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Inside Washington (12/30/2009)

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* WASHINGTON (12/31/09)--Credit unions offering qualified tuition savings program accounts--529 accounts--are eligible to insure them through the National Credit Union Share Insurance Fund (NCUSIF), the National Credit Union Administration said in a letter. The accounts can be insured through NCUSIF as public units or on a pass-through basis if membership and traceability requirements are met. Several states have established qualified tuition savings programs under the Internal Revenue Code and are placing the funds in federally insured credit unions. One requirement for qualified programs under the code is that participants acquire an interest in a state trust instead of depositing the funds directly with a financial institution ... * WASHINGTON (12/31/09)--Analysts are debating the impact of easing the limits on securities holdings at Fannie Mae and Freddie Mac. Last year, Fannie and Freddie were required by the Treasury to shrink their mortgage portfolios when they were placed in conservatorship. The idea was to make the companies’ size and growth more manageable (The Wall Street Journal Dec. 30). Last week, Treasury eased the requirement, which means Fannie and Freddie won’t have to sell mortgages next year and could even buy mortgages. Treasury also suspended a $400 billion cap on the bailout subsidy the government will offer through the next three years. Fannie and Freddie can now purchase delinquent loans, and new accounting rules that take effect next year will make it more cost effective for the companies to buy bad loans, said Mahesh Swaminathan, Credit Suisse senior mortgage analyst. A Treasury official said the eased limits weren’t intended for Fannie and Freddie to be active mortgage buyers, but the government may not object to their presence in the market. Karen Shaw Petrou, managing partner of Federal Financial Analytics, said the moves make sense in the short-term because they avoid market volatility, but limitless aid could make it harder for Fannie and Freddie to separate themselves from the government ...

NCUA seeks to intervene in WesCorp lawsuit

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ALEXANDRIA, Va. (12/31/09)--The National Credit Union Administration (NCUA), which serves as conservator of Western Corporate FCU (WesCorp), announced Wednesday it has filed papers in superior court in Los Angeles to intervene as plaintiff in a lawsuit against several current and former employees and officials of WesCorp. The civil action has been brought by seven natural person credit unions that are members of WesCorp that alleges negligence and breach of fiduciary duties in connection with WesCorp’s substantial investments in residential mortgage-backed securities and collateralized debt obligations. The NCUA said in its announcement that it is the proper plaintiff in the case and that the court should allow the agency to take the place of the current plaintiffs. In that capacity, the NCUA could determine whether and how to proceed with any action against WesCorp’s former board members and employees, the release said. The NCUA noted that WesCorp has been operating under federal control since being placed into conservatorship in March and, as conservator, the NCUA operates WesCorp through a management team. Therefore, the agency is “successor to all the rights titles, powers and privileges of the credit union and any of its members, accountholders, officers or directors.” NCUA concluded it had an obligation to intervene on behalf of all members of WesCorp. NCUA General Counsel Bob Fenner stated that "as conservator, NCUA has an obligation to protect the interests of all the members of WesCorp. NCUA has been actively investigating whether legal action is appropriate against many different parties, including former WesCorp officials, to redress the losses the institution has suffered. That investigation is continuing. "Federal law provides that NCUA as conservator is the appropriate party to represent the interests of all members in connection with any recovery attempts. While we did not choose to initiate this litigation, we believe NCUA has an obligation to intervene because claims of this nature belong to all of WesCorp’s members, not just the first plaintiffs to arrive at the courthouse.”

New FCRA allowable-charge ceiling announced

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WASHINGTON (12/31/09)—As of Jan. 1, 2010, the Federal Trade Commission (FTC) ceiling on allowable charges under Section 612 Fair Credit Reporting Act (FCRA) drop to $10.50, down from the $11 ceiling this year. Section 612 of the FCRA covers when a consumer has a right to get a free credit report and 612(f) addresses the cost that a credit bureau can charge a consumer for a credit report that it doesn't have to give for free. Since 1996, the FTC has been required to increase an $8 figure referred in the law on Jan. 1 each year to reflect changes in the Consumer Price Index (``CPI''). According to the FTC, the CPI increased 33.98% between the 1997 FCRA effective date and September 2009. “This increase in the CPI, and the requirement that any increase be rounded to the nearest fifty cents, results in a maximum allowable charge of $10.50 effective January 1, 2010,” the FTC noted in it Federal Register document published Wednesday. Use the resource link below for more.

FinCEN Spanish-language CTR pamphlet available

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WASHINGTON (12/30/09)--The Financial Crimes Enforcement Network (FinCEN) has made available a Spanish-language version of its brochure “Notice to Customers: A CTR Reference Guide.” The guide is designed to be a resource for credit unions and other financial institutions to address questions frequently asked by members or customers regarding the Bank Secrecy Act (BSA) requirement to report transactions in currency that exceed $10,000. "Currency transaction reports provide unique and reliable information that is essential to supporting investigations and detecting criminal activities," said FinCEN Director James Freis, Jr. when announcing the Spanish-language brochure last month. "We hope that financial institutions find this pamphlet useful for communicating with a wider range of customers the importance of compliance with the reporting requirement." According to FinCEN, its pamphlets use “plain language” to explain the reporting requirement to those who may not be familiar with a financial institution's obligations under the BSA. They explain that large currency transactions are not illegal, but that financial institutions are required to obtain information from their customers when these transactions occur, and that if a customer attempts to break up, or "structure," transactions in order to evade the CTR reporting requirement, there are potential civil and criminal consequences. Use the resource link below to access the Spanish- and English-language booklets.

Compliance CARD Act 21-day rule clear now

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WASHINGTON (12/31/09)—In November, President Barack Obama signed the CARD Act Technical Corrections Act (H.R. 3606) into law putting to rest a situation that had been plaguing credit unions since the original Credit Card Accountability, Responsibility and Disclosure (CARD) Act was signed in May. Christy, the compliance manager at DEF FCU, read all about it in the Nov. 10 issue of News Now and now wants to act on the information. But the whole situation has been, let’s say, a bit confusing for some who must deal with the nuts and bolts of compliance. The original bill set off the confusion by incorrectly implying that a 21-day late notice requirement applied to all open-end credit, and the Credit Union National Association successfully argued that it had always been lawmakers' intent to apply the provision only to credit cards. That resulted in the CARD Fix Act, which stated unequivocally that the 21-daydisclosure timing requirement between provision of the periodic statement and the payment due date applied only to credit card accounts rather than all open-end credit. Christy also read tjat the 21-day timing continues to apply to all open-end credit. She knows that DEF FCU provides a 10-day period after an open-end loan payment due date before the credit union imposes a late fee. Christy believes the credit union must now change the timing of the late fee charge to 21 days from the date their periodic statements are mailed. Is Christy correct? CUNA’s Compliance Challenge tells Christy and other folks like her that no, this interpretation is not correct. Use the resource link below to read why in question eight, and then enjoy more CARD Act guidance in questions one through seven. http://cuna.org/compliance/member/comp_challenge/12_09_challenge.html Fed's interim final rule to amend Reg Z, implementing two provisions of the Credit Card Accountability Responsibility and Disclosure Act http://edocket.access.

