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CUNA denounces banker opposition to MBL increase

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WASHINGTON (1/21/10)--Credit Union National Association (CUNA) President/CEO Dan Mica contacted Senate leaders Wednesday and denounced bankers' efforts to dissuade lawmakers from supporting a bill that would create more than 100,000 jobs by removing the credit union member business lending (MBL) cap. In a letter to Senate Majority Leader Harry Reid (D-Nev.) and Minority Leader Mitch McConnell (R-Ky.), Mica said he was “disappointed to see” a recent letter from the American Bankers Association which sought to discourage Senate support for including S. 2919, the Small Business Lending Enhancement Act, in jobs creation legislation that is expected to be considered in the near future. “The bankers’ once again oppose efforts aimed at providing small businesses with capital, and offer no alternative to address the current problems facing small businesses – problems that they have helped create and appear to be doing little to help alleviate,” Mica said. Encouraging both Reid and McConnell to support S. 2919 as it makes its way through the Senate, Mica said that “credit unions remain willing to lend to their small business-owning members,” and “allowing credit unions to extend loans to these credit starved businesses will add fuel to a self-sustaining economic expansion.” S. 2919, which was introduced by Sen. Mark Udall (D-Colo.) late last month, would increase credit union MBL authority to 25% of assets and raise the "de minimis" threshold for a loan to be considered a member business loan to $250,000. The legislation also has the support of Sens. Charles Schumer (D-N.Y.), Barbara Boxer (D-Calif.), Joseph Lieberman (I-Conn.), Olympia Snowe (R-Maine), Susan Collins (R-Maine) and Kirsten Gillibrand (D-N.Y.), and similar legislation is awaiting action in the House. CUNA has estimated that lifting the MBL cap would free credit unions to loan as much as $10 billion to small businesses in the first year of enactment, a move that would create over 108,000 new jobs. CUNA has noted that while this will not solve the entire credit problem facing small businesses, it will provide meaningful assistance at no cost to taxpayers and without increasing the size of government. For the full CUNA letter, use the resource link.

NCUA seeks dismissal of Corp. Central CU suit

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WASHINGTON (1/21/10)--The National Credit Union Administration (NCUA) has filed a motion to dismiss Corporate Central CU's lawsuit seeking a refund of $6 million in capital shares from U.S. Central FCU. The NCUA motion, which was filed in federal court last week, states that Corporate Central lacks the authority to bring a suit against U.S. Central and the NCUA because the Agency assumed the powers of both its management and its members when it took over U.S. Central in early 2009. The NCUA motion also seeks to dismiss Corporate Central's claim that NCUA's actions as conservator violated the equal protection clause of the U.S. Constitution. The case, which is currently in the United States District Court for the Eastern District of Wisconsin, was previously stayed by the NCUA in November of 2009, soon after Corporate Central filed its complaint in October of that year. According to the NCUA’s filings, its authority as conservator of U.S. Central "includes Plaintiff's right as a member of U.S. Central to sue the NCUA as conservator of U.S. Central or U.S. Central for damages arising from Plaintiff's investment in U.S. Central.” "The NCUA's filing to dismiss the Corporate Central lawsuit is similar to its motion to intervene as a substitute plaintiff in the litigation against former and current directors and officers of WesCorp, which it filed in Los Angeles Superior Court last month," said Credit Union National Association Counsel for Special Projects Michael Edwards. "In both cases, the NCUA has asserted that the Federal Credit Union Act gives the agency the rights and privileges of a conserved credit union’s members, including the right to sue the conserved credit union, or its management, under most circumstances." The Corporate Central suit claims that U.S. Central owes corporate credit unions up to $100 million in Membership Capital Shares (MCS) that had usually been returned to members when a member's investments in and loans from U.S. Central decreased. U.S. Central owes over $6 million to Corporate Central itself, according to the complaint, and Corporate Central alleges that U.S. Central improperly changed its bylaws in late 2008 to retain these funds as a reaction to its deteriorating financial condition. U.S. Central’s bylaw change centered on policies that governed the recalculation of required MCS balances. This recalculation created an "adjustment refusal policy" that would prohibit MCS refunds to U.S. Central members, even in the event that a member would have been entitled to a MCS refund under the previous policy based on the member corporate's investment and loan levels. U.S. Central's previous policy required member credit unions to maintain MCS and other capital equal to at least 5% of their total investments in U.S. Central and associated loans from U.S. Central. This percentage was recalculated every six months, and members could reportedly receive refunds of excess MCS if their total investments and loans with U.S. Central had decreased. Corporate credit unions, including Corporate Central, were notified of the policy change shortly before U.S. Central announced substantial losses for the 2008 fiscal year. Corporate Central, which held over $1.3 billion in direct and indirect investments in U.S. Central as of Dec. 31, 2008, has alleged that the bylaw change was invalid based on the theory that some U.S. Central board members should have recused themselves from voting on the bylaw change.

