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Frank bill would modify TARP rules

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WASHINGTON (1/12/09)—A vocal and consistent critic of the U.S. Treasury Department’s decisions concerning use of it Troubled Asset Relief Program (TARP) funds, Rep. Barney Frank (D-Mass.) Friday introduced a bill to amend statutory language in the bill that authorized the program. Frank said in a release that his TARP Reform and Accountability Act (H.R. 384) is intended to “strengthen accountability, close loopholes, increase transparency, and require Treasury to take significant steps on foreclosure mitigation.” The bill would amend provisions of the Emergency Economic Stabilization Act of 2008 (EESA) that created TARP. One provision important to credit unions and all federally insured depository institutions would make permanent the share and deposit insurance ceiling increase to $250,000, which was established on a temporary basis in EESA. Under some other, general, provisions of the bill, an insured depository institution receiving TARP funds:
* Would be required to report quarterly on the amount of any increased lending (or reduction in decrease of lending) and related activity attributable to the financial assistance; * Or, where that institution cannot categorize the effect of investment, it must report on lending and related activity during the period, with comparable prior period data.
Treasury, in consultation with the bank regulatory agencies, would have to establish standards for the required reporting. In new allocations of TARP funds, Treasury would be required to reach agreement with the institution and its primary federal regulator on how the funds are to be used. The department would have enlist benchmarks that would “advance the purposes of the Act to strengthen the soundness of the financial system and the availability of credit to the economy.” Under the Frank bill, examinations by a recipient institution’s primary federal regulator must specifically examine use of funds and compliance with any program requirements, including executive compensation and any specific agreement terms.

Top Republicans named to House Fin. Serv. subcommittees

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WASHINGTON (1/12/08)—Rep. Jeb Hensarling (R-Tex.) has been named ranking minority member of the House Financial Services subcommittee on financial institutions and consumer credit. Hensarling, now in his fourth term representing Texas’ fifth district, has been a member of the subcommittee and its parent committee. He is also a member of the Congressional Oversight Panel established under the 2008 Emergency Economic Stabilization Act (EESA). The oversight panel is charged with monitoring the expenditures of the U.S. Treasury Department under its Troubled Asset Relief Program (TARP), which was also established by EESA. Also announced by Rep. Spencer Bachus (R-Ala.), the top Republican on House Financial Services, were the following ranking members for the panel’s other subcommittees.
* Rep. Ron Paul (Tex.), Subcommittee on Domestic Monetary Policy and Technology; * Rep. Judy Biggert (Ill.), Subcommittee on Oversight and Investigations; * Rep. Gary Miller (Calif.), Subcommittee on International Monetary Policy and Trade; * Rep. Shelley Moore Capito (W.V.), Subcommittee on Housing and Community Opportunity; and * Rep. Scott Garrett (N.J.), Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises.

CUNA priorities 9-plus-1 in 09

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WASHINGTON (1/12/09)—Protecting the federal credit union tax exemption and preserving an independent federal credit union regulator and insurance fund, as well as the dual chartering system, are top among the Credit Union National Association’s (CUNA) action priorities this year. According to CUNA President and CEO Dan Mica, the watchwords for the association and the credit union movement in 2009 will be “agile and nimble.” “In fact, our emphasis on being ‘agile and nimble’ in dealing with the multitude of issues this year is reflected in the priority list itself, as the ‘+1,’” Mica added. “Seen from our vantage point, we believe it is vital for CUNA and credit unions to be ready to pivot readily-- from taking advantage of opportunities, to dealing with challenges, and back again – as occasions arise.” Also on the 2009 CUNA priority list:
* Expand ability of credit unions to provide business loans to members (and position credit unions as ready and willing to help the nation’s economic recovery); * Obtain more flexibility for credit unions in accumulating capital, in support of safety and soundness and continued growth of the movement; * Emphasize credit unions’ role as the solution to the financial crisis (not the source of the problems); * Restore the ability of single common bond credit unions and community chartered credit unions to add underserved areas to their fields of membership (FOM); * Ensure appropriate credit union access to “economic relief” programs; * Ease the regulatory and compliance burdens on credit unions; and * Sustain credit union access to products/services that best serve their members.
Rounding out the priority list in ‘09 is the “+1’: Being nimble and agile in dealing with opportunities and threats as they develop for credit unions.

