House Financial Services Subcommittee on Financial Institutions and Consumer Credit Hearing

Chairman Gutierrez, Ranking Member Hensarling and members of the Subcommittee, I appreciate the opportunity to testify on behalf of the Federal Deposit Insurance Corporation (FDIC) regarding the resolution process used when an insured depository institution fails. These hearings are an important way for Congress and the public to understand the statutorily-driven process for resolving depository institution failures and the work we do to ensure that there is minimal disruption to bank customers and the communities these institutions serve.

In 2009, the FDIC resolved 140 insured institutions with over $171 billion in total assets. While the economy is showing signs of improvement, recovery in the banking industry tends to lag behind other sectors. We expect to see the level of failures continue to be high during 2010.

My testimony will describe the FDIC's basic process for handling the failure of insured depository institutions. In addition, I will explain the FDIC's cross-guarantee authority and how it is applied, with specific reference to the resolution of nine insured depository institutions commonly controlled by FBOP Corporation, a registered bank holding company headquartered in Oak Park, Illinois (FBOP). Finally, I will discuss how the FDIC continues to position itself to ensure it has the necessary resources and expertise to handle the level of bank failures expected over the near term.

Overview of the Resolution Process

Insured depository institutions that fail are administered in a manner that fosters stability of the banking system and fulfills the FDIC's obligations to the failed institution's customers who have insured deposits. This responsibility is basically administered through two steps:

? The resolution process involves collecting information on the assets, liabilities and franchise value of a failing insured depository institution, marketing strategies, soliciting and accepting bids for the sale of the institution, determining which bid is least costly to the Deposit Insurance Fund (DIF) and working with acquiring institution(s) through the closing process (or paying insured deposits in the event there is no acquirer).

? The receivership process involves performing the closing function at the failed institution, liquidating any failed institution assets not purchased by the acquirer and distributing any proceeds of the liquidation to the FDIC, to the failed institution's customers who had uninsured deposit amounts and, if there are sufficient funds, to other creditors with approved claims.

The goals of the resolution and receivership processes are to:

? Provide depositors timely access to their insured funds.

? Resolve failing institutions in the least-costly manner, as required by law. n1

? Manage receiverships to maximize net return in order to fulfill our statutory obligation to all creditors of the receivership.

The FDIC normally uses, depending on the circumstances, two basic resolution techniques:

? A purchase and assumption (P&A) transaction occurs when a healthy institution (generally referred to as the acquiring or assuming institution) purchases some or all of the assets of a failed bank or thrift and assumes some or all of the liabilities, including insured deposits. Typically the acquiring institution will receive assistance from the FDIC to complete the transaction. As described in more detail later, the FDIC approaches a wide pool of potential acquirers with terms of the P&A transaction to solicit bids. The acquirer may pay a premium to the FDIC for the assumed deposits, which decreases the total resolution costs. If timing considerations do not allow the FDIC to have an acquirer on hand at the point of failure, a bridge institution may be established as an interim step to preserve the failed institution's franchise.


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Oil Falls for a Sixth Day on Sufficient Supplies, Slow Recovery

Crude oil fell for a sixth day, the longest losing streak in a month, on concern supplies are more than sufficient to meet demand as the pace of global economic recovery may be slow.

Oil traded below $78 a barrel after Qatar’s Energy Minister Abdullah bin Hamad al-Attiyah said yesterday the Organization of Petroleum Exporting Countries won’t change its output quotas because markets are well-stocked. Consumer confidence in the U.S., the world’s biggest energy user, rose less than forecast in January, missing the median economist estimate.

“It looks like a little bit of a swing in sentiment,” said Mark Pervan, senior commodity strategist at Australia & New Zealand Banking Group Ltd. in Melbourne. “The market’s been held up by some sentiment issues and some less-solid fundamental factors such as some of the economic data and some of the weather forecasts. The hard supply and demand numbers behind it really don’t hold up all that strongly.”

