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Citigroup Deutsche Bank settle with NCUA on corporate losses

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ALEXANDRIA, Va. (11/15/11)—The National Credit Union Administration (NCUA) will bring in $165.5 million in funds to help cover corporate credit union stabilization costs after Citigroup and Deutsche Bank Securities elected to settle with the agency, the NCUA announced on Monday. After legal and other costs are deducted, this will represent more than $100 million in net funds that will be applied to the 2012 stabilization fund assessment, which is roughly a 1 basis point reduction from what it would be otherwise. The agency is also seeking to recover $2 billion total from the Royal Bank of Scotland, RBS Securities, JP Morgan Securities, and Goldman Sachs in suits it has filed against these entities. There may be additional recoveries from other firms that sold residential mortgage-backed securities to corporate credit unions that contributed to their losses.

"I applaud the agency's efforts to pursue recoveries from these firms," CUNA's President and CEO Bill Cheney said this afternoon. "NCUA has appropriately taken a leading role in pursuing these entities and the agency's efforts will help reduce the corporate credit union stabilization costs that credit unions would have otherwise had to pay." "The actions announced by the agency were the result of out-of-court settlements," CUNA"s General Counsel Eric Richard explained. "Settlements of this type always involve judgment calls about the uncertainty of how litigation will turn out versus compromising the full extent of the claim. While the settlement did not result in admission of guilt from the banks, it has resulted in recoveries that will help contain credit union costs," he added.

Both Citigroup and Deutsche Bank Securities agreed to pay the NCUA to avoid litigation regarding potential claims relating to the sale of residential mortgage-backed securities to five failed wholesale credit unions. Neither Citigroup nor Deutsche Bank Securities admitted any fault in the settlements.

Deutsche Bank will pay the agency $145 million, and Citigroup will pay $20.5 million, under the terms of the separate settlements.

NCUA Chairman Debbie Matz said the settlements further the NCUA's goal "to minimize losses and thereby reduce the assessments that all credit unions will have to pay," and added that the agency is fulfilling its statutory responsibility "to secure maximum recoveries for credit unions and ensure that consumers remain protected."

Citigroup and Deutsche Bank Securities are among the first major underwriters to come forward with settlement proposals, and Matz said the agency appreciates their efforts to resolve potential claims and avoid the expense and delay of litigation.

The agency has brought four lawsuits and said earlier this year that it expects to take an additional five to 10 actions.

Three ex-CU employees prohibited by NCUA

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ALEXANDRIA, Va. (11/15/11)--The National Credit Union Administration (NCUA) on Monday blocked former San Antonio FCU employees Melissa Barajas and Donna Gonzalez, and former Southern CU employee Cheryl Watson, from participating in the affairs of any federally insured financial institution.

Barajas and Gonzalez, who worked for the San Antonio-based credit union, were both convicted on embezzlement charges. Barajas will serve 12 months and one day in prison and five years of supervised probation, and will pay $56,423 in restitution. Gonzalez has been sentenced to 15 months in prison and three years of supervised probation, and will pay $56,826.36 in restitution, the NCUA added.

Watson, who served as a bookkeeper with Chattanooga, Tenn.-based Southern CU, consented to an NCUA prohibition order, without admitting or denying fault.

Violation of a prohibition order is a felony offense punishable by imprisonment and a fine of up to $1 million. Use the resource link to access all NCUA prohibition orders.

For the full NCUA release, use the resource link.

CUNA testimony hearings highlight busy week in D.C.

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WASHINGTON (11/15/11)--Business on Capitol Hill will pick up this week ahead of the upcoming Thanksgiving constituent work week, with hearings and a number of votes scheduled.

One of the biggest events this week for credit unions will come on Wednesday as Credit Union National Association (CUNA) President/CEO Bill Cheney joins academics and financial services industry insiders to testify on community bank regulatory relief measure H.R. 1697, the Communities First Act.That hearing will take place before the House financial institutions subcommittee.

Other hearings held this week include a Tuesday Senate Banking Committee oversight hearing on the Federal Housing Finance Agency (FHFA). FHFA Acting Director Edward DeMarco is expected to testify during that hearing. The Senate Banking Committee financial institutions subcommittee will also hold a hearing today, as Consumer Financial Protection Bureau Office of Financial Protection for Older Americans Assistant Director Hubert "Skip" Humphrey III testifies on the financial security issues faced by older Americans.

