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Inside Washington (11/06/2009)

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* WASHINGTON (11/9/09)--Fannie Mae is awaiting approval from the Treasury Department to sell $2.6 billion in unused low-income housing tax credits. The Treasury is deciding whether to allow Goldman Sachs Group to buy the credits. Fannie entered into an agreement Sept. 30 to sell the credits, according to a filing with the Securities and Exchange Commission (Bloomberg News Nov. 6). The Federal Housing Finance Agency, which regulates Fannie, did not object to the sale. Fannie has garnered about $5.2 billion in tax credits for investing in low-income housing ... * WASHINGTON (11/9/09)--Senate Committee Chairman Christopher Dodd (D-Conn.) is expected to release a regulatory reform bill next week. Few committee members know what the bill contains, but there are likely three points of contention, according to financial observers. They include: creating a consumer protection agency, eliminating federal preemption for national banks and thrifts, and taking away the Federal Reserve Board and Federal Deposit Insurance Corp.’s supervisory powers and consolidating them into a single entity (American Banker Nov. 6). Dodd hopes to have the committee debate on the measure before Thanksgiving, but a vote is not likely to take place until December. If a deal with Republican committee members can’t be reached now, Dodd likely will work to win their support before the bill moves to the Senate, observers added ... * WASHINGTON (11/9/09)--House Financial Services Committee Chairman Barney Frank (D-Mass.) said he would revise a systemic risk reform bill before it moves to a final vote in two weeks (American Banker Nov. 6). Frank said he plans to reduce the Federal Reserve Board’s power and emergency lending authority, remove a provision that would allow the Fed to override other regulators, and eliminate the Federal Deposit Insurance Corp.’s ability to put a systemic firm into conservatorship. Frank also supports making public a list of systemically significant institutions. The debate over the bill began Thursday. The committee approved an amendment by Rep. Carolyn Maloney (D-N.Y.) to require that an interagency systemic risk council consider a company’s leverage and current regulation before it is slated as “systemic” ... * WASHINGTON (11/9/09)--Fannie Mae reported a $18.9 billion loss for the third quarter, according to a company press release. This compares with a loss of $14.8 billion in the second quarter. Third quarter results were due to $22 billion of credit-related expenses. The results reflect the continued building of combined loss reserves and fair-value losses associated with the increasing number of loans acquired from mortgage-backed securities trusts to pursue loan modifications. The loss resulted in a net worth deficit of $15 billion as of Sept. 30, taking into account unrealized gains on available-for-sale securities during the third quarter. The Federal Housing Finance Agency, Fannie’s regulator, has submitted a request for $15 billion from the Treasury Department by Dec. 31 ...

Mica on iBloombergi CUs can help small biz funding gap

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WASHINGTON (11/9/09)--While credit union funds could not fully make up the difference, credit unions could fill "a small piece" of the business lending gap that has been created by the recent bankruptcy filing of CIT Group, Credit Union National Association President/CEO Dan Mica said in an appearance on Bloomberg TV. And he stressed credit unions could do even more "if we're just given a little leeway by Congress." Supporting 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, is a "crucial issue" for both the U.S. Congress and the country in general, Mica said. He added that the legislation could help inject up to $10 billion in new credit union lending to bolster the struggling economy and create more than 100,000 new jobs. Specifically, the legislation, which is awaiting congressional action, would increase credit unions’ cap for member business lending (MBL) to 25% of a credit union's total assets, up from the current 12.25% limit. It also would raise the "de minimis" threshold for a loan to be considered a "member business loan" to $250,000, from $50,000, and exempt from the cap loans made to non-profit religious organizations, as well as those made in qualified underserved areas. The legislation would aid the economy at no cost to taxpayers, Mica emphasized. In fact, he said, increasing the amount credit unions are allowed to lend "would ultimately raise” tax revenue by creating more strong jobs from small businesses and could aid economic recovery "without spending one dime of government money." Credit union business loans can be used for nearly any business purpose as long as the member seeking the loan meets some requirements, Mica said during the 11-minute interview with Pimm Fox, host of Bloomberg's "Taking Stock" program. While commercial lending from banks has decreased 8% over the last year, business lending from credit unions has increased 14%, "and we can go up a lot more" if given the green light from congress, Mica said. Asked who is objecting, Mica said a "certain group" in the banking community regularly opposes non-profit financial services entities, such as credit unions. But, he said, the recent decreases in bank lending in the face of increased credit union lending shows that "their argument is hollow." In a related story, the Washington Post on Friday reported that while large U.S. businesses continue to have some success in obtaining loans, many smaller U.S. firms are still being rejected by banks. One example found a business owner was forced to look beyond U.S. shores, opting for funding from foreign banks when striking out at domestic banks.

NCUA will respond to exam temperance letter

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WASHINGTON (11/9/09)--The National Credit Union Administration (NCUA) will respond with a letter this week to Rep. Barney Frank’s (D-Mass.) request that federal regulators “show some temperance” during their examinations of financial institutions, NCUA Director of Public and Congressional Affairs John McKechnie told News Now. In a letter sent to NCUA Chairman Debbie Matz and the other federal financial regulatory leaders, Frank and co-signer Rep. Walter Minnick (D-Idaho) asked for the regulators to take a temperate approach to examinations so financial institutions “can continue to lend money to help the economy improve.” The legislators criticized seemingly tightening capitalization standards that have forced some financial firms to restrict their lending practices, and noted that CAMEL ratings should give greater weight to an institution’s liquidity and core earnings instead of focusing so closely on asset quality. “While our regulators need to uphold safety and soundness standards in this difficult economy, unnecessarily aggressive decisions made in the field by individual examiners or teams” that require capital in excess of the “official regulatory standard” for being well capitalized “must be avoided” to prevent unnecessary failures. “We are calling upon you to take the long view” and to use “wisdom and experience” to to guide field staff, Frank and Minnick wrote.