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Inside Washington (10/01/2010)

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* WASHINGTON (10/4/10)--During a hearing Thursday, lawmakers said they were concerned that the Consumer Financial Protection Bureau would try and enforce new rules without a director confirmed by the Senate (American Banker Oct. 1). Such a move would be illegal, according to members of the Senate Banking Committee. The bureau’s temporary leader, Elizabeth Warren, will serve as a special adviser to President Barack Obama and Treasury Secretary Timothy Geithner, and help set up the new agency. Neal Wolin, deputy Treasury Secretary, said that the bureau can work on disclosure rules. The bureau has until July 21, 2012, to write new mortgage disclosure standards. Senate Banking Committee Chairman Christopher Dodd (D-Conn.) said he thinks the bureau is in danger because some will look to get rid of it after midterm elections. It will be easier to eliminate the bureau if it doesn’t get off to a strong start and demonstrated its value, he said ... * WASHINGTON (10/4/10)--The Financial Stability Oversight Council held its first meeting Friday, and lawmakers have expressed their doubts about what it can accomplish. The council aims to provide comprehensive oversight over the stability of the nation’s financial system. Some lawmakers’ concerns include interagency disagreements, and whether members could agree on the council’s top priorities. Sen. Mike Johanns (R-Neb.) asked regulators what areas of conflict have arisen so far and what areas of conflict regulators anticipate. Regulators told Congress the council is getting along fine. Neal Wolin, deputy Treasury Secretary, said he didn’t think there were disagreements among council members. Federal Reserve Board Chairman Ben Bernanke agreed, saying that he didn’t forsee any controversies. However, on Sept. 27, the Office of the Comptroller of the Currency protested the Federal Deposit Insurance Corp.’s move to complete its own securitization rule ahead of requirements mandated by the regulatory reform bill. Treasury Secretary Timothy Geithner also was concerned about the action, said The Wall Street Journal (American Banker Oct. 1). Debbie Matz, chairman of the National Credit Union Administration, participated in the council’s first meeting ... * WASHINGTON (10/4/10)--The Troubled Asset Relief Program (TARP) could cost less than estimated, according to The New York Times (Sept. 30). TARP, which was a $700 billion lifeline to banks, auto companies and insurers, is set to expire Sunday and could turn taxpayers a profit, the newspaper added. On Thursday, the government said it had started negotiating a plan with American International Group to repay taxpayers for its $70 billion rescue. The Treasury committed $470 billion and disbursed $387 billion for TARP. Projected TARP losses are less than $50 billion. In mid-2009, the program was projected to lose $341 billion. The Congressional Budget Office reduced its estimate for loss to $66 billion ... * WASHINGTON (10/4/10)--CORRECTION: A Sept. 17 story on the National Credit Union Administration’s action to allow approved federal credit unions to offer short-term, small amount (STS) loans to their members contained an error. A sentence regarding loan payments through payroll deduction should have read: Federal credit unions are required to set a cap of 20% of net worth on the aggregate dollar amount of loans outstanding, and will not be permitted to require loan payment via member payroll deduction ...

NCUAs Matz reiterates Corp. CU plan not a bailout

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WASHINGTON (10/4/10)--In a column published in Friday’s American Banker, National Credit Union Administration (NCUA) Chairman Debbie Matz again said that “not a dime of taxpayer money” would be used as part of the NCUA’s plan for dealing with corporate credit unions. “One laudable aspect of the credit union system is that it takes care of its own. And now the vast majority of well-run and financially stable credit unions will repay their guarantees through special assessments,” Matz added. The NCUA last month introduced comprehensive plans to address both the corporate credit union system and the legacy assets held by many of the corporate credit unions. The NCUA took Members United Corporate FCU, Southwest Corporate FCU and Constitution Corporate FCU under agency control and is in the process of repackaging their legacy assets, along with the legacy assets of previously conserved Western Corporate FCU and U.S. Central FCU, into guaranteed notes. Those notes will then be sold on the open market. Credit union members “will see no changes at their local credit unions” as a result of the NCUA’s corporate actions, Matz said. Matz added that while the growth of credit union membership, assets, shares, investments, loans and net worth “(is) not record-setting,” these developments “are signs that the credit union industry is — overall — healthy, stable and poised for growth.” For the full Matz interview, use the resource link.

