Regulators Close Three More Banks

Three more U.S. banks failed in the first month of 2009. The MagnetBank of Salt Lake City, UT; Suburban Federal Savings Bank, Crofton, MD; and Ocala National Bank, Ocala, FL were closed on Friday, Jan. 30, by banking regulators.

All three banks were turned over to the Federal Deposit Insurance Corp. and placed into receivership. The Ocala National Bank was closed by its regulator, the Office of the Comptroller of the Currency. The bank's deposits of $205.2 million were bought by CenterState Bank of Florida, Winter Haven, FL, along with $23.5 million in assets. The bank had $223.5 million in assets. The FDIC will retain the rest of the failed bank's assets.

The Suburban Federal Savings Bank was closed by the Office of Thrift Supervision on Friday, and the Bank of Essex, Tappahannock, VA assumed all of the failed bank's deposits of $302 million and $348 million in assets at a discount of $45 million. The bank had $360 million in assets, the remaining assets will be retained by the FDIC.

The FDIC approved the payout of the insured deposits of Magnet Bank, Salt Lake City, UT. The bank was closed on Friday by the Utah Department of Financial Institutions. The bank had total assets of $292.9 million and total deposits of $282.8 million. The FDIC says the bank did not have any uninsured funds.

The cost to the FDIC's Deposit Insurance Fund will be $126 million for the Bank of Essex's acquisition of the Suburban Federal Savings Bank, and it will cost the Deposit Insurance Fund $99.6 million for the purchase of the Ocala National Bank assets by CenterState Bank of Florida.

GAO Report: TARP Oversight Needs More Work

In the Government Accountability Office's (GAO) second report on the Treasury's efforts to address transparency and accountability issues surrounding its handing out funds under the Troubled Assets Relief Fund (TARP), the GAO says of its nine recommendations made in its first report in late 2008, there has been work done on all nine, but eight still must be fully addressed.

GAO's previous report emphasized the lack of monitoring and reporting for Treasury's Capital Purchase Program investments. It recommended stronger measures to ensure institutions that were getting TARP money use the funds to meet the program's purpose and comply with CPP requirements on, for example, executive compensation and dividend payments.

In response to the GAO's recommendation, Treasury developed plans to survey the 20 largest institutions monthly to monitor lending and other activities and analyze quarterly monitoring data (call reports) for all institutions. While the monthly survey is a step toward greater transparency and accountability for the largest institutions, "We continue to believe that additional action is needed to better ensure that all participating institutions are accountable for their use of program funds," the GAO states. (Read the full report).

GAO Reports FinCEN Information Security Risks to BSA Data

The GAO has issued a report on the Financial Crimes Enforcement Network (FinCEN) information security and says that more is needed to address risks to Bank Secrecy Act data.

FinCEN is a bureau within the Department of the Treasury, and the GAO says it relies extensively on its own computer systems, as well as those at the Internal Revenue Service (IRS) and the Treasury Communications System (TCS), to administer the Bank Secrecy Act (BSA). FinCEN's mission is to safeguard the U.S. financial system from financial crimes. The GAO did this study to find out how effective FinCEN's information security controls over its systems are. BSA data contains sensitive financial information used by law enforcement agencies to prosecute financial crime. The GAO tested how well the BSA data is protected from inappropriate or deliberate misuse, improper disclosure, or destruction.

GAO evaluated whether security controls that effectively protect the confidentiality, integrity, and availability of the information and systems that support FinCEN's mission have been implemented. The GAO examined security policies and controls for systems at the three organizations.

The GAO found FinCEN, TCS, and IRS have taken important steps in implementing numerous controls to protect the information and systems that support FinCEN's mission, but says "significant information security weaknesses remain in protecting the confidentiality, integrity, and availability of these systems and information." The three organizations implemented many information security controls to protect the information and systems that support FinCEN's mission. For example, IRS controlled changes to a key application and FinCEN segregated areas of its network.

The GAO found the three organizations had inconsistently applied or not fully implemented controls to prevent, limit, or detect unauthorized access to this information and these systems.

Examples the GAO cited were that the organizations did not always implement user and password management controls for properly identifying and authenticating users; restrict user access to data to only what was required for performing job functions, adequately encrypt data; protect the external and internal boundaries on its systems; and log user activity on databases.

The GAO also found weaknesses in which systems were insecurely configured and patches were not applied to critical systems also existed. As a result, sensitive information used by the federal government, financial institutions, and law enforcement agencies to combat money laundering and terrorist financing is at an increased risk of unauthorized use, modification, or disclosure.

The Treasury has commented on a draft of the report and says it will develop a detailed corrective action plan for each of the GAO's recommendations. (Read the GAO Report)

Consumer Spending Falls for 6th Month

For a record sixth month, consumer spending slumped in December with no end likely, as companies continued to cut job rolls in January. The loss of nearly 2.6 million jobs last year and a record decline in home values have consumer confidence at a low point, and indicators point to sales and prices going lower.

President Barack Obama's stimulus package that includes tax cuts to boost consumer spending passed the House last week and faces a gauntlet of debate before a Senate vote this week. The more than $800 billion package includes projects to rebuild infrastructure. Economists see further drops in consumer spending in the coming year. Consumer spending rose 3.6 percent for year in 2008, the smallest increase in 47 years.

About the Author

Linda McGlasson

Linda McGlasson

Managing Editor

Linda McGlasson is a seasoned writer and editor with 20 years of experience in writing for corporations, business publications and newspapers. She has worked in the Financial Services industry for more than 12 years. Most recently Linda headed information security awareness and training and the Computer Incident Response Team for Securities Industry Automation Corporation (SIAC), a subsidiary of the NYSE Group (NYX). As part of her role she developed infosec policy, developed new awareness testing and led the company's incident response team. In the last two years she's been involved with the Financial Services Information Sharing Analysis Center (FS-ISAC), editing its quarterly member newsletter and identifying speakers for member meetings.

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