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Washington Archive

Washington

Inside Washington (11/30/2008)

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* ALEXANDRIA, Va. (12/1/08)--National Credit Union Administration (NCUA) Chairman Michael Fryzel said last week that the most important step taken by his agency to deal with financial market dislocations may its adoption of a 12-month examination program. The NCUA Board voted unanimously to approve the accelerated exam schedule at its Nov. 20 open meeting. Fryzel was addressing more than 50 Illinois credit union executives at a luncheon following a tour of Baxter CU in Vernon Hills, Ill. The chairman said the new program equips NCUA with additional and essential tools to oversee the safety and soundness of the credit union movement. Pictured from left are Baxter CU representatives: Jeff Johnson, senior vice president and chief information officer; John Bratsakis, senior vice president-Business Development; Bob McKay, senior vice president-chief operating officer; NCUA Chairman Fryzel; Carl Presto, vice president-Finance; Mike Valentine, president/CEO; and Baxter board member Bob Benziger … * WASHINGTON (12/1/08)--U.S. Small Business Administration (SBA)Acting Administrator Sandy Baruah said last week that the plan by the Treasury and the Federal Reserve to improve market conditions for asset-backed securities--including those composed of SBA-backed small business loans--should be welcome news to credit-hungry small businesses across the country. The Treasury-Fed plan establishes the Term Asset-Backed Securities Loan Facility, or TALF, to make loans to investors who purchase asset-backed securities made up of small business loans guaranteed by SBA, auto loans, student loans, or credit card loans. As a result, Baruah said, lenders will find it easier to sell the loans they make and use the proceeds of those sales to make new loans. The SBA said about $4 billion in securities backed by SBA-guaranteed loans are bought and sold in the secondary market each year, with the total outstanding amounting to about $15 billion. At present, a share of the current year’s volume of loans securitized by lenders--estimated at up to $3 billion--is essentially frozen. The resulting lack of liquidity hampers the ability of some of SBA’s lending partners to make new SBA-backed loans …

FHFA director plan may boost CU reps says CUNA

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WASHINGTON (11/26/08) -- The Credit Union National Association (CUNA) welcomes any opportunity to enhance credit union representation on the Federal Home Loan Bank (FHLB) boards of directors and said a new Federal Housing Finance Agency (FHFA) interim final rule could help with that goal. The Housing and Economic Recovery Act enacted this year changed current rules that said the FHLB boards were to be comprised of elected directors and those who were appointed by the Federal Housing Finance Board, the predecessor to the FHFA. The new law authorized members of the FHLBs to elect these independent directors, and the FHFA interim final rule outlines the process for nominating and conducting the election of these directors. “Although not directly related to the issues addressed in the interim final rule, CUNA’s greatest concern with regard to the selection of FHLB directors is that the current process makes it very difficult for credit unions to be represented on these boards,” CUNA wrote in its comment letter. CUNA said that there are nearly 900 credit unions that are members of the twelve district FHLBs, but noted this represents only about 11% of the 8,100 financial institutions members. “Credit unions, as well as other groups that comprise a minority of the FHLB’s membership, deserve representation on these boards,” CUNA said. The letter noted that the rule requires a certain number of the independent directors, known as “public interest” directors, to have at least four years of personal experience in representing consumer or community interests in banking services, credit needs, housing, or consumer financial protections. “We believe credit union representatives would make ideal candidates for these positions, as credit unions are not-for-profit financial cooperatives whose mission is to serve their members by providing affordable financial services.” CUNA pointed out. Use the resource link below to read the CUNA’s complete comments.

CUNA New leave categories for servicemembers

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WASHINGTON (12/1/08)—Under statutory changes that go into effect Jan. 16, credit unions and other employers must provide two new forms of military family leave. The National Defense Authorization Act of 2008, signed into law by President George W. Bush in January, established the following additional family leave policies for military servicemembers:
* "Qualifying exigency leave," which provides 12 work-weeks of leave under certain circumstances, such as short-notice deployments, military events or activities, and post deployment activities; and * “Military caregiver leave," which provides 26 work-weeks of leave to care for a covered servicemember with a serious injury or illness who is the employee's spouse, child, parent or next of kin.
The Department of Labor, in issuing a final rule to implement the 2008 rule changes, also updated the 1993 Family and Medical Leave Act (FMLA) employee notice provisions . The new rule covers standard posted notices, as well as individual notifications to an employee regarding such things as leave eligibility and conditions of leave. The rule also updates the medical certification requirements for FMLA leave, such as allowing an employer representative to contact, with limitations, an employee's health care provider directly about certification and clarifying the process for handling incomplete or insufficient certifications. Credit unions should consult their human resources counsel for a detailed analysis of how this new rule will impact their institutions, advises the Credit Union National Association compliance department, However, it can be assumed that credit unions will need to review and update their FMLA policies and procedures and FMLA-related forms/resources to reflect these changes. Also, CUNA notes, credit union must be prepared to provide adequate training on the updated rule to management and supervisors where appropriate.

NCUA to hold unscheduled closed meeting Tuesday

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ALEXANDRIA, Va. (12/1/08)--The National Credit Union Administration (NCUA) Board will convene at 10 a.m. ET Tuesday for a closed board meeting to consider "supervisory activities." The agency announced the meeting in a press statement Wednesday. No other information was available. The agency last held such a special session on Oct. 31. CUNA News Now will provide any available details. Follow News Now LiveWire for instantaneous alerts to your desktop or mobile device.

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 ...

Inside Washington (11/24/2008)

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* WASHINGTON (11/25/08)--President-elect Barack Obama’s pick for the next Treasury secretary, Timothy Geithner, has won support from industry observers. After rumors of Geithner’s appointment Friday, the Dow Jones industrial average increased more than 500 points. Geithner joined the Treasury in 1988 and served as undersecretary for international affairs from 1999 to 2001 (American Banker Nov. 24). He also directed policy development and the review department at the International Monetary Fund from 2001 to 2003. During a Senate Banking Committee hearing in April, Geithner also was perceived by senators as being more straightforward in replying to questions from lawmakers than Treasury Secretary Henry Paulson and Federal Reserve Board Chairman Ben Bernanke ... * WASHINGTON (11/25/08)--The Office of the Comptroller of the Currency (OCC) announced Friday that it granted its first conditional preliminary approval of a new type of national bank, a “self-charter,” designed to facilitate new equity investments in troubled depository institutions. When OCC grants preliminary approval to investors for a national bank charter, the charter remains inactive until the investor group is in a position to acquire a troubled institution. By granting the preliminary approval, the OCC expands the pool of potential buyers available to buy troubled institutions. The first such approval was granted Nov. 17 to establish Ford Group Bank ... * WASHINGTON (11/25/08)--The Federal Deposit Insurance Corp. (FDIC) Friday approved a final rule regarding the agency’s Temporary Liquidity Guarantee Program (TLGP), with a few changes. Originally, the FDIC planned to charge eligible entities 75 basis points annualized for guaranteed debt. After reviewing comments, the FDIC will charge based on a sliding scale. Shorter-term debt will have a lower fee structure and longer-term debt will have a higher fee. The range will be from 50 basis points on debt of 180 days or lesd to a maximum of 100 basis points for debt with maturities of one year or longer annualized ... * WASHINGTON (11/25/08)--The Treasury announced Monday an extension of its temporary guarantee program for money market funds until April 30, 2009, to support ongoing stability in the market. All money market funds that participate in the program and meet the extension requirements are eligible to continue to participate. The program will cover shareholders up to the amounts they held in participating money market funds as of the close of business Sept. 19 ...

NCUA has OKd Mass. bank-CU merger

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WASHINGTON (11/25/08)--Northeast Community CU, Haverhill, Mass., got the okay Nov. 17 from the National Credit Union Administration (NCUA) regarding that credit union’s proposed merger with Haverhill Bank. An NCUA spokesman confirmed Monday that the credit union had met all NCUA merger requirements--including certification of the membership vote—and was notified it could go ahead with its plan. With the merger approved, the resulting bank is expected to have combined assets of roughly $260 million, deposits totaling $220 million and capital totaling $30 million. It would have the second-largest market share in Haverhill, according to reports early in the year. Haverhill Bank and Northeast Community announced their plan to combine in August 2007. However, the NCUA in April deferred a decision on the merger until a membership vote could be taken which met the requirements of the agency's rules for converting a credit union to a mutual savings bank. The agency action, in effect, negated a 77-1 membership vote cast in September 2007 in which Northeast Community members approved the move. Sixty-seven depositors at Haverhill Bank had voted unanimously the week before to approve the bank's proposed merger. The Massachusetts Division of Banks has also given its requisite approval, according to a Haverhill Bank press release. The merger will be completed in December.

Print TV radio outlets cover CUNA holiday poll

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WASHINGTON (11/25/09)—More than 20 media outlets turned out to cover the ninth annual projection of consumers’ holiday spending plans produced by a national survey sponsored by the Credit Union National Association (CUNA) and Consumer Federation of America (CFA). The event was held Monday at The National Press Club in Washington, D.C.
Click to view larger image CUNA's Bill Hampel discusses on-camera the results of the consumer holiday spending survey with a reporter from Cox TV following the press conference today at National Press Club.
The survey of more than 1,000 adult Americans showed that a whopping 55% intended to decrease their holiday spending this year. (See related story in today’s News Now: Survey: Consumer desire to cut holiday spending soars.) CUNA's Mark Wolff, senior vice president of communications, said the annual event with CFA--particularly with its no-nonsense advice to help consumers control their holiday debt--has become another way to show credit unions are a trustworthy resource for the nation's consumers. Among the television, cable and radio networks, and newspaper groups that attended or covered the press conference:
* NBC News * CNN and CNN Newsource * Bloomberg * FOX News * ABC Radio News * Hearst TV * HD News * Cox TV * CBC News (Canadian Broadcasting Corp.) * AP TV (Associated Press)
Use the link below to read more stories of credit unions in the media.

CUNACFA Desires to cut holiday spending soar

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WASHINGTON (11/25/08)—The number of consumers saying they are determined to spend less this year on holiday gifts soared, according to the results of the ninth annual survey commissioned by the Consumer Federation of America (CFA) and the Credit Union National Association (CUNA). “Each year from 2003 to 2007, between 30% and 35% of consumers.
Click to view larger image CUNA Chief Economist Bill Hampel explains the results of the CFA/CUNA survey on consumer holiday spending during the press conference today (Monday)at the National Press Club unveiling the survey and results. Representatives from national and regional news organizations attended the event, including NBC News, AP TV, Fox, CNN, Bloomberg, and ABC radio.
reported that they were planning to cut back their holiday spending,” said CUNA Chief Economist Bill Hampel Monday at a press conference held to discuss the survey findings. This year, he noted, that figured soared. Fifty-five percent of respondents, interviewed by phone between Nov. 6-9, said they were planning to reduce spending “somewhat,” with 27% indicating that they want to spend “much less than last year.” “As a result,” Hampel said, “we may see an actual decline in holiday spending for the first time in many years.” Not surprisingly, the shaky state of the economy and peoples’ concerns about their financial futures were cited as the foremost factor determining consumers’ desire to cut back on holiday spending—36% of those who intend to reduce spending said that was their main reason. “The financial crisis and sustained economic downturn the nation has been experiencing are taking their toll on consumers,” Hampel explained. “People are worried about their finances, job loss, and what the future will hold. Amid their uncertainty, they are reacting by reining in their spending plans.” Hampel said a primary factor fueling financial anxiety is concern about meeting monthly debt obligations. CFA Executive Director Stephen Brobeck noted that a record 48% said this was a concern, with 23% indicating they were “very concerned.” A year ago, only 40% said they were concerned, and that was amid rocketing gasoline and energy costs. Also named as factors contributing to lower spending plans this year: 22% said they had less money; 12.5% cited a desire to save or reduce debt; 10.5% pinned it on higher prices; and 9% said they have less income. The CFA/CUNA report is based on the recent survey of more than 1,000 representative adult Americans by Opinion Research Corporation. The CFA and CUNA suggest the following holiday spending tips to help consumers avoid falling into a seasonal debt trap:
* Make a budget and list what you will buy and how much you can afford to spend and then stay within that budget: * Comparison shop: You can easily save more than 10% on most items by comparing prices at different stores. Often the savings are even greater; * Pay off your holiday debts quickly and remember you are less likely to overdo if you pay with cash or check than if you use either credit or debit cards; * Start saving now for 2009—open a Christmas Club account: While these accounts do not pay much if any interest, they provide a practical way to save small amounts over time; * Be smart about gift cards: read the fine print on each card. If you don’t use the card quickly, it can lose value. There may be a fee for checking your balance as well as a monthly inactivity, maintenance, administrative, or service fee; * Pay attention to return policies. Some stores are tightening return policies. Also keep receipts and note time limits, restocking fees, and other factors that may affect your recipient; * And also, find low- or no-cost ways to enjoy the holiday season. Just a few changes to holiday habits can really ease the strain on a spending budget. Draw names to reduce the number of people for whom you buy gifts; give homemade items; make your own gift wrap; organize a potluck dinner rather than preparing and paying for the entire holiday meal.
CFA’s Brobeck advised, “With just a little planning, consumers can substantially reduce their holiday spending without sacrificing holiday quality.”

Mica New economic team needs to understand CUs

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WASHINGTON (11/25/08)—President-elect Barack Obama has put together an economic team for his incoming administration that is both highly experienced and well regarded, said Credit Union National Association President/CEO Dan Mica Monday. Obama, who will be sworn in Jan. 20 as the 44th President of the United States, announced the names of five of his intended economic advisers, including Timothy Geithner as Secretary of the Treasury. Geithner currently serves as president/CEO of the Federal Reserve Bank of New York, where he has played a key role in formulating the nation's monetary policy. Upon hearing the Obama transition announcement, CUNA’s Mica said the challenge to the credit union movement now is to ensure that team has a clear understanding of the role of credit unions in serving 91 million Americans. The CUNA leader said credit unions also must work to clearly define for the new administration the unique nature of credit unions as cooperative, not-for-profit financial institutions. He added that this goal includes “the vital issue of maintaining an independent regulator and insurance fund for credit unions.” “Developing this understanding is no unusual task for CUNA and credit unions – it is something we have done with nearly every new administration. Yet, we are consistently successful in developing a solid working relationship with each administration and impressing upon each with the need to support credit unions whenever they are considering action related to the financial system. “We fully expect to be successful again and look forward to working with this new team,” Mica pronounced. The Obama transition team announced the following:
* Geithner as Treasury Secretary. Before joining the Federal Reserve System, Geithner joined Treasury in 1988 and has served three presidents. From 1999 to 2001, he was Under Secretary of the Treasury for International Affairs. Then he served as director of the Policy Development and Review Department at the International Monetary Fund until 2003. * Lawrence Summers to be nominated as Director of the National Economic Council. Summers is currently the Charles W. Eliot University Professor at Harvard University and served as 71st Secretary of the Treasury from 1999 to 2001. He has also been the World Bank's top economist. * Christina Romer to be nominated Director of the Council of Economic Advisors. Romer is the Class of 1957 Professor of Economics at the University of California, Berkeley, where she has taught and researched since 1988. Prior to joining the Berkeley faculty, Romer was an assistant professor of economics and public affairs at Princeton University's Woodrow Wilson School of Public and International Affairs. She is co-director of the Program in Monetary Economics at the National Bureau of Economic Research and has been a visiting scholar at the Board of Governors of the Federal Reserve System. * Melody Barnes to be nominated Director of the Domestic Policy Council. Barnes is co-director of the Agency Review Working Group for the Obama-Biden Transition Team, and served as the Senior Domestic Policy Advisor to Obama for America. Barnes previously served as Executive Vice President for Policy at the Center for American Progress and as chief counsel to Senator Edward M. Kennedy on the Senate Judiciary Committee from December 1995 until March 2003. * Heather Higginbottom to be nominated as Deputy Director of the Domestic Policy Council. Higginbottom served as Policy Director for Obama for America, overseeing all aspects of policy development. From 1999 to 2007, Higginbottom served as Senator John Kerry's Legislative Director. She also served as the Deputy National Policy Director for the Kerry-Edwards Presidential Campaign for the primary and general elections. After the 2004 election, Higginbottom founded and served as Executive Director of the American Security Project, a national security think tank. She started her career as an advocate at the national non-profit organization Communities in Schools.
Once instated as the country’s chief executive, Obama must formally nominate his candidates for the positions he has designated. They, in turn, must go through a thorough vetting process by the U.S. Congress, which will either confirm or deny them the positions.

