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CUNA urges different treatment of CU capital investments in corporates

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WASHINGTON (11/5/09)--Credit unions should not have been required to write down their capital in U.S. Central CU and Western Corporate CU (Wescorp) based only on estimates of future losses, Credit Union National Association (CUNA) President/CEO Dan Mica emphasized in a letter to National Credit Union Administration (NCUA) Chairman Debbie Matz on the eve of a meeting where this issue will be discussed. “We urge the board to reverse this decision and allow credit unions that had capital investments into these corporates to retain the ability to recover at least some of their capital, in the event the actual losses relating to asset-backed securities are not as large as NCUA has estimated they will be,” Mica wrote. “As we have stated, the central issue is that it is unfair to require credit unions to write down their capital in these corporates on the basis of estimates of their future losses, with absolutely no possibility of future recovery should those estimates turn out to be inaccurate,” Mica noted. The CUNA leader made these points as the NCUA board prepares to hold a meeting today with corporate credit unions on the capital extinguishment issue. CUNA will be among those attending the meeting. Mica told Matz that CUNA disagrees with NCUA’s Letter No. 09-CU-10, which says NCUA corporate rules require the depletion of corporate capital. He also took issue with those at NCUA who have indicated Generally Accepted Accounting Principles dictate depletion of capital in Wescorp and U.S. Central. “We do not agree, and neither do the accounting practitioners and experts we consulted on this matter,” he added. NCUA has several options it can pursue to address the unfair treatment of corporate capital, CUNA said. These could include:
* Refraining from depleting all capital. NCUA has this authority, CUNA contends, and it would mean some capital could be recovered if all of the losses do not materialize; * “Freezing” rather than deplete capital accounts and allow corporates to operate with negative retained earnings under certain conditions; * Precluding the use of new capital to cover legacy losses at corporates; and * Using the Corporate Stabilization Fund to help manage the corporates’ losses as they are realized.
Mica concluded by urging the NCUA following today’s meeting to “expeditiously reconsider and rescind” its decision on capital depletion.

Inside Washington (11/04/2009)

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* WASHINGTON (11/5/09)--The Federal Deposit Insurance Corp. (FDIC) issued a financial institution letter regarding the way FDIC administers its statutory restrictions on the deposit interest rates paid by banks that are less than well-capitalized. A final rule, effective Jan. 1, redefines the national rate as an average of rates paid by all insured depository institutions and branches for which data are available. Once the rule takes effect, an institution that believes it is operating in a high-rate area can use the rates in its market area only if it seeks and receives a determination from the FDIC that it is operating in a high-rate area. The FDIC said it would issue another letter explaining how banks can request such a determination. During the interim period ending Jan. 1, institutions can use national rates and rate caps on the FDIC’s website ... * WASHINGTON (11/5/09)--Debate in the House Financial Services Committee on a bill that would create a systemic risk regulator was expected to begin Wednesday. Several issues regarding the bill need to be addressed, according to financial observers (American Banker Nov. 4). Issues include whether the Federal Reserve Board should have powers over other regulators, how to create a resolution fund to handle systemically important firms, and how high a proposed risk retention requirement for securitizations should be set. The debate will likely be contentious, said Mark Calabria, director of financial regulations studies at the Cato Institute. Rep. Barney Frank (D-Mass.), House committee chairman, said he doesn’t expect a final vote on the bill for at least one week due to amendments. The 379-page bill would designate the Fed as systemic regulator, combine the Office of Thrift Supervision and the Comptroller of the Currency, create a resolution process to help systemic institutions and create an interagency council to help the Fed advise the institutions. The Credit Union National Association sent a letter Tuesday to House Financial Services Committee Chairman Barney Frank (D-Mass.) and ranking member Spencer Bachus (R-Ala.), asking that credit unions not be entangled in the legislation because they do not pose any systemic risk to the financial system ... * WASHINGTON (11/5/09)--If Federal Reserve Board Chairman Ben Bernanke’s plan to stop purchasing mortgage-backed securities (MBS) fails, he will likely face pressures from Congress to extend credit programs for consumers and small business programs, and maintain support for housing, financial observers said (American Banker Nov. 4). If Bernanke is pressured by Congress to carry out these tasks, it would undermine the Fed’s ability to control independent money policy. Bernanke has already been pressured to help car companies and extend more credit to the commercial real estate market. William Poole, former president of the Federal Reserve Bank of St. Louis, said Congress may ask the Fed to invent a new program when a sector has difficulties, The Fed is the biggest purchaser of securities from Fannie Mae and Freddie Mac, and Bernanke hopes to stop purchasing the MBSs by March. The Fed has maintained that the securities have helped to stabilize the housing market ...

