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Washington Archive

Washington

More tax on CUs would hurt consumers CUNA

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WASHINGTON (11/15/10)—Credit unions may “close or convert to for-profit banks” if the current credit union tax exemption is revoked, a move that would provide consumers with “few, if any other mainstream financial choices,” Credit Union National Association (CUNA) President/CEO Bill Cheney said on Friday. “Even if a credit union chooses not to convert, it will inevitably be forced to raise lending rates and fees and lower its returns to its members/ accountholders. Further, taxing credit unions would also divert funds that would otherwise be used to build capital and provide a cushion against any future losses, thereby protecting members and the National Credit Union Share Insurance Fund,” Cheney added. Eliminating the credit union exemption would also essentially raise taxes on 92 million current credit union members, Cheney said. The National Commission on Fiscal Responsibility and Reform's draft report on deficit reduction options, which was released last week, named tax expenditures as one way that the country’s debt could be cut. However, the report did not mention credit unions by name. Options promoted by the report include eliminating all $1.1 trillion of tax expenditures, eliminating and modifying some business tax expenditures, and reforming the tax code itself, while also putting in place “an across-the-board 'haircut' for itemized deductions, employer health exclusion, and general business credits that would take effect in 2013 if reform is not yet enacted." These proposals are in their infancy, and would require a super majority of 14 if the commission's 18 members to be officially recommended to lawmakers. The proposed reforms would also need both congressional and Presidential approval to be passed into law. Cheney last week said that CUNA would continue to work with the commission, the Obama administration and Congress to “help all comprehend the importance of the tax exemption on the long-term well-being of the nation's credit unions and, by extension, the 92 million consumers they serve.”

Bridge corporates created for Members United Southwest

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ALEXANDRIA, Va. (11/15/10)--Members United Bridge Corporate FCU and Southwest Bridge Corporate FCU will now assume the “existing business” of the conserved corporate credit unions Members United FCU and Southwest Corporate FCU, the National Credit Union Administration announced on Friday. The NCUA officially chartered the two new bridge corporates on Friday, and chartered U.S. Central Bridge Corporate FCU and Western Bridge Corporate FCU in early October. NCUA Chairman Debbie Matz in a release said that the creation of the four bridge corporates “ensures that 4,600 member credit unions continue to have access to essential liquidity and payment services.” The new bridge corporates have purchased and assumed the assets and member share deposits of their respective conserved corporate credit unions. All four of the bridge corporates will offer little in the way of new services, but will service existing loans and offer new loans for "settlement purposes" only, according to the NCUA. Fields of membership for the new corporates will be identical to that of the now-conserved corporates, and new members will not be accepted, the NCUA added. The bridge corporates will not operate indefinitely, and the NCUA has said that it will operate the bridge corporates until current members find their own individual service solutions. For the full NCUA release, use the resource link.

NCUA open meeting specifics revealed

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ALEXANDRIA, Va. (11/15/10)--A new interim National Credit Union Administration (NCUA) final rule regarding corporate credit unions will likely address, among other items, whether privately insured credit unions should help pay for the NCUA’s corporate credit union stabilization efforts. The interim final rule, which will be introduced at this Thursday’s NCUA open board meeting, will also fine tune some definitions and address whether natural person credit unions should be limited to membership in one corporate credit union, according to the Credit Union National Association (CUNA). The interim final rule may also address whether corporate credit unions should be able to assess membership or annual fees on their member credit unions, CUNA added. CUNA President/CEO Bill Cheney on Friday said that CUNA’s Corporate Credit Union Next Steps Working Group will help develop CUNA’s response to the new corporate CU documents. The NCUA will also consider the 2011 operating fee scale and operating fees for federal credit unions during the meeting, and will discuss the range of its National Credit Union Share Insurance Fund premium for the coming year as well. Discussion of the overheard transfer rate, which currently stands at 57.2%, is also on the agenda. The overhead transfer rate represents funds that are transferred from the NCUSIF to NCUA to pay for insurance-related agency costs. Pilot programs, insurance appeals, personnel issues, and supervisory activities are on the agenda for the NCUA’s closed meeting, which will take place on Wednesday. For the NCUA agendas, use the resource links.

Inside Washington (11/12/2010)

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* WASHINGTON (11/15/10)--Three trade groups sent a joint letter to the Securities and Exchange Commission asking for relief from “unreasonable and unwarranted” fees charged by CUSIP Global Services, commonly referred to as the CUSIP Service Bureau. The Bond Dealers of America, the Investment Adviser Association and the Government Finance Officers Association asked the SEC to use its jurisdiction to take control of the growing dispute over CUSIP fees and were particularly concerned about situations when federal regulators mandate their use. Standard & Poor’s manages the CUSIP bureau on behalf of the American Bankers Association (ABA). CUSIP alphanumeric codes are purchased by security issuers and used to identify government and municipal securities and stocks of registered U.S. firms. The dispute focuses on the CUSIP bureau’s attempt to charge licensing fees for the use of CUSIP codes – regardless of the source of the identifier or how it is used – from investment advisers, bond dealers and financial institution representatives (American Banker Nov. 12). These groups have typically used the codes in trade confirmations, account statements and other routine documents without being required to pay CUSIP annual fees, which can range from roughly $10,000 to hundreds of thousands of dollars. Editor’s Note: The ABA’s CUSIP has no connection to the National Credit Union Administration’s (NCUA’s) Credit Union System Investment Program (CU SIP), which was created in 2008 to enable participating creditworthy credit unions to borrow from the Central Liquidity Facility (CLF) and invest the proceeds in participating corporate credit unions …

Obama to nominate Smith as FHFA director

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WASHINGTON (11/15/10)—President Obama announced Friday that he intends to nominate North Carolina Bank Commissioner Joseph A. Smith, Jr. to become director of the Federal Housing Finance Authority. Smith has been commissioner of banks since June 2002 and his current term in that post ends March 31, 2011, according to the White House announcement. He is immediate past chairman of the Conference of State Bank Supervisors and the founding member of the board of managers of State Regulatory Registry LLC. Smith would replace acting FHFA Director Edward De Marco if the North Carolinian is confirmed by the U.S. Senate. De Marco has been acting director for about a year. The change in command is set against a back drop of potential reforms. The administration is working to draft revisions to the country’s housing-finance system, including a revamp of the government-sponsored entities, Fannie Mae and Freddie Mac—regulated by the FHFA. Fannie and Freddie were placed into conservatorship in 2008.

Mortgage rates drop to record lows

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WASHINGTON (11/15/10)--The average rate on both 30-year and 15-year fixed-rate mortgages fell to all-time record lows last week. As reported in Freddie Mac’s most recent mortgage rate survey, 30-year mortgages averaged 4.17% and 15-year mortgages averaged 3.57%, with both fixed rate loans falling more than five basis points below their previous weekly averages. Fixed rate 30- and 15-year mortgages averaged 4.91% and 4.36% this time last year, respectively. Both five-year and one-year adjustable rate mortgages were low, with average rates of 3.25% and 4.46% reported. “Despite historically low mortgage rates, however, the housing recovery continues to be slow owing in part to household job uncertainty and tight credit conditions,” Freddie Mac Vice President/Chief Economist Frank Nothaft said. For the full release, use the resource link.