Inside Washington (11/21/2008)

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* WASHINGTON (11/24/08)--The Federal Deposit Insurance Corp. (FDIC) Thursday provided mortgage servicers and investors with a toolkit that outlines FDIC program terms at IndyMac, offers insight into characteristics that drive modification modeling at the bank, and provides a framework for implementing similar programs ... * WASHINGTON (11/24/08)--Lawmakers criticized regulators at a House Agriculture Committee hearing Thursday for allowing a turf war to slow efforts on creating better oversight of credit-default swaps (CDS). The creation of two CDS clearing houses is dragging because of reviews by the Securities and Exchange Commission (SEC), the Federal Reserve Board and the Commodities Future Trading Commission, witnesses said (American Banker Nov. 21). Also, the New York State Insurance Department announced Thursday that it would stop plans to regulate certain types of CDS contracts by Jan. 1. Lawmakers at the hearing said they were frustrated that the clearing houses have not been set up and asked what was taking so long. Erik Sirri, director of the SEC’s trading and markets division, said the agency is planning to finish its review of exemption requests by mid-December ... * WASHINGTON (11/24/08)--The Basel Committee on Banking Supervision announced Thursday a comprehensive strategy to address weaknesses in the financial market. The strategy has eight building blocks: strengthening the risk capture of the Basel II framework; enhancing the quality of Tier 1 capital; building additional shock absorbers into the capital framework that can be drawn upon during periods of stress and dampen procyclicality; evaluating the need to supplement risk-based measures with simple gross measures of exposure in both prudential and risk management frameworks to help contain leverage in the banking system; strengthening supervisory frameworks to assess funding liquidity at cross-border banks; leveraging Basel II to strengthen risk management and governance practices at banks; strengthening counterparty credit risk capital, risk management and disclosure at banks; and promoting globally coordinated supervisory follow-up exercises to ensure implementation of supervisory and industry sound principles ...

CUs post asset savings loan and member figures

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ALEXANDRIA, Va. (11/24/08)—Call Report data as of Sept. 30 shows credit unions remain financially sound but are not unscathed by repercussions of the country’s current economic turmoil. The credit union system posted asset, loan and share growth, as well an increase in membership, according to the National Credit Union Administration (NCUA). However, return on average assets declined and net income decreased. The 15.7% net income decrease was primarily attributed to a 71.9% increase in provisions for loan and lease losses as credit unions reserve for possible losses. The NCUA also noted that the credit union data reflects current stress in the financial industry by an increase in delinquency ratios in all loan types. “Credit unions’ continued high level of net worth will help them weather today’s turbulent economy;” said NCUA Chairman Michael Fryzel in a release. “However, credit unions are not immune to financial stress, as noted in the delinquency increase in categories such as credit cards and mortgage loans.” Fryzel said the NCUA is “keeping a watchful eye on these adverse trends as part of a broader commitment to maintaining a safe and sound credit union industry.” Details of major balance sheet categories and membership growth in federally insured credit unions from Dec. 31, 2007, to Sept. 30, 2008, include:
* Assets increased 6.4% to $801.7 billion from $753.4 billion; * Loans increased 6.3% to $560.0 billion from $526.9 billion; * Investments increased 15.5% to $164.5 billion from $142.5 billion; * Shares increased 5.8% to $668.9 billion from $632.4 billion; * Net worth increased 5.21% to $89.5 billion from $86.2 billion; and * Membership increased 2.0% to 88.5 million members.
The NCUA also noted the loan-to-share ratio increased to 83.73% percent. First mortgage real estate loans and lines of credit expanded 13.6%, used automobile loans grew 5.6%, and unsecured credit card debt increased 4.5%. New automobile loans continued to fall marking a 5.4% decline so far in 2008. Regular shares increased 6.3% while money market shares increased 14.4%, share certificates increased 1.4% and IRA/KEOGH accounts increased 8.4%. Loan growth slightly outpaced savings, therefore pushing up the loan-to-share ratio to 83.7% from the 83.3% at year-end 2007. The loan delinquency ratio increased 20 basis points, up from .93% to 1.13%, and the net charge-off ratio increased from 0.51% to 0.75% during the first nine months of the year. The return-on-average-assets ratio dropped from 0.64% to 0.51%. Use the resource link below for complete details of third quarter 2008 data on the NCUA Consolidated Balance Sheet.

CUNA wants more shared sign flexibility

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WASHINGTON (11/24/08)--The Credit Union National Association (CUNA) supports the goal of a National Credit Union Administration (NCUA) proposal to reduce burdens of the current share insurance sign requirements for shared branch networks, but urges even greater flexibility for credit unions. Currently, for tellers accepting share deposits for both federally insured and nonfederally insured credit unions, there must be a second sign adjacent to the official NCUA insurance sign. The second sign must list each federally insured credit union served by the teller, along with a statement that only those credit unions are federally insured. The proposed rule will replace the required list of credit unions with a general statement that not all of the credit unions served by the teller are federally insured and members should contact their credit union for further information. In a Nov. 21 comment letter to the agency, CUNA such additional flexibility as:
* Allowing credit unions to post a single sign in a conspicuous location in the lobby that would include the general statement that not all of the credit unions served by the teller are federally insured and members should contact their credit union for further information; or, alternatively, * Instead of the second sign, credit unions that provide service to members of other credit unions could have the option of providing a similar disclosure that the teller would hand out to these nonmembers. Either of these alternatives should serve the goal of sufficiently informing members of their insurance coverage, especially considering that very few consumers are members of nonfederally insured credit unions.
Also, CUNA wrote, a federally insured credit union that provides service to members of other credit unions should have the option of indicating either on the sign or any separate disclosure that it is federally insured. “This should alleviate concerns from members who may not be aware of the insurance status or may believe the status has changed when they read these new signs or disclosures. This is especially important in the current environment in which many consumers are concerned about the safety of the money they have in financial institutions,” the CUNA letter said.

Approved NCUA budget has 12.1 increase for 2009

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ALEXANDRIA, Va. (11/21/08)—The National Credit Union Administration (NCUA) Board during its monthly November meeting approved the final fiscal year 2009 budget and the initial year 2010 budget. The board set the 2009 budget at $177.86 million--a 12.1% increase from the 2008—but about $5 million less than the agency said it would need at its annual budget briefing last month.
Click to view larger imageClick for larger view
The shift in part reflects a significant downward revision in the number of new examiners the agency thinks it will need. However, 2009’s travel budget increased by 34%, which NCUA staff partially attributed to the revised examination cycle. For the fiscal year 2010, NCUA approved a tentative budget of $189.97 million--a 6.8% increase over the requested amount for 2009. CUNA’s Examination and Supervision Subcommittee will continue to monitor the agency’s budget, especially given the current economic crisis, according to CUNA Deputy General Counsel Mary Dunn. The NCUA Board yesterday also approved an increase in the 2009 operating fee scale, which the agency uses to determine the operating fee assessed to federal credit unions. The changes increase the operating fee scale by 6.77%. The operating fees for federal credit unions, which will be assessed based on assets as of Dec. 31, 2008, will be due to NCUA no later than April 15, 2009. In addition, the board during Thursday’s meeting increased the Overhead Transfer Rate (OTR) from the current 52% to 53.8% for 2009. Under the Federal Credit Union Act, NCUA may transfer funds from the National Credit Union Share Insurance Fund (NCUSIF) to fund administrative and other expenses related to federal share insurance. NCUA uses the OTR to allocate those expenses. According to the agency, the 2009 OTR reflects the results of its most recent examiner survey that it says indicates examiners are spending a larger amount of their time on insurance related issues--such as financial analysis, evaluating risks, and assessing efforts to protect earnings and net worth. NCUA staff indicated that the OTR increase attributable to insurance related issues is a trend likely to continue. Meanwhile, NCUA staff reported that NCUSIF’s equity level is now at 1.27% and is expected to be at that level at the end of this year--precluding the possibility of an NCUSIF dividend to federally insured credit unions. Agency staff noted that its 1.27% estimate is .01% below October’s projection. There are currently 246 CAMEL 4 and 5 credit unions, up from 211 at the end of last year. The total insurance loss expense for 2008 is estimated to be approximately $176.5 million.

CU service to underserved Rule change

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WASHINGTON (11/21/08)—Final changes to the National Credit Union Administration’s process of approving multiple group credit unions' service to underserved areas are a significant improvement from the agency’s original proposal, according to the Credit Union National Association (CUNA). However, while CUNA appreciates the modifications, the group will continue to seek changes to a rule it believes is needlessly complex. NCUA made the following changes to its proposal:
*The final rule preserves for “underserved area” applicants the existing exemption from a requirement to submit a supplemental letter. The agency had considered requiring a supporting letter from credit unions seeking to add an underserved area: * The final rule changes the economic distress criteria for determining if a community is an investment area so that it is more compatible with the criteria used by the Community Development Financial Institutions (CDFI) Fund. To qualify as an underserved area, the local community must be an “investment area,” as defined by the CDFI Fund and it must also be underserved by other financial institutions; and * The final rule eases a burden that would have required a one-page narrative statement that describes the “significant unmet needs” for loans or other financial services in a proposed area, which would be supported by relevant data. The final rule allows credit unions to meet this obligation by fulfilling the current requirement to “identify the credit and depository needs of the community and detail how the credit union plans to serve those needs.”
The rule is effective 30 days after publication in the Federal Register. Use the resource link below to access the complete rule.

Low-income standard broadened NCUA under plan

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WASHINGTON (11/21/08)—As it adopted a plan to broaden its rule on low-income designation, the National Credit Union Administration (NCUA) Thursday approved changes to its original plan that are intended to provide greater clarity to the process. The low-income designation rule is important in determining whether a credit union qualifies for assistance to help low-income members. NCUA board member Gigi Hyland said prior to the NCUA’s vote on the final that she hoped the agency’s action would serve to encourage credit unions to explore low-income designation by making the rules easier to understand. With low-income designation, a credit union can qualify for subsidies from the NCUA’s Community Development Revolving Loan Fund. Under the new designation rule, median family income (MFI) will be used instead of median household income (MHI) to define whether a credit union’s members may be considered low-income. To be a low-income credit union, a majority of members must meet the income standard. The switch to MFI is meant to eliminate confusion associated with the need to adjust MHI in metropolitan areas with higher costs of living. Also, the change betters aligns NCUA low-income designation criteria with its criteria for adding an underserved areas to a federal credit union’s field of membership and certification as a Community Development Financial Institution, according the agency. Under the final rule, low-income members are those who earn 80% or less of their metropolitan area MFI. Credit unions are not required to apply for low-income status. Based on information culled during a routine examination, an NCUA regional director will notify the credit union that it qualifies. The credit union then has 30 days to accept the designation. Use the resource link below to access the complete final regulation.

Post-merger net worth definition tweaked by NCUA

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ALEXANDRIA, Va. (11/21/08)--The National Credit Union Administration (NCUA) board yesterday voted unanimously to change the prompt corrective action (PCA) definition of a natural person credit union's "net worth" to include as capital the retained earnings of a credit union that is merging into it. The rule applies to credit union mergers taking place after Dec. 31, 2008. The change would be consistent for corporate credit unions as well. The new rule, in effect, implements a statutory correction that was carried in The Financial Services Relief Act of 2006, which addressed accounting anomalies that have arisen since PCA requirements were first instituted. At the time PCA requirements were mandated in 1998 by the Credit Union Membership Access Act, the "pooling method" was used for the financial reporting of a credit union merger. This allowed the acquiring credit union to combine its own retained earnings with that of the merged credit union for determining the post-merger net worth ratio for purposes of complying with PCA requirements. In 2001, Financial Accounting Statement (FAS) No. 141 replaced the "pooling method" with the "purchase method" for business combinations, with the effect that an acquirer's net worth would not increase as a result of the merger. This potentially reduces the post-merger net worth. The Financial Services Relief Act of 2006 essentially reversed that policy by expanding the PCA definition of "net worth" to incorporate the retained earnings of the merged credit union. This would also apply to other combinations, such as purchase and assumption transactions. These changes will only apply to measuring capital under PCA and will not apply for other financial reporting purposes. At the time the change was proposed in July, NCUA staff members told the board that credit unions have a more limited statutory definition of "net worth" than banks and thrifts do and that--had credit union net worth been defined in a manner similar to the definition applicable to banks and thrifts--the "congressional fix" for the "merger accounting problem" would not have been necessary. NCUA staff also noted that the new regime for net worth calculation in mergers would not reinstate the "pooling method," but would have a similar practical effect.

NCUA accelerates to 12-month exam schedule

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ALEXANDRIA, Va.(11/21/08)—Extraordinary economic times and an incumbent need to be proactive rather than reactive in credit union regulation spurred the National Credit Union Administration (NCUA) to approve an accelerated schedule for risk-based examinations. At its open board meeting Thursday, the NCUA approved a 12-month examination cycle, to supplant the current 18-month cycle. NCUA Executive Director Len Skiles, in presenting the plan to the board for consideration, said that more-frequent on-site reviews are warranted under the current economic upheaval in order to identify and mitigate safety and soundness concerns at an earlier stage. Earlier problem detection and earlier remedial action must go hand-in-hand, Skiles said, to potentially save the NCUA’s share insurance fund millions of dollars in addressing credit union problems. Skiles acknowledged that implementation of the accelerated exam schedule will be challenging and there is a cost associated with it, but he added that otherwise there was no downside to more frequent regulatory observations. Approximately $6.84 million has been budgeted for the program in 2009. The program authorizes 56 new positions, including 50 examiners, five supervisory examiners, and one human resource specialist. The hirings will occur throughout the year; therefore the NCUA equates the hiring to 45 new full-time equivalent positions. The focus of the program will be on states where market dislocations are the greatest. Under the approved rule, agency staff will present a written evaluation of and briefing on the 12-month program at the October 2009 NCUA open board meeting. Use the resource link below to access the NCUA regulation.

Inside Washington (11/20/2008)

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* WASHINGTON (11/21/08)--The financial services industry’s conversion to check imaging from paper check processing is nearly complete, payments executives estimate (American Banker Nov. 20). The shift to imaging is increasing sharply, said Richard R. Oliver, executive vice president, Federal Reserve Bank of Atlanta and manager of the Fed’s retail payments office. By the end of next year, the Federal Reserve expects to consolidate its item-processing operations to two locations--one in Atlanta for images, and one in Cleveland, Ohio, for paper checks and adjustments. Some check processors report that they are imaging nearly 100% of their incoming checks. Fiserv Inc., a nonbank check processor, is imaging 100% of its checks. Clearing House Payments Co. LLC said its image-exchange customers are sending 85% to 90% of their checks as images. Clearing House also reported that its volume grew 67% in October compared with last year. ...

Archived CU economic and legislative webinar available

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Click to view larger image From left, CUNA President/CEO Dan Mica, Political Affairs Senior Vice President Richard Gose and Legislative Affairs Vice President Ryan Donovan read questions from credit unions during yesterday's live CUNA webinar. The event was webcast from the CUNA offices on Pennsylvania Avenue in Washington, D.C. (Photo provided by CUNA)
WASHINGTON (11/20/08)—More than 600 credit unions tuned into Wednesday’s live webinar from the Credit Union National Association (CUNA) to address the challenges presented to credit unions as a result of the financial crisis. The event featured CUNA President/CEO Dan Mica, Political Affairs Senior Vice President Richard Gose, Legislative Affairs Vice President Ryan Donovan and Senior Economist Steve Rick. Rick provided an update of the current economic climate, Gose gave an overview of the election results, and Donovan offered a legislative update. Each focused on the credit union impact. With a new “working majority” in Congress, Mica said credit unions have a number of vital issues coming up. “Some issues will be in our best interest, and some will not,” he explained. “We will need to be even more nimble to move from one end of the spectrum to the other." The group discussed the opportunities and challenges ahead for credit union--including secondary capital, prompt corrective action reform, member business lending, protecting credit unions' regulatory structure/insurance fund, and leveraging the "white hat" image to help members and the country. Mica provided a glimpse of CUNA's approach to these issues in the 111th Congress. Affiliated credit unions can watch the one-hour archived webinar by clicking on the resource link below.

Inside Washington (11/19/2008)

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* WASHINGTON (11/20/08)--Treasury Secretary Henry Paulson was criticized Tuesday by lawmakers at a hearing for changing the course on the Troubled Asset Relief Program (TARP) and refusing to create of a loan modification program (American Banker Nov. 19). House Financial Services Committee members also suggested Paulson tricked congressional members into agreeing to the $700 billion bailout package. Rep. Gary Ackerman (D-N.Y.) said Paulson is “flying a $700 billion plane by the seat of [his] pants,” and the vote for TARP was the second-largest bait and switch scheme after the Iraq war. House Financial Services Committee Chairman Barney Frank (D-Mass.), who has worked with Paulson on policy, asked him why he would spend money to bail out American International Group but ignore Sheila Bair’s $24 billion loan modification plan. Bair’s plan is promising, Federal Reserve Board Chairman Ben Bernanke said during testimony at the hearing. Bernanke agreed the government needs to help more to prevent foreclosures ... * WASHINGTON (11/20/08)--The Federal Reserve Board approved the restructuring of the Fed’s check-processing operations in the Seventh District this week. Specifically, the Fed approved amendments to Appendix A of Regulation CC. The amendments are effective Jan. 31 ... * WASHINGTON (11/20/08)--The Federal Deposit Insurance Corp. (FDIC) announced that it will open a temporary office in Irvine, Calif., to manage receiverships and liquidate assets from failed financial institutions located in western states. The FDIC will hire non-permanent employees and contractors to work in the office based on the number of closings and receiverships ... * WASHINGTON (11/20/08)--In a speech Tuesday, Federal Deposit Insurance Corp. (FDIC) Chairman Sheila Bair indicated that debt coverage fees could drop. The agency has received comments for an interim rule on a temporary liquidity guarantee program, and “we are considering suggestions with regard to whether the debt guarantee program should cover very short-term funding or whether we should have a tiered-fee structure based upon the maturity of the debt guaranteed,” Bair said. The FDIC is scheduled to finalize the rule Friday ...