Fed to study check electronic payment methods

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WASHINGTON (1/21/10)--The Federal Reserve (Fed) on Wednesday announced that it will undertake further study of “the current volume and composition of check and electronic payments in the United States.” The Fed study, which will collect information on the “annual number, dollar value and composition of retail noncash payments in the United States,” is similar to studies completed by the Fed in 2001, 2004 and 2007. “The Credit Union National Association’s Payments Subcommittee plans to follow the development of these studies closely, interact with those undertaking the work, and provide information to the Fed as it pursues these studies,” CUNA Deputy Counsel Mary Dunn said. The 2010 study, when combined with the results of these earlier studies, “will provide aggregate estimates and current trends in the use of noncash payment instruments by U.S. consumers and businesses,” the Fed said. “Previous studies have revealed significant changes in the U.S. payments system over time, including a continuing decline in the use of checks and growing use of electronic payments, such as automated clearinghouse, electronic banking transactions, credit cards, debit cards and stored value cards,” the release added. Early results of the studies should be released later this year.

Inside Washington (01/20/2010)

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* WASHINGTON (1/21/10)—The Federal Housing Administration was expected to release tighter standards yesterday for loans to qualify for its guarantee. (The New York Times Jan. 19). Included in the changes will be: a higher initial insurance premium, 2.25%, up from 1.75%; sellers will be banned from offering as much assistance to help buyers cover closing costs; and the ceiling for assistance will drop to 3% of a property’s value, down from 6%, among other things. The new standards are intended to bolster the FHA’s financial position, as well as to screen out unprepared borrowers. As of the end of 2009, the FHA was insuring more than a half million seriously delinquent loans, out of a reported total of 5.8 million single-family residences with a total loan balance of $750 billion... * WASHINGTON (1/21/10)—The Federal Deposit Insurance Corp. (FDIC) is seeking comment on ways its risk-based deposit insurance assessment system could be tweaked to reflect risks that might be posed by certain employee compensation programs. In a Jan. 19 Federal Register document, the FDIC indicated it does not seek “to limit the amount which employees are compensated, but rather is concerned with adjusting risk-based deposit insurance assessment rates to adequately compensate the (Deposit Insurance Fund) DIF for the risks inherent in the design of certain compensation programs.” By doing so, the FDIC intends to provide “incentives for institutions to adopt compensation programs that align employees' interests with the long-term interests of the firm and its stakeholders, including the FDIC.”... * WASHINGTON (1/21/10)) — In a recent speech in New York, a top Federal Reserve official kept up the drumbeat of Fed support for preserving, and even expanding, the central bank’s role in overseeing the country’s financial system. New York Fed President William Dudley, in remarks to the Partnership for New York City, said the Fed system has the experience and expertise needed to continuously monitor three areas that need it: large systemically important financial institutions, payments and settlements systems, and the capital markets. On Capitol Hill, the House has approved a bill that retains the Fed's supervision powers and gives it broad authority to rein in systemic risk. However, the Senate has yet to act on a bill and in that chamber there is bipartisan support to strip down the Fed’s role to setting monetary policy. (American Banker Jan. 20)…

Dodd added to vibrant GAC lineup

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WASHINGTON (1/21/10)—Senate Banking Committee Chairman Christopher Dodd (D-Conn.), whose panel is currently involved in negotiations to hammer out a financial services regulatory reform bill in that chamber, will address the 2010 CUNA Governmental Affairs Conference (GAC) in Washington, D.C. Dodd will address the GAC on Wednesday, Feb. 24. In addition to serving as the head of the Senate Banking Committee, Dodd serves on athe Committee on Health, Education, Labor, and Pensions. Dodd joins other starpower already announced for the upcoming GAC, with Reps. Barney Frank (D-Mass.) Paul Kanjorski (D-Penn.), Spencer Bachus (R-Ala.), Ed Royce (R-Calif.), and Ed Perlmutter among those signed on as speakers for the event. Kanjorski and Royce are longstanding friends of the credit union movement. They recently collaborated to introduce H.R. 3380, a bill that would lift the credit union member business lending cap. Bachus has also backed credit unions by working to maintain credit union independence in this year's ongoing regulatory reform process. All three are senior members of the House Financial Services Committee; Bachus is the panel's ranking Republican and Kanjorski is the number-two Democrat behind Chairman Frank. Perlmutter, also a House Financial Services Committee member, late last year offered an amendment to the committee print of the Financial Stability Improvement Act (H.R. 3996), a bill that would give the systemic risk council the authority to take corrective action regarding accounting matters. The amendment would bolster government oversight of the Financial Accounting Standards Board (FASB) and CUNA maintains it would improve the accounting board's policy-making process and help minimize arbitrary rulemaking. FASB Chairman Robert Herz is also highlighted on the GAC program. The GAC, which will take place between Feb. 21 and 25 in Washington, D.C., will give credit union leaders the opportunity to learn the latest, first hand, from influential policymakers, as well as a platform to advocate for credit union issues. Other featured speakers include: Larry Kudlow, economist and host of CNBC's The Kudlow Report, former Federal Reserve Chairman Alan Greenspan, and Richard Phillips, Captain of the Maersk Alabama, which was hijacked by Somali pirates earlier this year, are also scheduled to speak at the event. A political point-counterpoint discussion between Joe Scarborough, former Congressman and current host of MSNBC's Morning Joe, and Presidential candidate and former Democratic National Committee Chairman Howard Dean, will also liven up the GAC. The festivities will begin with a CUNA Council-sponsored concert by the World Classic Rockers, featuring member of Santana, Journey, Boston, Steppenwolf, Toto and Lynyrd Skynyrd. Use the resource link below for more information.