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Altered bankruptcy bill clears House panel

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WASHINGTON (1/28/09)—The House Judiciary Committee late Tuesday approved mortgage bankruptcy reforms but made a few changes as it marked up its bill (H.R. 200). Voting 21-15 along party lines for the Helping Families Save Their Homes in Bankruptcy Act, the committee ended up okaying a bill with notable improvements from the original. The committee approved a manager's amendment offered by the bill's sponsor, Rep. John Conyers (D-Mich.). The original bill would have given bankruptcy judges unfettered authority to change—or “cramdown”-- a borrowers’ mortgage loan terms, a provision strongly opposed by the Credit Union National Association (CUNA) and other financial services groups. In its amended version, the committee-approved measure would:
* Limit the application of the bill to mortgages made prior to the date of enactment; * Require borrowers to contact their lender or servicer at least 15 days prior to petitioning a bankruptcy court; * Allow lenders to share in the appreciation of a home's value with borrowers who discharge mortgage debt in bankruptcy, if the house is sold while the Chapter 13 plan is in effect, which typically is 5 years; and * Prohibit the Act from being construed as modifying any obligation of the Federal Housing Administration, the Veterans Administration, or the Department of Agriculture, under a contract that guarantees or insures the payment of any part of a loan secured by a security interest in a principal residence.
The committee also ringingly endorsed an amendment that would exclude borrowers who misrepresent their financial situation in bankruptcy from being eligible to have their mortgage crammed-down. The vote on this amendment was 21-3. Despite the improvements, Ryan Donovan, CUNA vice president of legislative affairs, said CUNA remains opposed to the bill. He said CUNA understands that a small number of Democratic committee members withheld amendments to the bill and will continue to try to work with the chairman as the bill proceeds to House floor consideration. That, Donovan said, could come as early as next week.

Frank hearing on promoting bank liquidity

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WASHINGTON (1/28/09)--House Financial Services Committee Chairman Barney Frank (D-MASS.) Tuesday announced that the committee has scheduled a hearing on how to enhance bank liquidity and lending. The hearing title is, “Promoting Bank Liquidity and Lending through Deposit Insurance, Hope for Homeowners, and other Enhancements.” It will be held Feb. 3 at 2:00 p.m. (ET) A witness list was not yet available.

NCUA asks Geithner for TARP aid for CUS

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ALEXANDRIA, Va. (1/28/09)—As Timothy Geithner assumed his new job as U.S. Treasury Secretary, he was contacted Tuesday by the federal credit union regulator about asset relief funds for credit unions. In a letter Tuesday, National Credit Union Administration (NCUA) Chairman Michael Fryzel congratulated Geithner on his successful appointment and called upon the Secretary to expand options for credit union participation in the Troubled Assets Relief Program (TARP). “Knowing of your commitment, and that of President Obama, to reforming the Troubled Assets Relief Program, I request that you take a fresh look at two of the issues of the greatest concern to me as the federal regulator with responsibility for the safety and soundness of the credit union system,” wrote Fryzel. Fryzel asked Geithner to reconsider two issues in particular. Fryzel specifically identified past decision by the Treasury Department not to institute an illiquid-asset-purchase feature of TARP. He also noted an absence of guidelines for participation for cooperatives such as credit unions “Although I can understand the initial actions that the Treasury Department has taken to help the large banks, insurance companies, and other major financial institutions that have faltered or failed, I am concerned about the second-place status into which credit unions and other smaller financial institutions have been placed,” noted the NCUA chairman. Fryzel additionally addressed the need for the Treasury to allow the National Credit Union Share Insurance Fund to establish a guarantee for credit union deposits in non-interest bearing transaction accounts, parallel to authority granted to the Federal Deposit Insurance Corp. He also asked the Secretary to “bear in mind the key role played by credit unions and credit union members in our financial system as you reevaluate the Federal response to the ongoing economic crisis.” Use the resource link below to read the complete letter.

Special NCUA closed meeting today

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ALEXANDRIA, Va. (1/28/09)—The National Credit Union Administration (NCUA) has scheduled a special closed meeting for today at 3 p.m. (ET). The single agenda item is “Consideration of supervisory activities.” Use the resource link below for the NCUA website.

