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Inside Washington (01/18/2010)

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* WASHINGTON (1/19/10)--The Federal Reserve should keep interest rates at “near zero” for the next couple months, said New York Federal Reserve Bank President William Dudley (Dow Jones Jan. 15). Dudley spoke with PBS in an interview Wednesday. The target rate likely will stay at exceptionally low levels for six months, he said. Dudley also suggested the Fed stop its planned purchase of $1.25 trillion in mortgage-backed securities by March because the economy is starting to improve ... * WASHINGTON (1/19/10)--In a report to Senate Banking Committee members, the Federal Reserve Board argued that it should keep its supervisory powers for several reasons (American Banker Jan. 15). The Fed said it is knowledgeable about monetary policy and consolidated supervision. Its current supervisory role also benefits central bank functions, the Fed added. The Fed submitted the report as senators consider Committee Chairman Christopher Dodd’s (D-Conn.) regulatory reform bill, which would strip the Fed of its powers and give them to another agency ... * WASHINGTON (1/19/10)--Treasury Secretary Timothy Geithner will testify Jan. 27 before a panel in the House that is investigating why the Federal Reserve Bank of New York told American International Group (AIG) not to disclose the government’s bailout to investors. Lawmakers are expected to ask Geithner about e-mails written in 2008 between the New York Fed and AIG (American Banker Jan. 15). Geithner headed the New York Fed during that time. Thomas Baxter, general counsel for the New York Fed, also is slated to testify. Baxter said in a statement Jan. 8 that Geithner was not involved in the issue ... * WASHINGTON (1/19/10)--Financial Crisis Inquiry Commission members Thursday questioned Securities and Exchange Commission (SEC) Chairman Mary Schapiro about SEC’s failure to take care of problems at the institutions it regulated. At the meeting, Schapiro said her agency is not flawed and that other agencies don’t have to ask lawmakers when they need funding (American Banker Jan. 15). She cited the Federal Deposit Insurance Corp. (FDIC), which can raise money from deposit insurance premiums. FDIC Chairman Sheila Bair also was questioned during the hearing. Brooksley Born, former chair of the Commodity Futures Trading Commission, asked Bair if the market still poses a systemic risk and whether regulatory reform is needed. Bair said both should “be a high priority for Congress,” and that regulators can only do so much until legislation is enacted. Also, Attorney General Eric Holder updated commission members on mortgage fraud. The Federal Bureau of Investigation is currently analyzing 2,800 cases, a 400% increase over the past five years ...

CUs equal 20 of CDFIs says federation

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WASHINGTON (1/19/10)--The U.S. Treasury Department's Community Development Financial Institutions (CDFI) Fund last week certified five credit unions and one credit union service organization (CUSO) as CDFIs. The certified organizations are Atlanta, Ga.’s B.O.N.D. Community Development FCU, Cleveland, Tenn.’s Bradley Initiative CU, El Paso, Texas’s El Paso Credit Union Affordable Housing, LLC, Clarksdale, Miss.’s Friendship Community FCU, Monroe, Ala.’s Monroe Education Employees FCU, and Jackson, Miss.’s Valued Members CU. Community Development Credit Unions (CDCUs) now account for 165, or 20%, of CDFI-certified financial institutions, the National Federation of Community Development Credit Unions (NFCDCU) reported. In comments accompanying the announcement, NFCDCU President/CEO Cliff Rosenthal said that that his group has “been focusing” on getting more CDCUs certified under the CDFI, as “nearly all” of their member CDCUs “qualify for the designation.” The Treasury's CDFI Fund helps locally based financial institutions offer small business, consumer and home loans in communities and populations that lack access to affordable credit, and credit unions that are certified to take part in the CDFI program may apply for as much as $2 million in funding that will help maintain their credit union's presence in the community. The Treasury is making a total of $113 million in funding available through the CDFI Fund during 2010.

HUD Over 100k loan mods completed as of Dec.

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WASHINGTON (1/19/10)--The U.S. Department of the Treasury and the Department of Housing and Urban Development (HUD) have noted a “significant acceleration in the rate at which borrowers are being approved for permanent modifications” under the Obama Administration’s Home Affordable Modification Program (HAMP), with over 100,000 mortgage modifications being converted under HAMP as of Dec. 2009. A number of credit unions participate in HAMP, which aims to help struggling homeowners by modifying their mortgages. The program is attempting to lower the mortgage payments of up to 4 million homeowners through mortgage modifications by 2012. HAMP modifications have resulted in savings of $1.5 billion in funds for homeowners thus far. Over 850,000 homeowners “have had a median payment reduction exceeding $500,” according to the release.

