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Inside Washington (10/15/2009)

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* WASHINGTON (10/16/09)--The House Financial Services Committee approved the first-ever comprehensive regulation of the over-the-counter (OTC) derivatives marketplace. The bill, approved Thursday by a 43-26 vote, requires that all standardized swap transactions between dealers and large market participants, referred to as “major swap participants,” must to be cleared and must be traded on an exchange or electronic platform. According to a committee release, a major swap participant is defined as anyone maintaining a substantial net position in swaps, exclusive of hedging for commercial risk, or whose position creates such significant exposure to others that it requires monitoring. OTC derivatives include swaps, which are contracts that call for an exchange of cash between two counterparties based on an underlying rate, index, credit event or the performance of an asset… * WASHINGTON (10/16/09)--The Federal Deposit Insurance Corp. (FDIC) could finalize rules on Tuesday to end its temporary guarantee of unsecured debt starting Oct. 31. The agency last month proposed two options for ending the program (American Banker Oct. 15). One plan would forbid participants from issuing protected debt after the end of the month. A second option would have the same deadline but give institutions in distress another six months to apply for emergency coverage. The plan was launched last October as a part of the Temporary Liquidity Guarantee Program ... * WASHINGTON (10/16/09)--Credit and asset-quality declines for commercial real estate (CRE) loans may continue, banking regulators said Wednesday. CRE lending presents the biggest area of risk for credit losses at Federal Deposit Insurance Corp. (FDIC) institutions, said FDIC Chairman Sheila Bair at a Senate Banking subcommittee hearing (American Banker Oct. 15). FDIC-insured institutions hold a large stake of commercial mortgage debt outstanding, leaving their exposure to CRE loans at a “historic high,” she added. CRE loans backed by nonresidential or nonfarm properties account for nearly $1.1 trillion, or 14.2% of total loans. Business bank bankruptcies have increased 64% during the first half of the year, according to the Office of Thrift Supervision. Credit quality continues to worsen, added Comptroller of the Currency John Dugan ...

House Committee adds exemption to CFPA legislation

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WASHINGTON (10/16/09)--An amendment to H.R. 3126, the Consumer Financial Protection Agency Act which would limit the examination and enforcement authority of the Consumer Financial Protection Agency (CFPA) over insured depository institutions to credit unions with more than $1.5 billion in assets and banks with more than $10 billion in total assets, passed by a voice vote on Thursday afternoon. The amendment was offered by Reps. Brad Miller (D-N.C.) and Dennis Moore (D-Kan.). Responding to the passage of the amendment, Credit Union National Administration (CUNA) President/CEO Dan Mica said that CUNA would be “compelled to oppose” the legislation, as “a basic premise of the credit union movement is to never be divided against itself in any way.” “A key principle of ours in approaching financial regulatory reform has been for examination authority to remain with credit unions’ primary regulator. We cannot support legislation that would apply this principle only to a portion of the nation’s credit unions, as envisioned in this amendment,” Mica added. Committee Chairman Rep. Barney Frank (D-Mass.) has indicated that he is willing to discuss this issue between mark-up and floor consideration. Mica said that CUNA would “have no choice but to oppose” the CFPA bill if an “accommodation cannot be reached on the substance of the CFPA bill as amended.” CUNA is working with legislators to produce additional amendments that would exempt credit unions completely or set an exemption threshold at a higher standard than that of asset size. CUNA has also circulated alternative language to the bill that would address credit union issues such as the CFPA's impact on examinations, enforcement, preemption of existing rules, and regulatory burden. The House Financial Services Committee will continue discussion and markup of H.R. 3126, which would seek to protect consumers of financial products through the creation of a powerful independent agency with extensive rulemaking, oversight, and enforcement tools, early next week, with a vote likely to occur on Wednesday. The Committee on Thursday approved the Over-the-Counter Derivatives Markets Act of 2009 by a 43-26 vote.

ICU Day recognized by Congress

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WASHINGTON (10/16/09)--Hailing the positive contributions of U.S. credit unions that have provided “affordable and safe financial services to many Americans of moderate means,” Rep. Brad Sherman (D-Calif.) on Thursday commemorated International Credit Union Day by citing the “equally notable” contributions that credit unions have made internationally in a statement submitted to the Congressional Record. Sherman also praised credit unions as “a means to promote economic growth and democratic practices” for over 186 million members of communities in 97 nations. “Credit unions make a difference on a global scale by providing access to affordable financial services,” including microloans, “for those who otherwise would have been excluded from the financial sector,” Sherman added. Sherman also noted credit union outreach to the unbanked in rural areas and praised the “innovative technology solutions” that are being extended via the World Council of Credit Unions. “In many countries, credit unions lead economic democratization, a step closer to political democratization by providing economic security and sustainability and exposing lower-income communities to free-market principles and democratic values that will help eradicate terrorism at its roots,” he added. The financial services offered by credit unions “help expand job opportunities, improve local economies and promote democracy,” and aid the “post-conflict rebuilding of societies and economies in war-torn countries,” and the “democratization of societies” via the “one-member one-vote principle of credit unions.” In short, offering a “sustainable development solution to some of the world’s poorest countries,” is, as Sherman ultimately highlighted, is the “credit union difference.”

CUs urged to comment on CARD Act rules

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WASHINGTON (10/16/09)--The Credit Union National Association (CUNA) has issued a regulatory comment call on the Federal Reserve Board's proposal to implement the portions of the Credit Accountability, Responsibility and Disclosure (CARD) Act that will become effective on February 22, 2010. Items addressed by the Fed proposal include provisions that will limit the CARD Act's minimum payment warning provisions to credit cards, prohibit interest rate increases for existing balances and during the first year the account is opened, require the consumer's consent before charging fees for exceeding the credit limit, and require co-signors for cardholders that are under the age of 21 if they cannot otherwise demonstrate that they can make the minimum payments. These requirements as well as additional requirements addressed in this proposal will be discussed during an audio conference call on Oct. 20. The call, which will be led by CUNA Senior Assistant General Counsel Jeff Bloch, will also feature commentary from Federal Reserve Board Senior Attorney Benjamin Olson, PSCU Financial Services General Counsel Steve Salzer, CUNA Assistant General Counsel Michael McLain, and UW Credit Union Chief Credit Officer Mike Long. Comments may be submitted to CUNA and can be submitted to the Fed for thirty days following the proposal being published in the Federal register. To view the CUNA comment call, and register for the CUNA audio conference call, use the resource links.