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Inside Washington (06/03/2009)
* WASHINGTON (6/4/09)--The Federal Housing Finance Agency (FHFA) is considering creating an insurance fund that could absorb losses at a troubled Federal Home Loan Bank (American Banker June 3). The FHFA has not said if any of the banks are in trouble. Currently, all 12 banks are liable for each other’s debt. The joint system is a source of strength, according to FHFA Director James Lockhart. He was slated to testify Wednesday before a House Financial Services Committee capital markets subcommittee on the future of Fannie Mae and Freddie Mac, where the issue of creating an insurance fund could surface. Financial observers have questioned how the insurance fund would work, how much money each bank would have to contribute to the insurance fund, and how long it would take to establish the fund ... * WASHINGTON (6/4/09)--The underbanked’s monthly transaction fees can range from $10 to $100 for the same transactions depending on the provider, says a study by the Center for Financial Services Innovation. The center interviewed 22 prepaid cardholders in Chicago and Seattle for “One Size Does Not Fit All: A Comparison of Monthly Financial Services Spending.” The analysis indicates that financial products and services available to underbanked consumers could be improved by broadening the availability and use of direct deposit; expanding the functionality of both prepaid cards and checking accounts; increasing the transparency and certainty around fees to be paid; and guiding consumers to the best choice for their needs ... * WASHINGTON (6/4/09)--Christopher Cox, former Securities and Exchange Commission (SEC) chairman, wrote Federal Housing Finance Agency Director James Lockhart to ask if Fannie Mae and Freddie Mac were being pushed too hard by the government to boost the housing markets (Bloomberg June 3). Cox, who wrote the letter in his final days as chairman, told Lockhart to develop an exit strategy for the enterprises. The letter has not been released to the public, but it indicates tension at Fannie and Freddie between the government’s demands and their obligations to investors. The future of the enterprises was scheduled to be discussed at a House Financial Services Committee capital markets subcommittee Wednesday. Cox left the SEC Jan. 20 ... * WASHINGTON (6/4/09)--Federal Reserve Board Chairman Ben Bernanke called for a plan to restore the nation’s fiscal balance in remarks at a House Budget Committee hearing. The national deficit is expected to reach $1.8 trillion this year. To address the country’s fiscal problems, Congress, the Obama administration and consumers must confront how many economic resources to devote to federal government programs, Bernanke said. “Whatever size of government is chosen, tax rates must ultimately be set at a level sufficient to achieve an appropriate balance of spending and revenues in the long run. In particular, over the longer term, achieving fiscal sustainability--defined, for example, as a situation in which the ratios of government debt and interest payments to gross domestic product are stable or declining, and tax rates are not so high as to impede economic growth--requires that spending and budget deficits be well-controlled,” he added ...


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