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CUNA CU MBLs could help Obama small biz plan

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WASHINGTON (10/22/09)—The Credit Union National Association (CUNA) will urge President Barack Obama to include increased member business lending (MBL) for credit unions as part of his just-launched initiatives to help small businesses. Obama, along with U.S. Treasury Secretary Timothy Geithner and U.S. Small Business Administrator Karen Mills, announced a series of measures Wednesday intended to get more credit to the country’s small businesses. The efforts included such things as seeking legislation to increase maximum SBA loan sizes and increased support of community bank lending through the administration’s Financial Stability Plan. CUNA President/CEO Dan Mica intends to contact the administration about credit union member business lending. CUNA notes that while much of Obama announcement’s focus was on community banks, data shows growth in business lending at those banks is almost imperceptible and actually has declined at all banks by over 8%. However, CUNA underscores, credit unions have a very different record on small business lending through their MBL programs. MBLs grew by 14% for the 12-month period ending in June of this year as small business members turn to their credit unions because they cannot find credit elsewhere, including at banks. Mica intends to note the 12.25% of statutory cap on credit unions' aggregate MBLs exists despite their low loss rates. CUNA estimates that if the cap were eased, approximately $10 billion could be provided in new small business loans. On July 29, Reps. Paul Kanjorski (D-Pa.) and Ed Royce (R-Calif.) introduced H.R. 3380, the Promoting Lending to America’s Small Businesses Act, to increase the MBL cap to 25% of a credit union’s total assets. It also would raise the “de minimis” threshold for a loan to be considered a “member business loan” to $250,000, and exempt loans made to non-profit religious organizations as well as loans made in qualified underserved areas from the cap. CUNA believes the administration and Congress should support a legislative fix to the MBL cap as an important step to ensure credit is available to small businesses, which will promote economic recovery.

Inside Washington (10/21/2009)

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* WASHINGTON (10/22/09)--The Obama administration is planning to order companies that received the most aid from government bailouts to significantly decrease the compensation of their highest-paid executives. The plan is expected to be announced by the Treasury within the next few days (The New York Times Oct. 21). The seven companies receiving bailout funds--including Citigroup, Bank of America, American International Group, General Motors, Chrysler, and funding arms of the two auto companies--will have to cut cash payouts to their 25 best-paid executives by about 90% compared with last year. The cash the executives would have received will be replaced with stock that they won’t be able to sell immediately. Total executive compensation will drop by about 50% ... * WASHINGTON (10/22/09)--The Federal Deposit Insurance Corp. (FDIC) plans to let its debt guarantee program expire at the end of October, said FDIC Chairman Sheila Bair at a board meeting Tuesday (American Banker Oct. 21). A six-month extension is available for banks that participated in the program. They can apply for permission to issue the debt until April 30 by proving they can’t issue non-guaranteed unsubordinated debt in the marketplace and that they are viable. About 4,464 institutions participated in the program ... * WASHINGTON (10/22/09)--Senate Banking Committee Chairman Christopher Dodd (D-Conn.) supported extending a first-time homebuyer tax credit that will expire next month (American Banker Oct. 21). Dodd was joined by Sen. Johnny Isakson (R-Ga.) in support. Both testified at a hearing Tuesday on the credit, which provides first-time homebuyers with $8,000. Dodd said “we still need to use every tool at our disposal” to fix the problem of the housing crisis, and that reducing foreclosures needs to be part of the effort. The tax credit can be maximized only if it works with a program to protect struggling homeowners from foreclosure, he added ... * WASHINGTON (10/22/09)--Two banking groups oppose consolidating bank regulatory agencies into one (American Banker Oct. 21). The Independent Community Bankers of America and the American Bankers Association sent letters to Senate and House banking committee leaders, saying consolidation would undermine the dual banking system. The Senate Banking Committee has discussed creating a single regulator. Senate Banking Committee Chairman Christopher Dodd (D-Conn.) said he is working on a bill that would create a single financial regulator. The consolidation, however, would not apply to credit unions (News Now Oct. 1) ...

Committee acts on CFPA amendments vote expected today

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WASHINGTON (10/22/09)--The House Financial Services Committee on Wednesday continued debate on H.R. 3126, the Consumer Financial Protection Agency (CFPA) Act, following a number of voice votes on amendments that were discussed earlier in the week. A final vote on the bill is expected today. An amendment that would have allowed prudential regulators to veto CFPA regulations that threaten the safety and soundness of the financial institutions that they oversee, which was offered by Reps. Ed Royce (R-Calif.) and Jeb Hensarling (R-Texas), failed by voice vote on Tuesday. Hensarling also offered amendments that would prohibit the CFPA from banning certain types of financial products and would suspend the authority of the CFPA to prescribe regulations if the unemployment rate in the United States is greater than 8%, but these amendments also failed by voice vote on Tuesday. An amendment that would require so-called “financial autopsies” of foreclosures and bankruptcies, identifying the underlying causes of the financial issues and identifying whether or not specific financial products or services appear to have caused a substantial number of the bankruptcies or foreclosures, was also offered by Reps. Alan Grayson (D-Fla.), William Macy Clay (D-Mo.), Brad Miller (D-N.C.) and Jackie Speier (D-Calif.). The Credit Union National Association is also monitoring an amendment, offered by Rep. Gwen Moore (WI), that would eliminate the explicit mention of credit insurance as a product that can be regulated by the CFPA.