Recession breeds lifelong savings habit says report

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WASHINGTON (12/31/09)—As the Credit Union National Association (CUNA) has reported, through October, year-to-date credit union savings balances experienced their fastest growth since 2001. According to a recent report from the National Bureau of Economic Research, the increased consumer attention to savings may not disappear any time soon. The National Bureau of Economic Research is a private, nonprofit research organization that says on its website is dedicated to promoting a greater understanding of how the economy works. The organization’s report on savings rates said an upside to the country’s ongoing financial crisis is that it may forge a new, lifelong devotion to savings among Americans between the ages of 18 and 25. (American Banker Dec. 30) Recessions have a very formative effect on working young people, the report posits. Analyzing recessions between 1963 and 2006, the bureau found that younger folks who experience a recession feel a lack of control over their careers. They pin success more to luck than to their personal positive attributes or actions. Such skeptical attitudes just increase if that young person has been fired due to the impact of a recession or if they have seen a relative lose a job. The attitude may be more realistic than cynical, according to the report, because while the national unemployment rate is currently around 10%, among 16- to 19-year-olds it is more than 26%. CUNA figures show that the new attention to savings goes
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across the board—at least for now. Credit union savings balances increased 1.6% in October 2009 and 10.3% during the first 10 months of 2009. During October, share drafts rose 7.3%, followed by regular shares (2.6%), and money market accounts (1.8%). One-year certificates increased 0.8%, while individual retirement accounts decreased 0.6%. "With members in no mood to take on additional debt, credit union investment portfolios rose almost 30% so far this year," Steve Rick, CUNA senior economist, reported to News Now.

RESPA coverage questions CUNA answers

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WASHINGTON (12/30/09)--As the Credit Union National Association (CUNA) reminded credit unions in yesterday’s News Now, the changes to the U.S. Department of Housing and Urban Development’s (HUD’s) implementing rules for the Real Estate Settlement Procedures Act (RESPA) go into effect Friday, Jan. 1. “CUNA would like to clarify compliance requirements regarding home equity lines of credit (HELOCs) that have not changed in RESPA,” said Kathy Thompson, CUNA’s senior vice president for compliance. Addressing questions recently posed to CUNA, Thompson offered the following guidance:
* Have the RESPA rules changed on when credit unions need to supply HUD’s “Shopping for Your Home Loan: HUD’s Settlement Cost Booklet”?
Answer: No. As we reported yesterday, HUD has updated its settlement cost booklet that has to be provided to consumers within three days of applying for certain mortgage loans. HUD has not made any changes to the section of the RESPA regulations that dictate when the booklet must be given (Section 3500.6). Therefore, for a HELOC, credit unions should continue to provide the Federal Reserve Board’s “When Your Home Is On the Line: What You Should Know About Home Equity Lines of Credit” to be in compliance with the RESPA rules. And the exceptions to providing the booklet for refinancings, closed-end subordinated loans and reverse mortgages continue to apply. While HUD's booklet makes mention of home equity loans and refinancings--and cautions consumers about taking out such loans--the booklet is clearly oriented to a person buying a house, and it would undoubtedly be confusing to give the booklet out for all types of mortgage loans.
* Do the RESPA amended rules now require the use of any new HUD forms for home equity lines of credit (HELOCs)?
No. While HELOC loans are “covered” under the general RESPA definitions, there are specific exceptions that HUD did not change when it revised its RESPA rules in November 2008. HUD did not change the language of current Section 3500.7(f) [but did re-designate (f) as a new (h)], which states that if a lender provides the disclosures required by the Truth in Lending Act’s Regulation Z at the time the person applies for a home equity line of credit, then the lender isn’t subject to the general rule of providing a Good Faith Estimate (GFE). Moreover, the revised Section 3500.8 on settlement statements continues to state: “The use of the HUD-1 or HUD-1A is exempted for open-end lines of credit (home equity plans) covered by the Truth in Lending Act and Regulation Z.”
Thompson said therefore, at this point credit unions do not have to change their compliance procedures for closing HELOCs. She admonished, however, “Remember that the Fed has under consideration changes to its Regulation Z’s rules on both closed-end mortgage loans and HELOCs (the comment periods for both proposals closed on Dec. 24), and it has indicated its interest in trying to better coordinate disclosures under Truth and Lending and RESPA. So we will have to see what 2010 holds in store for further changes in lending disclosures.”

Inside Washington (12/29/2009)

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* WASHINGTON (12/30/09)--On Monday, the Federal Reserve Board issued a proposal indicating that it is moving ahead with efforts to scale back the aid it infused into the economy during the peak of the financial crisis. The proposal would allow banks to place their reserves in the Fed. Fed officials worry that if banks have too much cash tied in their reserves, there might be a credit boom and inflation. However, Fed Chairman Ben Bernanke said inflation is not a near-term concern (Associated Press Dec. 28). Industry observers expect the investments to have a maturity of one to six months, with an interest rate set through auctions. Banks would not be able to withdraw the funds until the deposits mature ... * WASHINGTON (12/30/09)--Community banks are lobbying the Federal Reserve Board to exempt them from new compensation guidance designed to help financial institutions establish appropriate pay practices. The Fed’s guidance would subject the nation’s 28 largest banks to a “horizontal review” where their pay packages would be compared with those of other firms. Large banks whose compensation practices differ from the norm would be closely analyzed. However, community banks’ compensation would be reviewed as a part of the institutions’ exam processes. Community banks argue that the guidance goes too far because they did not contribute to the current financial crisis. Smaller banks are already exempt from a regulatory reform bill that passed the House in December. Banks with less than $10 million in assets would not be supervised from the proposed Consumer Financial Protection Agency ...

FOM chartering comments due March 1

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WASHINGTON (12/30/09) — March 1 is the due date for comments on recently proposed changes to the National Credit Union Administration’s (NCUA’s) chartering and field-of-membership rules, according to the Tuesday issue of the Federal Register. At its Dec. 17 open meeting, the NCUA proposed revisions designed to make the application and review process involving new community charters or expansions faster, simpler, less labor intensive, and more objective for both credit unions and NCUA. If approved, the new rule would set objective and quantifiable criteria to determine the existence of a well-defined local community (WDLC) for areas that encompass multiple group areas. Single political jurisdictions, such as a county, could continue to be the basis for a community charter or addition without having to meet further statistical standards. A new, objective definition for rural districts is also proposed. In addition, the NCUA is seeking comments on whether underserved areas should have to continue to qualify as well-defined local communities as the current rule requires. The NCUA also plans to eliminate a required narrative statement, a change that could potentially save credit unions significant consultant fees in assembling field-of-membership applications. The chartering and FOM proposal, which supersedes one issued in 2007, also would allow a credit union to contact its regional office and find out during that call whether an area being requested would meet the definition of a “community” under the agency’s rule. The Credit Union National Association (CUNA) is seeking credit union comment on the NCUA proposal by Feb. 10. CUNA's Community Credit Union Committee and Federal Credit Union Subcommittee will help develop CUNA's comment letter to the agency. For NCUA’s full proposal, use the resource link.

