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Matz urges removal of statutory MBL cap

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ALEXANDRIA, Va., (11/25/09)--National Credit Union Administration (NCUA) Chairman Debbie Matz would like to see the statutory cap on credit union member business lending (MBL) increased or eliminated and wrote to the U.S. Treasury Department urging support for measures that would allow NCUA to establish the regulatory parameters. “I believe any lending limitations should be regulatory, not statutory. NCUA is best positioned to set requirements and maintain limits on member business lending, utilizing our direct supervisory knowledge and application of firm safety and soundness standards,” Matz stated in a Nov. 24 letter to Treasury Counselor Gene Sperling. Sperling had requested additional policy suggestions from the NCUA following last week’s Small Business Financing Forum, hosted by Treasury and the Small Business Administration (SBA) and attended by Matz. NCUA supports a proper balance of serving business lending needs with a prudent regulatory framework to protect safety of the institutions and of the National Credit Union Share Insurance Fund. “Historically, credit unions have been successful at making member business loans,” Matz noted. She urged the Department of Treasury and the SBA to support legislative and regulatory enhancements to allow “well-managed credit unions to make more business loans to members who need them.” “This will in turn help achieve your over-arching goals to create jobs and grow the economy,” she added. Credit Union National Association (CUNA) President/CEO Dan Mica said Tuesday that Matz’s strong statement is a significant step and that it will certainly help the overall effort to build support for lifting the statutory MBL cap, a change CUNA has been working for diligently. In testimony last summer, Roger Heacock testified on behalf of the Credit Union National Association (CUNA) that the current number one obstacle to more business lending by credit unions is the restrictive 12.25%-of-assets cap imposed on credit unions just over 10 years ago. The hearing was conducted by the House Small Business Committee. Heacock is president/CEO of Black Hills FCU, Rapid City, S.D., and that credit union was the South Dakota district SBA award-winner for writing more SBA loans in the state than any other financial institution during 2008-2009. The loans totaled just over $1.6 million, and averaged $56,703 per loan. CUNA has repeatedly urged members of Congress to support increased business lending capacity for credit unions by backing HR 3380, the Promoting Lending for America's Small Business Act, which would raise the amount of money a credit union can devote to business lending. CUNA President/CEO Dan Mica said that HR 3380, if passed, "would enable credit unions to continue to provide significant capital to credit union member-owned small businesses – up to $10 billion in the first year--and create as many as 108,000 new jobs." CUNA has sent similar letters to the House, Senate, President Barack Obama, White House Chief of Staff Rahm Emanuel,and other top administration officials.

Inside Washington (11/24/2009)

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* WASHINGTON (11/25/09)--Rep. Ron Paul (R-Texas) has indicated that he will not support legislation to curb systemic risk, even though he proposed an amendment that will be attached to the bill aiming to toughen oversight of the Federal Reserve Board (American Banker Nov. 24). Paul’s amendment, which the House Financial Services Committee approved last week, would subject the Fed to audits from the Government Accountability Office. The Fed opposes the measure because it argues that audits would compromise the independence of monetary policy. But Paul said the amendment does not have anything to do with running monetary policy but rather finding out what the Fed is doing and how it is spending money ... * WASHINGTON (11/25/09)--A report Monday picked out six large and midsize banks that are most likely to expand through failed-bank acquisitions (American Banker Nov. 24). The banks are: BB&T Corp., New Alliance Bancshares Inc., People’s United Financial Inc., New York Community Bancorp, Washington Federal, and U.S. Bancorp. The report was issued by FBR Capital Markets. Analysts said the companies would be attracted to the low costs and high earnings potential of acquiring failed institutions with help from the Federal Deposit Insurance Corp., which has pledged to cover some of the closed institutions’ losses ... * WASHINGTON (11/25/09)--Critics of a plan to handle oversight of systemically significant financial companies said the bill does not address how the Federal Reserve Board and an interagency council would interact. Senate Banking Committee Chairman Christopher Dodd (D-Conn.) has proposed giving the oversight to an interagency council, while the Obama administration has proposed giving the power to the Federal Reserve Board. It’s unclear [in the bill] who is going to do what, said William Isaac, former Federal Deposit Insurance Corp. chairman. Isaac also questioned what would happen if the council and the Fed disagreed on an issue. The Fed and the council don’t have “defined responsibilities,” added Gil Schwartz, a former Fed lawyer. Congress should settle on a solution, said Oliver Ireland, also a former Fed lawyer. The combo is “confusing,” and could create friction, he told American Banker (Nov. 24) ...