Crude oil for February delivery fell as much as 93 cents, or 1.2 percent, to $77.07 a barrel in electronic trading on the New York Mercantile Exchange. The contract, which expires Jan. 20, was at $77.87 a barrel at 3:20 p.m. in Singapore. The more widely traded March futures lost 15 cents to $78.22 a barrel.

Prices dropped 5.7 percent last week, the first weekly decline in five, after U.S. crude oil and refined-product stockpiles rose and temperatures climbed.

The Reuters/University of Michigan preliminary index of U.S. consumer sentiment increased to 72.8 from 72.5 in December. It was forecast to strengthen to 74, according to the median of 68 economists surveyed by Bloomberg News. JPMorgan Chase & Co., the first of the largest U.S. banks to post fourth-quarter earnings, Jan. 15 reported a loss in retail banking.

‘Real Fundamentals’

“People are coming back to real fundamentals, and really suggesting that perhaps we are awash with some commodities and we just don’t have economic performance to substantiate” higher prices, Jonathan Barratt, managing director at Commodity Broking Services Pty in Sydney, said in a Bloomberg Television interview. “We’re seeing adverse weather conditions ease, we’re seeing inventories once again build.”

U.S. distillate fuel stockpiles, including heating oil and diesel, increased in the week ended Jan. 8, snapping a four-week drawdown, according to the Energy Department. Crude oil and gasoline inventories climbed for a second week.

Temperatures in the U.S. northeast, which consumes four- fifths of the country’s heating oil, will probably be above average through Jan. 27, according to the National Weather Service. Oil rallied 4.3 percent in the first 10 days of 2010 as demand for heating fuels gained during a cold snap.

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Low Cost Professional Data Recovery Service

SF Bay Area Low Cost Data Recovery, a renowned data recovery company is please to announce its hard drive data recovery services at very affordable prices. Through their easy to use website they cater to the needs of the people by offering them straightforward, honest, low cost, professional data recovery services.With their "No Data No Pay Guarantee" they enable their customers to hire a uniquely skilled data recovery professional to evaluate and diagnose their hard drive absolutely free. They provide same services to their customers but at up to one-tenth of the prices in comparison of other top companies. Their professional services on hard drive data recovery enables their customers to save immensely on data recovery. It also provides free return shipping.

This company offers manifold services catering to the needs of their customers. They deal with minor logical problems, media defects which include low cost data recovery, external hard drive, and internal hard drive failures. It also recovers more severe hard drive failures like maintenance track problems and hard disk failures such as head problems.

Their data recovery group recovers hard disk data of various brands including Samsung, Hitachi, Maxtor, IBM, Toshiba, Western Digitals, Seagate and Quantum Drives. They recover desktop data recovery of brands including HP, Dell, Acer, Toshiba, Sony, Lenovo and Compaq. They also specialize in Mac Data Recovery also known as Apple Macintosh.

This company strongly recommends their customers to stop using their hard drive if they experience a hard disk failure because using it may decrease its chances of recovery and cause further damage. They also recommend to "never" to hit, shake, tap or smack a hard drive as this might result in further damage or even non recoverability. Here every data recovery is sent directly to a company engineer who always runs the whole process from the beginning till the end.


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Russia's 3rd mth of flat prices seen heralding rate cut

Russia is on track for a third month of zero inflation in October, data showed on Wednesday, paving the way for the central bank to administer more economy-boosting interest rate cuts in the near future.

Prices were flat for the eighth week in a row in the period to Oct. 26, the Federal Statistics Service said, estimating that for the whole of October inflation was also likely to be zero.Prices were also flat overall on the month in August.

The central bank has pledged to press on with rate cuts if inflation keeps falling, as it seeks to put the economy on a solid recovery path from its first recession in a decade.

'We expect interest rates to be cut again this week, as inflation maintains its pace of 0 percent growth,' analysts at UniCredit said in a research note.

Russia has already reduced the benchmark refinancing rate by 300 basis points since April to 10.00 percent.