CUNA letter to iWash Posti Let CUs lend lead

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WASHINGTON (12/30/09)—“Give credit unions a chance to lend and lead,” the Credit Union National Association wrote in a letter to the Washington Post editor published yesterday. In the letter, CUNA President/CEO Dan Mica urged the U.S. Congress to pass legislation to increase credit union member business lending (MBL) authority. In the letter, Mica noted recent news reports that the Obama administration has taken a “loan plea to small banks.” It has been reported that the U.S. Treasury Department plans to offer community banks $30 billion to make more loans to small businesses to spur economic growth and create jobs. “Credit unions could advance these goals at no cost to the U.S. government under legislation that Sen. Mark Udall (D-Colo.) introduced Dec. 21 with bipartisan support,” Mica pointed out. The Udall bill would raise the cap on credit unions' small-business loans up to 25% of assets, up from the current statutory limit of 12.25%. It would exempt from that cap loans under $250,000—up from a current ceiling of $50,000. Mica went on to note that community bankers were quoted in a recent news story as saying the reason for their lackluster lending performance is a lack of demand for credit. Mica questioned that assertion, saying, “That has not been the credit unions' experience.” For the 12 months ending June 30, small business loans from credit unions rose 14% (according to CUNA figures)…while declining 8% percent at banks (according to the Federal Deposit Insurance Corp.).” Mica urged the U.S. Congress and the Obama administration to back legislation to increase credit union MBL powers as a way credit unions could do more to help solve the small-business credit crunch without adding to the federal debt. The increased authority would enable credit unions to generate $10 billion in new lending in the first year, and that in turn could boost job creation by about 108,000 new positions. There is a companion bill in the House to the Udall bill, introduced by Reps. Paul E. Kanjorski (D-Pa.) and Ed Royce (R-Calif.). The chairman of the National Credit Union Administration supports legislation to raise the cap.

Inside Washington (12/28/2009)

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* WASHINGTON (12/29/09)--Several top executives from the nation’s biggest banks will testify before the Financial Crisis Inquiry Commission next month about their roles during the economic crisis (American Banker Dec. 28). Scheduled to testify include Jamie Dimon, chairman/CEO of JPMorgan Chase and Co.; John Mack, chairman of Morgan Stanley; and Lloyd Blankfein, chairman/CEO of Goldman Sachs. Brian Moynihan, who will become CEO of Bank of America Jan. 1, has not confirmed his appearance. The commission was formed to determine the causes of the nation’s financial crisis and will hold several hearings throughout 2010 ... * WASHINGTON (12/29/09)--The Federal Housing Finance Agency Thursday announced that it is curbing executive compensation at Fannie Mae and Freddie Mac. Average pay at the enterprises will be 40% less than before Fannie and Freddie entered into conservatorship, the agency said. Beginning Jan. 1, base salary for executive officers will not exceed $500,000 a year, except for five positions including the enterprises’ CEOs and chief financial officers plus the chief operating officer of Freddie Mac. Before the enterprises were placed into conservatorship, 16 employees had salaries above $500,000 ...

2010 HMDA exemption remains the same

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WASHINGTON (12/29/09)--The Federal Reserve Board published its annual notice and final rule of the asset-size exemption threshold for depository institutions under Regulation C, which implements the Home Mortgage Disclosure Act (HMDA). The asset-size exemption for depository institutions will remain at $39 million, which was the level set for 2009. The threshold is based on the annual percentage change in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPIW) for the twelve-month period that ended in November. The CPIW for that period decreased by 0.98%, but this change was too small to warrant any reduction in the exemption threshold, the Fed said in a Federal Register document. An institution's exemption from collecting data in 2010 does not affect its responsibility to report the data it was required to collect in 2009, the Credit Union National Association (CUNA) reminds credit unions. HMDA and the Fed's Regulation C require most depository institutions and certain for-profit, nondepository institutions to collect, report and disclose data about applications for, and originations and purchases of, home mortgage loans, home improvement loans and refinancings. Data reported include the type, purpose, and amount of the loan; the race, ethnicity, sex and income of the loan applicant; and the location of the property. The purposes of HMDA include helping to determine whether financial institutions are serving the housing needs of their communities and assisting in fair lending enforcement. Use the link below to access the Fed's notice.

A crisis upside for CUs Mica explains

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WASHINGTON (12/29/09)—As the financial crisis and pursuant economic turmoil have sparked consumer ire with banking organizations, more Americans are discovering the cooperative difference that credit unions offer, Credit Union National Association (CUNA) President/CEO Dan Mica said in a recent column. Writing for the Cooperative Business Journal produced by the National Cooperative Business Association, Mica noted that CUNA data shows credit union membership grew 1.8% during the 12-month period ending June 2009. That figure equals twice the growth rate for the overall U.S. population and was the largest membership growth figure since 2003. Traditionally, Mica said, CUNA research shows that credit union members are not very interested in the credit union’s cooperative structure. But the crisis has pushed consumers—angry at banks—to look for local and consumer-focused alternatives and “more are discovering the cooperative difference that credit unions offer.” “(W)hile consumers may not appreciate the underpinnings of credit unions’ ownership structure, they respond warmly to the natural effects of cooperative ownership: trust and value,” Mica wrote. The CUNA leader also called upon all cooperative sectors to work more closely together to the benefit of all cooperatives—and ultimately consumers. “I am convinced that if credit unions and other cooperatives had a greater recognition of our shared principle and history, we would see greater interaction between these sectors,” Mica wrote, and added: “If consumers’ changing desires cause cooperatives to work together more regularly, we’ll see another silver lining in this dark economic period.”

Dodd Shelby speak of reg reform accord

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WASHINGTON (12/29/09)—The top Democrat and Republican members of the Senate Banking Committee united to say “meaningful progress” has been made in the area of financial regulatory reform. Both Chairman Christopher Dodd (D-Conn.) and ranking member Richard Shelby (R-Ala.) said they are hopeful remaining issues can be resolved before the Senate reconvenes Jan. 19. "Our country needs financial regulatory reform, and we are committed to working together," said Dodd and Shelby in their joint statement last week. They identified six areas of accord:
* Seeking to end the “Too-Big-to-Fail” problem; * Protect taxpayers from future bailouts by enhancing “our resolution regime”; * Enhancing consumer protections; * Modernizing and streamlining the country’s financial regulatory structure, while preserving the dual-banking system; * Focusing the Federal Reserve more fully on monetary policy; and * Modernize regulation and oversight of the derivatives market.