Mortgage cramdown bills moving in Congress

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WASHINGTON (1/12/09)—In its first week in session, the 111th U.S. Congress saw a flurry of activity on bankruptcy issues, including three mortgage bankruptcy “cramdown” bills, and an early revision to one of those measures. Sen. Richard Durbin (D-Ill.), Rep. John Conyers (D-Mich.) and Rep. Brad Miller (D-N.C.) all introduced bills last week. The bills would, in part, allow judges to modify certain terms in certain mortgages in the bankruptcy proceedings, a practice called a “cramdown.” Ryan Donovan, vice president of legislative affairs for the Credit Union National Association (CUNA), said Friday the association is carefully evaluating the proposed legislation. “CUNA remains concerned about unintended consequences of any legislative proposals that would open the federal bankruptcy code and allow for broad loan term modifications for homes in bankruptcy,” Donovan said. He added, “Giving bankruptcy judges wide latitude to change mortgage interest rates and maturity dates would have an adverse effect on existing loan portfolios held by financial institutions. “In addition, the value and safety of existing mortgage-backed securities would be called into question.” Donovan noted that CUNA worked closely last year for modification in Durbin’s 2008 cramdown bill and appreciated the effort that Durbin and his staff made to address many credit union concerns. ‘We will continue our efforts to ensure those concerns are addressed in this year’s legislation as well,” Donovan said. Changes have already been considered. A day after introducing his bill with provision strongly opposed by the CUNA and others in the financial services industry, Durbin announced he would make certain changes to his bill. Durbin indicated that he would amend his bill to:
* Limit eligibility for bankruptcy modification of mortgages to only existing mortgages (mortgages originated by the date of enactment); * Require homeowners to certify that they attempted to contact their lender regarding loan modification before filing for bankruptcy; and * Provide that only major violations of the Truth in Lending Act (TILA) will invalidate creditor claims in bankruptcy, rather than TILA violations of any size.
Donovan said that as mortgage bankruptcy legislation develops in Congress, it will remain a top priority of CUNA to work to ensure that the bill targets toxic mortgages made by predatory lenders and does not have unintended negative effects on credit unions. CUNA will also work for inclusion of a sunset provision, and a limited scope of what the bankruptcy courts could do to the loans. CUNA also is working to add provisions to the bill that would make it less likely that borrowers able to pay their current mortgages will resort to bankruptcy simply to reduce their loan amounts. “This situation is extremely fluid," said Donovan, "As the legislative process continues to evolve, we will continue to discuss credit union concerns with Sen. Durbin and Congressional leadership."

Inside Washington (01/09/2009)

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* WASHINGTON (1/12/09)--The financial regulatory system appears to be ill-suited to meet the nation’s needs in the 21st century, the Government Accountability Office (GAO) said in a 107-page report released Thursday. The agency recommended that state regulators create a more effective regulatory model. The report was released as state regulators work on recommendations to emphasize the importance of state regulation. The recommendations, which will be released by the Conference of State Bank Supervisors, state that regulation should be based on an institution’s size and consumer protection guidelines should fit state and federal institutions (American Banker Jan. 9). The GAO report also said a revamped regulatory system should include items such as clearly defined regulatory goals, consistent consumer protection and financial oversight, and have minimal taxpayer exposure ... * WASHINGTON (1/12/09)--The Treasury’s oversight of the $700 billion federal bailout--known as the Troubled Asset Relief Program--is faulted, according to a draft report from the Congressional Oversight Panel. The report was expected to be released Friday (The New York Times Jan. 9). In the draft, the panel criticized the Treasury for changing its explanations about the bailout’s purpose and not requiring financial institutions receiving money from the program to account for how the money was used. The Treasury has not yet commented on the panel’s assessment, but has continually told Congress that the rescue plan is working and has reduced foreclosures ... * ALEXANDRIA, Va. (1/12/09)--Consumer bankruptcy filings increased 33% in 2008, the American Bankruptcy Institute (ABI) said last week. Data indicates that consumer filings for 2008 reached 1,064,927, compared with 801,840 filings in 2007. However, data indicates that 84,926 consumer filings in December represented a 15% decrease compared with November. “We expect the upward spike in personal bankruptcies to continue in 2009,” said Samuel J. Gerdano, ABI executive director ... * WASHINGTON (1/12/09)--Michael Fryzel (left), chairman of the National Credit Union Administration (NCUA), visited South Side Community FCU (SSCFCU), Chicago. Fryzel congratulated SSCFCU, a $3.5 million-asset community development credit union, on its work as a start-up credit union, according to the Illinois Credit Union League. Fryzel also said he was impressed with the credit union’s financial education curriculum. “It was quite an honor for our credit union to be recognized by the NCUA chairman,” said Gregg Brown, SSCFCU CEO. (Photo provided by the Illinois Credit Union League) ...