Underserved budget among NCUA agenda items today

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ALEXANDRIA, Va. (11/20/08)—The National Credit Union Administration (NCUA) is scheduled to address a broad array of agenda items at today’s open meeting, including the agency's 2009-2010 operating budget, issues regarding its examination program, and its underserved areas policy. At its annual budget briefing last month, NCUA projected a 15% budget increase to $182.9 million and an additional 85 staffers to accommodate program modifications the NCUA said were "necessary to address the current turbulent economic environment." The agency also said the overhead transfer rate is projected to be 55% and the operating fee is expected to increase 10% to oblige increased expenditures. The most significant NCUA program changes noted at the briefing would add additional staff, implement a 12-month examination cycle, develop a national examiner team to conduct high-risk exams, and centralize credit union chartering in 2009. The NCUA also proposed to allot a $300,000 expenditure over two years for the 75th Anniversary of the Federal Credit Union Act, an expense questioned by the Credit Union National Associtation in a recent comment letter to the agency. In fact, CUNA urged that the NCUA approach its entire budget with a sense of austerity, particularly in light of the troubling economic climate facing the nation and its credit unions currently. Also on today’s agenda, the NCUA is scheduled to vote on proposed revisions to the current federal regulatory process for approving multiple group credit unions' applications to serve underserved areas. CUNA does not support the plan and has questioned its very basis of the NCUA plan. "While we appreciate efforts to clarify and update rules, we are not aware of problems with the current process that indicate that the (field of membership) FOM Manual provisions on underserved applications are not clear and which would justify a broad new regulation on underserved areas and the application process," CUNA said in an August comment letter. Other agenda items include:
* A final rule addressing Part 702 of NCUA's Rules and Regulations, Prompt Corrective Action, expectd to be an amended definition of post-merger net worth; * A final rule addressing Parts 701 and 705, Low Income Definition; and * The quarterly insurance fund report.
To see the agenda, use the resource link below.

CUNA Bankruptcy issues to come in 111th Congress

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WASHINGTON (11/20/08)—The Credit Union National Association (CUNA) continues to assiduously monitor developments in bankruptcy legislation but is advising credit unions that the real story on changes to the code will unfold next year. CUNA's Governmental Affairs Committee is scheduled to meet in early December, and legislative pushes to change bankruptcy rules will be a top issue for discussion. Meanwhile, according to CUNA Vice President of Legislative Affairs Ryan Donovan, CUNA will be watching for a revised bill from Sen. Richard Durbin (D-Ill.), who is a proponent of giving judges authority to alter the terms of distressed mortgages in bankruptcy cases. Durbin, the Senate majority whip, this week announced introduction of his Homeowner Assistance and Taxpayer Protection Act, which is meant to provide foreclosure relief to mortgage borrowers. However, the bill varies little from legislation he offered at the beginning of the year, and which failed to clear the Senate. “The real story will be next year when he introduces his revised bankruptcy bill,” said Donovan Wednesday. Use the resource link below for CUNA resources on bankruptcy reform.

Senators uged to support MBL increase

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WASHINGTON (11/20/08)—Continuing its resolute push for increased member business lending (MBL) authority to help the country through its current credit drought, the Credit Union National Association (CUNA) urged top members of the Senate Budget Committee to consider such plan. In advance of the committee’s Wednesday hearing titled “The Economic Outlook and Options for Stimulus,” CUNA President/CEO Dan Mica sent the panel’s leaders a letter reiterating that without a statutory cap, credit unions could extend an additional $10 billion in business in the first year. “This represents significant economic stimulus that does not cost the taxpayers a dime and does not expand the size of government,” Mica said in his letter to Chairman Kent Conrad (D-N.D.) and ranking member Judd Gregg (R-N.H.). The CUNA letter also underscored that credit unions historically have lower net charge off rates for business loans than do banks. Referring to data from both the National Credit Union Administration and the Federal Deposit Insurance Corp., Mica noted that the average net charge off rate for credit union business loans was .19% in June 2008 compared to .73% for banks. In fact, he pointed out that for ten of the last eleven years, credit union net charge-off rates have been similarly lower than bank rates. “There is no economic, safety and soundness nor historical rationale to the (MBL) cap, which was enacted a decade ago. The cap exists to limit credit unions in this market – the only groups that benefits from credit unions being excluded are the banks that presently are withdrawing credit from small businesses,” Mica said in his letter. While bankers benefit, small businesses pay the price of the credit union business lending cap because they have fewer borrowing options, Mica said, and added, “(I)n the credit crunch, some are finding they have no options at all.” CUNA has sent similar letters to key House members.

NCUA seeks Treasury funds for distressed CU assets

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ALEXANDRIA, Va. (11/19/08)---National Credit Union Administration (NCUA) Chairman Michael Fryzel asked Congress Wednesday to encourage the U.S. Treasury Department to equip the NCUA to deal with troubled credit union assets. In a letter to congressional leaders, Fryzel asked federal lawmakers to intervene with the Treasury to secure funds necessary for the NCUA to construct a relief program for troubled assets. The NCUA chairman said the Treasury's recent decision not to purchase distressed assets under the Troubled Asset Relief Program (TARP), authorized under the Emergency Economic Stabilization Act, was a concern. He said NCUA stands ready to create a TARP-like program for credit unions, with Treasury back up, to serve as "an important potential avenue of relief." The NCUA would be responsible for establishing standards and procedures for the use of the funds under the plan. The NCUA letter was sent to the chairmen and ranking members of the House Financial Services Committee and Senate Banking Committee and House and Senate leadership. Credit Union National Association (CUNA) President/CEO Dan Mica said that access to Treasury funds through NCUA, as suggested by the NCUA chairman, could be “an important backstop for credit unions affected by the economic downturn.” “However,” he said, “CUNA continues to hear from credit unions who want a system-based solution that does not rely on Treasury funding to address credit union problems.” Mica noted that there are many ways such a solution could be structured to avoid reliance on taxpayer funds. “We will continue to work with Chairman Fryzel and the NCUA board to seek such an approach, which is reflective of the cooperative nature of the credit union movement and would not further burden the U.S. taxpayer,” the CUNA leader pledged.

Space still open for todays Dan Mica webinar

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WASHINGTON (11/19/08)--Affiliated credit unions can still register to participate in a special live nationwide webinar featuring Credit Union National Association (CUNA) President/CEO Dan Mica, today at 2 p.m. ET. The event will address the challenges presented to credit unions as a result of the financial crisis. The medium also will allow credit unions to correspond directly with Mica during the event. The Internet-based video conference is open to all CUNA-affiliated credit unions at no charge. Among the topics to be discussed:
* How the stage is set for a "working majority" in the Congress; * The opportunities and challenges ahead for credit union--including secondary capital, prompt corrective action reform, member business lending, protecting credit unions' regulatory structure/insurance fund, leveraging the "white hat" image to help members and the country; * The value of "credit union unity of purpose" and * CUNA’s vision of how that purpose can be achieved.
Affiliated credit unions can register, as well as hear directly from Dan Mica about today's webinar by clicking on the image below.
Click to view video (affiliated credit unions only)

Twenty-six corporates in NCUA liquidity program

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ALEXANDRIA, Va. (11/19/08)--The National Credit Union Administration (NCUA) Tuesday posted its list of 26 corporate credit unions that are participating in the agency’s Temporary Corporate CU Liquidity Guarantee Program (TCCULGP). On Oct.16, the NCUA approved the guarantee program, under which its National Credit Union Share Insurance Fund will provide a 100% guarantee on new unsecured debt obligations. All corporates were automatically covered for debt obligations issued through Nov. 17, 2008. However, they were then able to elect to opt out of the program by providing notice to the NCUA Office of Corporate Credit Unions. The NCUA’s list appeared to carry the names of all but one of the corporate credit unions, including the “corporates’ corporate”--U.S. Central. To qualify under the program, a debt obligation must be issued by eligible corporate credit unions on or before June 30, 2009, and mature on or before June 30, 2012. Included are promissory notes, commercial paper, inter-bank funding, and any unsecured portion of secured debt, according to the agency announcement. Under the plan:
* The amount of debt obligations covered by the guarantee per eligible corporate credit union may not exceed the greater of: * 100% of the eligible corporate credit union's maximum unsecured debt obligations outstanding during the period Sept. 30, 2007 through Sept. 30, 2008; * An amount determined by written approval of the agency's director of the Office of Corporate Credit Unions, with the prior concurrence of its director of the Office of Examination and Insurance, not to exceed $100 million; or * An amount determined by the NCUA board.
Use the resource list below to access the list of participating corporate credit unions or to read more about the program.

CUs get Paulson nod for lending efforts

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WASHINGTON (11/19/08)—With all that is on his mind these days, U.S. Treasury Secretary Henry Paulson still managed to give credit unions the nod Tuesday for their continued lending efforts during the country’s current credit squeeze. Paulson was testifying before the House Financial Services Committee on the government’s economic stimuli efforts under the Emergency Economic Stabilization Act. He appeared before the panel along with Federal Reserve Chairman Ben Bernanke and Federal Deposit Insurance Corp. Chairman Sheila Bair. Rep. Tom Price (R-Ga.), during a question period after Paulson’s testimony, said he had many smaller institutions in his district, such as credit unions and community banks, that would like to have access to TARP capital. Although he did not address credit union access to the TARP plan, Paulson did reply that they, in part, are key and will do a lot of lending. The Credit Union National Association (CUNA) has been asking federal lawmakers, as they consider additional economic recovery legislation, to increase credit unions' ability to be part of the solution for problems faced by consumers and small businesses. In letters to the leaders of the Senate Banking Committee and the House Financial Services Committee, CUNA has highlighted several regulatory changes it urges should be considered as part of an economic recovery plan. The letters recommend changes that would:
* Allow the National Credit Union Administration to implement a risk-based capital system for credit unions—similar to that of banks-- to help credit unions to better manage unexpected circumstances; * Eliminate the 12.25 % of assets credit union business lending cap as a means to provide much needed credit to America's small businesses without costing taxpayers a dime; and * Permit all credit unions to accept secondary capital.
(See related story: CUNA keeps CU message before Congress.)

CUNA keeps CU message before Congress

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WASHINGTON (11/19/08)—As the U.S. Congress investigates the evolving nature of the Treasury Department’s Troubled Asset Relief Program (TARP), the Credit Union National Association (CUNA) is keeping the message before key lawmakers that credit unions must be included in any assistance plan. CUNA backs a plan under which the National Credit Union Administration would develop a "shadow TARP" program for credit unions that would purchase mortgage loans and mortgage-related assets from credit unions, but wants backup funding from the Treasury if necessary. In advance of yesterday’s House Financial Services Committee oversight hearing on the Bush administration’s actions to restore economic stability, CUNA wrote to the panel’s chairman, Rep. Barney Frank (D-Mass.), and its ranking member, Rep. Spencer Bachus (R-Ala.), to press the case for credit union inclusion. Last week, Treasury announced it would abandon its plan to purchase troubled assets from financial institutions in favor of greater emphasis on capital infusions into financial institutions. That shift, said the CUNA letter, causes credit unions concern. “Although the Emergency Economic Stabilization Act explicitly includes America’s credit unions among the institutions eligible to participate under the (TARP) plan, the implementation of the program thus far has not included credit unions, and the Treasury’s announcement makes it unclear how credit unions will be included,” wrote CUNA President/CEO Dan Mica. Mica stressed, “We hope that no credit union will need to turn to Treasury or NCUA for assistance. However, should the need arise, it is critical that the mechanisms Congress has put in place through the enactment of the Emergency Economic Stabilization Act work for credit unions as well as banks and other entities.”

Inside Washington (11/18/2008)

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* WASHINGTON (11/19/08)--The Government Accountability Office (GAO) is slated to release a report Dec. 2 on the Troubled Asset Relief Program (TARP). The GAO and the Financial Stability Oversight Board supervise TARP. Two other TARP supervisors are not yet in place (American Banker Nov. 18). Neil Barofsky, assistant U.S. attorney for the Southern District of New York, was confirmed as a TARP special inspector general at a hearing Monday. He will testify before the Senate Banking Committee and then the Senate will vote on his nomination ... * WASHINGTON (11/19/08)--The Federal Deposit Insurance Corp. is scheduled to meet Friday to finalize a rule regarding the temporary liquidity guarantee program. The program, introduced last month, is intended to give corporate credit unions competitive standing in the market (News Now Oct. 17) ... * WASHINGTON (11/19/08)--Those responsible for the mortgage market crisis should go to jail, Kenneth Donohoe, inspector general at the Department of Housing and Urban Development, told attendees of a mortgage fraud conference in Washington, D.C., last week. He noted his concerns regarding the Federal Housing Administration’s (FHA) ability to take on the refinancing load (American Banker Nov. 18). A penalty of $100 million in fines and 30 years in prison for defrauding the agency could save the FHA, he said. Prohibiting down payments assistance to borrowers or anyone involved with the loan also could help, because down payment assistance is a magnet for fraud schemes, Donohoe said ... * WASHINGTON (11/19/08)--Privately held financial institutions are eligible for funds in the Treasury Department’s capital purchase program, the department said Monday. To collect, institutions must apply by Dec. 8. Public institutions had until Friday to apply. The Treasury has invested $158.6 billion in 29 institutions (Financial Week Nov. 18). Privately held institutions follow similar rules to public institutions but the Treasury can only buy an additional 5% of underlying shares compared with 15% in public institutions ... * WASHINGTON (11/19/08)--National Credit Union Administration Vice Chair Rodney Hood last week presented the National Association of Realtors with its federal credit union charter at the association’s annual meeting in Orlando, Fla. Realtors FCU, Rockville, Md., is slated to open next year. From left are Dick Gaylord, president of the National Association of Realtors; Dale Stinton, CEO, National Association of Realtors, and Hood. (Photo provided by the National Credit Union Administration) ...

NCUA announces mortgage help plan for CU members

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ALEXANDRIA, Va. (11/19/08)—National Credit Union Administration (NCUA) Chairman Michael Fryzel unveiled an initiative Tuesday to help credit union members, who are experiencing mortgage-related financial difficulties, preserve their homeownership. The proposed new program, called Credit Union Homeowners Affordability Relief Program (CU HARP), would allow the NCUA, through its Central Liquidity Facility (CLF), to work with credit unions and their members to temporarily lower monthly mortgage payments. In addition to NCUA Board approval, the agency said CU HARP must also receive sign off by the U.S Treasury Department and the Federal Reserve Board. According to an NCUA announcement, the CLF would provide credit unions with funds, borrowed from the Treasury, at lower rates than otherwise available through private sources. In turn, credit unions are expected to pass the entire rate reduction to struggling low- and moderate- income borrowers. The credit union, in exchange for the reduced likelihood of borrower default on the mortgage, would also match the rate break, doubling the benefit to struggling homeowners, Fryzel said of the plan. The agency said CU HARP will be administered at no cost to taxpayers: CLF loans are made to credit unions on a fully secured basis, and all advances received by the CLF will be repaid to the Treasury’s Federal Financing Bank, with interest. The program will receive initial funding of $2 billion. A credit union would have the option of setting the period of the rate break, from three to five years, and would be able to create a 40-year maturity and/or reduce the principal balance to increase mortgage affordability, said the agency announcement. “My principal reason for advancing CU HARP is simple: The consumer must not be left out of the broader government efforts to mitigate the housing and credit market dislocations,” stated Fryzel. “CU HARP is an effort to foster a solution whereby the NCUA and credit unions work together to assist distressed borrowers. It represents what I believe to be an innovative and practical use of federal homeowner assistance that will also benefit credit unions and the market. “At the same time, the standards and requirements for CU HARP participation will be stringent and will enable NCUA to be responsible stewards of any public funds used. CU HARP will be a ‘win-win’ for all involved,” the chairman added. Borrowers participating in CU HARP would be subject to eligibility standards, including income level, default or danger of default, and required occupancy. The Credit Union National Association (CUNA) welcomed the NCUA’s proposed innovation. CUNA President/CEO Dan Mica said, “Although credit unions did not make the kind of mortgages that have done so much harm to borrowers, many credit union members are suffering because of a weak economy and collapsing housing markets. “This plan – a product of creative thinking -- is a welcome addition to the tools credit unions are already using to help their members face down financial challenges. In fact, some credit unions that many of these members belong to could likely benefit from assistance themselves.” He added that a further, welcome addition would be for the agency to adopt a ‘troubled asset relief program’ “for credit unions, by credit unions – to help those credit unions in distressed areas that are bearing the brunt of the collateral damage from the real estate crash.”