HUD issues new settlement-cost booklet

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WASHINGTON (12/29/09)—Starting Friday, Jan. 1, 2010, credit unions and other mortgage lenders must comply with the changes to the Real Estate Settlement Procedures Act (RESPA) implementing rules. These rules, finalized in November 2008 by the Department of Housing and Urban Development (HUD), require the use of revised Good Faith Estimate (GFE) forms and HUD-1 Settlement Statement forms. Last week, the U.S. Department of Housing and Urban Development (HUD) posted on its website an updated “Shopping for Your Home Loan: HUD’s Settlement Cost Booklet,” which lenders are required to give to consumers within three days of their applying for a mortgage loan. The 49-page booklet has been revised to reflect the information and format of the revised forms. HUD significantly revised the GFE requirements to ensure that the estimates provided by lenders or brokers are more accurate, and to facilitate comparison shopping among lenders. Moreover, the changes made in the HUD-1 form were designed to facilitate easier comparison by the borrower of the information provided in the GFE form and what actually is owed at settlement. Credit unions have been asking the Credit Union National Association (CUNA) about the significance of HUD’s announcement in mid-November that HUD plans “restraint in RESPA enforcement” through April 2010. Last month HUD announced that it was instructing its staff “to exercise restraint in considering an action against FHA-approved lenders who have demonstrated that they are making a good faith effort to comply with RESPA’s new requirements…” HUD has enforcement authority over credit unions for RESPA compliance, although credit union examiners check for compliance. “Ten days ago Federal Housing Administration Commissioner David Stevens made clear that HUD’s restraint in enforcement does not mean there is any flexibility in which forms can be used starting on January 1,” said Kathy Thompson, CUNA’s SVP for Compliance. “The new forms must be used. The only time beyond Thursday when the old HUD-1 form can be used is when the GFE the borrower received was issued in 2009 on an old version of the GFE form.” “Obviously, lenders are going to have to act quickly to get the updated version of the HUD booklet into borrowers’ hands starting next week – and may just have to hand out downloaded versions for the time being,” noted Thompson. “I was surprised that HUD didn’t even issue a press release about the new booklet being available, so this is obviously a case where some regulatory flexibility will need to be shown.” The link to the revised HUD booklet is provided in the resources below. Thompson also noted that HUD held some limited-access informational webinars on the new RESPA rules earlier in December, but has not yet provided a publicly accessible link to the information provided on its webinar.

Inside Washington (12/27/2009)

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* WASHINGTON (12/28/09)--The Financial Crisis Inquiry Committee plans to have its first public hearing Jan. 13 and 14. The hearing will focus on the state of the financial crisis and its causes (American Banker Dec. 23). Top leaders of private and public-sector entities that played critical roles in the crisis will testify, but no names were announced ... * WASHINGTON (12/28/09)--Federal Reserve tests of tri-party reverse repurchase agreements have gone well, according to Thomas Wipf, chairman of the Treasury Market Practices Group, which is working with the Fed on the transactions. The Federal Reserve Bank of New York drained $990 million in reserves from the banking system this month through five trials of the repo program. The tests are not a change in policy, but are a way to take stimulus money out of the economy. Fed policymakers are considering how to withdraw emergency programs used to help the economy, and may use the repos to withdraw or neutralize cash in the system. In a reverse repo, the Fed lends securities for a set period, taking cash from the banking system (Bloomberg News Dec. 23). * WASHINGTON (12/28/09)--The amount of money the Federal Reserve and U.S. agencies have lent, guaranteed or spent has dropped 15% since September to $8.2 trillion--the lowest in a year (Bloomberg News Dec. 23). The drop--an ease in taxpayer burden--signals a change in the economy. But the government’s $4.2 trillion contribution still complicates future strategies for exiting from economic stimuli. It might be tough for elected officials to stop spending, which prolongs the bailout. Fiscal stimulus programs be dangerous, said David Wyss, chief economist for Standard and Poor’s. The Fed can print money, but the government has to raise taxes or borrow more money, he added. The House increased the government’s debt ceiling to $12.4 trillion last week and also passed a $154 billion economic aid package to pay for unemployment benefits, infrastructure and help for state governments ...

CUNA opposes some HELOC changes

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WASHINGTON (12/28/09)--The Credit Union National Association (CUNA) in a recent comment letter opposed some of the proposed amendments to Regulation Z that would make changes to the content and timing of disclosures related to home equity lines of credit (HELOCs). While CUNA said that it understands that the Federal Reserve Board has amended HELOC in response to abusive loan practices, “credit unions have not engaged in these practices, primarily because their mission and incentives are to serve their members, not to achieve and maximize profits.” While the Fed has proposed requiring that borrowers be given an early HELOC disclosure three days after the application is submitted and an account-opening disclosure at the time that the account is opened, CUNA has suggested that the Fed not require the account-opening disclosure “if the terms and conditions have not changed since the borrower was given the early HELOC disclosure.” However, the Fed’s proposal to increase the notification period for a change-in-terms from 15 to 45 days is a positive step that CUNA said would “benefit consumers” and would not impose significant burdens on credit unions. The mandatory compliance deadline should also be extended to at least 18 months after the proposed changes are made final, CUNA added. For the full comment letter, use the resource link.

Closed-end mortgage disclosure rule excessive--CUNA

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WASHINGTON (12/28/09)--Commenting on the Federal Reserve Board’s proposed revisions to Regulation Z requirements for closed-end mortgage loans, the Credit Union National Association (CUNA) said it “generally supports disclosures that are helpful for consumers,” but added the disclosure requirements under this proposal are excessive and “would be overwhelming for consumers.” CUNA noted that providing more streamlined information “may actually be preferable if it is carefully targeted to the needs of consumers who apply for mortgage loans.” Portions of the new Fed rule would require changes in the format and timing of the required disclosures and would prohibit certain payments to mortgage brokers and loan officers that are based on the loan’s terms or conditions. However, CUNA argued, these rules should not apply to credit unions because “compensation systems for credit union employees have worked well, without abuse, and credit union employees were not the cause of the problems that these provisions are intended to address.” The Fed rules would seek to address many questionable lending practices, including instances where lenders have provided high-cost and abusive loans to unsuspecting borrowers. CUNA is also concerned about provisions that would require more finance charges and fees to be included within the annual percentage rate (APR) calculation. This would increase the overall annual percentage rate (APR) attached to a loan and may cause consumers to believe that the increase is due to a change in credit union business practices, rather than a change in how the APR of a given loan must be disclosed. “The preferable approach would be to require disclosure of the interest rate and disclosure of the finance charge in dollar terms, which will be easier for borrowers to understand and easier for lenders for purposes of complying with these requirements,” CUNA added. “Based on their relationships with their members, credit unions strongly believe these additional and enhanced disclosures are for the most part unnecessary, and the resulting confusion will actually thwart the goal of this proposal, which is to provide useful information for consumers,” the comment letter added. CUNA urged the Fed to “substantially revise the proposal” and “conduct additional consumer research as part of this process prior to issuing a rewritten proposal.” For the full comment letter, use the resource link.

