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New Fed program may help CUs members says CUNA

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WASHINGTON (11/26/08)—A new program unveiled by the Federal Reserve Board and U.S. Treasury Tuesday could be useful to credit unions by invigorating the market for mortgage-backed securities, according to Credit Union National Association President/CEO Dan Mica. The program, announced Tuesday by the Fed, would make up to $500 billion available for the purchase of mortgage-backed securities over a period of “several quarters.” A Fed release said the program would also make up to $100 billion available for purchase of the government-sponsored enterprises’ (GSE’s) direct obligations. CUNA’s Mica welcomed the Fed’s announcement, saying it would be important news to some credit unions seeking an invigorated market for these assets now on their books. “We urge the Fed to include credit unions in this program as soon as possible,” Mica said. In its statement, the Fed pointed out that purchase of GSE direct obligations under the program will be conducted with the agency’s primary dealers through a series of competitive auctions, beginning next week. Purchases of the MBSs will be conducted by asset managers selected via a competitive process. More operational details of this program, the Fed said, will be provided “after consultation with market participants.” CUNA Vice President of Economics and Statistics Mike Schenk noted that the potential overall impact of the MBS-purchase program on the mortgage market is important to credit unions and their members because it should make mortgages more affordable. “The 30-year, fixed-rate mortgage has been priced 250-300 basis points over the 10-year Treasury recently, but historically that spread is normally 150-200 basis points,” Schenk said. He added, “The Fed plan should result in reducing the spread from its current high level to more normal levels allowing credit unions and other financial institutions to make loans with lower rates and improving affordability for purchasers.”

3Q bank thrift earnings drop sharply

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WASHINGTON (11/26/08)—Third-quarter net income for federally insured banks and thrifts represents, with one exception, the lowest posted by the industry since the fourth quarter of 1990—down 94% from one year ago, according the Federal Deposit Insurance Corp. (FDIC). Only the fourth quarter of 2007 beat this year’s third quarter in dismal income results. The FDIC Tuesday reported net income for its insured institutions of $1.7 billion in the third quarter, a decline of $27.0 billion from the $28.7 billion the industry earned in the third quarter of 2007. The agency also reported that the number of banks on the problem list soared as of Sept. 30 stood to 171, and their combined asset value was $116 billion. This compared to 117 banks on the list the previous quarter, according to Reuters Tuesday, and is the highest since 1995 when there were 193 banks identified as problem institutions. "We've had profound problems in our financial markets that are taking a rising toll on the real economy,” said FDIC Chairman Sheila Bair when she announced the bank and thrift figures. “Today's report reflects these challenges." In releasing the latest results, the FDIC cited higher provisions for loan losses as the primary reason for the drop in industry profits. In addition to the increased provision expenses, the industry reported $7.6 billion in losses on sales of securities and other assets in the third quarter, compared to $77 million in gains a year earlier. The FDIC also said its industry-funded reserve, which backs deposits, dipped to $34.6 billion by the end of September, down 23.5% from almost $43 billion the previous quarter.

Compliance Disability Act changes affect CUs

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WASHINGTON (11/26/08)—Recent changes to the Americans with Disabilities Act (ADA) can affect a credit union’s operations. Do know how, quizzes the Credit Union National Association (CUNA) Compliance Challenge. In September, President George W. Bush signed the ADA Amendments Act into law, and it takes effect Jan. 1. The new law covers some individuals who were not previously protected under the country’s disability statutes. Therefore, CUNA compliance experts advise credit unions to consult an experienced human resources professional to determine the law’s potential impact on handling their employee’s accommodation requests under the ADA. Here’s some information that will help you go into that meeting well-informed: The ADA defines "disability" as "a physical or mental impairment that substantially limits one or more . . . major life activities," or "a record of" or "being regarded as having such an impairment." It prohibits employment-related discrimination "against a qualified individual with a disability," one "who, with or without reasonable accommodation, can perform the essential functions" of the position in question. The ADA Amendments Act:
* Broadens the scope of protection available to employees by rejecting two United States Supreme Court decisions that had narrowly construed the definition of “disability” under the ADA; * Clarifies three critical terms in the ADA's definition of "disability" ("substantially limits," "major life activities," and "regarded as" having such impairment) and the standards that must be applied when considering the definition of disability. For example, the law requires courts to broadly interpret what is considered a "disability" under the Act; * Includes specific examples of “major life activities,” such as caring for oneself, performing manual tasks, seeing, hearing, eating, sleeping, walking, etc.; and expands the term to include bodily functions; * Clarifies that an impairment that is episodic or in remission is a disability if it would substantially limit a major life activity when active; * Prohibits consideration of the effects of mitigating measures such as medication, assistive technology, reasonable accommodations, or modifications when determining if an impairment constitutes a disability, excluding ordinary eyeglasses and contact lenses; and * Requires the Equal Employment Opportunity Commission (EEOC) to amend its regulations to implement the definitions in the Act.
However, CUNA’s compliance folks say, that’s just the surface of the law. Use the resource links below for more information.

Inside Washington (11/25/2008)

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* WASHINGTON (11/26/08)--Credit Union National Association President/CEO Dan Mica met with 70 New Jersey credit union leaders Nov. 20, including New Jersey Credit Union League President Paul Gentile, about the Treasury Department’s Troubled Asset Relief Program (TARP) and the possible addition of supplemental and risk-based capital programs for credit unions (The Weekly Exchange Nov. 24). If credit unions are going to receive capital relief, they should not be “pigeon holed” into one option, Mica said. He also said that taxpayer money has never been used to bail out credit unions, but if TARP could be used to help them, the industry may be better off in the long run. From left are: Gentile, former league chairman and NJ Gateway FCU President/CEO Rina Pantano, Mica, and New Jersey league chairman and Atlantic City Firemen’s FCU President/CEO Steven Schlundt. (Photo provided by the New Jersey Credit Union League) ... * WASHINGTON (11/26/08)--Lawmakers are working to reverse a Sept. 30 notice from the Treasury Department that would allow banks to write down loan losses from acquisitions. Sen. Bernie Sanders (D-Vt.) and Rep. Lloyd Doggett (D-Texas) proposed legislation last week to prevent an acquiring bank from writing off target loan losses after a purchase (American Banker Nov. 25). Some institutions, such as Wells Fargo and PNC Financial, have used the exception ...
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