1. Nason & Nason September 16, 2010 Nason Temp Solutions
Fall is upon us, back to school, football and more football, and hope springs eternal with
the Dolphins having won their first game. Not so on the economic side - with the first
quarter's 3.7% growth now fading into memory and a prolonged recession an unfortunate
possibility. What happened? Lots of moving and complex parts. Here are a couple of
thoughts on some things that have had an immediate impact on our banking and business
communities, and an attempt to "connect the dots."
Banking Bill Is Quashing Recovery
Unintended consequences of the Dodd-Frank Financial Reform Act will take months, if not
years, to straighten out. In its haste to punish "Wall Street" Congress rushed through a bill
that may not have effectively addressed the practices of a few giant financial institutions
that triggered much of the disruption in the market. The result is that all financial institutions
will now pay a very high price in terms of additional costs and regulatory burden for the
excesses committed by a few huge banks. Many of the rules were already in place prior to
the crisis in 2008 but they were not enforced effectively. On the other hand, one worrisome
outcome of the new legislation will be a delay in lending and stagnation of job creation,
ultimately prolonging the recession. How so and how is this happening?

2. The new law introduced leverage and capital restrictions which will compel banks to pull
back on lending. Simultaneously, it has introduced tighter lending standards especially in
real estate. In field regulators have been vigorously enforcing these restrictions even
beyond those contained in formal legislation. They are not completely in sync with the
legislators and senior policy makers. This has made it even more difficult for small
businesses. Since they account for 70% of the job creation in the US, and as they are
being shut out of the credit markets, small business is holding back on hiring. So
connecting the dots may help to explain why there is talk of a double dip recession.
Why hasn't the Fed acted to counter the contraction? They have very few tools to work with
in the low interest rate environment. There is no room to lower rates, and if rates rise it will
slow any growth. Couple that with the planned record tax increase, which itself will create
more contraction, and cooperation with the financial sector becomes critical. They need the
banks to begin to lend.
This is where the unintended consequences of the Reform Act kick in again creating
uncertainty. Top regulators are stymied by the wording on use of private credit ratings.
There are no answers on who is going to oversee credit ratings and how. Ratings impact
bank capital. That problem is simple compared to the complexities of controlling
derivatives, with a face value of 650 trillion dollars. It is required that trading of these
instruments be moved to exchanges that don't exist. Who is going to run these exchanges?
Which derivatives, standards or synthetic? There has been very little monitoring of
derivatives, with limited information, so there is scarce analysis of their real magnitude and
the extent of their risks. There are also misconceptions, and is a credit swap a swap, or is it
is an insurance policy? What are we going to do with the new monster we have created in
consumer protection that will involve a huge bureaucracy to control and the cost for banks
will be huge? Compensation is still very much up in the air. End results: uncertainty, less
profits, lower capital, less lending, contraction.
Questions remain. What was broken and what really needed to be fixed? Was it fixed or
even repaired? The impact of the Reform bill will be more wide reaching than the bill itself.
US banks will undoubtedly become less competitive. Uncertainty will continue for the near
future and when there is uncertainty banks will stand pat and lending will be slow and so
will job creation. Not all doom and gloom, but we can hope when the regulations are put
into practice for the over 800 changes that will be needed to implement the legislation, they
connect the dots and take into account the macro as well as the micro. Comment on this
article

3. Basel Three- Are We Better and Safer?
If Congress had focused on the issues addressed by the Basel Conventions, they could
have addressed the crux of the financial systems weaknesses in a productive and long
term fashion that would have made a positive contribution to Main Street and probably in
the long term helped Wall Street as well. Although some financial institutions see Basel
Three as a double whammy on top of the other banking legislation passed in the US and
other countries, the cooperative spirit in which it was addressed may well have led to
solutions not confrontation.
Basel Three issued rules that would require banks to bolster the amount of low-risk assets
they hold in reserve as a cushion against market shocks. Some 27 nations reached
agreement to participate and the new Basel fundamentally tightened leverage and capital
requirements that were in place from previous accords. Theoretically more capital and less
leverage should make us safer at the expense of bank profitability.
Which brings us back to the Dodd-Frank Act. Does it make us better and safer and will it
save us from chaos? Comment on this article
FATCA at a Critical Stage
FATCA (Foreign Account Tax Compliance Act) was passed as an amendment to the
HELP jobs bill which basically went unnoticed outside the banking community. It's
intention was that US taxpayers pay their taxes as owed and not use deposits, trusts and
other shelters to obscure their finances and evade their tax obligations under US law. It
imposes vast information reporting on financial institutions, requiring them to identify and
disclose US account holders or become subject to a 30 % US withholding tax with respect
to any payment of US source income and proceeds from the sale of equity or debt
instruments. (See what is included in the Law.) There is little sympathy for tax dodges as
most would agree and they should be punished. However to completely disrupt
international finance, trade and commerce, and use the international financial system as
deputized agents of the IRS is arrogant and shortsighted with potentially disastrous
consequences for the US as a financial center. Add this to the burden of Patriot Act
enforcement that has swamped the banking system with significant costs and personnel
burdens (and has yet to catch terrorists), banks will spend more time and money on law
enforcement than they do on servicing clients. The clock is ticking and on August 27th the
IRS issued a Notice for Comments by November 1, 2010 that they will use to guide the
writing of the regulations for the Act. At stake is the definition of "foreign financial