Tinker FCU CEO to serve on Feds TIAC

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WASHINGTON (12/28/09)--The Federal Reserve Board last week announced that Tinker FCU’s President/CEO Michael Kloiber is one of five newly added members of its Thrift Institutions Advisory Council (TIAC). Kloiber, who heads the Tinker Air Force Base, Oklahoma-based credit union, will join Home Savings Bank President/CEO Howard Boyle, American Federal Savings Bank President/CEO Peter Johnson, Northampton Co-Operative Bank President/CEO William Stapleton, and First Clover Leaf Bank President/CEO Dennis Terry as first-time members of the TIAC. Randy Smith, President/CEO of Universal City, Texas’s Randolph-Brooks FCU, will also remain on the TIAC through 2010. The TIAC, an advisory group, was established by the Fed in 1980 and meets three times per year with the Fed's Board of Governors to discuss developments relating to thrift institutions, mortgage finance, and regulations.

Treasury urged to investigate potential mortgage fraud

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WASHINGTON (12/28/09)--The Credit Union National Association (CUNA) on Wednesday encouraged U.S. Department of the Treasury General Counsel George Madison to “undertake an expeditious investigation into a troubling matter that involves the fraudulent conveyances of residential mortgage loans to the Federal National Mortgage Association (FNMA).” The letter, which was also sent to Sen. Charles Schumer (D-N.Y.), Rep. Barney Frank (D-Mass.), Rep. Paul Kanjorski (D-Pa.), National Credit Union Administration (NCUA) Chairman Debbie Matz, Treasury Assistant Secretary for Financial Institutions Michael Barr, and Federal Housing Finance Agency (FHFA) Acting Director Ed DeMarco, said that FNMA “has not handled” this potential fraud situation “in a manner that is appropriate for the federal government,” adding that the FHFA has not required FNMA to take any action. CU National/U.S. Mortgage, a third party mortgage processing specialist that purchased many loans originated by credit unions, “defrauded at least 26 credit unions” over a number of years “by conveying the loans to FNMA without the authorization of the credit union and retaining the proceeds.” CU National, which filed for bankruptcy in February and whose former CEO is awaiting sentencing after being found guilty of embezzlement, was a FNMA seller/servicer. While FNMA continues to hold these proceeds, CUNA said that “FNMA has not offered, nor has the FHFA required them to offer, a settlement” to defrauded credit unions that may be currently facing “severe prompt corrective action sanctions (PCA) from NCUA as a result of the losses.” The lack of a financial resolution may also create issues for the NCUA, as the agency may be required to draw funds from its National Credit Union Share Insurance Fund “if the affected credit unions are subject to harsh PCA sanctions as a result of their FNMA losses, NCUA may need to draw upon the to deal with the losses,” CUNA added.

CUNA comments on CARD Act gift card rules

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WASHINGTON (12/23/09)--The Credit Union National Association (CUNA) in a recent comment letter told the Federal Reserve Board that some exceptions to proposed rules that will implement the restrictions on fees and expirations dates for gift cards and similar products, as required under the Credit Card Accountability, Responsibility, and Disclosure Act of 2009 (CARD Act), should apply in some instances. Specifically, CUNA stated that an exception that applies to reloadable cards that are not marketed as gifts “should apply if the issuer does not market the card in this manner, regardless of how the card may be characterized by others.” As for the requirement to provide an expiration date that is at least five years after issuance, the Board provides two alternatives for compliance and CUNA supports the alternative that would require policies and procedures to ensure consumers have an opportunity to purchase a card with an expiration date that is at least five years after purchase. CUNA also encouraged the Fed to alleviate some of the confusion caused by a misunderstanding of expiration date rules by informing consumers that the expiration date that is printed on their gift card may not “coincide with the expiration date of the underlying funds.” While CUNA generally supports disclosure information that helps consumers understand financial products, there is some concern that it will be difficult to place all of the needed disclosures in the spaces provided on the gift card. CUNA recommended that the Fed “provide some flexibility in the placement and location of these disclosures” to help alleviate these disclosure issues. CUNA also suggested that satisfying a requirement that would force credit unions to automatically issue replacement cards if the underlying funds do not expire until after the expiration date would be “impossible,” as “credit unions do not have records as to who is the ultimate recipient of these cards.” Also, while gift cards or other certificates that are printed on paper should not be exempted from these rules, CUNA called on the Fed to exempt cards that are sold and in circulation as of Aug. 22, 2010 from the rules. Use the resource link below to read CUNA's complete remarks.

Inside Washington (12/22/2009)

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* WASHINGTON (12/23/09)--The Treasury Department has adjusted pay limits at American International Group Inc. (AIG), prompted by a highly paid AIG employee who won’t leave the company by year-end as originally expected (American Banker Dec. 22). Kenneth Feinberg, Treasury pay czar, said AIG can pay the employee $4.3 million in incentive payments, on top of his $450,000 salary. In other news, Treasury modified a pay rule to allow Citigroup to pay expatriate compensation to five employees instead of four ... * WASHINGTON (12/23/09)--Howard Schmidt, former eBay Inc. and Microsoft Corp. security official, has been tapped to be the White House cyber security chief. Schmidt will set computer security policy and provide budget guidance throughout the federal government (The Wall Street Journal Dec. 22). He also will tap cyberdefense capabilities at the National Security Agency. Schmidt has previously worked for the White House, the Air Force and Federal Bureau of Investigation. He is president of the Information Security Forum, a nonprofit security group ... * WASHINGTON (12/23/09)--The Federal Reserve Board Tuesday announced that the asset-size exemption threshold for depository institutions under Regulation C, which implements the Home Mortgage Disclosure Act (HMDA), will remain $39 million. As a result, institutions with assets of $39 million or less as of Dec. 31 are exempt from collecting data in 2010. Under HMDA, mortgage lenders in metropolitan areas are required to collect, report and disclose data about applications for, and originations and purchases of home purchase loans, home improvement loans and refinancings ...

CU CEO discusses small biz lending at Obama meeting

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WASHINGTON (12/23/09)--Hope Community CU CEO Bill Bynum was the only credit union official among several finance industry representatives that discussed various approaches to boosting small business lending during a Dec. 22 meeting with President Barack Obama and key members of his economic team. During the meeting, Bynum detailed his own experiences as CEO of the $68.7 million asset, Jackson, Miss.-based credit union, which serves members in four Mississippi Delta states, and discussed some of the lending issues that are unique to the communities that his credit union serves. Bynum was also invited to the White House in his capacity as the chairman of the CDFI Advisory Fund. After the meeting, Bynum told News Now that one goal of the meeting with Obama was to ensure that institutions such as his credit union, which is one of the few credit unions to participate in the Treasury’s Community Development Financial Institutions (CDFI) program, would have the “tools” needed to continue lending activities. Bynum is the chairman of the CDFI Advisory Council. His credit union is a member of the Mississippi Credit Union Association and the Credit Union National Association (CUNA). “We know how to lend in times like these, and we want access to the same types of resources and latitude that big banks have so we can do our job,” Bynum added. "I think the president heard that message very clearly." Obama acknowledged that credit unions and small banks did not create the current financial crisis, and added that they can contribute to the recovery by lending to small businesses and families in need of funds. Bynum was also scheduled to appear yesterday on the Fox Business Network, the PBS Nightly Business Report, and will appear today on NPR's "Tell Me More" as part of their coverage of the White House meeting. CUNA has recognized the need for increased lending to small businesses, and has strongly supported House and Senate legislation that would increase credit union member business lending to 25% of assets. The Senate bill, S. 2919--introduced in the Senate on Monday by Sens. Mark Udall (D-Colo.), Charles Schumer (D-N.Y.), Barbara Boxer (D-Calif.), Joseph Lieberman (I-Conn.), Olympia Snowe (R-Maine), Susan Collins (R-Maine) and Kirsten Gillebrand (D-N.Y.)--could be taken up by the Senate once that legislative body returns in early 2010. Similar House legislation, H.R. 3380, has been introduced by Reps. Paul Kanjorski (D-Pa.) and Ed Royce (R-Calif.).

