented in her keynote remarks at the Brookings Institution on December 11, 2019.
She said, "One option to consider is replacing Section 29 of the FDI Act altogether with a simple restriction on asset growth for banks that are in trouble. This would be a far easier regime for the FDIC to administer, would at the very least limit the size of the FDIC's potential exposure, and would more directly address the key goal of preventing troubled banks from using insured deposits to try to grow out of their problems. A simple limitation on asset growth would also be more durable and should retain its effectiveness as the industry evolves and as banks change the way they attract deposits over time."
This solution to the brokered deposit issue would prevent the Section 29-caused discrimination against LMI (low and moderate income) and minority clientele in rural areas who are net-borrowers and whose financial institutions must look to the brokered deposit market in order to obtain funding for their borrowing needs.
Cent 2:
The solution to the flawed rate cap rule needs to be fast-tracked. Now that rates have plummeted and the economy is in crisis, no bank should be forced to fail just because it isn't allowed to obtain funding and liquidity at real market rates. This is urgent.
Thanks!
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Mary Fowler
Chief Executive Officer
The Peoples Bank
Magnolia AR
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Original Message:
Sent: 03-16-2020 11:56
From: Barb Rehm
Subject: Tuesday Topic: Liquidity and Leadership in the Time of Coronavirus
Liquidity is everything now, as companies start to draw down credit lines. The Fed opened its toolbox late Sunday, announcing it is cutting rates, buying bonds, encouraging use of the discount window, and eliminating bank reserve requirements. And the Fed is likely not finished. It could start lending directly to struggling businesses, as it did during the 2008 financial crisis. The biggest banks did their part, as well, suspending stock buybacks until at least June 30. Don't be surprised if dividend cuts are next. The White House declared a national emergency, freeing up more money, and Congress is working on its second piece of legislation designed to ease the virus' impact on both businesses and workers. You are all CEOs, presidents or CFOs so you're being looked to for guidance, right? Harvard Business Review has a broad article on how best to communicate during this crisis, and this The Wall Street Journal piece has some basic wisdom about how to lead during a crisis. My favorite paragraph is this one: "Crises teach us that CEOs aren't expected to be as right as they are expected to be engaged." So worry less about making the best decision, and more about engaging with your employees, customers, and community.
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Barb Rehm
Senior Managing Director
Promontory Interfinancial Network, LLC
Arlington VA
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