Inside Washington (11/17/2008)

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* ALEXANDRIA, Va. (11/18/08)—National Credit Union Administration (NCUA) Chairman Michael Fryzel last week reiterated the agency’s ongoing initiatives to protect consumers. They include the agency’s: multi-faceted media campaign to communicate facts about the National Credit Union Share Insurance Fund (NCUSIF) to credit union members and the general public; enhancement of NCUA’S Consumer Assistance Hotline, including expanded hours and number of available lines; continued close supervision of credit unions, particularly those dealing with exposure to a declining housing market and simultaneous credit crunch, and with additional attention to credit card and home equity delinquencies; performing comprehensive "stress tests" to gauge the NCUSIF’s ability to withstand potential losses during market dislocations; daily monitoring of the liquidity position of corporate credit unions and establishment of a team of capital markets specialists to aid the corporate credit union network; and a proposal to return to a 12-month supervisory contact/examination schedule for all federally insured credit unions. Fryzel made his remarks at the California/Nevada Credit Union League’s Annual Meeting and Convention in San Francisco. Fryzel challenged credit unions to develop fresh ideas about what they can do better and to reconnect to the philosophy of people helping people … * WASHINGTON (11/18/08)--The Federal Deposit Insurance Corp.’s (FDIC) loan modification plan is better than other government and industry plans to stop foreclosures, observers say (American Banker Nov. 17). It is still unclear if the proposal will solve conflict between investors and mortgage servicers, but the plan could “make a difference,” according to Ellen Seidman, director, New America Foundation’s Financial Services and Education Project. The proposal has safeguards so that it won’t become a catalyst for service to dump bad loans, she added. Congress supports the plan and hopes Treasury Secretary Henry Paulson will support it when he testifies today at a House Financial Services Committee hearing. The Bush administration opposes the plan ... * WASHINGTON (11/18/08)--Regulators Friday agreed to join efforts to oversee credit default swaps, with plans for at least one clearinghouse to be in place by the end of 2008. The President’s Working Group on Financial Markets, the Federal Reserve, the Securities and Exchange Commission, and the Commodity Futures Trading Commission signed a memorandum of understanding to share information (The Washington Post Nov. 15). Wall Street had been pressured by government officials to create a small clearinghouse to soften losses from the failure of a credit default swap dealer. Credit default swaps were developed about 10 years ago so bondholders could protect themselves against borrower defaults ... * WASHINGTON (11/18/08)--The Financial Crimes Enforcement Network updated its BSA electronic filing specifications. New error codes for e-filing have been added ...

Lame duck session packed with CU interest

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WASHINGTON (11/18/08)—Congress is back only briefly this week for a post-election lame duck session, but even so there are seven scheduled hearings of interest to credit unions. Chief among them is today’s study of the administration’s economic stabilization efforts and the evolving Troubled Asset Relief Program (TARP). The Credit Union National Association (CUNA) sent a statement to be included in today’s House Financial Services Committee record of its hearing with the lengthy title, “Oversight of Implementation of the Emergency Economic Stabilization Act of 2008 and of Government Lending and Insurance Facilities: Impact on Economy and Credit Availability.” CUNA has urged both lawmakers and Bush administration officials to ensure that credit union interests are addressed in any rescue plan so the country’s 8,000 cooperatively owned financial institutions may help their 90 million members deal with the country’s financial crisis. CUNA backs a plan under which the National Credit Union Administration would develop a "shadow TARP" program for credit unions that would purchase mortgage loans and mortgage-related assets from credit unions, but wants backup funding from the Treasury if necessary. Scheduled to testify at today’s hearing are U.S. Treasury Secretary Henry Paulson, Federal Reserve Board Chairman Ben Bernanke, and Federal Deposit Insurance Corp. Chairman Sheila Bair, as well as representatives from the Financial Services Roundtable, and banking and insurance industries. The committee will also hear from economists Alan Blinder and Martin Feldstein. Also of note to credit unions this week:
* Senate Banking Committee hearing today to examine the state of the country’s automobile industry; * House Financial Services Committee Nov. 19 hearing on a bill, currently being drafted, which would extend TARP to the country’s auto industry. Witnesses: to be announced. * Senate Banking Committee Nov. 19 nomination hearing to consider Neil Barofsky for the position of special inspector general for TARP; * Senate Budget Committee on the country’s economic outlook and options for further economic stimuli plans; * Senate Judiciary Committee Nov. 19 hearing titled, “Helping Families Save Their Homes: The Role of Bankruptcy Law;" and * House Small Business Committee review on Nov. 20 of recent federal efforts to improve credit conditions for small businesses.
Regarding pending credit union regulatory improvement legislation, congressional leaders’ announcements that they will not seek to address additional economic stimulus legislation this week has dashed long-shot hopes that some credit union provisions could be enacted this year. The House and Senate will return to full session on Jan. 6. to swear in the 111th Congress.

SBA changes to improve credit access

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WASHINGTON (11/18/08)—Credit unions and other lending partners of the U.S. Small Business Administration (SBA) will benefit from two recent changes the agency instituted to help increase small business access to capital. First, an interim final rule now allows new SBA loans to be made with an alternative base interest rate. The one-month LIBOR rate may now be used, in addition to the previously allowed prime rate. The SBA announcement explained the need increased rate flexibility this way: “In the past 60 days, both the prime and LIBOR rates have not yet returned to their historical relationship-of roughly 300 basis points between the two rates. “The mismatch between the rates is squeezing SBA lenders out of the lending market, since their costs are based on the LIBOR rate.” The SBA’s second rule change allows a new structure for assembling SBA loans into pools for sale in the secondary market. The SBA maintains that because the average interest rate will now be used, the pools will be easier for pool assemblers to create, thus providing incentives for more investors to bid on these loans. "The challenge small businesses face today is not the cost of capital, it is access to capital," said SBA Acting Administrator Sandy Baruah. Baruah added, “Interest rates are at historically low levels meaning money is inexpensive, yet lenders aren't lending and borrowers aren't borrowing. This indicates markets are frozen due to liquidity concerns. “This interim final rule is an important step to reenergize the lenders to make SBA- backed loans and will help open the gateway of capital for entrepreneurs." The effective date for both changes was Nov. 13.

CUNA New Form 990 UBIT webinar here

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WASHINGTON (11/18/08)—An important resource for state-chartered credit unions on new Form 990 reporting rules and other unrelated business income tax (UBIT) information has been added to the Credit Union National Association (CUNA) website. Credit unions can access CUNA’s archived version of its recent webinar, “New 990 Reporting Rules,” now through May 11. The webinar features:
* A UBIT background session presented by Larry Blanchard of CUNA Mutual Group, including an overview of UBIT, its application to credit unions, impact on credit union accounting issues, and current litigation surrounding UBIT issues. Blanchard is the chair of CUNA’s UBIT Steering Committee. * Karen Gries and Rich Gabrielson, from the accounting firm of LarsenAllen, LLP, discussing the recently redesigned Internal Revenue Form 990, which is filed annually by state-chartered credit unions.
Gries and Gabrielson noted that changes to the IRS form are intended to enhance transparency and promote tax compliance. The new form will be used for the 2008 tax year, filed in 2009. The LarsenAllen experts shared preparation tips, such as the fact that there will be transition relief available for smaller organizations using a phase-in requirement for filing the new form over a three year period. Also, they highlighted a number of items on the new form that may be of importance to credit unions, such as a front-page summary snapshot, the governance section, information on noncash contribution reporting, and the form’s focus on compensation/excess benefit transactions. Gries and Gabrielson discussed some potential problems for credit unions using the new form. For instance, they noted that the “governance” section requests information regarding the business and family relationships of certain individuals—such as officers, directors, trustees or key employees. It seeks information also on the number of voting and independent members of the board, and whether a copy of the Form 990 is provided to board prior to filing. The form also asks for a description of the board's process of review, which Gries and Gabrielson said may require a credit union to reschedule its board meeting to accommodate a board review before the filing of the form. For full details on this and other Form 990 issues, use the resource link below to sign up for the CUNA webinar.

Dialogue part of Nov. 19 Dan Mica webinar

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WASHINGTON (11/18/08)--The challenges presented to credit unions as a result of the financial crisis will be addressed in a special live nationwide webinar featuring Credit Union National Association (CUNA) President/CEO Dan Mica, Wednesday at 2 p.m. ET. The medium will allow credit unions to correspond directly with Mica during the event. The Internet-based video conference--open to all CUNA-affiliated credit unions at no charge--will focus on the financial crisis and how credit unions can leverage their "white hat image" to help minimize the impact of the crisis on credit union members, as well as the nation itself. "We are developing a vision for how credit unions can work for their members and the nation, through the Congress and the regulatory agencies, to help them through these difficult times," Mica said. "The Congress will have a 'working majority,' meaning that if they decide to do something quickly, they can move very fast. We are going to need to be ready to act in any number of ways." Affiliated credit unions can hear directly from Dan Mica about the Nov. 19 webinar, by clicking on the image below.
Click to view video (affiliated credit unions only)

Thorough review of fair value accounting urged

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WASHINGTON (11/18/08)--The Credit Union National Association (CUNA) has urged the Securities and Exchange Commission (SEC) to perform a “thorough and comprehensive examination of the positive and negative effects of mark-to-market accounting, especially when used in a stagnant market.” CUNA’s viewed were expressed in a comment letter to the SEC in response to its 90-day study on mark-to-market accounting. “While credit unions generally practice more conservative investment strategies than other financial institutions, the wide-spread nature of the current financial crisis is likely to have at least some effect on credit unions,” noted CUNA. The trade association encouraged the SEC to explore how an institution's intent to hold an asset can be incorporated into determining its "fair value." “We also ask that the study include a look at auditor practices and the inflexibility shown by some firms in conducting the measurement process under fair value accounting,” wrote CUNA. Access the full letter using the resource link below.

Inside Washington (11/14/2008)

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* WASHINGTON (11/17/08)--The Federal Deposit Insurance Corp. (FDIC) Thursday provided details on a plan intended to prevent 1.5 million foreclosures during the next year. The $24.4 billion-proposal will offer incentives to companies that agree to reduce monthly mortgage payments (The Washington Post Nov. 14) ... * WASHINGTON (11/17/08)--Freddie Mac is asking for $13.8 billion in government after posting a quarterly loss (Associated Press Nov. 14). The government-sponsored enterprise posted a loss of $25.3 billion Friday for the third quarter. Last year, Freddie posted a loss of $1.2 billion for the third quarter. This year’s loss is due to $9.1 billion in write-downs on mortgage securities, $6 billion in credit losses and a $14.3 billion charge to reduce tax asset value. Tightening credit, increasing unemployment rates and poor economic conditions have triggered higher numbers of delinquent loans, Freddie said. Freddie’s loan delinquency rate rose to 1.22% from 0.9% in June ... * WASHINGTON (11/17/08)--During a speech celebrating the 10th anniversary of the euro in Frankfurt, Germany, Federal Reserve Board Chairman Ben Bernanke encouraged central banks to coordinate on policy. “The merits of coordinated monetary policies have been discussed by policymakers and academics for decades, but in practice, such coordination has been quite rare,” he said. Efforts of central banks worldwide have contributed to improvements in the credit market, but the continuing volatility of markets and recent indicators of economic performance confirm that challenges remain, he said. Policymakers will remain in close contact and stand ready to take additional steps if needed. “We are especially aware of the importance of having close working relationships with our central bank colleagues around the world,” Bernanke concluded ...

Fryzel pushes lawmakers to review TARP application

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WASHINGTON (11/17/08)--National Credit Union Administration (NCUA) Chairman Michael Fryzel in a letter Friday asked Congressional leaders to ensure the U.S. Treasury uses the Troubled Assets Relief Program to purchase distress mortgage securities--as stipulated in the Emergency Economic Stabilization Act of 2008. Fryzel’s letter came two days after U.S. Treasury Secretary Henry Paulson said the TARP no longer would seek to buy distressed mortgage-backed assets. The move effectively eliminates the opportunity for credit unions to participate in program. “This concerns me deeply,” wrote Fryzel of the Treasury’s action. “Not only because Congress was specific in the legislation that this was a primary purpose of the rescue package, but also because this provision (in addition to the share insurance coverage increase) was welcomed by credit unions and seen as a mechanism which would enable many of them to remain safe, solvent, and secure,” he said. “While the majority of credit unions are not in need of such relief, there are some which may require its use,” Fryzel wrote. The NCUA letter was addressed to Senate Banking Committee Chairman Christopher Dodd (D-Conn.) and Ranking Member Dick Shelby (R-Ala.), as well as House Financial Services Committee Chairman Barney Frank (D-Mass.) and Ranking Member Spencer Bachus (R-Ala.).

State regulator group urges alt capital for CUs

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ARLINGTON, Va. (11/17/08)--The National Association of State Credit Union Supervisors (NASCUS) on Friday urged Congress to pursue “legislative and regulatory amendments” allowing credit unions access to supplemental capital. The group said its primary emphasis for the action is on credit union safety and soundness. “Given the current unpredictable economic conditions, allowing credit unions access to supplemental capital will bolster safety and soundness and provide further stability for the credit union system,” wrote NASCUS in letters to Senate and House leaders. “Unlike other financial institutions, credit union access to capital is limited to reserves and retained earnings from net income,” said NASCUS. “Since net income is not easily increased in a fast-changing environment, regulators recommend additional capital-raising capabilities for credit unions.” In its letter, NASCUS emphasized that while credit unions remain safe and sound in this troubled and volatile market, supplemental capital will enhance their ability to react to market conditions, grow into the future and serve their members in times of economic trouble. “Further, supplemental capital will allow credit unions to protect their liquidity as well as empower them to respond proactively and efficiently in a constantly changing financial environment,” said NASCUS.

Small biz pays price of loan limits on CUs House told

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WASHINGTON (11/17/08)--Small businesses pay the price of the limit on credit union business lending, another reason to lift the cap in upcoming economic stimulus legislation, the Credit Union National Association (CUNA) wrote in letters to leaders of the House of Representatives and its Financial Services Committee. The only group that benefits from the credit unions being limited in business loans is banks, CUNA President and CEO Dan Mica wrote in letters to House Speaker Nancy Pelosi (D-Calif.), Majority Leader Steny Hoyer (D-Md.) and Financial Services Committee Chairman Barney Frank (D-Mass.) and Ranking Member Spencer Bachus (R-Ala.). Further, Mica wrote, an additional $10 billion in business loans could be made by credit unions in the first twelve months once the cap is lifted. “Small businesses pay the price of the credit union business lending cap because they have fewer options; and in the credit crunch, some are finding they have no options at all,” Mica wrote. The CUNA president emphasized that “considerable data on credit union member business lending demonstrates this type of lending is sounder than both commercial extended by banks as well as other types of credit union loans.” Mica called it a “myth” that credit unions do not have a history of making business loans. He said that notion is “dispelled by the fact that when Congress capped credit union business lending, credit unions with significant experience doing this type of lending were exempted by the cap.” Use the link below to access the complete text of CUNA’s letters to the House leaders--text of letter to Speaker Pelosi is same as in others.

CUNA urges Treasury on shadow TARP for CUs

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WASHINGTON (11/17/08)--Noting that credit unions want to handle their own issues themselves arising from the financial crisis, the Credit Union National Association (CUNA) has also urged the Treasury Department to work with the National Credit Union Administration (NCUA) to stand behind credit unions if needed. Wednesday, Treasury Secretary Henry Paulson announced his agency would not pursue a plan to purchase troubled assets from financial institutions under the auspices of the Economic Emergency Stabilization Act (EESA) and its “Troubled Asset Relief Program” (TARP). CUNA President/CEO Dan Mica, in a letter to Paulson, called the decision “troubling,” noting it essentially cuts out credit unions from any help under the EESA. “We continue to believe, however, that because no one knows the extent of the financial crisis, credit unions should, as Congress intended, be able to call upon the resources available under EESA, if the reserves of the National Credit Union Share Insurance Fund (NCUSIF) prove to be insufficient,” Mica wrote to the Treasury secretary. CUNA has urged NCUA to develop a “shadow TARP” program for credit unions that would purchase mortgage loans and mortgage-related assets from credit unions. Under CUNA’s proposal, the program would be self-funded from within the credit union system and operated out of the NCUSIF. Mica said that, by coordinating with NCUA for a broad asset purchase program for credit unions, the program would not only remove these assets from credit unions' balance sheets, but also provide a net worth contribution to affected credit unions achieving the same purpose that the capital purchase program--for which credit unions are not eligible--does for other institutions. “In that connection, we also urge Treasury to work with NCUA to specifically designate and set aside the appropriate level of funds that would be available to purchase credit union assets or provide direct capital infusions, should the need for such assistance from Treasury materialize,” CUNA wrote. Access the full text of CUNA’s letter to the Treasury secretary using the link below.

