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Senate bill addresses NCUA resolution tools some net worth

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WASHINGTON (12/20/10)—A “technical corrections bill” passed by the Senate late last week could give the National Credit Union Administration (NCUA) new tools to deal with the corporate credit union situation and troubled credit unions. The bill (S. 4036) also orders a government study of the NCUA’s supervision of the corporate credit unions, as well as its implementation of prompt corrective action (PCA) rules for both corporate and natural person credit unions. The new NCUA resolutions tools would be created by S. 4036 through changes to the Federal Credit Union Act. If enacted, the bill would permit the NCUA to make payments to the Temporary Corporate Credit Union Stabilization Fund without borrowing from the U.S. Treasury—a step the NCUA seeks as a means to hold down costs to credit unions. Another provision of the legislation would give credit unions the ability to count 208 assistance as net worth for the purposes of prompt corrective action. would allow section 208 assistance provided by the NCUSIF to a credit union to count toward the credit union’s net worth, at the agency’s discretion. A third provision clarifies that the equity ratio of the share insurance fund—the National Credit Union Share Insurance Fund (NCUSIF)--is based solely on the unconsolidated financial statements of the NCUSIF. The study ordered by the bill would be conducted by the Comptroller General of the U.S. The Comptroller General would be charged with the following responsibilities:
* Determine the reasons for the failures of any corporate credit union since 2008; * Evaluate the adequacy of the NCUA’s response to the failures of the corporates, including how taxpayers were protected, how moral hazards were avoided, costs were minimized in the resolution process, and “the ability of insured credit union to bear any assessments levied to cover such costs”; * Evaluate, as mentioned above, the effectiveness of PCA implementation; and * Examine whether the agency has been effective in implementing recommendation made by its Inspector General contained in Material Loss Review Reports, or the adequacy of the NCUA’s reasons for not doing so.
The Comptroller General is ordered to report back to the Senate Banking Committee and House Financial Services Committee within six months after enactment. The bill is expected to pass the House with expediency and then will be sent to the President to be signed into law.

Inside Washington (12/17/2010)

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* WASHINGTON (12/20/10)--The president of the Consumers Bankers Association accused the Federal Reserve Board of price fixing in its proposal to restrict interchange fees on debit cards “Regulating interchange fees is price fixing and has no role in our free market economy. Presented as a pro-consumer provision to lower costs, the most likely result will be an increase in the cost of financial services for American consumers and the elimination of benefits and efficiencies valued by many debit card users,” CBA President Richard Hunt said in a statement. “The Fed’s proposal “will severely restrict the ability of debit card issuers to recoup their costs and earn a fair rate of return. This will have a great effect on banks of all sizes--small and large,” Hunt added. See related News Now story, “CUNA: Interchange rule confirms ‘worst fears’ about CU treatment” … * WASHINGTON (12/20/10)--The Federal Deposit Insurance Corp. (FDIC) Thursday announced the appointment of Jim Wigand as the director of the new Office of Complex Financial Institutions (CFI). Since 1997, Wigand has served as the deputy director for franchise and asset marketing in the division of resolutions and receiverships, where he oversaw the resolution of failing insured financial institutions and the sale of their assets. The CFI was created to assist the FDIC in carrying out its new responsibilities as outlined in the Dodd-Frank Wall Street Reform and Consumer Protection Act. It is responsible for the oversight of bank holding companies with more than $100 billion in assets and non-bank financial companies designated as systemically important by the new Financial Stability Oversight Council. The CFI carries out the FDIC’s joint responsibility with the Federal Reserve Board to oversee resolution plans for large bank and nonbank institutions. The CFI also is charged with implementing the FDIC's new authority for the orderly liquidations of bank holding companies and non-bank financial companies that fail … * WASHINGTON (12/20/10)--The Internal Revenue Service (IRS) Friday released instructions to help employers implement the 2011 cut in payroll taxes, along with new income-tax withholding tables that employers will use during 2011. Millions of workers will see their take-home pay rise during 2011 because the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 provides a two percentage-point payroll tax cut for employees, reducing their Social Security tax withholding rate from 6.2% to 4.2% of wages paid. This reduced Social Security withholding will have no effect on the employee’s future Social Security benefits. The new law also maintains the income-tax rates that have been in effect in recent years. Employers should start using the new withholding tables and reducing the amount of Social Security tax withheld as soon as possible in 2011 but not later than Jan. 31, said the IRS. Notice 1036, released Friday, contains the percentage method income tax withholding tables, the lower Social Security withholding rate, and related information that most employers need to implement these changes. For Notice 1036, use the link ...

CUNA to Fed Interchange rule confirms CU fears

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WASHINGTON (12/20/10)—The Federal Reserve’s proposed rule on interchange fees, which was introduced late last week, confirms the Credit Union National Association’s (CUNA) “worst fears about the inadequacies of the purported protections” for credit unions and other smaller issuers of debit cards, CUNA President/CEO Bill Cheney has said. The Fed has left its proposal open for public comment until Feb. 22, and Cheney quickly responded to the interchange announcement via a Friday letter to Fed Chairman Ben Bernanke summarizing CUNA’s initial concerns. A more detailed comment letter is also under development. The Fed proposal could cap debit card interchange fees that are paid by merchants to card issuers at 12 cents per transaction. Issuers with under $10 billion in assets would be exempt from the interchange changes. (See related Dec. 17 story: Fed offers two plans for interchange fees) However, Cheney has cast doubt on the effectiveness of the proposed asset limit, noting the lack of any enforcement mechanism to protect small issuers, which are supposed to be exempted from the law’s provisions. The loss of interchange fee income for small issuers and the costs of having to belong to more payment networks will have a “horrendous impact” on credit unions that offer debit cards, as well as their ability to build net worth, Cheney added. Cheney also noted that the complex routing provisions contained in the proposal would burden smaller issuers with even greater costs. “Because of statutory requirements, credit unions can only build net worth (capital) from retained earnings,” he wrote. “Any significant reduction in interchange income will require higher fees paid by consumers. Thus, consumers will be left paying for the bonanza to merchants--which is not what Congress intended.”

Average mortgage rates reach seven-month high

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WASHINGTON (12/20/10)--The average rate on both 30-year and 15-year fixed-rate mortgages continued to rise last week, posting double digit basis point increases. As reported in Freddie Mac's mortgage rate survey for the week ended Dec. 16, both mortgage rates continued to rise for the fifth week, with 30-year mortgages averaging 4.83% and 15-year mortgages averaging 4.17%. Those mortgage rates averaged 4.61% and 3.96% during the week ended Dec. 9, respectively. Both five-year and one-year adjustable rate mortgages remained low, with average rates of 3.77% and 3.35% reported. Freddie Mac Vice President/Chief Economist Frank Nothaft noted that the mortgage rate averages were the highest reported since March. For the full release, use the resource link.