Fast-paced financial reform increases CUNA efforts

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WASHINGTON (12/23/09)--The expansive legislative agenda, which was led in 2009 by the administration of President Barack Obama and congressional leaders, has led to sweeping regulatory changes and, for many lobbying groups, including the Credit Union National Association (CUNA), increased levels of activity. CUNA Senior Vice President of Legislative Affairs John Magill told Politico (Dec. 22) that the “frantic pace” of this years’ legislative calendar, which included in-depth reforms of financial regulations, credit card rules, bank overdraft rules, and other items, has caused CUNA to spend “considerably more” on its lobbying efforts than it spent in the previous year. However, Magill said, simple accounting does not explain CUNA’s full grassroots efforts, which resulted in thousands of credit union representatives coming to Washington for CUNA’s annual Government Affairs Conference and hundreds more speaking directly with their members of Congress during CUNA’s “Hike the Hill” initiatives. This type of grassroots activity, which also took place earlier this month in advance of the recent final House vote on financial reforms, contributed to the defeat of a proposed mortgage cramdown amendment, Magill added. Citing data from the Center for Responsive Politics, Politico reported that in spite of a decrease in the number of registered lobbyists and a still troubled economy, D.C.-based lobbying groups will likely outdo the previous spending record of $3.3 billion, which was set last year.

CUNA thanks Udall for S. 2919 sponsorship

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WASHINGTON (12/23/09)--The Credit Union National Association (CUNA) in a Tuesday letter thanked Sen. Mark Udall (D-Colo.) for introducing S. 2919, the Small Business Lending Enhancement Act, earlier this week. The legislation, which was co-signed by Sens. Charles Schumer (D-N.Y.), Barbara Boxer (D-Calif.), Joseph Lieberman (I-Conn.), Olympia Snowe (R-Maine), Susan Collins (R-Maine) and Kirsten Gillebrand (D-N.Y.), would increase credit union member business lending (MBL) to 25% of assets and raise the "de minimis" threshold for a loan to be considered a member business loan to $250,000. While S. 2919 “will not completely solve the problems small businesses face,” CUNA in the letter recommended that S. 2919 could be considered as part of broader job creation legislation. The changes proposed by S. 2919 “will give credit unions currently serving the lending needs of their business-owning members the opportunity to help even more” and will “encourage credit unions that do not currently offer these loans to consider investing the necessary resources to do so,” the letter added. In a release addressing the recently introduced legislation, Udall said that “by increasing access to credit union loans, small businesses across the country will be able to expand, and create thousands of jobs." Snowe seconded Udall’s remarks, saying that “modestly increasing the lending cap for credit union members to 25 percent” would “help to thaw the frozen credit markets and increase access to critical capital for small businesses which, in turn, will bolster their business and spur job growth across the nation.” Boxer also hailed the legislation as a “common-sense measure” that will spur business growth. The release also quoted CUNA estimates that state that the MBL reforms would create over 100,000 new jobs and increase small business lending by $10 billion within the first year following their enactment.

Senate joins House with MBL cap-lift bill

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WASHINGTON (12/22/09)--A bill to increase credit union member business lending (MBL) to 25% of assets was introduced Monday in the Senate by Sens. Mark Udall (D-Colo.), Charles Schumer (D-N.Y.), Barbara Boxer (D-Calif.), Joseph Lieberman (I-Conn.), Olympia Snowe (R-Maine), Susan Collins (R-Maine) and Kirsten Gillebrand (D-N.Y.). The Credit Union National Association (CUNA) strongly supports the measure, S 2919. CUNA President/CEO Dan Mica offered credit unions’ “sincere thanks” to the senators, saying the lawmakers’ action acknowledges “that credit unions can be a significant part of the solution for helping the economy." Similar bipartisan legislation, also backed by CUNA, was introduced in the House last July by Rep. Paul Kanjorski (D-Pa.) and Ed Royce (R-Calif.). While the MBL issue will carry into 2010, Mica still emphasized that, "Time is of the essence; with this action, House leaders should recognize that increased capacity for credit union business lending has legs--despite cynical banker opposition. The House should now begin moving its bill through the legislative process as soon as possible." The House bill, known as Promoting Lending to America’s Small Businesses Act (H.R. 3380), would also raise the “de minimis” threshold for a loan to be considered a member business loan to $250,000, and exempt loans made to non-profit religious organizations as well as loans made in qualified underserved areas from the cap. The Senate bill features the former provision, but not the latter. The bill was introduced in the Senate the same month as President Barack Obama met with bankers to urge them to loosen unnecessary restrictions on credit to help the economy recover. CUNA has long advocated lifting the member business lending cap for credit unions, but even more vehemently so as lending from banks and other sources has shrunk during the country’s economic downturn. CUNA estimates that the higher business lending authority could provide $10 billion in new small business loans and at least 108,000 new jobs. A joint U.S. Treasury-Small Business Administration report, submitted following President Obama's recent White House jobs summit, included increased credit union business lending as part of a long list of possible job-stimulus initiatives that came out of that meeting. CUNA’s Mica has noted that the only lobbyists opposed to increased MBL powers are those representing the banking industry. "These are the same players who accepted billions of dollars of taxpayer money and now are restricting access to credit for consumers and small businesses.” Among those who have voiced public support for lifting the cap are the National Association of Realtors; National Cooperative Business Association; Americans for Tax Reform, Competitive Enterprise Institute, Ford Motor Minority Dealer Association, League of United Latin American Citizens, Manufactured Housing Institute, National Association for the Self Employed, National Association of Mortgage Brokers, National Cooperative Grocers Association, National Farmers Union, National Small Business Association, NCB Capital Impact, the National Association of Professional Insurance Agents, National Association of Manufacturers, National Council of Textile Organizations, and Council of Insurance Agents and Brokers.