Inside Washington (11/13/2008)

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* WASHINGTON (11/14/08)--The Federal Reserve Board, the Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency and the Office of Thrift Supervision Wednesday released guidance to banks and thrifts lending to creditworthy borrowers. The guidance focuses on strengthening capital, working with mortgage borrowers and structuring compensation ... * WASHINGTON (11/14/08)—The U.S. Treasury official in charge of overseeing the agency’s evolving $700 billion financial rescue fund, Neel Kashkari, will appear Friday before the House Oversight and Reform subcommittee on domestic policy. Kashkari, Treasury interim assistant secretary for financial stability and assistant secretary for international economics and development, is the sole first panel witness at a hearing titled, “Is Treasury Using Bailout Funds to Increase Foreclosure Prevention, as Congress Intended?” A second panel of witnesses will include Michael Barr, former deputy assistant secretary for community development, Treasury Department; Anthony B. Sanders, W.P. Carey School of Business, Arizona State University; and Alys Cohen, National Consumer Law Center. The hearing is scheduled to take place just two days after Treasury Secretary Henry Paulson announced a major shift in the agency’s Troubled Asset Relief Program … * WASHINGTON (11/14/08)—The Credit Union National Association (CUNA) this week issued a final rule analysis of the Federal Reserve Board’s changes to Regulation C, which implements Home Mortgage Disclosure Act provisions. The Fed’s revisions make the rule’s definition of “higher-priced mortgage loan” identical to Regulation Z. Before the change, Regulation C required lenders to report the spread between the annual percentage rate (APR) on a loan and the yield on comparable Treasury securities if the spread was at least three percentage points for first-lien loans or five percentage points for subordinate-lien loans. Under this final rule, a lender will report the spread if the loan APR exceeds an average of comparable prime mortgage rates by at least 1.5 percentage points for first-lien loans or 3.5 percentage points for subordinate lien loans … * WASHINGTON (11/14/08)--House Financial Services Chairman Barney Frank (D-Mass.) has scheduled a hearing Nov. 19 on a plan to provide $25 billion in loans for the Big Three automakers (CongressDaily Nov. 13). The heads of Chrysler, General Motors and Ford are expected to testify. The bill is being drafted. Frank has said the funding would come out of the $350 billion portion of the $700 billion financial rescue fund that has not yet been designated by the Treasury. According to the article, Frank’s staff is studying the 1970s bailout of Chrysler as a starting point to drafting the bill … * WASHINGTON (11/14/08)--The Federal Deposit Insurance Corp. board of directors approved the new general counsel’s opinion on the insurability of funds underlying stored value cards and other nontraditional access mechanisms. The opinion, Opinion No. 8, replaces the previous Opinion No. 8, which was published in 1996 ...

NCUA has full Nov. 20 agenda

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ALEXANDRIA, Va. (11/14/08)—The National Credit Union Administration (NCUA) released the agenda for its open board meeting next Thursday and among the items for consideration, as expected, is the agency’s 2009-2010 operating budget, overhead transfer rate, and operating fee schedule, as well as issues regarding its examination program. At its annual budget briefing last month, the agency projected a 15% budget increase to $182.9 million and an additional 85 staffers to accommodate program modifications the NCUA said were "necessary to address the current turbulent economic environment." The agency also said the overhead transfer rate is projected to be 55% and the operating fee is expected to increase 10% to oblige increased expenditures. The most significant NCUA program changes noted at the briefing would add additional staff, implement a 12-month examination cycle, develop a national examiner team to conduct high-risk exams, and centralize credit union chartering in 2009. Also on the NCUA agenda:
* A final rule addressing Part 702 of NCUA’s Rules and Regulations, Prompt Corrective Action, expectd to be an amended definition of post-merger net worth; * A final rule addressing Parts 701 and 705, Low Income Definition; * A final rule addressing Part 701, Interpretive Ruling and Policy Statement (IRPS) 08-2, Criteria to approve service to underserved areas; and * The quarterly insurance fund report.
To see the agenda, use the resource link below.

CUNA and NAFCU recommend capital strategy

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WASHINGTON (11/14/08)--Out of agreement that the current system of capital standards for credit unions needs reform--compounded by the current economic crisis--the Credit Union National Association (CUNA) and the National Association of Federal Credit Unions (NAFCU) have issued a joint statement declaring they will work together "for change in capital standards applicable to credit unions." NCUA Board Chairman Michael E. Fryzel asked both trade groups to determine between them one method to pursue in addressing credit union capital--risk-based (PCA reform), or supplemental capital. The joint statement, in response to Fryzel's request, was sent to him yesterday. In the statement, the two trade associations acknowledge they have different areas of emphasis on the issue of capital standards. However, they note two objectives they share:
* A system based primarily on risk-based capital standards; and * Support for a system giving credit unions access to supplemental capital--in addition to retained earnings, now the only source of capital for most credit unions.
Use the link below to download the complete text of the CUNA/NAFCU statement.

Dodd Lack of foreclosure help may spark more legislation

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WASHINGTON (11/14/08)—Growing frustration with the pace of voluntary mortgage foreclosure mitigations may spark more legislation, according to the remarks of two key lawmakers this week. Senate Banking Committee Chairman Christopher Dodd (D-Conn.) said Thursday that he was speaking for himself and others in relating that more progress is needed “from our friends in the financial sector” in foreclosure mitigation, affordable lending, and curbing “excessive compensation.” He added that if such progress was not soon apparent, his panel stood ready to prepare legislation to address the gap. Dodd made his remarks at his committee’s hearing titled “Oversight of the EESA: Examining Financial Institution Use of Funding Under the Capital Purchase Program” On the House side, the chairman of the Financial Services Committee, Rep. Barney Frank (D-Mass.) has cited his perception of a lack of cooperation from mortgage providers in working out troubled loans. He also suggested Congress should consider legislation that could make renegotiating troubled loans easier.

Fryzel urges Paulson to reconsider TARP change

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ALEXANDRIA, Va. (11/14/08)—The chief federal credit union regulator called upon Treasury Secretary Henry Paulson Thursday to reconsider his announced reversal of the asset purchase function of the Troubled Assets Relief Program (TARP). National Credit Union Administration (NCUA) Chairman Michael Fryzel asked Paulson to immediately make a portion of the TARP funds available for the purchase of troubled assets from credit unions and others. The NCUA chairman’s urging was in response to yesterday’s Treasury announcement that the TARP Program would abandon its orginial strategy and would no longer seek to buy distressed mortgage-backed assets. Fryzel wrote to Paulson: “As a regulator and insurer of 8,000 financial institutions, I must be proactive rather than reactive. The financial climate demands that I have all the tools I need to protect the savings of the 90 million people who use credit unions.” “Although I can understand the initial actions that Treasury has taken to help the large banks, insurance companies, and other major financial institutions that have faltered or failed, I am concerned about the second-place status into which credit unions and other smaller financial institutions have been placed,” the NCUA chairman said. Fryzel also noted that “the federal government is expected to be undertaking firm and coherent steps to improve the situation,” and said that “if mitigating steps are not made available through TARP, some credit unions experiencing difficulties could face a considerably worsened financial environment.” The NCUA chairman reiterated his assessment that the majority of credit unions are performing well, despite the overall market conditions. However, he acknowledged there are some that may require the TARP assistance “that was originally set forth in the Emergency Economic Stabilization Act enacted last month.” Prior to Paulson’s announcement, the Credit Union National Association sought credit union access to the TARP Program, as well as urged the NCUA to set up a similar credit union-funded program under the National Credit Union Share Insurance Fund.

Waived MBL fees dont equal prepayment penalties says NCUA

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ALEXANDRIA, Va. (11/14/08)—Federal credit unions may recoup waived settlement costs and fees associated with a member business loan (MBL) without it being considered a prohibited prepayment penalty, according to a recent legal opinion issued by the National Credit Union Administration (NCUA). The opinion was written in response to CUNA inquiries seeking clarification on the statutory mandate prohibiting federal credit unions from charging a borrower a prepayment penalty. The NCUA answered that as long as the recoupement period is reasonable in terms of the size and type of fees involved, the action is not prohibited under the Federal Credit Union Act (FCUA). It is the NCUA’s view, its letter said, that an agreement stating a borrower will pay for fees initially waived if he or she closes the loan within one year does not constitute a prepayment penalty. A loan agreement should specifically disclose to borrowers the conditional nature of a fee waiver and the recoupment period should be only long enough as is “reasonably necessary to offset expenses associated with waived fees.” The NCUA also said it agrees with CUNA’s interpretation that a fee due at loan payoff, a so-called back-end fee, should be treated the same as a fee due at or before loan closing. “In principle, we agree but only if the back-end fee is one that is charged regardless of whether the MBL is paid early or at maturity,” said the agency opinion.

Final UIGEA rules unveiled by Treasury Fed

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WASHINGTON (11/13/08)-- The U.S. Department of the Treasury and the Federal Reserve Board Wednesday announced the release of a joint final rule to implement the Unlawful Internet Gambling Enforcement Act (UIGEA) of 2006. UIGEA prohibits gambling businesses from knowingly accepting payments in connection with unlawful Internet gambling, including payments made through credit cards, electronic funds transfers, and checks. Under the Internet gambling law, financial institutions must establish and implement policies and procedures to identify and block restricted transactions, or rely on those established by the payments system. According to an agency release, the final rule provides “non-exclusive examples of such policies and procedures and sets out the regulatory enforcement framework.” Compliance with the rule is required by Dec. 1, 2009. Earlier this week, House Financial Services Committee Chairman Barney Frank (D-Mass.) wrote to Treasury Secretary Henry Paulson and Federal Reserve Board Chairman Ben Bernanke to urge them to delay implementation of what he called "deeply flawed" UIGEA rules. (News Now Nov. 11) The Credit Union National Association (CUNA) has voiced concerns, both to the implementing agencies and to Congress, that provisions of the law could swamp credit unions and other financial institutions with compliance burdens. CUNA opposed the agencies' draft implementation of the law, saying it lacked clarity and sufficient definition of terms. “While we have not had an opportunity to review the full 66-page document in detail, the agencies have stated in their explanation to the final regulation that the federal government will not establish a list of businesses known to be involved in unlawful Internet gambling,” noted Kathy Thompson, CUNA’s SVP for Compliance. Thompason added that, in fact, the Fed and the Treasury Department "go to great length" to explain why it’s not possible for them to determine what entities are engaged in unlawful Internet gambling. “Without an ‘OFAC-type’ list where the government -- not private businesses -- ascertains who is engaging in unlawful activities, I do not see how credit unions and other financial institutions can reasonably be expected to develop a cost-effective compliance program. “With everything else going on in the financial world today, this doesn’t seem the time to burden credit unions with implementation of a law of questionable value,” Thompson said.

New RESPA rules unveiled

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WASHINGTON (11/13/08)—The U.S. Department of Housing and Urban Development (HUD) Wednesday announced final rules implementing its overhaul of Real Estate Settlement Procedures Act (RESPA) provisions. The changes, years in the making, are meant to simplify and improve disclosure requirements for mortgage settlement costs. Jeffrey Bloch, senior assistant general counsel of the Credit Union National Association (CUNA), said there are a few beneficial changes in the final rule from an earlier proposal, which will be good news to credit unions. Dropped from the final, Bloch said, is a cumbersome requirement that would have made settlement agents read a “closing script” of disclosures to a borrower at the closing table. CUNA strongly opposed this provision for a number of reasons, including the presumption that all individuals would prefer to receive the information in this manner. CUNA also was concerned that some might be insulted by a process in which information is read to them, with the possible implication that they are incapable of reading it for themselves. Also different from the proposal, the final RESPA rule will give lenders and settlement service providers 30 days to correct potential RESPA violations. Originally, HUD proposed a 14-day period. CUNA supported a longer timeframe. “Also, the Good Faith Estimate (GFE) is now three pages instead of the proposed four pages. In our comment letter, we opposed going from the current 1 page to 4 pages as this would be more confusing to borrowers. We welcome this slight improvement in the final rule,” Bloch said. Lenders will not be required to use the new GFE until 1/1/10. The final rule is expected to be published in the Federal Register Friday. CUNA will continue its review of the final rule and provide more analysis after close scrutiny of the details. Use the resource links below for more information on the RESPA rules.

Inside Washington (11/12/2008)

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* WASHINGTON (11/13/08)--Federal Deposit Insurance Corp. (FDIC) Chairman Sheila Bair expressed concerns regarding a loan modification plan unveiled Tuesday by industry representatives and federal regulators. Bair said the plan is not enough to achieve modifications of troubled mortgages and questions remain about the plan’s implementation. Specifically, uncertainties lie with “allowing extended amortization prior to interest-rate reductions, whether payment increases are capped for a loan’s life, the use of higher interest-rate caps, and reporting to determine compliance and results” (American Banker Nov. 12). The plan would help delinquent borrowers who are at least three months past due by providing them with modifications from Fannie Mae and Freddie Mac requirements. The modifications would drop borrowers’ mortgage-debt-to-income ratio to 38% on loans with a loan-to-value ratio of 90%. The plan was proposed by Fannie Mae and Freddie Mac, the Treasury, the Federal Housing Finance Agency and the Hope Now coalition ...

CUNA offers design help in mortgage registration plan

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WASHINGTON (11/13/08)—The Credit Union National Association (CUNA) has requested to be included in the design process as federal regulators proceed to hammer out details of a national licensing and registry program for mortgage originators. The program is required under the Housing and Economic Recovery Act, signed into law in July. It requires employees of state- and federally chartered credit unions, and others, who originate mortgages to annually register with the National Mortgage Licensing System and Registry as a "registered loan originator." The law requires the National Credit Union Administration and the federal banking agencies via the Federal Financial Institutions Examination Council (FFIEC) to develop and maintain the registry system in conjunction with the Conference of State Bank Supervisors (CSBS) and the American Association of Residential Mortgage Regulators. The FFIEC agencies have one year to put this program into place. In a letter to the NCUA, CUNA wrote Wednesday, “We have been actively involved in both providing information to our members about the new mortgage registration system and soliciting their views and concerns with regard to both the burdens and the areas in which further clarification is needed.” Therefore, the letter said, CUNA could assist federal regulators in understanding credit union concerns about the registry and licensing program prior to such a program being finalized. The CUNA letter went on to fully describe six main areas of concern. Use the resource link below to read the complete letter.

New urgency for CU-backed TARP says CUNA

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WASHINGTON (11/13/08)--After the U.S. Treasury Department yesterday said its Troubled Asset Relief Program would no longer seek to buy distressed mortgage-backed assets, the Credit Union National Association (CUNA) reiterated its call on the National Credit Union Administration (NCUA) to create its own credit union-funded troubled-asset relief program through the National Credit Union Share Insurance Fund. After Wednesday’s announcement by Treasury Secretary Henry Paulson, CUNA President/CEO Dan Mica expressed concern about the Treasury’s change of direction in not using the $700 billion of congressionally mandated funds for purchase of troubled assets from U.S. financial institutions--including credit unions. “Although the Economic Emergency Stabilization Act explicitly includes America’s credit unions, the implementation of the program thus far has not included credit unions, and the Treasury’s announcement makes it unclear how credit unions will be included,” said Mica. The CUNA leader pointed out that it has been CUNA’s position that credit unions not be disadvantaged by the government’s response to the nation’s financial crisis. Credit unions could have been covered under provisions of the original troubled asset purchase plan. But, because of the credit union capital structure, to date credit unions have not been eligible for the capital infusion. “An asset purchase program would have helped to establish values for some of these troubled assets in today’s dysfunctional markets,” said Mica. “We must be assured that the interests and needs of our 8,000 cooperatively owned financial institutions are addressed so they may help their 90 million members deal with this financial crisis,” said Mica. “At the least, we urge the Treasury to consider a set aside of funds to be used by Main Street financial institutions--such as credit unions.” Mica said CUNA prefers that credit unions be able to turn to the NCUA for assistance, so that credit union funds can “help credit unions solve their own problems, with backup funding from Treasury if necessary.” “We again urge NCUA to implement a program for credit unions--by credit unions--that accomplishes the intent of the Emergency Economic Stabilization Act for the movement,” he said. During the Oct. 30 NCUA budget review meeting, CUNA urged the agency to consider such a program exclusively for credit unions. Use the resource link below to access the related story.