4. institution" which is key because, as it stands, the act does not provide an exemption in the
case of a foreign bank that has a US branch. All banks with offices in this country will be
required to sign an agreement with the IRS to turn over lists of all US citizens with
accounts of that bank anywhere in the world. Foreign banks could even be required to
withhold payments as an intermediary for US citizens. Some interpretations go so far as to
even demand correspondent banks provide the names of all US citizens who have
accounts worldwide in their banks. Far reaching extensions of US tax collection laws as
the Congress attempts to make not only US banks but all banks with a presence in the US
agents of the IRS. This will create a whole layer of regulatory enforcement which will be
imposed on any bank that wants to have a presence in the US. Comment on this article
Small Business Still Taking it on the Chin
Small business (75% of which have 10 employees or less) is the backbone of job creation,
accounting for nearly 70% of all new jobs and they are not hiring. Take a look at our
editorial that was published in the Miami Herald in July. The uncertainty created by health
care, financial reform and pending tax increases have made it very difficult for businesses
to figure out their future costs. That makes companies reluctant to add new workers and
make capital investments. The new small business bill in Congress misses the point and is
a long term, not a short term solution. Tax credits for capital investments would help but
one has to be making money to use tax credits. Many small businesses aren't. We can
expect the small business owners to sit on the sideline until they sense calmer waters. The
administration needs to turbo charge getting money into this sector. Yes pumping money
into small banks will help in the long run. They need help from the banks now and not from
banks that are backed to the wall themselves. Can't we find a more realisitc way of
assisting the community banks with problems caused by market conditions rather than
choking them to death slowly? The extermination of the community banks cuts off small
business's most reliable source of growth. Comment on this article
Hot Jobs - South Florida
Well, South Florida may be hot, but banking jobs have been taking a hiatus after a busy
late spring and early summer hiring trend. It seems that everyone was on vacation in
August, but now that everyone is returning, things are beginning to pick up again.
The trend is that banks are looking for senior managers in commercial lending, credit and
compliance, but they need to be approved by the regulators. And of course, good credit
analysts and business generators are always in demand. Another area that we expect to

5. see hiring heating up is in consumer compliance and anti-money laundering positions as
the effects of the Reform bill work though the system. Comment on this article
On the Move-Where Your Friends Are Hanging Out
Jesus Valencia has just been appointed as the new President of Ultralat. He comes from
Merrill Lynch where he was head of the International Wealth Organization. Roberto Perez
is now a Senior Lender at Intercredit Bank. Prior to this, he was with JGB Bank. Felix
Garcia, formerly with Bank United, has just joined Pacific National Bank as their Chief
Credit Officer. David Hernandez has recently joined BAC as the Chief Risk Officer. He
is coming from Great Florida Bank where he was the Sr. Risk Officer. Michael Dwiggins
has recently started at Espirito Santo Bank as a VP of the Trade Finance Division.
Mahesh Pattabhiraman, formerly of Pacific National Bank has been brought on board as
the Chief Lending Officer of Union Credit Bank. Hector Ramirez, previously with BBU
Bank has been made the Chief Lending Officer at Eastern National Bank. Gordon
Joost, a former Managing Director of Standard Chartered has moved over to Cititbank to
be a Managing Director, Head of Bank Services Group Latin America. Charles Alzati has
joined Terrabank as SVP of the bank's Personal Banking Group. Charles was most
recently a consultant at Nason & Nason. Robert Gutierrez has just arrived at Nason &
Nason as a Senior Recruiter. Prior to this, he was an AVP Human Resources Officer at
Ocean Bank. Comment on this article
Nason & Nason would like to wish Carlos Perez, who was released from the hospital after
spending several weeks there, a speedy recovery.
What's ahead?
A lot going on. Feel free to make comments on our blog. Give us some suggestions on
topics you would like to see covered and let us know who else is on the move for our next
issue of .
Contact us at main@nasonsearch.com

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