Texas foundation applauds presidents fin lit commitment

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FARMERS' BRANCH, Texas (12/22/09)--The Texas Credit Union Foundation (TCUF) lauded the Obama administration for its plans to implement a nationwide financial education program for students. Credit unions throughout the nation have long been championing financial literacy. TCUF helped bring the National Endowment for Financial Education (NEFE)'s accredited High School Financial Planning Program (HSFPP) to schools in Texas, TCUF said (LoneStar Leaguer Dec. 21). TCUF has taken the program a step further and developed Project NEFE as a training program in the community. The Treasury Department and the Department of Education teamed up to offer the National Financial Capability Challenge, a nationwide initiative aimed at providing students, especially in economically disadvantaged communities, a chance to build their financial understanding "No matter your background, the need for an understanding of basic financial principles and operations is fundamental, and we at the foundation are adamant in our support of President Obama's decision," said Courtney Nickles, executive director at TCUF. TCUF also worked with state legislators to support a state law in 2005 to require financial literacy education as a prerequisite to high school graduation. A number of state league associations have made similar efforts to get financial literacy education mandated in their state's educational curriculum.

Inside Washington (12/21/2009)

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* WASHINGTON (12/22/09)--Financial industry observers said that the Federal Deposit Insurance Corp. (FDIC) should help financial institutions that are in trouble instead of letting them fail. The problem is that buyers are scared away from purchasing open and operating institutions when the FDIC sells failed banks’ deposits cheaply and guarantees their losses, observers noted (America Banker Dec. 22). If the FDIC provided open-bank assistance in a few cases, the failures could slow and the government could save money. It could be the “least-cost” solution in some cases, said Ron Glancz, partner at Venable LLP. Lawmakers need to help the FDIC prop up institutions, because they cannot do open-bank assistance under the current law. Banking agencies can encourage more private capital investment in banks, he added. Tom Vartanian, former Federal Home Loan Bank Board senior official, said the FDIC should use its systemic risk exception to help small institutions. If 500 community banks fail, there’s an impact in 500 communities and in the FDIC, he added. The FDIC has said it is not going to help openly troubled institutions. The FDIC can’t assist an “open institutions absent a systemic risk determination,” FDIC Chair Sheila Bair said earlier this month ... * WASHINGTON (12/22/09)--Treasury inflation protected securities (TIPS) indicate that Federal Reserve Board Chairman Ben Bernanke won the battle with deflation, Bloomberg News reported Monday. The gap between yields on Treasuries and TIPS due in 10 years--which measures the outlook for consumer prices--closed about 2.25 percentage points four days last week--the longest stretch since August 2008. Bernanke has said that tame inflation expectations have kept the target interest rates for overnight loans between banks at 0% to 0.25%. But, TIPS indicate that there may be more losses in bonds. Yields on the 10-year Treasury note hit 3.62% last week ... * WASHINGTON (12/22/09)--The Federal Bureau of Investigation released a preliminary semiannual uniform crime report, indicated that violent crime in the nation decreased by 4.4% and the volume of property crime declined 6.1%. The report is based on information from law enforcement agencies ...

U. N. resolution 2012 is International Year of Co-ops

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NEW YORK (12/22/09)--The United Nations (U.N.) has passed a resolution declaring 2012 as the International Year of Cooperatives--the first time the international body has made such a declaration. The National Cooperative Business Association (NCBA) obtained a draft version of the resolution. The final version, which will not be available online for a few days, had no changes, NCBA said. The organization will post the final resolution on its website. "Co-ops help people of all means, from all walks of life, work together for a common good," said NCBA President/CEO Paul Hazen (USAgNet Dec. 21). "That's why they're not only so attractive in the U.S., but in countries around the world." The resolution was supported by the World Council of Credit Unions (WOCCU). In May, WOCCU CEO Pete Crear spoke at a U.N. meeting of global experts on "Cooperatives in a World in Crisis" (News Now May 6,). At that time, WOCCU said it supported the proposed International Year of Cooperatives for 2012. "Declaring 2012 as the International Year of Cooperatives would shine a more intense light on cooperatives and credit unions worldwide," Crear said in May.

CUs among Hills top 10 lobbying triumphs

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WASHINGTON (12/21/09)--The Credit Union National Association's (CUNA) and credit unions' political advocacy efforts are listed among The Hill's 2009 "Top 10 lobbying triumphs." They even topped Google and AARP on the list. The Washington, D.C.-based publication noted that in a year of corporate belt-tightening and lobbyists being "shamed month after month by an administration determined to limit their access," that doors opened for some groups especially in healthcare, energy and financial regulation. "Some companies and trade groups emerged as clear winners," said The Hill (Dec. 18). No. 3 on the list is credit unions. CUNA "scored a slew of wins this year on financial reform," said the publication, adding, "With thousands of grassroots members, the credit unions mobilized throughout the year to press lawmakers against new restrictions on the industry." The Hill also cited other credit union efforts. They also "played a central role, alongside financial firms large and small, in stopping a proposal to give bankruptcy judges greater power to rewrite the terms of primary home mortgages. The House in March had passed the proposal, derided in the industry as "cramdown," but it failed in the Senate. Then it failed again in the House, with members citing small banks and credit unions as presenting persuasive arguments against the legislation," said The Hill. Others on the list were:
* The Pharmaceutical Research and Manufacturers of America; * Independent Community Bankers of America; * Edison Electric Institute; * Google; * General Electric/Rolls-Royce; * AARP; * Auto dealers; * Clean-tech; and * Boeing.

Filene to CUs Focus on consumer-friendly cards

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WASHINGTON (12/21/09)--As larger financial institutions find ways to get around the new rules imposed by the Credit Card Accountability, Responsibility and Disclosure (CARD) Act, a Filene Research Institute report has recommended that “credit unions should re-focus on their traditional consumer-friendly cards as a differentiator to for-profit entities.” The Filene Research Institute also recommended that credit unions focus their efforts on “simplicity and transparency” and improving their “collaborative credit card efforts to improve efficiencies” in order to “pick off the current and future malcontents fleeing boorish bank behavior.” The CARD Act will “limit” some of the “tricks and traps” that many credit card issuers use, “but it will also incentivize large issuers to come up with new ones,” Levitin said. While credit card accounts are not “core to most credit union lending practices,” as they only represent 5% of total credit union lending, the report found that credit union members that carry credit cards “carry higher balances and have fewer dormant accounts than bank card users.” “Credit unions are at a disadvantage when they attempt to compete with large institutions on business models that require economies of scale and are centered around backloaded, behaviorally contingent pricing,” according to Levitin, but the CARD Act “scrambles the credit card industry’s backloaded pricing model” by “constraining introductory credit terms and making it difficult for issuers to change borrowing terms.”