CUNA covers Reg Z at CU eBoot camp

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WASHINGTON (11/5/09)--Individuals looking to gain a more thorough understanding of the Federal Reserve Board’s recent amendments to open-end credit rules under Regulation Z can improve their knowledge on the issue through the Credit Union National Association’s (CUNA) Z eBoot Camp eSchool. The comprehensive training program, which begins on Nov. 19, will cover the basics of Regulation Z and provide an in-depth look at how recent changes will affect credit unions. The proposed changes would affect disclosures for credit cards and other credit plans, and are intended to resolve uncertainties and make other technical changes to the rule, although they are not intended to change the level of protection. CUNA’s eSchool will be divided into five separate 90-minute webinars which can be attended for $219 per class. The sessions, which will take place at 3 pm, will begin with a class on Regulation Z consumer lending basics on Nov. 19. CUNA will follow up with classes on Regulation Z mortgage lending basics on Dec. 3 and a class on account opening and credit card disclosures on Dec. 10. Finally, CUNA will cover advertising, change in terms notices, and multi-featured open-end loan programs on Dec. 17 and requirements for periodic statements on Jan. 7. The sessions will also be archived for attendees that cannot view the courses at the scheduled time. To register for the courses, use the resource link.

NCUA kicks off 2009 CDRLF program

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ALEXANDRIA, Va. (11/5/09)--The National Credit Union Administration (NCUA) on Wednesday announced that it has opened the 2009 edition of its Community Development Revolving Loan Fund (CDRLF) program. The CDRLF is administered by the NCUA's Office of Small Credit Union Initiatives and the funds are used for such things as improved financial services for members and stimulating community economic development through financial education programs, free tax preparation and asset-building services, and improved credit union operations. The application period began on Nov. 4 and will end on Dec. 30. Credit unions that will be awarded funds will be notified on March 1. In statements accompanying the release, NCUA Chairman Debbie Matz encouraged “low income-designated federal and state-chartered credit unions that have received NCUA concurrence to apply” for CDRLF funds. “I can’t think of a more opportune time to assist your members and at the same time support your community,” Matz added. Eligible credit unions may apply for as much as $300,000 in funding from the CDRLF, which has $3 million in funds available for credit unions. The House in July approved $1.25 million in CDRLF funding for the 2010 fiscal year as part of the General Government Appropriations Bill. The NCUA in May of this year had requested $1 million in funding for the CDRLF for 2010.

CU-backed candidates win Virginia California contests

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WASHINGTON (11/5/09)--Credit union leagues nationwide took part in Tuesday’s elections, and credit union-backed candidates have gained two prominent positions. New Congressman John Garamendi, who was supported by the California Credit Union League and the Credit Union National Association (CUNA)'s federal political action committee, the Credit Union Legislative Action Council (CULAC), will serve California’s 10th Congressional District, which spans Contra Costa, Solano and Alameda counties in Northern California. Garamendi defeated Republican challenger David Harmer by earning 53% of the total vote. Garamendi, who has also served as lieutenant governor and state insurance commissioner, became the Democratic nominee earlier this year when he won a California special primary. Former representative Ellen Tauscher (D-Calif) vacated the congressional seat to take a position in the State Department. Commenting on the result, CUNA Political Director Trey Hawkins said that Garamendi “has been a strong friend to credit unions on the state level, and we look forward to continuing to work with him in Congress.” The Virginia Credit Union League publicly backed incoming Virginia Governor Bob McDonnell (R), who soundly defeated Democratic challenger Creigh Deeds by 17 points on Tuesday. CULAC and the league earlier this year also supported Judy Chu (D-Calif.), who won a special election for the House seat from the 32nd district.