Six blocked from future CU activity

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ALEXANDRIA, Va. (11/13/08)--The National Credit Union Administration (NCUA) has issued orders prohibiting six individuals from participating in the affairs of any federally insured financial institution. The NCUA posted the following list of actions on its Web site:
* Thomas Gerald Hayes, former executive president of ELGA CU, Burton, Mich., was convicted of embezzlement and sentenced to 21 months in prison, four years of supervised probation and ordered to pay $130,301 in restitution to the credit union; * Sherril C. Millien, a former teller at Rockland Employees FCU, Spring Valley, N.Y., was convicted of grand larceny and sentenced to serve 6 months in prison, five years of supervised probation and ordered to pay $45,000 in restitution to the credit union; * Randal Scott Replogle, former ATM representative at Blair FCU, Altoona Regional Health System FCU and Huntingdon FCU, Altoona, Pa., was convicted of property theft and sentenced to serve 60 months of supervised probation and ordered to pay a $500 fine; * Lucinda Sterling, former vice president of the liquidated Nor-Car FCU, Easton, Pa., consented to entry of a Prohibition Order to avoid the time and cost of litigation, (Editor’s Note: In June 2006, Betty Jean Barachie, 39, of Kunkletown, Pa., was sentenced to 27 months in prison after pleading guilty to embezzling more than $1.5 million from Nor-Car, causing the credit union to be placed into receivership.) * Amy M. Taylor, former manager of Hurd Employees CU, Greenville, Tenn., was charged with theft, entered a pre-trial diversion program, and was ordered to submit to two years of supervised probation and to pay restitution of $14,000 to the credit union; and * A Notice of Prohibition was issued against Josette L. Williamson, convicted of petit larceny against WIT FCU, Rochester, N.Y., and ordered to perform 120 hours of community service.
Violation of a prohibition order is a felony offense punishable by imprisonment and a fine of up to $1 million. Use the resource link below to find NCUA prohibition orders online.

NACHA plan needs small changes says CUNA

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WASHINGTON (11/13/08)—Although recommending a few tweaks, the Credit Union National Association (CUNA) came out in support of a NACHA proposal to clarify its requirements for authorizations and returns. Specifically, NACHA is proposing to clarify the requirements for obtaining authorization of an automated clearinghouse (ACH) payment and amend its rules regarding the process by which receiving depository financial institutions (RDFIs) handle claims of unauthorized debits. Additionally, NACHA want to modify the ACH codes used to classify a return (return reason codes) to more effectively identify the reason an unauthorized debit is returned. In its Nov. 7 comment letter, CUNA said it supports NACHA’s proposal to clarify the requirements for obtaining a receiver’s authorization for an ACH payment by stating that an unclear, deceptive or otherwise invalid authorization is not valid. However, CUNA argued, the terms “unclear” and “deceptive” are subjective and should be clarified in the rules. CUNA also supported NACHA’s recommendation to eliminate all references to the phrase “penalty of perjury” with regard to a receiver’s written statement that a debit was unauthorized. Such a phrase may raise concerns that notarization may be required in certain jurisdictions, the CUNA letter warned. Use the resource link below to read the entirety of CUNA’s comments.

Mica Attend GAC in year of major changes

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WASHINGTON (11/13/08)--2009 will be a year of major changes, and credit unions should plan to attend the Credit Union National Association's 2009 Governmental Affairs Conference (GAC) to stay abreast of those changes, says CUNA President/CEO Dan Mica in a special video invitation.
In the video, Mica outlines why it's important to attend the GAC, which will be held Feb. 22-26, 2009, at the Washington Convention Center in Washington, D.C. (Push the play button to view the video.) He notes changes in economic policies, tax policies, regulations, Congress, the White House, the Treasury and NCUA as all having a possible impact on credit unions and their members. In addition credit unions will celebrate their 100th anniversary, and CUNA and the Federal Credit Union Act will turn 75. The GAC headliners include:
* Steve Forbes, editor-in-chief of Forbes magazine, providing economic commentary on America's Economic Outlook and Opportunities; * Pundits Paul Begala, CNN political analyst, and Tucker Carlson, MSNBC senior correspondent, facing off over current developments in national news, politics and world issues; * "Lt. Dan Band," formed by Chicago composer Kimo Williams and Gary Sinese, star of "CSI New York," the hit CBS TV show. The band is named after Sinese's character in the 1994 blockbuster film, "Forrest Gump." The concert kicks off the GAC on Feb. 22 and is presented by the CUNA Councils.
For more information, use the link.

Inside Washington (11/11/2008)

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* WASHINGTON (11/12/08)--Office of Thrift Supervision (OTS) Director John Reich said that he plans to leave his position “sooner rather than later” (The Wall Street Journal Nov. 11). An exact date of his departure has not been set. Treasury Secretary Henry Paulson suggested in March that the OTS and the Office of the Comptroller of the Currency combine, which Reich rejected. The OTS is a division of the Treasury that oversees thrifts ... * WASHINGTON (11/12/08)--The Bush administration Monday purchased American International Group (AIG)’s troubled assets--the last time this type of authority will be used, according to observers (American Banker Nov. 11). Congress five weeks ago authorized the Troubled Asset Relief Program (TARP). The Treasury has not explained how the assets will be priced or if managers will be hired to oversee them. Observers say TARP’s lack of progress will hurt the market. At a speech Monday, Treasury Assistant Secretary Neel Kashkari was pressed for more details by audience members, but Kashkari said Treasury Secretary Henry Paulson will determine the next steps. Robert Clark, former comptroller of the currency, pointed out the Treasury is overstretched, and it’s hard to implement an unfamiliar program. Joe Mason, Louisiana State University professor, said it’s unlikely the asset-buying program will materialize ... * WASHINGTON (11/12/08)--No significant changes are expected at this weekend’s Group of Twenty (G-20) meeting, but observers say they hope the meetings will encourage collaboration with the Financial Stability Forum and international supervisory bodies. Forum representatives and International Monetary Fund (IMF) and World Bank presidents plan to attend the meeting. Both the bank and fund say they want to gain stronger international voices (American Banker Nov. 11). The forum announced recommendations in April for financial institutions to strengthen their liquidity and capital standards, and released an update of the recommendations last month to address specific issues regarding the nation’s financial crisis. Regulators need to avoid amplifying cycles that produced damage in the economy, said Svein Andersen, forum secretary general. Dominique Strauss-Kahn, IMF managing director, also plans to put out a five-point plan for regulatory restructuring at the meeting ... * WASHINGTON (11/12/08)--The National Association of State Credit Union Supervisors (NASCUS) provided comments Friday on the National Credit Union Administration’s (NCUA) proposed budget for 2009. NASCUS urged NCUA to consider the effect of changes to the federal examination program on state resources. It also asked for clarification on interpretations of NCUA’s proposed exam cycle changes and on questions about the authority, purpose and organization of the proposed National Examination Team. NASCUS also complimented NCUA on its proposal to centralize chartering functions and said the NCUA could improve the budget briefing public comment process by providing more information in additional formats ...

FHFA announces streamlined loan mods

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WASHINGTON (11/12/08)—The Federal Housing Finance Administration (FHFA) Tuesday announced a streamlined mortgage loan modification plan the agency said is intended to complement existing loss mitigation programs. According to the FHFA, which regulates Fannie Mae and Freddie Mac and the Federal Home Loan Banks, the program targets highest risk borrowers who have missed three payments or more, own and occupy the property as a primary residence, and have not filed for bankruptcy. “Fannie Mae and Freddie Mac own or guarantee almost 31 million mortgages, about 58% of all single family mortgages. Although these mortgages only represent 20% of serious delinquencies, I believe their leadership role combined with the many partners of HOPE NOW should spread this approach throughout the whole mortgage loan servicing business,” said FHFA Director James Lockhart. Homeowners who are spending up to 38% of their income on their mortgage payment and are threatened with foreclosure could have their monthly payments reduced by Fannie and Freddie under the program. Lockhart said the new program is the result of a unified effort involving Fannie and Freddie, the administration’s HOPE NOW program and its twenty-seven servicer partners, the U.S. Department of the Treasury, the Federal Housing Administration and FHFA. He said the group also drew on the expertise of the Federal Deposit Insurance Corp. The FHFA director said Fannie Mae and Freddie Mac soon will issue specific guidance to their servicers, and added that implementation will be required by Dec. 15. To encourage participation, servicers will receive a fixed payment of $800 for each loan modified through this program. Use the resource link below for more information.

CUs reap 334250 in grants to help tax prep

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WASHINGTON (11/12/08)—Credit unions were again included in the matching funds granted recently by the Internal Revenue Service (IRS) to support its Volunteer Income Tax Assistance (VITA) program. Three credit union organizations received a total of $334,250 of the $8 million IRS gave out in matching VITA grants. State Employees CU, a $15 billion-asset, Raleigh, N.C., credit union, received a $122,850 grant. El Paso (Tex.) Credit Union HOAP, Inc., described by the Texas Department of Housing and Community Affairs as a nonprofit corporation formed by eight area credit unions promoting homeownership and homebuyer education, received $86,400. The National Federation of Community Development Credit Unions was awarded $125,000. VITA is an IRS program that helps low- and moderate-income taxpayers complete their annual tax returns at no cost. Credit unions and community organizations awarded grants receive IRS-provided training in the preparation of basic tax returns and establishment of tax preparation sites. Questions about the program may be addressed to the Grant Program at 404-338-7894 (not toll-free) or by e-mail at Grant.Program.Office@irs.gov. The National Credit Union Administration (NCUA) has been working with the IRS to prepare a video to be used to encourage credit unions to offer VITA services to their membership and communities.

Compliance What to do about expired flood form

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WASHINGTON (11/12/08)—The Federal Emergency Management Agency (FEMA) flood hazard determination form carried an Oct. 31 expiration date, but FEMA has not yet issued a new form. What’s a credit union to do? The Credit Union National Association (CUNA) November Compliance Challenge advises credit unions that they are to continue using the old Form 81-93 Standard Flood Hazard Determination until FEMA issues its new one. What’s more, CUNA’s compliance team points out, FEMA is providing time for credit unions and other users of the form to update their systems to the new version. The effective date for mandatory use of the new document will be six months from the date of its approval by the agency. And which credit unions use this form? CUNA explains that a credit union must perform a flood hazard determination whenever it makes, increases, extends, or renews a loan secured by a “building,” defined as a home on a permanent foundation or a mobile home that is located in a special flood hazard area (SFHA). The credit union or service provider acting on the credit union’s behalf must document the determination on the FEMA’s Standard Flood Hazard Determination Form. This form must be retained, either in hard copy or electronic form, for the period of time that the credit union owns the loan. To read this month’s Compliance Challenge, or for access to more information on flood insurance and the FEMA flood form, use the resource links below.

Inside Washington (11/10/2008)

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* WASHINGTON (11/11/08)--The House Financial Services Committee announced its witness list for its upcoming hearing, "Private Sector Cooperation with Mortgage Modifications-Ensuring That Investors, Servicers and Lenders Provide Real Help for Troubled Homeowners." On Wednesday, the following witnesses are scheduled to testify: Benjamin Allensworth, senior legal counsel, Managed Funds Association; Thomas Deutsch, deputy executive director, American Securitization Forum; Michael Gross, managing director, Loan Administration Loss Mitigation, Bank of America; and Molly Sheehan, senior vice president, Home Lending Division, JPMorgan Chase ... * WASHINGTON (11/11/08)--The Federal Housing Finance Agency (FHFA) announced Friday that the conforming loan limit will remain $417,000 for 2009. The loan limit is the maximum size of loans that Fannie Mae and Freddie Mac can purchase in 2009. The limit was left unchanged based on declines in FHFA’s monthly and quarterly house price indexes over the past year...

Frank criticizes agencies UIGEA haste

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WASHINGTON (11/11/08)-- House Financial Services Committee Chairman Barney Frank (D-Mass.) said the Bush administration is proceeding with “unseemly haste” in its efforts to implement the Unlawful Internet Gambling Enforcement Act (UIGEA). In a letter to U.S. Treasury Secretary Henry Paulson and Federal Reserve Board Chairman Ben Bernanke, Frank reiterated his call to delay implementation of what he called “deeply flawed” UIGEA rules. In September, Frank’s committee approved the Payment System Protection Act (H.R. 6870), a bill that would place a moratorium on the implementation of UIGEA, as proposed by Treasury and the Fed. Those agencies are statutorily assigned that responsibility. In separate letters to each agency head, Frank wrote, “This midnight rulemaking will tie the hands of the new administration, burden the financial services industry at a time of economic crisis, and contradict the stated intent of the Financial Services Committee.” Frank wrote that the proposed regulations, “like the underlying UIGEA statute,” are deeply flawed. Under the Internet gambling law, financial institutions must establish and implement policies and procedures to identify and block restricted transactions, or rely on those established by the payments system. Frank and other critics complain that the proposal fails to define the term “unlawful internet gambling,” leaving each financial institution to reconcile conflicting state and federal laws, court decisions and inconsistent Department of Justice interpretations when determining whether to process a transaction. “I strongly urge you to delay implementation of these major, and deeply flawed regulations to permit the incoming (Obama) administration the ability to review the consequences of such a significant policy decision, rather than unfairly being denied that opportunity. The Credit Union National Association (CUNA) has voiced concerns that the provisions of the law could swamp credit unions and other financial institutions with compliance burdens. CUNA also opposes the agencies’ draft implementation of the law, saying it lacks clarity and sufficient definition of terms.

CUNA urges austerity in 2009 NCUA budget

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WASHINGTON (11/11/08)—In troubled times, such as the nation and its credit unions currently face, the National Credit Union Administration (NCUA) should approach its budget with a sense of austerity, according to the Credit Union National Association (CUNA). CUNA sent letters to each NCUA board member Friday commenting on the NCUA’s proposed 2009 budget. The NCUA has projected a 15% increase next year to $182.9 million. In its letter, signed by President/CEO Dan Mica, CUNA reminded the federal regulators that CUNA has a long-standing policy of supporting sufficient resources for NCUA. Mica wrote it is CUNA’s view that the entire credit union system benefits when the agency is able to perform its job well, thereby facilitating the safety and soundness of federally insured credit unions. However, Mica pledged that CUNA always will urge the agency to achieve efficiencies and minimize costs. The CUNA letter added that the group has several major concerns regarding the proposed 2009 budget the NCUA Board is scheduled to consider at its Nov. 20 open meeting. The proposed 15% increase, in part, encompasses 84 new full-time equivalent employees. “CUNA does not oppose all of the increases, but we seriously question the manner in which NCUA is proposing to expand its available resources,” the Mica letter noted. For instance, CUNA has “serious concerns” regarding the agency’s plan to add such a significant number of new employees. Other options should first be considered, CUNA said, including whether the agency can rely more heavily on part-time and contract workers, or shift examiners from one region to another that is more hard hit by the country’s economic problems. Mica also questioned the agency’s projected benchmark raise of over 6% for pay and relocation costs for agency staff. He asked the regulators to bear in mind that those increases would be funded by federal credit unions, a number of which will not be able to afford such increases for their own employees. CUNA also asked the NCUA board to reconsider its intention to budget $300,000 over two years for the 75th Anniversary of the Federal Credit Union Act. “We doubt NCUA would condone a credit union spending such a relatively sizeable amount on a celebration when safety and soundness concerns required funds to be allocated elsewhere,” Mica wrote explaining the concern. Use the resource link below to read the comprehensive comment letter sent by CUNA.

Inside Washington (11/07/2008)

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* WASHINGTON (11/10/08)--Restructuring oversight of the nation’s financial system is going to be a larger challenge than most people realize, said Rep. Mel Watt (D-N.C.) last week. Though policymakers agree that something should be done to remedy the problem, they do not agree on a solution. Agency heads also are concerned about keeping their jobs, so it may be difficult for them to suggest a new system that doesn’t involve them. Watt said he’s seen more “turf protection” than public policy (American Banker Nov. 7). The congressman also said he plans to ask regulators during a hearing this week why foreclosures weren’t stemmed earlier. His role in revamping the financial system is not yet clear--he currently serves as chairman of the House Financial Services oversight subcommittee, but says he could leave to head a subcommittee on the Judiciary Committee ... * WASHINGTON (11/10/08)--The U.S. Small Business Administration (SBA) awarded more than $450,000 in veterans assistance and services grants to fund programs that promote business ownership for veterans and services to small businesses. The recipients, SBA Small Business Development Centers, were selected based on their range of services provided to veterans. The grantees are the Research Foundation at the State University of New York, the University of Arkansas at Little Rock, the University of Kentucky Research Foundation in Lexington, the University of Texas at San Antonio and George Mason University in Virginia ... * WASHINGTON (11/10/08)--Speaker of the House Nancy Pelosi is considering a two-staged effort to help the economy by acting on a $60 billion to $100 billion stimulus package and permanent tax cut next year, she told The Wall Street Journal. The job market is weak, and the White House needs to work with Congress during the end of the Bush administration, she said. (The Wall Street Journal Nov. 6). Any action taken during the lame-duck session will be a foundation for later measures, Pelosi added ...