CUs should assess impact of Fed Reg CC amendments

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ALEXANDRIA, Va. (11/25/09)--The National Credit Union Administration (NCUA) has urged federally insured credit unions to assess the impact that the Federal Reserve’s recent amendment to its Regulation CC could have on “their funds availability policies and schedules.” These credit unions should also notify their members of the changes, if required to do so, the NCUA added. However, the NCUA said that the Fed amendments should not impose an “additional burden” on credit unions. The Fed recently amended its routing number guide to next-day availability and local checks in Regulation CC to reflect recent changes in the Fed's check processing operations, and transferred its check processing operations from the head offices of the Federal Reserve Bank of Dallas and the Los Angeles branch of the Reserve Bank of San Francisco to the Federal Reserve Bank of Cleveland. The Fed has also provided advanced notice that its check-processing infrastructure will be consolidated into a single check-processing region early next year. In a separate regulatory release, The NCUA also addressed recent Fed changes to the minimum level of points and fees that designate when lenders must provide borrowers disclosures required by Section 32 of Regulation Z, Truth in Lending. While “very few” credit unions charge mortgage rates and fees as high as those cited under the Fed changes, and few credit union real estate loans “should require these additional disclosures,” NCUA Chairman Debbie Matz said that some risk-based loans may exceed the Fed’s yearly thresholds. According to the NCUA release, the minimum total fee and point threshold as of Jan. 1, 2010, will decrease from $583 to $579. Under section 32 of Reg Z, lenders would be required to provide borrowers with additional disclosures if the total amount of points and fees exceeds $579 or 8 percent of the loan amount, the NCUA release added. For the full NCUA regulatory alerts, use the resource links.

Mica asks CUs Step it up in Dec. through grassroots action

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WASHINGTON (11/25/09)--Credit Union National Association (CUNA) President/CEO Dan Mica has urged credit unions to “step it up” and get involved in CUNA’s grassroots efforts as the Congress races to complete business for the year. “We need to step forward and let Congress know CUs are indeed the white hats,” Mica says in a video posted on CUNA's web site. “We didn’t start the fire; this crisis, that was created by others—we helped solve it." Mica said that with Congress primed to take hasty action in order to pass legislation before the holidays, and with so many crucial issues for credit unions possibly coming to a vote next month, lawmakers must hear from credit unions before they take any action. Comprehensive regulatory reform legislation is active on both the House and Senate sides of Congress, and legislation addressing overdraft fees and interchange is also in play. CUNA is developing a multi-pronged program for bringing the credit union voice to lawmakers – in Washington, from home to Washington and at home in district and state meetings at lawmakers’ offices, and has recently communicated with lawmakers via grassroots action on the issues of overdraft and interchange fees. While Congress is scheduled to finish its work for the year on Dec. 18, CongressDaily this week said that Senate Democratic leaders have indicated that that chamber could remain in session during the upcoming winter break, if necessary. Credit unions are being asked to coordinate their grassroots advocacy activities in conjunction with the CUNA program through their state leagues. To view the video, use the resource link.

Bank collapses push FDIC fund over 8B into the red

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WASHINGTON (11/25/09)--The net worth of the Federal Deposit Insurance Fund during the third quarter of fiscal 2009 declined to negative $8.2 billion, the Federal Deposit Insurance Company (FDIC) reported on Wednesday. This is the third time since 1992 that the net worth of the fund has fallen below zero, and the loss reflects a contingent loss reserve of $38.9 billion that the FDIC has “set aside to cover estimated losses over the next year,” according to the FDIC. The National Credit Union Administration (NCUA) also reported on the status of its own insurance fund at its recently held November meeting. While the National Credit Union Share Insurance Fund (NCUSIF) remains well capitalized at 1.28% of insured shares with over $8.3 billion in total equity as of Oct. 31, the agency estimated that an NCUSIF assessment in the range of 0.10% and 0.25% of insured shares could be sought in 2010 to replenish projected expenses. Melinda Love, NCUA director of examination and insurance, recently predicted that NCUSIF losses for the coming year could range from $450 million to $1.68 billion. The FDIC also reported that the number of institutions on its "Problem List" rose to 552 as of Sept. 31, the highest level since 575 institutions were reported in late 1993. These problem institutions accounted for a total of $345.9 billion in assets, according to the FDIC. Fifty institutions failed during the most recent quarter, increasing the number of failed institutions reported during 2009 to 95. "For now, the credit adversity we have been observing for some time remains with us, and we expect that it will be at least a couple of more quarters before we see a meaningful improvement in that trend," Chairman Sheila Bair said. "Despite the challenges, depending on the economy, I am optimistic that if we address these problems head-on we will see clear signs of improvement in bank earnings and lending in 2010," she added.