Richard's Rapid Fire - August 31, 2018

OCC’s CRA ANPR Proposal: Comptroller of the Currency Joseph Otting is a CEO at heart and he showed it this week when the OCC issued its ANPR on the Community Reinvestment Act. The OCC issued the ANPR unilaterally, but we expect the FDIC and possibly the Fed to join in on the reform efforts before all is said and done. CBA’s Community Reinvestment Committee of almost 50 member banks led by Sue Whitson of BMO Harris and Yvonne Blumenthal of U.S. Bank has been advocating for changes to this forty-year-old law, last updated about 20 years ago – or around the time America’s Team, the Dallas Cowboys, were in the Super Bowl. As a lifelong Cowboys fan, I can attest that is a long time ago (ask my hairline). 
CBA has outlined some guiding principles we believe would help ensure community investment dollars are put to the best use for the communities CBA member banks serve. After the OCC issued its ANPR, we held a members-only call on Tuesday to discuss the proposal and CBA’s role in its reform. I also sat down to chat with the chair of our Community Reinvestment Committee Sue Whitson of BMO Harris and our General Counsel Steve Zeisel about the road ahead. You can hear our conversation on the latest episode of our Suite 550 podcastIn an op-ed on Thursday, Comptroller Otting emphasized the importance of CRA modernization.
CBA Starts Fraud Working Group: Every bank – and likely ever industry – has to deal with the constant threat of fraud. When other participants in the payments chain fail to do their due diligence, it is often banks left making things right for their customers. At the direction of our Board of Directors, CBA has formed a Fraud Working Group. Several organizations have a similar group but those groups tend to be reactionary, with a “news of the day” focus. Our new working group, on the other hand, will provide senior-level, enterprise-wide perspectives on fraud issues. Special thanks to Brian Housler of TD Bank and Jason Castillo of Citizens for agreeing to lead this new working group that will be holding monthly calls.
Critic Frotman Departs Bureau: After seven years in the student lending office, Seth Frotman resigned from the Bureau on Monday. In his letter to Director Mick Mulvaney, he talked about the rapidly increasing debt students are taking on to finance their higher educations. I agree with him on this – some students are indeed trapped by their debt because the federal government – the largest student lender in the country – makes loans without any underwriting. 
Since 1978, the cost of college has nearly doubled that of medical care, in large part because of the open spigot of student loans offered by the government. The New York Federal Reserve found for every dollar in federal aid available, tuition rates can increase by more than 60 cents. To make matters worse, look at how much federal student loans have grown since 2008.
Not only is the loan value growing, it is also underperforming. Default rates are in the double digits compared to a nearly 98 percent repayment rate for private student loans. This is a huge problem that is burdening students – as well as their parents – with enough debt to delay buying a car, a home or even retire. 
CBA has an active Education Funding Committee and CBA has made right-sizing the federal student loan market a top priority. You can learn about our work here.
Richard Clarida Nomination: Earlier this week, Richard Clarida was confirmed by the U.S. Senate to be Vice Chairman of the Federal Reserve. This brings the number of Fed governors to four on the seven-seat Fed Board in Washington.
Lenders Increase Consumer Loans: Personal loans are a rapidly growing consumer-lending category. Banks and fintech companies are taking initiative by offering consumer loans to help customers effectively manage their finances. According to the Wall Street Journal, “the second quarter marked the first period that lenders mailed out more offers for personal loans than credit cards, a much bigger market, according to research from Mintel Comperemedia.”
But while loans are increasing, consumer credit card debt is still increasing. According to CNBC, personal debt – excluding mortgages – now averages $38,000. Credit Cards account for a quarter of that.
KeyBank Adopting Mastercard’s AI Tool: KeyBank will implement Mastercard’s AI platform, Mastercard Decision Intelligence. As described by American Banker, the platform is “a security solution that uses artificial intelligence to make more informed authorization decisions.” With this system in place, true transactions are expected to be approved more efficiently while false transactions will be more easily identified. 
U.S. Bank Welcomes New Leaders: Everybody wants to be a banker! U.S. Bank has named Ismat Aziz its Chief Human Resources Officer and Mahesh Kharkar its Northern California Market President. Aziz held a similar role at Sprint and Kharkar has 30+ years of industry experience. CBA is excited for U.S. Bank and its newest hires!
JP Morgan’s “Digital Push”: In an effort to modernize its services, JP Morgan is utilizing its capital and technology tools to develop a completely digital bank. This revised consumer business model prepares the company for its next generation of consumer bankers in the digital age. According to CB Insights, this strategy has already produced strong results, noting “In Q2 ’18 JPM had about 48M active digital customers [about 8 million more than its top competitor]. JPM’s mobile active users also showed strong growth in Q2’18, jumping 12% YoY.”
Aretha Franklin Did Not Have a Will: Following the death of entertainer Aretha Franklin, I was surprised to discover she did not have a will in place. It is never too early to develop a plan for your assets and money! A lot of people either think they do not need a will or think they do not have time. At SunTrust, teammates are given a “Day of Purpose” to take care of their own financial wellbeing. CNBC has a quick list of why everyone should be prepared to avoid issues like:
  • “When you die without a will – called “dying intestate” – the courts in your state determine where your assets go.”
  • “If you have no plan in place for your minor children and they are left parentless, a judge gets to decide who will be their guardian.”
  • “It is also important to name people to several key roles, including an executor of your will, and powers of attorney for both health care and your financial affairs if you become incapacitated while still living.”
Scary thoughts, so kudos to SunTrust’s CEO Bill Rogers, who developed and successfully executed the bank’s “Day of Purpose.” It is so important for bankers to take care of their own financial situations so they can help take care of their customers!
Must-Read Article: While the widespread belief is that young people are engrossed in social networking sites, there is an increasing gap among Generation Z who use and do not use social media. As The Guardian put it, Gen Z was born into a world where everything is documented, so “it makes sense for them to strive for privacy, as soon as they reach the age when they have a choice over their online image.” As the first group to grow up with all things digital, it will be interesting to follow this trend and continue to explore their antipathy to social media. For now, I am sticking with Twitter. 


RIP Senator John McCain (R-AZ): John McCain’s passing was a loss for our country, but his legacy as a courageous American will live on forever. McCain’s sense of patriotism and commitment to America was profound. The CBA Team’s deepest condolences go out to Cindy McCain and family during this difficult time.
CBA Welcomes a New American Citizen: Congratulations to my favorite former Canadian! CBA Executive Banking School Faculty Advisory Committee Chairman, Paul Leventhal, was sworn in as an American citizen on Wednesday. 
Congratulations to CBA Executive Banking School Faculty Advisory Committee Chairman Paul Leventhal who was sworn in as an American citizen this week. 
Happy Birthday to Jenny Kottler: CBA Board Member and invaluable advisor, Bob Kottler of IBERIABANK, celebrated his wife’s birthday this week. Best wishes to Jenny and make sure Bob buys you a great present!
Congratulations to the Meleis Family: Congratulations to Executive Vice President of CBA Premier Sponsor Novantas, Sherief Meleis, and his wife on the birth of their child! CBA is thrilled for you to begin this new chapter. Wishing you all the best!