The House Oversight and Government Reform Committee financial services subcommittee will also discuss job creation today, and the House Financial Services Committee today also is scheduled to mark up H.R. 1221, the "Equity in Government Compensation Act of 2011," which would suspend the current compensation packages for the senior executives of Fannie Mae and Freddie Mac and impose a new pay structure on Fannie and Freddie employees.

This week will also feature the following hearings:

  • A Wednesday House Oversight and Government Reform Committee hearing on Fannie Mae and Freddie Mac executive compensation;
  • A Wednesday House Rules Committee mark-up of H.R. 10, the "Regulations From the Executive in Need of Scrutiny (REINS) Act," a bill to require congressional approval of certain agency rulemaking;
  • A Wednesday Joint Economic Committee hearing on the impact of infrastructure investment on job creation;
  • A Thursday Senate Banking Committee nomination hearing, which will include the nomination of Thomas Hoenig to join the Federal Deposit Insurance Corp. board of directors; and
  • A Thursday Joint Economic Committee tax-reform related hearing.



The Joint Select Committee on Deficit Reduction is expected to meet, but will not hold any public meetings this week.

The House and Senate floors will also see action this week.

A minibus spending bill and Medicare-related Senate amendments are set to be considered by the House on Tuesday, and minibus spending legislation is scheduled to be taken up by the Senate this week. H.R. 2112, an appropriations bill for the Departments of Agriculture, Commerce, Justice, Transportation and Housing and Urban Development that would also fund the government until mid-December, could also be approved this week.

NCUA says it meets or exceeds Obama reg review order

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ALEXANDRIA, Va. (11/15/11)--The Credit Union National Association (CUNA) is reviewing the National Credit Union Administration's (NCUA) claim that it "already meets or exceeds the key principles" of an Obama administration executive order that called on federal agencies to review their existing regulations and ensure they are compatible with economic growth, job creation, and competitiveness.

The NCUA in a letter responded to Executive Order 13579, which was released earlier this year.

To meet the terms of this executive order, Chairman Debbie Matz said, the NCUA regularly reviews all of its regulations in a three-year-long process, and modernizes its existing rules and develops new rules to minimize compliance costs.

The agency also holds public meetings, town halls, and webinars, and releases videos and other communications to inform the public of regulatory initiatives, and integrates publicly available financial data to support regulation and rule changes, the NCUA said. The agency's release also noted that it frequently coordinates its rulemaking with other federal financial regulators and state credit union supervisors.

Matz added that the NCUA "strongly supports a balanced regulatory approach," and "will continue to protect the safety and soundness of credit unions as new risks emerge" while also providing relief from regulatory burdens.

While CUNA supports and encourages such regulatory relief, CUNA wants to ensure that all efforts that can be done to minimize credit unions' regulatory burdens are undertaken by NCUA and other regulators, including the Consumer Financial Protection Bureau.

CUNA's Examination and Supervision Subcommittee discussed regulatory burdens, the agency's budget, examination concerns, and the agency's credit union service organization (CUSO)- and interest rate risk-related proposals in meetings with Matz and other NCUA officials last week.

Subcommittee chair and Ohio Credit Union League CEO Paul Mercer, CUNA Federal Credit Union Subcommittee Chairman Marshall Boutwell, and other subcommittee members urged the agency to make every effort to help relieve credit unions' regulatory burdens. The subcommittees recommended that the agency tailor its regulations to impact only areas of particular concern, and said the NCUA should allow credit unions that are well-managed and performing well to not be encumbered by new rules that seek to eliminate their risks.

CUNAs Hampel tells IFoxI Bank Transfer Season has begun

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WASHINGTON (11/15/11)--The 700,000 in new members and $4.5 billion in new deposits that credit unions brought in the past month are "phenomenal," and this success, and the continued attention paid to credit unions, could signal a "Bank Transfer Season" that will last beyond Nov. 5's Bank Transfer Day, Credit Union National Association (CUNA) Chief Economist Bill Hampel said in a recent FoxNews.com online interview.



