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Inside Washington (01/14/2010)

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* WASHINGTON (1/15/10)--A lot of uncertainty exists surrounding the Troubled Asset Relief Program (TARP)--specifically, when it will wind down and how much it will cost taxpayers, according to TARP’s congressional oversight panel. The report comes after President Barack Obama Thursday unveiled a plan to tax large banks to recoup TARP losses--which could reap an estimated $116 billion, according to the Treasury (Dow Jones Jan. 14). Elizabeth Warren, the congressional panel’s chair, said TARP likely will remain in place after its Oct. 3 expiration date because Treasury can continue to disburse funds after that date. TARP will “live on for years,” Warren said. However, Treasury needs to share with the public more details on why it provided “substantial assistance” to GMAC while appearing to have treated GMAC differently from other stress-tested institutions, the report said. It also questioned how Treasury would handle conflicts of interest while winding down TARP. The panel suggested Treasury hold TARP assets in a trust separate from the government and political pressure ... * WASHINGTON (1/15/10)--As published in the Federal Register Wednesday, the Federal Deposit Insurance Corp.’s Advisory Committee on Community Banking is scheduled to meet Jan. 28 to discuss policy issues that impact small community banks. On the agenda: the impact of the current economic environment on community banks’ ability to raise capital and increase lending, current examination issues, regulatory reform and other legislative proposals. The meeting is open to the public ...

Compliance When negative balance fees may be charged

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WASHINGTON (1/15/10)--Changes to many financial institution business practices, including overdraft fees, have been all the rage in Congress lately, and this month’s Credit Union National Association (CUNA) Compliance Challenge addresses overdraft fees, asking if the newly proposed Regulation E overdraft rule allows credit unions to charge a negative balance fee when the member’s ATM/debit card overdraft leads to a negative balance for a long period of time. The Federal Reserve Board recently changed Reg E to require institutions to inform and to acquire the consent of account holders before they can charge overdraft fees for ATM and one-time debit card transactions. Consumers may revoke this consent at any time, and financial institutions must provide the same types of accounts to all members or customers, whether they choose to opt in or not. According to CUNA, the new Reg E rule does not change, whether you call the fee an “overdraft fee” or a “negative balance fee.” Any fee that results from an ATM/one-time debit card overdraft is covered by the regulation. Thus, credit unions will only be allowed to charge these types of fees for ATM and one-time debit card overdrafts, beginning on July 1st (or on August 15th for existing members) if the credit union member has been notified in writing of the overdraft service and fully opts-in to the service. The notification must disclose all overdraft fees, including per item fees, daily overdraft fees, and sustained overdraft fees, CUNA added. For the full Compliance Challenge, use the resource link.

Obama bank fee would not affect CUs

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WASHINGTON (1/15/10)--President Barack Obama on Thursday announced a new Financial Crisis Responsibility Fee that, according to the U.S. Treasury, “would require the largest and most highly levered Wall Street firms to pay back taxpayers” for the assistance provided to them through the government's Troubled Asset Relief Program (TARP). “Over sixty percent of revenues will most likely be paid by the 10 largest financial institutions,” the Treasury predicted. There is no indication that the fee will affect credit unions. The fee will seek to recoup up to $117 billion in funds, and the Treasury has projected that the fee will bring in $90 billion in funds over a 10-year period. However, if the full $117 billion in funds have not been fully paid back within 10 years, the fee would remain in place until the full amount has been replenished. “It is our responsibility to ensure that the taxpayer dollars that supported these actions are reimbursed by the financial sector so that the deficit is not increased,” the Treasury said in a release announcing the fee. The fee, which covers “firms that were insured depository institutions, bank holding companies, thrift holding companies, insurance or other companies that owned insured depository institutions, or securities broker-dealers,” would “only be applied to firms with more than $50 billion in consolidated assets,” and small and community banks would not be subject to the fee. Domestic firms as well as U.S.-based subsidiaries of foreign firms will be subject to the fee. “The Administration will also work through the G-20 and the Financial Stability Board to encourage other major financial centers to adopt comparable approaches,” the release added. The fee will be assessed at a rate of 15 basis points, or 0.15%, of covered liabilities per year, and Federal Deposit Insurance Corporation-assessed deposits and insurance policy reserves will be exempted, “as appropriate,” from the fee, the Treasury added. The fee will be collected through the Internal Revenue Service, and the Obama Administration plans to “work with Congress and regulatory agencies in order to design protections against avoidance by covered firms.” Additional details on the fee will be released with President Obama’s upcoming budget.

Schumer underscores support for MBL cap increase

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WASHINGTON (1/15/10)--Sen. Charles Schumer (D-N.Y.) this week reiterated his support for increasing the member business lending cap for credit unions, telling a group at Cortland, N.Y.’s CFCU Community Credit Union that in 2010 he must “focus” on increasing lending to the small businesses that “are the lifeblood” of the American economy. Credit unions are well-positioned to help small businesses in central N.Y., adding that the MBL bill will provide “a major boost” for credit unions. Schumer late last year joined Barbara Boxer (D-Calif.), Joseph Lieberman (I-Conn.), Olympia Snowe (R-Maine), Susan Collins (R-Maine) and Kirsten Gillibrand (D-N.Y.) in sponsoring Sen. Mark Udall’s (D-Colo.) S. 2919, which would increase the credit union MBL cap to 25% of assets raise the "de minimis" threshold for a loan to be considered a member business loan to $250,000. Schumer, like fellow Senator Hagan, cited Credit Union National Association (CUNA) statistics which estimated that lifting the MBL cap would allow credit unions nationwide to lend up to $10 billion in funds to small businesses in the first year that the cap has been lifted. CUNA has also stated that the MBL reforms would create over 100,000 new jobs. A mere 10 of Central N.Y.’s credit unions currently lend to small businesses, and Schumer said that lifting the cap would encourage credit unions that are not currently lending to small businesses to begin doing so.