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Primus, Juniper and NetApp Take Firewall, Rapid Data Recovery to SMBs

Primus Business Services has reportedly partnered with Juniper Networks (News - Alert) and NetApp to enhance its array of managed services and also to bring firewall technology and rapid data recovery to small and medium businesses.

Primus is a national full service communications provider offering voice, data, hosting, IP connectivity, disaster recovery and business continuity solutions. Juniper deals in high-performance networking. NetApp offers storage and data management solutions.
Under the deal, Primus will be able to offer Juniper's SSG series products that are integrated with Unified Threat Management firewall features. The UTM firewall offers businesses protection against inbound and outbound attacks at all levels and antivirus, anti-spam, and Web filtering options, as well
Primus is of the opinion that SMBs’ IT managers can’t afford to leave their networks vulnerable by focusing only on protection against a single type of attack and their new partnership with Juniper will enable SMBs to outsource firewall service and enjoy secure, around the clock management and monitoring of firewall devices at a fraction of the cost of doing it themselves.
Juniper said that Primus is leveraging their high-performance network infrastructure to drive security and threat monitoring to one of Canada's most important businesses markets - small and medium sized companies. Primus can help its SMB clients conduct critical transactions through the internet safely and securely through Juniper’s firewalls.
The collaboration with NetApp will allow Primus to make use of NetApp’s SnapVault and OSSV technology to offer its clients with the most up-to-date technology in data recovery services. SnapVault has been designed to safeguard data faster and more cost effectively and to leverage disk-based backup and block-level incremental for reliable, low-overhead backup and recovery. OSSV increases performance and enables more frequent data protection by moving and creating backups from changed data blocks, not entire changed files. And since only changed blocks are stored, less capacity is needed.
Jeff Lorenz, vice president sales and marketing at Primus Telecommunications (News - Alert) Canada, said that SMBs will now be able to enjoy operational and financial benefits that come as a result of Primus' managed business continuity services. Time and money are wasted by companies on lost data, and Primus and NetApp can help SMBs improve their backup and recovery speeds by up to 92 percent, enable more cost effective backups and simplify all aspects of their data protection with the SnapVault option.
NetApp said that Primus has partnered with them to deliver differentiated solutions to the Canadian marketplace and to bring NetApp Data Protection capabilities to small and medium size businesses with the same data protection requirements as larger organizations but without the dedicated storage administration staff.


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The Recovery Is Beginning to Take Shape

We believe the recession ended around the middle of this year and that a recovery has begun to take hold. Real GDP is expected to rise at a 3.4 percent pace in the third quarter and average a 3.0 percent pace for the second half of this year. The improved outlook reflects recent revisions to the underlying GDP data and a sharp reduction in inventories. The initial success of the cash for clunkers trade-in program has also bolstered our outlook for consumer spending. Aside from these changes, our forecast remains close to its earlier track.

Private domestic demand is expected to remain weak throughout the first year of the recovery, averaging just a 1.0 percent pace. Consumer spending will be constrained by rising unemployment, sluggish income growth, declines in household wealth and higher taxes, particularly at the state and local level. Outlays for plant and equipment will also take some time to recover. Businesses are awash in excess capacity and continue to focus on strengthening their balance sheets. Commercial construction will be another drag on economic activity during the early part of the recovery but homebuilding appears set to make a slight positive contribution to growth.

The sluggish start to the economic recovery should allow the Federal Reserve to keep short-term interest rates on hold through the middle of next year. Once the risks of the economy backsliding have passed, the Fed will move quickly to bring the federal funds rate back to a neutral level.

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Managed IT services for disaster recovery and business continuity

Midmarket CIOs are signing on to managed IT services for disaster recovery (DR) planning and business continuity (BC) services. With the right DR/BC plan in place, employees can begin working as soon as possible in the event of a disaster. But finding the appropriate strategy, and focusing the business around it, can be a challenge.
From weighing the risks and benefits of using managed IT services for disaster recovery and business continuity plans to understanding available options and contract terms, get the low-down on DR/BC services.

For free advice and resources on more IT and business topics, visit our list of Midmarket CIO Briefings.


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