Bankers: Industry reforms likely to cut into lending

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In what the Colorado Banking Association has called a “controversial, last-minute bank-assessment tax,” Congress has asked banks to cover the costs of the new Consumer Financial Protection Bureau.

The bank would do so by increasing the deposit insurance fund of the Federal Deposit Insurance Corp.

Of course, increasing the insurance fund means asking banks to cough up more in premiums.

For regulated banks with more than $10 billion in assets, FDIC premiums will be increased. Congress expects to raise nearly $6 billion this way. But the problem is that the increase comes from capital ratios, which will reduce funds available for lending.

“This effectively strips up to $50 billion of lendable funds out of the credit markets,” said Tim Powers, director of communications for the CBA.

In all, there are three things that Congress intends to do to raise funds: Increase FDIC deposit insurance premiums; appropriate some of the Troubled Asset Relief Program, or TARP, profits generated by the banking industry; and end the TARP program early by applying those savings to the new costs of the bill.

The banking association’s objections to this approach are that it indirectly uses FDIC premiums to offset, or “pay for,” the cost of the Consumer Financial Protection Bureau. At the same time, non-banks — such as credit unions, hedge funds and investment “banks” — while subject to CFPB rules, will pay nothing.

Many in the industry see this as a “tax” on bank capital, which in the long run not only affects banks but consumers and business owners as well.

“And every dollar of bank capital serves as the basis for making loans of $8 or more,” Powers said.

While banks with assets under $10 billion would not be required to pay to increase the FDIC’s Deposit Insurance Fund from 1.1 percent to 1.3 percent, they would pay the extra premiums needed to maintain the fund at the higher level.

Small-business owners: Speak up

By 2012, a new Internal Revenue Service rule will require businesses to report a wider range of payments to contractors, vendors and others on their Form 1099s. The IRS is seeking comments about how best to go about implementing this change.

The IRS wants to minimize the burden to business owners and avoid duplicate reporting, said spokeswoman Karen Connelly.

Previously, the U. S. Treasury Department and the IRS issued a proposed regulation that would make business purchases made with credit or debit cards exempt from the new reporting requirement because such purchases would already be reported by banks and other payment processors.

The new rule, enacted in March but not effective until 2012, expanded existing reporting requirements to include business payments related to goods and other property, and payments to most corporations. With some exceptions, payments to corporations are currently exempt from this requirement.

There are two ways to submit comments.

E-mail to: Notice.Comments@irscounsel.treas.gov. Include “Notice 2010-51” in the subject line.

Snail-mail to: Internal Revenue Service, CC:PA:LPD:PR (Notice 2010-51), Room 5203, P.O. Box 7604, Ben Franklin Station, Washington, D.C. 20044.

The deadline is Sept. 29. For more information, view “Notice 2010-51,” at www.IRS.gov.

Banking musical chairs

Peoples Mortgage Corp., a subsidiary of Peoples National Bank, has purchased Lincoln Mortgage Inc. Peoples National, based in Illinois, has operated in El Paso Country for 30 years.

Lincoln Mortgage, founded in 1995, is headquartered in Colorado Springs. It has one branch, at 6809 Space Village Ave., near Peterson Air Force Base, which is now operating as Peoples Mortgage.

Lincoln specialized in military and conventional home mortgages.

People’s branch manager Debbie Laney, a former president with Lincoln, said the new location will focus on military clientele and the acquisition will make it easier for the company to process loans and help clients.

As part of Peoples, Lincoln can offer loans through El Paso Country bond programs and Colorado Housing and Finance Authority.

Rebecca Tonn can be reached at rebecca.tonn@csbj.com or 719-329-5229. Friend her on Facebook.