Credit unions brought in 40,000 in new members, and added $80 million in new savings account funds and $90 million in new loans, on Bank Transfer Day. Overall, a CUNA survey of 1,100 credit unions found that around 80% of larger credit unions said they signed up new members on Bank Transfer Day.

Larger states with more credit unions have picked up the most new members, with membership totals seeing larger increases in larger, urban areas, Hampel said.

Hampel during the interview also highlighted the main difference between credit unions and banks: the non-profit structure that requires credit unions to think of their members first rather than be beholden to shareholders. Credit unions tend to offer better deals and lower fees than banks, and fewer hidden fees, Hampel added. Hampel did the Fox interview late last week.

Meanwhile, in interviews that aired over the weekend on Bloomberg radio and CBS radio, including Washington-based WTOP, CUNA President/CEO Bill Cheney also noted that "momentum is in credit unions' favor." The "special efforts" that many credit unions have taken to tap into the surge in interest was also covered in a recent Huffington Post item, with Cheney noting that many credit unions have made individual and collaborative efforts to welcome new members and advertise their credit unions.

Inside Washington (11/14/2011)

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  • WASHINGTON (11/15/11)--The Federal Reserve will soon issue a package of proposed rules implementing the Dodd-Frank Act, Federal Vice Chairman Janet Yellen said Friday. The central bank will release for comment its proposed rule on enhanced prudential standards that would apply to large bank holding companies and systemically important nonbank financial firms, Yellen said at a conference hosted by the Federal Reserve Bank of Chicago (American Banker Nov. 14). The rules, considered by many to be the core of Dodd-Frank, affect some of the biggest issues in financial services, such as risk-based capital requirements, leverage, resolution planning and concentration limits. The Fed issued its proposed rule for designating nonbank financial firms in October …
  • WASHINGTON (11/15/11)--The Supreme Court's decision to consider a housing case could help banks that have been negatively impacted by fair lending laws. The case is not directly related to lending, but it does focus on legal theory used to prosecute and pursue banks for discrimination (American Banker Nov. 14). Magner v. Gallagher centers on a conflict between landlords and the city of St. Paul, Minn. In the majority of previous cases, courts have found lenders liable if their practices have a "disparate impact" on minorities, even though the lender's policies are not intentionally discriminatory. Banks, which have faced scrutiny for their lending from the Justice Department since the nation's financial crisis, could find relief if the Supreme Court eliminates or restricts the legal standard …

NEW Citigroup Deutsche Bank settle with NCUA on Corp CU losses

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ALEXANDRIA, Va. (UPDATED: 2:45 P.M. ET, 11/15/11)—The National Credit Union Administration (NCUA) will bring in $165.5 million in funds to help cover corporate credit union stabilization costs after Citigroup and Deutsche Bank Securities elected to settle with the agency, the NCUA announced today.

Both Citigroup and Deutsche Bank Securities agreed to pay the NCUA to avoid potential litigation regarding potential claims relating to the sale of residential mortgage-backed securities to five failed wholesale credit unions. Neither Citigroup nor Deutsche Bank Securities admitted any fault in the settlements.

Deutsche Bank will pay the agency $145 million, and Citigroup will pay $20.5 million, under the terms of the separate settlements.

NCUA Chairman Debbie Matz said the settlements further the NCUA's goal "to minimize losses and thereby reduce the assessments that all credit unions will have to pay," and added that the agency is fulfilling its statutory responsibility "to secure maximum recoveries for credit unions and ensure that consumers remain protected."

Citigroup and Deutsche Bank Securities are among the first major underwriters to come forward with settlement proposals, and Matz said the agency appreciates their efforts to resolve potential claims and avoid the expense and delay of litigation.

The NCUA is also attempting to reclaim billions in securities-related corporate credit union losses from other Wall Street firms, and has requested nearly $2 billion in combined damages from Goldman Sachs, RBS Securities and J.P. Morgan. The agency has brought four lawsuits and said earlier this year that it expects to take an additional five to 10 actions. Credit Union National Association (CUNA) General Counsel Eric Richard said that these Wall Street firms have the potential to provide significant reimbursement of the credit union system's losses, but reclaiming these losses may be a long, difficult process for the NCUA.