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Washington Archive

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Inside Washington (12/26/2007)

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* WASHINGTON (12/27/07)—Last week the Senate approved a second seven-year term for Allan Mendelowitz as a director of the Federal Housing Finance Board. His previous term expired in February and his new appointment will extend to Feb. 27, 2014. The Federal Housing Finance Board is the agency charged with oversight of the safety, soundness, and mission of the 12 regional Federal Home Loan Banks Just prior to joining the Finance Board in December 2000, Mendelowitz served as executive vice president of the Export-Import Bank of the United States…

Congress increases CDFI funding for 08

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WASHINGTON (12/27/07)—An omnibus spending bill approved last week by Congress included the first increase in years in the funds appropriated for the Treasury Department’s Community Development Financial Institutions (CDFI) Fund. The bill included $94 million for grants, investments and technical assistance for community development projects through the CDFI. In recent years, the Bush administration repeatedly pushed for and secured cuts in the CDFI funding, maintaining that CDFIs should have a higher rate of return on their investments and not need increased taxpayer support. Last year the program was funded at $55 million. The Credit Union National Association (CUNA) has worked with the National Federation of Community Development Credit Unions and the Coalition of Community Development Financial Institutions to oppose attempts to cut the fund. The CDFI Fund provides capital grants, equity investments and awards for technical assistance to community development financial institutions, including credit unions Financial institutions are required to provide a 1:1 match for most of the awarded funds, which are offered on a competitive basis. Also in Congress’ massive spending bill, $975,000 was approved for the National Credit Union Administration’s (NCUA’s) Community Development Revolving Loan Fund (CDRLF), up from $941,000 the previous year. CUNA backs an even higher funding level for the program it believes plays a vital role in underserved communities. The CDRLF provides loans and technical assistance grants to credit unions, enabling them to enhance their technologies in order to provide increased products and services. Funding for the NCUA’s Central Liquidity Fund, which has functioned as a backup liquidity lender for the credit union system since Congress established it in 1978, was set at $1.5 billion, the same level as for FY 2007.

CUNA seeks Treasury meeting to discuss tax report

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WASHINGTON (12/27/07)—The Credit Union National Association (CUNA) recently asked the Treasury Department to clarify its rationale behind failing to remove credit unions from a discussion document on tax reform when the department removed other, more questionable, entities from the white paper. Specifically, CUNA noted that the Treasury’s revised “Approaches to Improve the Competitiveness of the U.S. Business Tax System for the 21st Century,” issued last week, focused on repealing various business tax breaks in the federal code, listing the credit union tax exemption as a possible target. In a letter to Treasury Secretary Henry Paulson , CUNA President/CEO Dan Mica underscored CUNA’s understanding that the white paper does not represent a proposal by the Treasury to change tax policy. However, Mica questioned how credit union concerns were not addressed in the revised report while mention of such bodies as state and municipal governments was eliminated. Mica reiterated to Paulson that listing the credit union tax exemption among possible tax revisions wholly contradicts a 2004 letter to CUNA from President George W. Bush, in which he stated, "I support strongly the tax-exempt status of credit unions, and will continue to highlight the important contributions that credit unions make to our financial system.” Further, the CUNA letter noted that the entities that have been removed from the original white paper have a greater impact on the tax system than the credit union tax exemption could ever have. “Investors do not have the ability to invest in credit unions in order to gain a tax advantage,” CUNA wrote. “In contrast, state and municipal governments do issue tax-exempt bonds that attract investors in high-tax brackets precisely because of the resulting tax benefits of state and municipal bond investments vis-à-vis non-tax-favored investments. “Credit unions should be eliminated from this report because the credit union tax exemption plays little role in investment decisions, whereas the tax-exempt entities eliminated from the December 20, 2007 draft of this report do influence investment decisions because of their tax-favored status.” In his letter, Mica repeated CUNA’s request, made when the first draft was released during the summer, for an opportunity to meet with Paulson to discuss the issues involved. At that time, CUNA wrote to Paulson questioning the Treasury's suggestions that a way to reduce corporate income taxes would be to repeal various business tax breaks, listing the exemption of credit union income among the preferences. That letter noted that the Treasury paper fell silent on the "substantial benefits of credit unions to consumers," but the Treasury document praised Subchapter S Corporations which a government study showed cost the government $726 million in lost revenues in 2006 alone.