MasterCard paper explains importance of interchange

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WASHINGTON (1/28/09)—MasterCard International recently released a paper on interchange fees. It posits that the relatively small fee brings enormous benefits to all electronic payment participants—including both consumers and merchants. The paper, titled “Benefits of Open Payment Systems and the Role of Interchange,” argues that electronic payments have become so ingrained in everyday life that they are often taken for granted or misunderstood. “Perhaps the easiest way to grasp the value of electronic payments is to envision a world without them. Clearly, if electronic payments came to a sudden halt, many facets of commerce – travel, trade and the Internet just to name a few – would face dire consequences,” MasterCard President and CEO Robert W. Selander says in the introduction. The paper goes on to outline the role of interchange, which is the fee paid by merchants for the benefits of card acceptance. The Credit Union National Association (CUNA), with other financial services groups and card issuers, launched a huge opposition campaign last year when federal lawmakers proposed legislation that would allow the government to set interchange fees. CUNA said such an action would adversely affect consumer options, competition and technological innovation. According to CUNA, interchange fees allow business costs, including the risk of consumer nonpayment, to be shared by the payments participants. Discussions regarding what value should be placed on the use of electronic payments should be within the purview of the industry participants, not government, the group maintains. CUNA expects that interchange bills, similar to those that circulated in 2008, will be re-introduced this year.

Inside Washington (01/27/2009)

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* WASHINGTON (1/28/09)—The Federal Reserve Board yesterday announced the appointment of the chairs and deputy chairs of the twelve Federal Reserve Banks for 2009. Each Reserve Bank has a nine-member board of directors. The Fed announcement noted that the Board of Governors in Washington appoints three of these directors and each year designates one of its appointees as chair and a second as deputy chair… * WASHINGTON (1/28/09)--On his first day as U.S. Treasury Secretary, Timothy Geithner proposed reforms to the Emergency Economic Stabilization Act (EESA), which was enacted last year to bolster a flagging economy. He outlined new rules designed to limit the influence of lobbyists and special interests in the EESA process. The idea, he said, is to ensure that investment decisions are guided by objective assessments in the best interest of the health and stability of the financial system. An agency release said Tuesday’s announcement builds on EESA reforms already outlined by President Barack Obama, including monitoring and tracking lending patterns by financial institutions, limiting executive compensation, and preventing shareholders from being unduly rewarded at taxpayer expense. Credit Union National Association (CUNA) President/CEO Dan Mica, in a recent column in The Hill, backed Obama’s move toward transparency in lobbying efforts calling the change “welcome and overdue.” He said the organizations that face a difficult future are those claiming falsely to represent wide interests, while really representing a narrow few … * WASHINGTON (1/28/09)--The Federal Deposit Insurance Corp. (FDIC) issued a final rule Tuesday requiring insured depository institutions to inform their sweep account customers of the nature of their swept funds and how those funds would be treated if the institution fails. The rule largely codifies the agency’s long-standing policies on bank closings, the FDIC said. The rule is a follow-up to a July 2008 interim rule, which establishes the FDIC’s practices for determining deposit and other account balances at failed banks ... * WASHINGTON (1/28/09)--The Federal Deposit Insurance Corp. (FDIC) plans to tighten and clarify interest-rate restrictions on banks that are less than well-capitalized. The agency is seeking comments on a proposal that would define nationally prevailing deposit rates as a direct calculation of the national averages computed by the FDIC. Reliance on Treasury yields would be discontinued. The regulation also would establish a presumption that locally prevailing deposit rates equal the national rates published by the FDIC and “bring much needed concreteness to the administration of these statutory interest rate restrictions,” said FDIC Chairman Sheila Bair. As of third quarter 2008, about 154 banks reported being less than well-capitalized out of 8,300 banks nationwide ... * WASHINGTON (1/28/09)--The Federal Reserve Bank of New York named William Dudley as president/CEO to succeed Timothy Geithner, who was sworn in as Treasury Secretary Monday. Dudley was executive vice president of the Markets Group at the New York bank and was manager of the System Open Market Account for the Federal Open Market Committee. Prior to joining the bank in January 2007, Dudley was a partner and managing director at Goldman, Sachs and Co. ... * WASHINGTON (1/28/09)--Sen. Christopher Dodd (D-Conn.), chairman of the Senate Banking Committee, asked regulators to report on their fraud detection improvement efforts every three months (The New York Times Jan. 27). At a hearing Tuesday, Dodd questioned the Securities and Exchange Commission enforcement director and the interim chief executive of the Financial Industry Regulatory Authority on what happened with the Bernard Madoff pyramid scheme ...