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Treasury TARP must include CUs says CUNA

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WASHINGTON (10/30/08)—Although presently it appears unlikely that the credit union system will have a widespread need for capital as proposed by the U.S. Treasury Department’s Troubled Asset Relief Program (TARP), the Credit Union National Association (CUNA) continues to seek access to the program for credit unions. In an Oct. 28 comment letter on the TARP plan, CUNA noted that credit unions generally sought to avoid the kinds of subprime mortgage lending that helped inflame the current economic meltdown. However, the letter added that the Treasury is aware that credit unions do not operate in a vacuum and therefore “will likely not totally escape problems in the broader financial markets.” CUNA also noted its plans to work with the National Credit Union Administration (NCUA) to determine if the federal credit union regulator can develop TARP-like programs that would allow any federally insured credit union that needs to sell troubled assets, apply for additional capital, or obtain asset guarantees will first be able to find a credit union-funded solution before having to call upon taxpayer dollars for help. “Working through NCUA in this manner would also free up Treasury TARP funds for other institutions,” the CUNA letter noted. The TARP program was authorized under the Emergency Economic Stability Act of 2008 (EESA). The troubled assets eligible for the guarantee must have been originated or issued prior to March 14, 2008. The department’s request for comments sought guidance on how the insurance or guarantee program should be established. To read CUNA’s full comments, use the resource link below.

GAO report shows some economies with Check 21

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WASHINGTON (10/29/08)—The Government Accountability Office reports that while the Federal Reserve Board has been able to save on transportation and labor costs under The Check Clearing for the 21st Century Act of 2003 (Check 21) , check truncation has not yet resulted in overall gains in economic efficiency for the Fed or for banks. Check 21 was enacted to make check collection more efficient and less costly by facilitating wider use of electronic check processing. It authorized a new legal instrument—the substitute check—a paper copy of an image of the front and back of the original check. The GAO report, required by the Check 21 law, found that although check volume has declined, checks still represent a significant volume of payments that need to be processed, cleared, and settled. However, a survey of 108 banking customers found that most seem to have accepted changes to their checking accounts from check truncation. That, the GAO surmises, may result in future economies. The GAO said the interviews with bank consumers showed the majority accepted the lack of canceled checks and also accepted being able to access information about their checking account activity online. Several of those surveyed said they considered electronic image and online reviewing to be more secure than receiving canceled checks. Eleven percent of those consumers surveyed did express a preference for receiving canceled checks. Also, the GAO found that the federal banking regulators reported few consumer complaints relating to Check 21. While the GAO report was based on data collection instruments and interviews from the 10 largest banks by deposit size as of March 2008 and a group of smaller banks, which included credit unions, check truncation is not new to credit unions. For instance, even in 2002—just before Check 21 became law—CUNA figures found that 64% of credit unions offered share draft accounts and 91% of those credit unions utilized truncation. Approximately 7.1% of credit unions offering share draft accounts offered images of all checks with their statements. As of 2007, the most recent data available, CUNA figures showed 72% of credit unions offer share draft accounts. Their use of check truncation remains above 90%.

CUNA seeks comment on shared insurance signage

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WASHINGTON (10/30/08)—The Credit Union National Association (CUNA) is asking credit unions to comment on proposed simplifications to the a National Credit Union Administration (NCUA) rule on share insurance signs for shared branching. Under current rules, a shared branch must list the names of all credit unions served and whether each one is federally insured. The proposal would replace that cumbersome list with a general statement that not all of the credit unions served by a shared teller are federally insured and that members should contact their credit union for further information. CUNA notes that the proposal recognizes the burden of the current requirements for those shared branch networks that are national in scope, which may serve thousands of individual credit unions. That situation often results in lengthy signs that need to be updated frequently. The proposal also:
* Requires that the second sign must be similar to the current official NCUA sign in terms of design, color, and font. The NCUA will produce signs that meet these new requirements and will make them available at a reasonable cost. * Clarifies that tellers in nonfederally insured credit union branches may accept deposits for federally insured credit unions as part of a shared branching network. However, these credit union branches may not display the official NCUA sign and there would, therefore, be no need to display the second sign.
Comments are due to the agency by Nov. 21, and CUNA seeks comments by Nov. 17. CUNA specifically asks credit unions to address the NCUA request for comment to help the agency understand the inner workings of shared branching. Use the resource link below to read the complete request for comment.

