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TARP deadbeat problem is growing say pubs

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WASHINGTON (12/29/10)—National publications, such a The Washington Post and The Wall Street Journal, in recent days have featured stories on the growing problems the government is facing with so-called “deadbeat” banks failing to make their TARP dividend payments. The number of banks that have missed six or more payments has more than doubled from the previous quarter, up to 19 from seven. That delinquency gives the government the right to monitor the board meetings of those institutions, as well as appoint new board members. The Post, in its Monday issue, reported that the U.S. Treasury Department has dispatched officials to monitor the board meetings of those 19 banks and may take steps to replace some board members in the new year. The Post also reported that the number of “deadbeat” banks--those failing to make at least one dividend payment--rose to 132 last quarter. The laggards are almost solely community lenders, ones that have “collectively received billions of dollars in taxpayer assistance.” In addition to the banks that have not paid dividends, seven other TARP recipients have failed “resulting in the total loss of the government's investment” in those collapsed institutions. The article noted that analysts believe the repayment and profits generated overall will more than offset the financial losses generated by smaller banks. But they added that the issues surrounding community banks indicate that the Treasury lacked proper filters in determining which institutions got access to the financial rescue program.

Inside Washington (12/28/2010)

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* WASHINGTON (12/29/10)--Debit interchange revenue for regulated card issuers will decline by 73%, according to a report issued by Oliver Wyman last week. In the U.S. banking industry, $11.8 billion of the $16.2 billion generated in debit interchange revenue will disappear from the system, according to the report, “The U.S. Debit Market and the Durbin Amendment: Worse Than the Worst Case Scenario.” Based on the proposed draft rules announced by the Federal Reserve on Dec. 16, debit interchange revenue will shrink from an average of 44 cents per transaction to at most 12 cents per transaction as of July 21, 2011. With the new rates set in reference to a subset of all debit card costs, the economics of debit card programs will become significantly unprofitable, said the report. Between 2000 and 2009, debit grew at an average annual rate of 18% and is now the most commonly used non-cash payment method. In 2009, 37.9 billion debit card transactions were performed in the U.S., representing 35% of total non-cash retail payments. Currently, card issuers generate an average of $87 of revenue per active consumer debit card per year, but starting on July 21, for banks with at least $10 billion in assets, this figure will drop to $24 per year. Card issuers with less than $10 billion in assets may also be affected, as there is no provision that requires debit networks to set different interchange rates between large, regulated card issuers and small, exempt card issuers such as credit unions. The Oliver Wyman report agrees with the Credit Union National Association’s analysis that if debit interchange revenue for smaller issuers declines, the result could be severe; not only will these programs become unprofitable, the viability of some community banks and credit unions will be threatened …

Monthly FHFA report shows ARMfixed-rates drop slightly

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WASHINGTON (12/29/10)—When viewed together, the contract rate on fixed- and adjustable-rate mortgages (ARM) went down slightly in November from the previous month—to 4.35% from 4.44%, a decline of nine basis points (bp). The composite effective interest rate, which also reflects the
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amortization of initial fees and charges, was down 11 bp at 4.46% in November. When viewed separately, fixed-rate mortgage loans experienced the bigger decline. For instance, the average interest rate on conventional, 30-year fixed-rate mortgage loans of $417,000 or less decreased 12 bp in November to 4.32%. The average November rate for ARM contracts was 4.42%, down 7 bp from the previous month. The averages are those reported by the Federal Housing Finance Agency’s National Average Contract Mortgage Rate for the Purchase of Previously Occupied Homes by Combined Lenders released Tuesday.

NCUA-safe campaign attracts millions in donated ad space

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ALEXANDRIA, Va. (12/29/10)—The “NCUA-safe” ad campaign featuring personal finance expert Suze Orman touting the virtue of federal credit union insurance has tallied more than $2.6 million in free advertising for the National Credit Union Administration (NCUA). Launched just three months ago, the public-education campaign combines 30- and 60-second
Suze Orman, nationally recognized personal finance expert, is shown here in an NCUA-designed ad that assures the public their funds are safe with federal credit union share insurance. (NCUA Photo)
television and radio ads, as well as outdoor and indoor posters proclaiming the safety of the National Credit Union Share Insurance Fund that guarantees credit union member deposits. NCUA Chairman Debbie Matz announced the campaign will continue throughout 2011. She said the campaigns “impressive results” are particularly gratifying because there is a national scope of the pick-up of the “NCUA-safe” ads. Through Dec. 20, the NCUA announced the following ad-space results:
* National cable networks: 79 airings on CBS, ION and WGN Superstation, for a total of $154,000 in donated airtime; *Local TV: 1,346 airings, worth $388,808; * Radio: 817 airings, worth $963,018; and * Out-of-home (bus shelters, mall posters and Times Square (N.Y.) message board); worth $1,108,000.
“I look forward to continuing the success of our efforts to elevate the financial public’s understanding of the value of federally insurance,” Matz said. The NCUA revealed the precise dollar-value amount of $2,613,826 for the PSAs.