First Financial Stability Oversight Council meeting held

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WASHINGTON (10/4/10)—The newly created Financial Stability Oversight Council (FSOC), which provides a forum for discussion between various regulatory agencies, held its first meeting on Friday. The Council, which is comprised of National Credit Union Administration (NCUA) Chairman Debbie Matz, Treasury Secretary and FSOC Chairman Tim Geithner, Federal Reserve Chairman Ben Bernanke, Acting Comptroller of the Currency John Walsh, Securities and Exchange Commission Chairman Mary Schapiro, and Federal Deposit Insurance Corp. Chairman Sheila Bair, and representatives from the Commodity Futures Trading Commission and the Federal Housing Finance Agency, will also oversee the resolution of troubled financial institutions. Matz in a statement released on Friday said that the FSOC would also “strengthen the early warning systems of independent regulators of insured institutions.” “The sharing of information about the health and practices of uninsured financial service providers, in and of itself, will provide a vital tool in our ability to protect tens of millions of insured depositors,” she added. The FSOC during the meeting also approved its Bylaws, its Transparency Policy, an Advance Notice of Proposed Rulemaking on designating nonbank financial companies for heightened supervision, a request for information regarding the Council's "Volcker Rule" study and recommendations, and an Integrated Implementation Roadmap for both the FSOC and its independent member agencies, according to a release. For releases from the FSOC and the NCUA, use the resource links.

NFIP now extended into 2011

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WASHINGTON (10/4/10)—The National Flood Insurance Plan (NFIP) is now extended until Sept. 30, 2011 after President Barack Obama signed legislation into law on Friday. The NFIP lapsed for a period of time, beginning on June 1, but was restored in early July when H.R. 5569 was signed into law. Legislation that would reauthorize the NFIP program until Sept. 30, 2015, and improve the program by adding a Flood Insurance Advocate and raising the maximum coverage limits, passed the House in July. A Senate vote on that legislation has not been scheduled. The NFIP is important to credit unions because the mortgages they write for properties in a floodplain are required to have flood insurance.

Fed creates Community Depository Institutions Advisory Council

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WASHINGTON (10/4/10)--The establishment of the new Community Depository Institutions Advisory Council (CDIAC) was announced by the Federal Reserve on Friday. In a release, the Fed said that the council, which will include credit union, bank and thrift representatives, “will provide input to the (Fed) on the economy, lending conditions, and other issues.” The Fed will select one member from each of its 12 Fed local advisory councils to serve on the new council. The Fed and the CDIAC will meet twice a year in Washington. The CDIAC replaces the Thrift Institutions Advisory Council, which has been active since 1981. Michael Kloiber of Oklahoma’s Tinker FCU and Randy Smith of Texas’s Randolph-Brooks FCU are currently serving on the Thrift Institutions Advisory Council. The 12 local advisory councils should begin meeting in “early 2011,” with the CDIAC scheduled to hold its first meetings later in that year, the Fed said. For the full release, use the resource link.

NCUA Guaranteed Notes prospectus out Oct. 12

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SAN ANTONIO, Texas (10/4/10)--The prospectus for the National Credit Union Administration (NCUA) Guaranteed Notes (NGNs) will be released around Oct. 12, NCUA Chairman Debbie Matz said last week. The NGNs will be comprised of $50 billion of legacy assets gathered from the accounts of corporate credit unions that are currently under NCUA conservatorship. The NGNs will then be sold on the open market. The NGNs will be permissible investments for credit unions, and have received a zero risk weight from the Securities and Exchange Commission. Matz covered several other aspects of the recently released corporate credit union and legacy asset plans during her speech made during the National Association of State Credit Union Supervisors (NASCUS) yearly gathering. Credit Union National Association (CUNA) President/CEO Bill Cheney, also speaking before the NASCUS conference, said that CUNA’s work in 2011 would focus on secondary capital and member business lending. Congress is interested in more capital across the spectrum of financial institutions, Cheney said, adding that the NCUA has also backed increased capital, with the Agency calling alternative and supplemental capital for credit unions “a safety and soundness issue.” While the credit union industry remains “very well capitalized,” with a 9.9%, dollar-weighted average, Cheney said that CUNA economists have estimated that one in four credit unions would likely “feel a very strong need to rebuild their net worth ratios over the next few years.” Generally, credit unions “would be best served” by having as many alternative capital options as possible, Cheney added.