House panel announces TARP oversight session

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WASHINGTON (10/30/08)—House Financial Services Committee Chairman Barney Frank (D-Mass.) announced his panel will conduct a Nov. 18 oversight hearing on the U.S. Treasury Department’s new Troubled Asset Relief Program (TARP). The panel will also look at initiatives taken by the Federal Reserve Bank and the Federal Deposit Insurance Corp. related to the turmoil in domestic and global financial markets Frank’s announcement said the committee expected testimony from senior administration officials, institutions using or affected by the initiatives, and academic and other experts. “While much of our attention is, appropriately, focused on the $700 billion TARP program recently passed by Congress; it is clear that Treasury has been working closely with both the Federal Reserve and the FDIC on broader coordinated initiatives. “ The committee is interested in exploring the rationale for the specific steps already taken and to better understand how the Treasury Department, Federal Reserve and the FDIC expect their actions to work and how, and over what time frame, they expect to be able to measure results,” Frank said. He identified three primary areas of interest: The effort to recapitalize financial institutions; the effort to reduce volatility and restore liquidity to financial markets and; the effort to reduce foreclosures and mitigate the erosion of housing values.

Inside Washington (10/29/2008)

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* WASHINGTON (10/30/08)—The Credit Union National Association is advising credit unions that the Federal Emergency Management Agency (FEMA) has issued the Compendium of Flood Map Changes, which provides a listing of changes made to the National Flood Insurance Program maps effective Jan. 1 to June 30, 2008. Future notices of map changes will be issued approximately every six months... * WASHINGTON (10/30/08)--Financial services companies slated “too large to fail” may face political backlash next year, according to observers (American Banker Oct. 29). The issue is likely to surface when regulators revamp the financial system. Manuel Johnson, former Federal Reserve Board vice chairman, said he could envision politicians arguing to break up large institutions or tax them to redistribute profits. The “too big to fail” debate has waged for years, and on Oct. 14, the government came close to deciding which institutions were too large to fail when it provided $125 billion to nine institutions. Bank of America, Citigroup, JP Morgan Chase and Co., and Wells Fargo received $25 billion each. The Treasury has hesitated to provide guidelines on how much of their capital infusions banks would be required to use for new lending, but observers expect that the situation will likely change after next week’s presidential elections ... * WASHINGTON (10/30/08)--Steve Cross was named deputy director this week of the Federal Housing Finance Agency, where he will reside over the 12 Federal Home Loan Banks (FHLBs). Cross authored a failed proposal two years ago that would require FHLBs to keep more of their earnings. The proposal triggered tension between him and some individuals in the FHLB system (American Banker Oct. 30). James Lockhart, Finance Agency director, said Cross was hired because he had done a good job running the Federal Housing Finance Board’s supervision department--a position Cross held for six years. Geoff Bacino, director at the Finance Board, who advocated tabling Cross’ original proposal, said Cross would not “disrupt” the banks in his new job ... * WASHINGTON (10/30/08)--The Small Business Administration made changes to the Military Reservist Economic Injury Disaster Loan program, effective Tuesday. The changes will make the program more accessible to small businesses facing financial loss when the owner or an essential employee is called to active military duty. A small business can apply for a loan on the date the employee receives notice of duty. SBA extended the period for one year after the employee is discharged from duty. Also, the small business is no longer required to pledge collateral to secure a loan of $50,000 or less ...