Health care amendment could help small CUs

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WASHINGTON (10/22/09)--Small federally and state-chartered credit unions may become eligible to receive small business health care tax credits under S. 1796, America's Healthy Future Act, health care reform legislation recently approved by the Senate Finance Committee. These tax credits are designed to aid small businesses in offsetting the cost of providing health insurance for their employees. For tax-exempt small employers, like credit unions, the tax credits could be used to decrease the amount of payroll taxes the employer pays to the IRS. As originally constructed, the bill did not extend the same tax credits or other assistance to small tax-exempt employers that were offered to small for-profit businesses that provide healthcare insurance to their employees. Credit Union National Association (CUNA) President/CEO Dan Mica, in a letter sent to Senate Finance Committee Chairman Max Baucus (D-Mont.) and ranking Republican Charles Grassley of Iowa, called for equal benefits for all small employers to provide health care coverage for their employees, saying that “employer parity and basic fairness must prevail and the bill’s incentives should apply to all small employers.” However, CUNA has not taken a position on any other aspects of the health care reform debate, and is not actively engaging in other related issues. Under the amended legislation, the tax credit would be a portion of the healthcare premiums paid by a small employer and would vary according to the number of employees and their average salaries. Full tax credits would be granted to employers with fewer than 10 employees and with average annual salaries of under $20,000, while partial tax credits would be granted to employers with between 10 and 25 employees and with average annual salaries between $20,000 and $40,000. The credits, which would amount to as much as 2 5% for non-profits with employer-paid healthcare premiums, would only be available during the 2011 and 2012 tax years. A maximum credit of 35% of employer health care premiums paid would be granted to tax-exempt employers after 2012 if they participate in the bill's healthcare insurance "state exchanges". While the amended bill offers small nonprofit employers a smaller credit than that offered to for-profit employers, CUNA Senior Legislative Representative John Hildreth said the legislation represents “ a starting point in further discussions on this specific issue with lawmakers in both the House and Senate who are currently writing healthcare reform legislation".

Senate close to vote on CARD Act fix

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WASHINGTON (10/22/09)—Just a week after House members approved H.R. 3606, the CARD Act Technical Corrections Act, by voice vote, their colleagues in the Senate appear poised to take up that bill. After the House vote, Credit Union National Association (CUNA) President/CEO Dan Mica urged quick Senate action, saying it was needed urgently to “save credit unions and their consumer members both money and peace of mind." CUNA, the leagues, and credit unions have worked closely for weeks with lawmakers and their staffs to explain credit union concerns about a 21-day late notice requirement found in section 601 of the Credit Card Accountability, Responsibility and Disclosure (CARD) Act. H.R. 3606, if passed by the Senate and signed into law by the President, will clarify that the 21-day applies only to credit card accounts and not to all open-end credit. CUNA has warned lawmakers that the CARD Act, as currently written, would prevent credit unions from granting biweekly payment plans to their members, from sending members consolidated billing statements, and would force them to change payment due dates for members that had previously chosen due dates based on their specific financial circumstance. The situation is particularly problematic for Home Equity Lines of Credit (HELOC) because the due date of a HELOC is often a contractual term. CUNA has maintained that the 21-day provision was originally intended to cover only credit card accounts and was inadvertently changed during the legislative process. A Senate vote H.R. 3606 could come this week.

CUNA economic update A look at corporates

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WASHINGTON (10/21/09)—Within an extensive economic update and outlook on credit unions presented this week at the American Institute of Certified Public Accountants Conference on Credit Unions in Chicago, Bill Hampel shared his insights on the corporate credit union situation. Hampel is chief economist of the Credit Union National Association. First, Hampel said, significant losses in the Western Corporate CU and U.S. Central Corporate CU portfolios will occur over the next one to five years. However, the actual amount of those losses, Hampel noted, depends on the future course of interest rates, the economy, housing markets, and housing finance. Because of this, the rate and depth of future losses are “unknown, and unknowable.” Hampel noted that GAAP, or Generally Accepted Accounting Principles, unfortunately require a single number representing loss estimates for financial statement purposes. Because there is no way to have any confidence about what that number is, GAAP is a misleading way to deal with the situation. On the economy, Hampel noted that the nation’s general economic trends that will affect credit unions in the near term, and said that the country’s freefall has ended and predicted a return to modest growth. However, the bad news in unemployment figures is not over, Hampel said, anticipating that the unemployment rate will continue to “drift up.” In this context, credit unions can expect continued strength in savings growth and weak loan demand. High loan losses will continue to place downward pressure on earnings. Overall, he added, although the worst is behind us, for the near term credit unions are facing a “fragile low-growth economy.”