CUNA Online CU expands cooperative reach

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WASHINGTON (11/10/08)—The Credit Union National Association (CUNA) welcomed the announcement Friday that Realtors FCU, headquartered in Rockville, Md,, was granted a charter to serve members and employees of the National Association of Realtors (NAR). Realtors FCU will operate as an Internet-based credit union without physical branch locations. The credit union plans to offer a wide range of products and services, to include share drafts, ATM services and debit cards, Internet banking and electronic bill-paying, courtesy pay, mortgage and home equity loans, and an audio response system. The credit union will have a national field of membership. “CUNA offers its warm welcome and hearty congratulations to the National Association of Realtors on its success in establishing a credit union for its members,” declared CUNA Preisdent/CEO Dan Mica. “The technological innovation that will allow the new Realtors FCU to provide online credit union access to its 1.2 million members across the country is laudable in that it expands the reach of cooperative financial institutions. “NAR has worked diligently on its members’ behalf to join the more than 90 million Americans who, as members of 8,000 state- and federally chartered credit unions, enjoy the status of member-owners of their financial cooperatives.” In announcing the NCUA’s approval of the charter, Chairman Michael Fryzel said: "The real estate industry fills an essential front-line role in America's economic life, and the choice and flexibility afforded to NAR members by access to credit union service makes this a logical endeavor. Their efforts to enhance the value of membership through this new credit union are commendable." The charter is due to be presented this morning at the NAR annual convention in Orlando. Tom Dorety, is president/CEO of Suncoast Schools FCU, Tampa, Fla., is scheduled to attend the presentation on behalf of CUNA as its chairman.

FinCEN seeks to make BSA rules user friendly

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WASHINGTON (11/10/08)—Credit unions and other interested parties have until March 19 to comment on a Financial Crimes Enforcement Network (FinCEN) plan to reorganize Bank Secrecy Act (BSA) information to make it more user friendly. FinCEN is proposing to move BSA regulations to a new chapter in the Code of Federal Regulations (CFR). That chapter would then be organized by financial industry, according to a document published in the Nov. 7 Federal Register. The reorganization is intended to make BSA regulations “more easily identifiable by a particular regulated industry,” FinCEN said. Among the labeled parts are the following:
* General Provisions; * Rules for Banks; * Rules for Casinos and Card Clubs; * Rules for Money Services Businesses; * Rules for Brokers or Dealers in Securities; * Rules for Mutual Funds; * Rules for Insurance Companies; and * Rules for Futures Commission Merchants and Introducing Brokers in Commodities.
Additionally, FinCEN is proposing to divide the regulations relating to currency transaction reporting (CTR) into separately numbered sections. “Interested parties will be able to identify specific CTR requirements, including those relating to filing reports, identification, aggregation, and structured transactions, more readily as they have been grouped together, rather than throughout the subpart or in several subparagraphs within a section,” the FinCEn document noted. FinCEN is also proposing minor technical changes to the BSA rules.

Senate banking chair reveals priorities for 2009

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WASHINGTON (11/7/08)—Senate Banking Committee Chairman Christopher Dodd (D-Conn.) Thursday outlined several issues that the committee will target for the remainder of this Congress as well as in the next, including “intensive oversight” of the administration’s implementation of the Emergency Economic Stabilization Act (EESA). Dodd also dispelled speculation that he might resign as chairman of the banking panel in favor of another chairmanship. He said he will continue to lead the Senate Committee on Banking, Housing and Urban Affairs in the 111th Congress. Dodd pledged to continue to work with ranking member Richard Shelby (R-Ala.), as well as Senate leadership and the new Obama administration to “build an economy that is strong and in which every American has the opportunity to succeed.” In addition to EESA oversight, issues on the chairman’s upcoming agenda include:
* Modernizing the country’s financial architecture to spur competition domestically and ensure that financial institutions are properly capitalized, regulated, and supervised; * Strengthening protections for consumers in mortgage lending, credit card lending, and investor rights, among other areas; * Renewing focus on the country’s housing needs; * Addressing critical economic and national security challenges; and * Crafting a transit bill to address problems from low economic growth to higher gas prices to pollution and global warming.
In his remarks announcing his committee priorities, Dodd said, “Our economic crisis is the center of gravity to which all our other problems are being pulled – and it will be ‘Ground Zero’ when it comes to digging us out of the hole we are in.”

GAO Urgent issues include financial institutions

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WASHINGTON (11/7/08)—Under an authority granted in 2000 but unused until the completion of the 2008 presidential election, the Government Accountability Office (GAO) launched a new “Transition Website,” which features as its centerpiece a list of the top 13 urgent issues facing President-elect Barack Obama. “Oversight of Financial Institutions and Markets” is featured prominently on the list. The website is the result amendments to the Presidential Transition Act of 2000, which included GAO as a resource to incoming administrations, specifically identifying GAO to serve as a source of briefings and other materials. The GAO is the research arm of the U.S. Congress and federal lawmakers will likely be reviewing the site carefully as information is posted. GAO Acting Comptroller General Gene Dodaro said in a release, “With the serious challenges related to financial markets and the economy, the financial crisis facing the nation, two wars under way, and the first transition since 9/11 and the creation of a Department of Homeland Security, this is absolutely a unique time.” He said GAO has combed through all its recent work to “help address urgent challenges facing the nation now, to assist new appointees in every agency zero in on the challenges of that particular agency, and to help identify areas with the potential to save the nation billions of dollars.” Regarding financial institutions and markets, the GAO website notes, “The global economy and financial markets are coping with a crisis that started with a rise in foreclosures and defaults in the subprime mortgage market that quickly afflicted credit markets globally.” It also refers to passage of the Emergency Economic Stabilization Act of 2008 and creation of the Troubled Asset Relief Program “in an attempt to stabilize the financial system and restore the functioning of credit markets.” GAO goes on to identify “a number of challenges that the new administration and the Congress will have to immediately confront, including:
* Effectively managing and evaluating efforts initiated by the Office of Financial Stability; * Maintaining the safety and soundness of the nation's banking system; * Reforming the U.S. financial regulatory system to reflect 21st century realities: and * Restoring the functioning of mortgage markets.
“The new Web site is designed to be easy to navigate and to find information since this is a period when appointees have limited time to learn about their new positions and the challenges that come with making a successful transition from campaigning to governing,” Dodaro said. The complete urgent issues list is as follows:
* Caring for Servicemembers; * Defense Readiness; * Defense Spending; * Food Safety; * Iraq, Afghanistan, and Pakistan; * Oversight of Financial Institutions and Markets; * Preparing for Large-Scale Health Emergencies; * Protecting the Homeland; * Public Diplomacy and International Broadcasting; * Retirement of the Space Shuttle; * Surface Transportation; * The 2010 Census; and * Transition to Digital TV.
In addition to the urgent issues, the new GAO Web site is to include sections on: agency-by-agency issues, summarizing its work addressing 28 federal agencies; major cost-saving opportunities across agencies; and management challenges across the government. Use the resource link below to view the new GAO site.

Inside Washington (11/06/2008)

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* WASHINGTON (11/7/08)--The Federal Reserve Banks announced Thursday that the Federal Reserve Bank of Cleveland will serve as the single paper check processing and adjustments site and that the Federal Reserve Bank of Atlanta will serve as the single paper check processing site for the Federal Reserve System. The banks also announced they will use a restructuring schedule that scales back or shifts operations at other sites when paper check volumes do not justify the existing operation. Paper check volumes have steadily declined and do not support the need for four full-service sites. The transition from four to one full-service paper processing site is likely by the end of next year, the Fed said ... * WASHINGTON (11/7/08)--President-elect Barack Obama selected two bankers Wednesday to work on the Obama-Biden Transition Project, which aims to ease the new administration’s transition into the White House (American Banker Nov. 6). The individuals are: Michael Froman, former managing director, Citigroup; and William Daley, JPMorgan Chase and Co. Midwest chairman. Daley is the brother of Mayor Richard Daley of Chicago. Froman previously worked as chief of staff to former Treasury Secretary Robert Rubin ... * WASHINGTON (11/7/08)--The Federal Reserve Board Wednesday asked for more cash from the banking industry so that it can pay more interest on reserves that financial institutions hold at the Fed. The current interest rate is 1%. The plan aims to encourage bankers to send their money to the central bank instead of other institutions. Some smaller banks have been borrowing in the interbank market at lower rates than the Fed funds rate (American Banker Nov. 6). The Fed’s interest hike could cost small banks more, but it would add to the Fed’s balance sheet to support liquidity programs the central bank is using to ease the credit crisis ... * ALEXANDRIA, Va. (11/7/08)--National Credit Union Administration Chairman Michael Fryzel (far right) toured Regional FCU’s student branch at Morton High School in Hammond, Ind., Tuesday. “This kind of outreach sets the foundation for America’s youth to become financially responsible adults, and is one that will pay significant dividends in the future,” he said. Regional FCU operates nine school branches run by students. The student branch program was designed by the credit union to teach students money management skills. (Photo provided by the National Credit Union Administration) ...

Mica to address CU challenges in live Nov. 19 webinar

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WASHINGTON (11/7/08)--The challenges presented to credit unions as a result of the financial crisis will be addressed in a special live nationwide webinar featuring Credit Union National Association (CUNA) President/CEO Dan Mica, Nov. 19 at 2 p.m. ET. The Internet-based video conference--open to all CUNA-affiliated credit unions at no charge--will focus on the financial crisis and how credit unions can leverage their “white hat image” to help minimize the impact of the crisis on credit union members, as well as the nation itself. “We are developing a vision for how credit unions can work for their members and the nation, through the Congress and the regulatory agencies, to help them through these difficult times,” Mica said. “The Congress will have a ‘working majority,’ meaning that if they decide to do something quickly, they can move very fast. We are going to need to be ready to act in any number of ways.” Affiliated credit unions can hear directly from Dan Mica about the Nov. 19 webinar, by clicking on the image below.
Click to view video (affiliated credit unions only)

CUs positioned well for 2009 Congress says Magill

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WASHINGTON (11/6/08)—Legislative experts at the Credit Union National Association (CUNA) said Wednesday that credit unions can feel good about how they are positioned politically going into the next session of Congress. “Going into the 2008 federal elections, credit unions have been seen by lawmakers and government officials as being part of the solution to the country’s economic woes, not part of the problem that created the mortgage and credit crisis,” said John Magill Wednesday. Magill is CUNA senior vice president of legislative affairs. “I feel very good about where we are positioned going into the 111th Congress in January.” Magill said that perhaps the biggest political challenge credit unions face from the beginning is the overwhelming nature of the economic problems that must be dealt with. “We will have to make enough noise to keep credit union issues on the front burner. We will have to be vigilant to make sure we are dealt with uniquely and not painted with the same brush as the bad actors,” he said. “The new Congress is already talking about regulation rather than deregulation. So we will have to make sure our new friends in Congress don’t kill us with kindness with regulatory efforts,” Magill added.

CUNA hones its political clout

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WASHINGTON (11/6/08)—The Credit Union National Association (CUNA) flexed its ever-growing political muscles during the 2008 federal election cycle. For instance, CUNA participated in 359 of the 435 races in the U.S. House of Representatives and logged a greater than 90% success rate with its chosen candidates, reported its political affairs department Wednesday. CUNA also pushed the envelope a little further this cycle, according to CUNA Senior Vice President of Political Affairs Richard Gose, by its first-time effort to unseat an incumbent in favor of a more credit union –friendly candidate. CUNA launched one of its two independent expenditure (IE) campaigns in support of Kansas State Treasurer Lynn Jenkins (R), who was challenging Rep. Nancy Boyda (D-Kan.). Jenkins, a long-time credit union advocate, unseated Boyda in Tuesday’s election. Federal regulations dictate that IEs must be made independently, with no coordination between the group and the candidates' campaign camps. The money is used for such things as independent advertising and mailings in support of a candidate. CUNA also backed the unsuccessful bid of Democratic State Rep. Judy Baker against banker and former State Rep. Blaine Leutkemeyer (R), an important race for credit union involvement, noted Gose. “We don’t look at the labels Republican or Democrat when we offer support in a race,” Gose pointed out Wednesday. “We are always looking for candidates whose vision includes a strong and viable place for credit unions in the future.” “We are not a Republican organization. We are not a Democratic organization. We are a credit union organization. We keep that always foremost in our minds and we are always working to be balanced,” Gose said. CUNA Senior Vice President of Legislative Affairs John Magill added that CUNA’s ability to offer such strong support—especially in the form of IEs—speaks volumes on Capitol Hill to the benefit of the credit union system. “CUNA’s ability to do IEs tells lawmakers that credit unions are playing with the adults when it comes to political activism.” CUNA, state leagues and credit unions have been carefully watching results in the races involving credit union supporters and co-sponsors of the Credit Union Regulatory Improvements Act (CURIA, H.R. 1537). See related story for results of House and Senate races of key interest to credit unions: "Election results of key CU interest."

Election results of key CU interest

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WASHINGTON (11/6/08)—The Credit Union National Association (CUNA), state leagues and credit unions were active in a large number of federal election campaigns in the 2008 cycle with good results for credit union friendly candidates, according to CUNA Political Director Trey Hawkins. Credit union forces provided contributions, campaign support, and foot soldiers to knock on doors and assist on phone banks for candidates of their choice. For instance, the Minnesota Credit Union Network (MnCUN) for the first time endorsed a candidate, Republican Erik Paulsen, who won Minnesota's only open seat. Paulsen’s strongest opponent in the race considered a plan to remove the credit union tax exemption to fund small business health insurance benefits. Through MnCUN and credit union efforts, according to the league’s Mara Humphry, Paulsen was the beneficiary of door-knocking, literature-distributing volunteers, as well as favorable articles in newsletters sent by credit unions to their members. A similar effort was launched by the Pennsylvania Credit Union
Click to view larger imageOne of the direct mail advertisements credit unions sent to member households in support of Rep. Paul Kanjorski (D-Pa.). Click for larger view
Association (PCUA), to support the threatened seat of Rep. Paul Kanjorski, a democrat and primary sponsor of the Credit Union Regulatory Improvements Act (CURIA, H.R. 1537). (See News Now, Nov, 5, “CURIA sponsor Kanjorski prevails in reelection bid”) PCUA President James McCormack said Wednesday that at least 70 credit union volunteers helped Kanjorski in his fight to retain his House seat. Also, CUNA worked with the Pennsylvania league and five credit unions to send direct-mail pieces to 18,000 member households containing 24,000 voters. CUNA, state leagues and credit unions also have been carefully watching results in the races involving credit union supporters and co-sponsors of the Credit Union Regulatory Improvements Act (CURIA, H.R. 1537). Some results of key interest in the Senate:
* Two co-sponsors of the Senate’s CURIA who were up for re-election won their races: Sens. Mary Landrieu (D-La.) and Susan Collins (R-Me.); * In Colorado, Rep. Mark Udall (D), a House CURIA co-sponsor, won his race for an open Senate seat against former Rep. Bob Schaffer (R); and * Rep. Steve Pearce, a New Mexico Republican and House CURIA co-sponsor, running for an open Senate seat, lost to Rep. Tom Udall (D).
In addition to Kanjorski’s and Paulson’s House victories, other races of interest include:
* State Rep. Judy Baker (D-Mo.), lost her bid against banker and former State Rep. Blaine Leutkemeyer (R), for an open seat; * Kansas State Treasurer Lynn Jenkins (R), a long-time credit union advocate, won against Rep. Nancy Boyda (D-Kan.); * Rep. Joe Knollenberg (R-Mich.), a CURIA co-sponsor, was defeated by Michigan State Lottery Commissioner Gary Peters (D); * Rep. Steve Chabot (R-Ohio), a CURIA co-sponsor and key player in passage of H.R. 1151, lost to State Rep Steve Driehaus (D); * Rep. Chris Carney (D-Pa.), a freshman House member and CURIA co-sponsor, won against businessman Chris Hackett (R); and * Rep. Jon Porter (R-Nev.), a CURIA co-sponsor, lost against State Sen. Dina Titus (D).
See related News Now stories: “CUNA hones its political clout” and “CUs positioned well for 2009 Congress, says Magill.”

In iRoll Calli Mica says sunshine great for CUs

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WASHINGTON (11/6/08)—President-elect Barack Obama’s intention to bring sunshine to lobbying efforts is great news for credit unions, according to Credit Union National Association (CUNA) President/CEO Dan Mica. Mica, featured in a Nov. 5 post-election article in Roll Call, noted, “The Obama camp has had study groups working all summer long on changes they would make on how advocacy would take place in this town. “They’re talking about having complete and total transparency in advocacy.” That, the CUNA leader said, would give a great boost to credit union advocacy efforts. Mica called the Obama plan “tremendous.” “That is a boon to the credit union system. We don’t have the money that some of our adversaries have. If it is fully transparent,” Mica said, “we’ll go toe to toe with anybody.” Roll Call is a widely read publication covering Capitol Hill.