House committee sets hearings on fin. inst. health housing

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WASHINGTON (1/19/10)--The House Financial Services Committee will return to work with a busy week of hearings, beginning with a Jan. 20 hearing on H.R. 476, the Housing Fairness Act of 2009. A hearing on the health of U.S. financial institutions will follow on Thursday, Jan. 21, and Chairman Rep. Barney Frank (D-Mass.) announced a hearing on executive compensation, set for Friday, Jan. 22, earlier this week. Witness lists and prepared testimony had not been posted at press time.

Senate may remove CFPA from its reg reform bill

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WASHINGTON (1/19/10)--As the Senate begins its portion of the regulatory reform debate, Senate Banking Committee leaders Sen. Chris Dodd (D-Conn.) and Richard Shelby (R-Ala.) are reportedly considering removing the proposed Consumer Financial Protection Agency in favor of increasing the consumer protection powers of existing regulatory agencies. Both Dodd and Shelby recently stated that they have made "meaningful progress" in negotiating the structure of the Senate version of a financial regulatory reform bill. The proposed Consumer Financial Protection Agency, which was passed by the House, alongside a series of comprehensive financial regulatory reform measures, just before the recently completed winter break, would seek to protect consumers of financial products through the creation of a powerful independent agency with extensive rulemaking, oversight, and enforcement tools. However, there were a number of changes made to the agency before it passed the house, including language which exempted all credit unions with under $10 billion in assets from the authority of the agency. Legislators are reportedly considering a wide range of alternatives to the CFPA, including a council of regulators that would collaborate to create and enforce consumer protection measures, and creating a consumer protection division at the Department of Treasury. Ryan Donovan, CUNA vice president of legislative affairs, said that details of the various proposals have not been made available and no decision on how to proceed in the Senate has likely been made. "We will evaluate any new consumer agency proposal as we have the CFPA and other proposals: what is the likely affect of the proposal on credit unions' ability to serve their members, and how can we eliminate or minimize any adverse impact on credit unions and their members?" Donovan said. Dodd, who will retire after his replacement is elected this Nov., introduced his own regulatory reform proposal late last year. However, after that proposal failed to gain support in the Senate from Republicans and some Democrats, Dodd announced the creation of bi-partisan pairs of Senators to work on the major components of regulatory restructuring legislation. The Senate Banking Committee could begin to mark-up regulatory restructuring legislation as early as February, Donovan said.

New NCUA examiner guidance Look beyond fin. ratios

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ALEXANDRIA, Va. (1/19/10)—Guidance to federal examiners to “look beyond financial ratios” to determine a credit union’s financial condition—and particularly when examining a low-income (LICU) or community development credit union (CDCU)—was issued late Friday by the National Credit Union Administration (NCUA). In a Letter to Credit Unions (10-CU-1), NCUA Chairman Debbie Matz noted that the contents of the guidance apply to all federal credit unions but the primary focus is “to discuss the characteristics, benefits, and unique challenges of low-income credit unions and community development credit unions.” “One of the primary reasons for the creation of credit unions is to make credit available to people of modest means for productive purposes.” Matz wrote adding, “This guidance was developed based on discussions with dedicated low-income credit union management.” The agency has been working on the guidance for some time, and has been in communication with the National Federation of Community Credit Unions as the guidance developed. The agency released the letter shortly after meeting Friday with Credit Union National Association’s (CUNA’s) Small Credit Union Committee. The chairman of that CUNA committee, CEO Frank Michael, of Allied CU, Stockton Calif., said after that meeting that the NCUA has a clear view of the existing divide between encouraging messages sent by the agency board to low-income and community development credit unions, and the sometimes discordant, harsh treatment they experience from examiners. The NCUA letter offers 11 pages of guidance to examiners. It clearly defines some operational differences allowed LICUs, which could also apply to many CDCUs, including additional sources of funding and resources from both the NCUA and outside parties. The guidance, in part, tells examiners to consider how these different types of available funding could affect balance sheets. For instance, the letter said:
*Funding sources such as nonmember deposits, secondary capital, and loans from the Community Development Revolving Loan Fund will affect the financial ratios of these usually small credit unions; * In addition to the effects of the additional funding, examiners must also consider the unique characteristics of members in LICUs and CDCUs; * Moreover, examiners should recognize that LICUs and CDCUs systematically show higher operating costs than other credit unions because of the nature of the field of membership they serve. * Similarly, delinquency rates at LICUs and CDCUs, while often higher than other credit unions, do not automatically translate proportionally into charge-offs.
Use the resource link below to acce4ss the NCUA letter.