Inside Washington (11/05/2008)

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*WASHINGTON (11/6/08)—The House Financial Services Committee announced Wednesday that it will conduct a hearing entitled “Private Sector Cooperation with Mortgage Modifications-Ensuring That Investors, Servicers and Lenders Provide Real Help for Troubled Homeowners.” Witnesses have not yet been announced for the Nov. 12 session… * WASHINGTON (11/6/08)--The next president of the U.S., president-elect Sen. Barack Obama (D-Ill.) will have a long to-do list when it comes to the financial markets, and he will have to act quickly, according to observers (American Banker Nov. 5). The largest task will involve rewriting the financial regulatory system. Other challenges include eliminating the government from banking in the private sector, deciding the fate of Fannie Mae and Freddie Mac, focusing on foreclosure mitigation, and dealing with the Treasury’s $700 billion rescue plan. If funds are left over from the rescue plan, the president would have to decide how that money should be spent. Observers also expect that the president would have to solve accounting problems. Many in the financial industry have complained that fair-value accounting has been a large contributing factor in the financial crisis ... * WASHINGTON (11/6/08)--Critics claim that a Federal Deposit Insurance Corp. (FDIC) plan that would guarantee bank debt is too punitive, narrow and costly for institutions that do not participate. The agency received about 50 letters from banks saying that the 75-basis-point charge for covering debt that is unsecured is too high (American Banker Nov. 5). The agency announced in October that it would guarantee the debt and back non-interest-bearing deposits to help credit markets. The interim rule was released Oct. 23 and provided information for participating institutions, including an opt-out until Nov. 14. Banks argued the timeframe was too short, so the FDIC said Monday it would allow banks to opt out until Dec. 5 ...

CURIA sponsor Kanjorski prevails in reelection bid

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Click to view larger image CUNA Senior Vice President of Political Affairs Richard Gose (right) discusses with Rep. Paul Kanjorski (D-Pa.) the elections during Gose's visit to Kanjorski's campaign in his district in Pennsylvania two weeks ago. Gose spoke to credit unions about Kanjorski, a long-time credit union champion. It was the third trip CUNA staff have made to the district during the campaign. (Photo provided by Penn. Credit Union Association)
WASHINGTON (11/5/08)--In one of the most closely watched races by credit unions, the efforts of the Credit Union National Association (CUNA), Pennsylvania Credit Union Association (PCUA) and credit unions from around the country helped push credit union champion Paul Kanjorski's (D-Pa.) reelection bid over the finish line last night. The 12-term congressman was in an extremely tight race against challenger Lou Barletta, the mayor of Hazleton, Pa. Kanjorski garnered 52% of voters in Pennsylvania’s 11th Congressional District. Kanjorski is a staunch supporter of credit union legislative initiatives in Washington. He was the original sponsor of the Credit Union Regulatory Improvements Act (CURIA, H.R. 1537), the Credit Union Membership Access Act (H.R. 1151) and the Credit Union, Bank and Thrift Regulatory Relief Act (CUBTRRA, H.R. 5519). Kanjorski also chairs the House Financial Services Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises. Check News Now for further coverage of election results on races of key interest to credit unions.

CUNA looks forward to CU work under Obama

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WASHINGTON (11/5/08)—The Credit Union National Association (CUNA) has good relationships with leaders from both political parties and welcomes the election of President-elect Barack Obama as an opportunity to continue to work for progress on credit union legislative priorities, said CUNA senior vice president of legislative affairs, John Magill, late Tuesday night. Although the Obama campaign declined to become giddy over polls leading up to the election that indicated its candidate would be victorious, it had been widely predicted that the Democratic senator from Illinois would become the country’s next president. Magill said of the election results, “Credit unions serve and represent the interests of their member-owners—the every-day Americans who are this country’s voters. CUNA, in working to help credit unions better serve their members, maintains good working relationships with political leaders from both parties.” He added, “We look forward to working with President-elect Obama on credit union legislative priorities, such as freeing up credit through increased member business lending authority and by establishing a risk-based capital system for credit unions.” Inauguration day is more than two months away-- Jan. 20. However, Congressional lawmakers will not be silent until that time. Both the House and Senate have announced intentions to return for a lame duck session the week of Nov. 17—and perhaps another such session in December. Congress is expected to investigate possible further measures for shoring up the nation’s troubled economy and stabilize capital markets. Also an energy bill, defense authorization bill and a continuing resolution to fund the government are pending before Congress. CUNA’s Magill has said that a lame duck session is a good development for credit unions. "The Senate is where CUBTRRA now sits," Magill said, referring to the Credit Union, Bank and Thrift Regulatory Relief Act (H.R. 6312), approved by voice vote in the House on June 24. "A so-called lame duck session in the Senate, after yesterday’s elections, will give us another opportunity—another shot at getting the regulatory improvements through the Senate this year." The bill provides about a dozen improvements for credit unions. "Clearly there is precious little legislative time left on the 2008 clock. However, CUNA continues to work in Congress at every opportunity to advance legislation to provide regulatory relief for credit unions. It’s a long shot for this year—but still a shot," Magill said. See tomorrow’s News Now for further coverage of election results on races of key interest to credit unions.

Gwen Ifill part of CUNA-sponsored election review

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WASHINGTON (11/05/08)--Credit unions will gain broad exposure before a vital audience in the nation's capital during a presidential election discussion organized by the National Journal and “The News Hour with Jim Lehrer.” Today’s session, billed as “The Day After: An Exclusive, Insiders’ Play-by-Play,” will include the following panelists:
* Charlie Cook, political analyst, National Journal; * Gwen Ifill, senior correspondent, “The News Hour,” who also was moderator of a debate between candidates for vice president, Sen. Joe Biden (D-Del.) and Alaska’s Governor Sarah Palin; and * Amy Walter, editor-in-chief, The Hotline.
The program participants are expected to analyze events that lead up to and culminated in the historic election of the Democratic candidate, Sen. Barack Obama of Illinois, whose sweeping victory also represents the first time a non-white candidate has run for and been elected as president of the country. CUNA Political Affairs Senior Vice President Richard Gose said through CUNA’s participation in the news event, "insiders from Capitol Hill and in the Washington lobbying community will see credit unions actively engaged in the political arena."

Inside Washington (11/04/2008)

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* WASHINGTON (11/5/08)--Regulators are hoping to increase participation in Hope for Homeowners by easing its standards. The program, which was effective Oct. 1, helps borrowers refinance mortgages that are written down and worth less than their homes (American Banker Nov. 4). Few lenders have applied for the program, according to industry representatives. The government could drop the required writedown to 3% to 5% below market value. Currently, lenders are required to write down a mortgage to 13% below market value. Regulators also could lower borrower eligibility requirements. Currently borrowers’ payment-to-income ratio cannot be higher than 31%. Observers also suggest that annual premiums could be cut in half, to 75 basis points ...

Forbes CarlsonBegala Sinise highlight GAC

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WASHINGTON (11/5/08)--Economic commentary from Steve Forbes, editor-in-chief of Forbes magazine, and a political face-off between pundits Paul Begala and Tucker Carlson will be among the highlights of the Credit Union National Association’s (CUNA) 2009 Governmental Affairs Conference (GAC), to be held Feb. 22–26 at the Washington Convention Center in Washington, D.C. The 2009 GAC also will again feature a special kickoff concert on Sunday evening, Feb. 22, presented by the CUNA Councils. Performing will be the Lt. Dan Band, formed by Chicago composer Kimo Williams and actor/musician Gary Sinise, star of the hit CBS TV show “CSI New York.” “Lieutenant Dan” is the character Sinise portrayed in the 1994 blockbuster film, “Forrest Gump,” a role that won him an Oscar nomination. The band has completed six tours for the USO and performs regularly for troops around the world. Steve Forbes will offer economic outlook and commentary at a time when the nation continues to struggle through one of the worst financial crises in its history. The current issue of Forbes magazine--the nation’s leading business magazine--features his cover story, “How Capitalism Will Save Us.” He also attained national visibility in both 1996 and 2000 when he campaigned for the Republican nomination for President. Tucker Carlson and Paul Begala will face off over current developments in national news, politics, and world issues. Carlson is a senior correspondent for MSNBC, where he hosted his own fast-paced political talk show. Paul Begala also appeared on Crossfire and is a CNN political analyst and former top aide to President Bill Clinton. He helped his friend John F. Kennedy, Jr., launch the political magazine George and was its Capital columnist. CUNA’s GAC is the credit union movement’s premier national conference on Washington issues. The GAC brings together top policy makers from Congress, the Administration, the federal regulatory agencies and the Washington political establishment to provide the latest information on legislation and regulation that affects credit unions and their ability to serve their members. The GAC also devotes an afternoon to Capitol Hill visits, when attendees meet with their members of Congress and staff to discuss the movement’s legislative agenda. With a new Congress and Administration fresh in office, a top priority of the 2009 GAC will be to ensure policy makers understand the credit union difference. “In the aftermath of the housing and credit crises that has gripped our nation, we know policy makers will be giving close scrutiny to the regulatory scheme and structure that governs the financial sector,” explained CUNA President/CEO Dan Mica. “At such a critically important juncture, it is essential that we make our voices heard. The GAC--where we bring together thousands of credit union representatives--presents a unique opportunity to have a powerful and lasting impact.” GAC housing registration opens Thursday at 2 p.m. ET. Use the resource link below to access more information and the complete schedule.

Inside Washington (11/03/2008)

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* WASHINGTON (11/4/08)--Six individuals caused the financial crisis, said former Federal Deposit Insurance Corp. (FDIC) Chairman L. William Seidman while speaking on a panel at the International Association of Deposit Insurers (American Banker Nov. 3). The individuals Seidman named are: William H. Donaldson, former Securities and Exchange Commission chairman; Daniel Mudd, former Fannie Mae CEO; Alan Greenspan, former Federal Reserve Board chairman; Bob Rubin, former Treasury Secretary; Frank Raiter, Standard and Poor’s head of residential mortgage-backed securities; and Seidman himself ... * WASHINGTON (11/4/08)--Public comment is due on the Federal Deposit Insurance Corp.’s temporary plan to insure no-interest deposits and unsecured debt (American Banker Nov. 4). The program covers for three years senior unsecured debt that was issued between Oct. 14 and June 30. The coverage on zero-interest deposits expires Dec. 31, 2009 ... * WASHINGTON (11/4/08)--IntercontinentalExchange Inc. of Atlanta, which has been working with the Federal Reserve Bank of New York to launch a clearing house for credit-default swaps (CDS), announced that it is buying Clearing Corp., a Chicago-based firm that was its partner in the project. The planned merger could bolster the Federal Reserve Board’s case to oversee the CDS market, according to observers (American Banker Nov. 3). Clearing has received support from CDS players Morgan Stanley, Bank of America Corp. and JPMorgan Chase and Co. CME Group also is working on a rival swap that would be operated by the Commodities Futures Trading Commission. The Fed’s clearing house may be more popular, but it may not mean the Fed will regulate CDS business, said Kip Weissman, former attorney for the Securities and Exchange Commission ... * WASHINGTON (11/4/08)--The Federal Deposit Insurance Corp. (FDIC) rejected a bid by Wachovia Corp. to remain independent (American Banker Nov. 3). Wachovia presented the FDIC with a plan that included a loss-sharing agreement and proposed raising $10 billion in capital. FDIC Chairman Sheila Bair said Wells Fargo will buy Wachovia, and that the deal would close next month ... * WASHINGTON (11/4/08)--Up to 1,800 publicly held financial institutions are expected to apply for government investments during the next few weeks. Thousands of private banks could apply for capital as well, according to a Treasury spokesman (The Wall Street Journal Nov. 3). The institutions fear that if they do not apply for the funds, they will be left out of the rescue plan, the spokesman said. Applications are due Nov. 14 ...

FinCEN reminder New e-filing program deadline

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WASHINGTON (11/4/089)—The Financial Crimes Enforcement Network (FinCEN) Monday sent an important reminder that as of Jan.1 it will require any electronic filing of Bank Secrecy Act (BSA) information to be executed through a new BSA Electronic Filing program. FinCEN announced the new program in July and said it was part of its effort to make BSA filing requirements more “secure, efficient, and effective.” FinCen is retiring its BSA Magnetic Media Filing Program in favor of the new program. The magnetic media filing has required credit unions and other financial institutions to submit BSA reports using tapes and diskettes. The more secure BSA E-Filing is a web-based system that is user-ID and password protected. Importantly, it does not require storage media. BSA E-Filing supports both single and multiple BSA report filings and uses the same file format as the Magnetic Media Program. FinCEN has suggested that without tapes or diskettes to mail, BSA E-Filing may help reduce reporting costs. FinCEN said it is collaborating with the Internal Revenue Service (IRS) to ensure this transition is as seamless as possible. Financial institutions currently using the Magnetic Media program to file BSA reports may register to use BSA E-Filing at any time. Filers may contact the BSA E-Filing Help Desk at 1-888-827-2778 (option 6) from 8 a.m. to 6 p.m., Monday through Friday or use the resource link below to access details on registration and see an overview of BSA E-Filing.

CUNA monitors races of CU friends

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WASHINGTON (11/04/08)—The nation’s media outlets for months have been predicting record voter turnout for today’s presidential election as the country decides whether Democrat Barack Obama or Republican John McCain will lead the country for the next four years. Also, hanging in the balance are a number of key races involving credit union friendly candidates. The Credit Union National Association (CUNA), state leagues and credit unions will be carefully watching developments in the following races involving credit union supporters and co-sponsors of the Credit Union Regulatory Improvements Act (CURIA, H.R. 1537). Races of interest in the U.S. House include:
* Long-time credit union advocate and CURIA co-author Rep. Paul Kanjorski (D-Pa.), who is being challenged by Hazelton Mayor Lou Barletta (R); * State Rep. Judy Baker (D-Mo.), who is running against banker and former State Rep. Blaine Leutkemeyer (R), for an open seat; *Kansas State Treasurer Lynn Jenkins (R), a long-time credit union advocate, who is challenging Rep. Nancy Boyda (D-Kan.); * Rep. Joe Knollenberg (R-Mich.), a CURIA co-sponsor, in a three-way race against Michigan State Lottery Commissioner Gary Peters (D) and Dr. Jack Kervorkian (I), assisted suicide advocate; * Rep. Steve Chabot (R-Ohio), a CURIA co-sponsor and key player in passage of H.R. 1151, against State Rep Steve Driehaus (D); * Rep. Chris Carney (D-Pa.), a freshman House member and CURIA co-sponsor, against businessman Chris Hackett (R); and * Rep. Jon Porter (R-Nev.), a CURIA co-sponsor, who is running against State Sen. Dina Titus (D).
Key races in the U.S. Senate of interest to credit unions include:
* In Louisiana, Sen. Mary Landrieu (D), a Senate CURIA co-sponsor who is being challenged by State Treasurer John Kennedy (R); * In Colorado, Rep. Mark Udall (D), a House CURIA co-sponsor, who is running for an open Senate seat against former Rep. Bob Schaffer (R), * Rep. Steve Pearce, a New Mexico Republican and House CURIA co-sponsor, running for an open Senate seat against Rep. Tom Udall (D).
“These are just some of the races that we are following with great interest,” said CUNA Political Director Trey Hawkins Monday. “We encourage credit unions and credit union members to get out today and vote for credit union friends across the country.”

Compliance FACTA address violations

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WASHINGTON (11/4/08) -- The Fair and Accurate Credit Transaction Act (FACTA) identity theft red flag regulations require credit and debit card issuers to validate an address whenever they receive a request for a replacement or additional card. Is this true or false, asks the Credit Union National Association’s (CUNA’s) Compliance Challenge. It’s false. The FACTA ID theft red flag regulations only require validation of an address when a card issuer has also received a notification of a change of address. The mandatory compliance date was Nov. 1 for both state- and federally chartered credit unions. The Federal Trade Commission's 6-month enforcement delay for the ID theft red flags rule does not extend to the rule regarding address discrepancies applicable to users of consumer reports, or to the rule regarding changes of address applicable to card issuers. The Challenge advises that the regulations require credit and debit card issuers to assess the validity of change of address requests when a card issuer receives a change-of-address notice and then, within a short period of time afterwards--at least 30 days--receives a request for an additional or replacement card. The credit union is prohibited from issuing a new card unless it takes steps to assess whether the change of address is valid, such as:
* Notifying the cardholder at the old address; * Notifying the cardholder through some other means of communication that the cardholder has previously agreed to; or * Using another method of assessing the validity of the change of address that the issuer has included in its red flag program.
In any case, CUNA notes, credit unions can always opt to validate addresses when issuing new cards, even when no change-of-address is involved. This is a good idea if the credit union has experienced incidences of identity theft related to requests for new credit/debit cards. Use the resource links below for more FACTA information.