30- 15-year mortgages up for second straight week

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WASHINGTON (12/21/09)--Freddie Mac this week reported an average 30-year mortgage rate of 4.94%, slightly up from the 4.81% average recorded last week. Thirty-year mortgages averaged 5.19% during the same week of 2008. Fifteen year fixed rates averaged 4.38% during the week ended Dec. 17, a .06% increase from the 4.32% rate reported last week and a .54% decrease from the 4.92% rate reported during the same week of 2008. “Interest rates on 30-year fixed-rate mortgages have remained below 5% over the past seven weeks and are contributing to a wave of refinance activity,” and “mortgage rates followed bond yields higher once again this week amid signs of an improving economy,” Frank Nothaft, Freddie Mac vice president and chief economist, said. Five-year and one-year Treasury-indexed hybrid adjustable-rate mortgages averaged 4.37% and 4.34%, respectively, during the week. Both rates represent slight increases from the numbers reported during the previous week, and significant decreases from the rates reported during the corresponding period of 2008.

Obama honors CUNA s 75th CUs member service

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WASHINGTON (12/21/09)--Sending “greetings” to the Credit Union National Association in recognition of its 75th year of service, President Barack Obama congratulated credit union employees “for their dedication to excellence in their work.” Obama in a letter sent late last week also congratulated credit unions for “serving individuals and families in their communities,” adding that credit unions would “help grow and strengthen local economies across America” as the nation confronts the challenges set before it. CUNA earlier this year commemorated its founding, which took place on Aug. 10, 1934, with a series of meetings and commemorations in Estes Park, Colorado. In the letter, Obama urged credit union personnel and CUNA to “take pride” in the accomplishments of the last 75 years as they “mark this important milestone and look to the future.”

Inside Washington (12/18/2009)

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* WASHINGTON (12/21/09)--The mortgage market is stable but may be carrying some risk, financial observers said. Fannie Mae and Freddie Mac are still buying loans and subprime borrowers can still find financing. The Federal Housing Administration has taken over Fannie and Freddie’s more “perilous” lending, and by transferring the risk to the government, the market has avoided trouble. However, observers wonder if the future will bring new complications or an excess of old problems. Robert Pozen, chairman of MFS Investment Management and senior lecturer at Harvard Business School, said important lessons from the crisis are being ignored, he told American Banker (Dec. 18). He is leery about the extension of an $8,000 tax credit to first-time homebuyers. However, there are some positive signs. In the case of Fannie and Freddie, both are doing their job, so there hasn’t been pressure to fix them, said James Lockhart, former director of the Federal Housing Finance Agency. But although fixing Fannie and Freddie is on the “backburner” because they don’t pose a problem, they still have to be addressed, he said ... * WASHINGTON (12/21/09)--The Senate Banking Committee approved the renomination of Federal Reserve Board Chairman Ben Bernanke Thursday, but there likely will be a heated debate in the Senate over his nomination. Analysts expect him to win, but he faces opposition from legislators including Sens. Bernie Sanders (I-Vt.) and John McCain (R-Ariz.). Sen. Richard Shelby (R-Ala.), the committee’s ranking member, voted against Bernanke. Senate Banking Committee Chairman Chris Dodd (D-Conn.) told reporters that lawmakers will “no choice” but to approve his nomination. Dodd also stumped for his reform bill, which would eliminate the Fed’s banking supervisory power. The House passed a bill that would make the Fed a systemic risk regulator but without consumer protection functions (American Banker Dec. 18) ... * WASHINGTON (12/21/09)--The Federal Deposit Insurance Corp. (FDIC) warned against interest rate risk (IRR) in its Winter 2009 Supervisory Insights report. IRR is the potential for changes in interest rates to reduce a bank’s earnings or economic value. Financial institutions should be vigilant in their oversight and control of IRR exposures, FDIC said. Given the current low interest rate environment, it is important that financial institutions plan for increases in interest rates and prepare for the associated risks, the agency said. Financial institutions should be prepared to manage the risk of declining yield spreads between longer-term investments, loans and other assets and shorter-term deposits and other liabilities. FDIC advised institutions to reduce their IRR exposure and increase capital if their capital and earnings are insufficient against changes in interest rates ...

CUNA continues push for alt capital

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WASHINGTON (12/18/09)—Noting that the issue continues to be a priority for many credit unions, the Credit Union National Association (CUNA) pushed its efforts to get the Obama administration on board with the idea of alternative sources of capital for credit unions. In its latest effort to garner support, CUNA reinforced to key contacts within the U.S. Treasury Department the importance of credit union alternative capital authority. “CUNA is acutely aware that some credit unions need to issue supplemental capital products in order to maintain their net worth ratio requirements,” CUNA General Counsel Eric Richard said. “We are reaching out to help the Treasury understand the dilemma some credit unions find themselves in.” "We have long maintained that secondary capital and PCA—-prompt corrective action--reform are required for credit unions for the long term. However, that future is here for some,” Richard noted. CUNA figures show upward of 15% of well-managed, well-capitalized credit unions are now sufficiently close to the PCA net worth cutoffs to be concerned that they could run into PCA issues in the mid- to near-term. CUNA has been aggressively pursuing reforms through meetings with Obama administration officials and federal legislators. CUNA also reached out to the National Association of Federal Credit Unions earlier this year in an effort to work together to obtain alternative capital for credit unions. In a recent development on PCA reform, National Credit Union Administration Chairman Debbie Matz, in a Dec. 7 letter to Rep. Barney Frank (D-Mass.), asked for legislators to address issues with PCA standards by allowing qualified credit unions "to issue alternative forms of capital to supplement their retained earnings." Frank is chairman of the House Financial Services Committee. Matz wrote, in part, that while the intent of PCA is to control potentially "accelerated, unmanageable growth of credit union assets," PCA can at times "discourage manageable asset growth by financially healthy credit unions in times of economic distress." CUNA President/CEO Dan Mica, at that time, commended Matz’s letter saying the agency chairman’s action clearly draws the connection between increased credit union service to the American public and the need for PCA reform and additional sources of capital for credit unions.

FFIEC plans reverse mortgage guidance for CUs banks

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WASHINGTON (12/18/09)--The Federal Financial Institutions Examination Council (FFIEC) in proposed guidance released this week advised credit unions and other financial institutions to “provide adequate information” and “qualified independent counseling” for consumers that opt to take part in reverse mortgage products. Specifically, the FFIEC recommended that “consumers be provided clear and balanced information about the relative benefits and risks of reverse mortgage products” and encouraged financial institutions to “inform borrowers about reverse mortgage alternatives that they already offer.” The counseling provided to consumers should “cover the potential consequences of entering into these transactions, such as the potential effect on eligibility for needs-based public benefits,” the FFIEC added. Credit unions and other financial institutions should also “avoid potential conflicts of interest,” the FFIEC recommended. The guidance also addresses “related policies, procedures, and internal controls and third party risk management.” Comments on the proposed guidance must be received 60 days from publication in the Federal Register. For the full FFIEC guidance, as published in the Federal Register, use the resource link.

Shorter community charter process second mortgage rule voted

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ALEXANDRIA, Va. (12/18/09)--The National Credit Union Administration (NCUA) on Thursday approved a proposed rule that would revise the agency's community chartering policies and more clearly outline the parameters of a community chartered credit union. While federal credit unions that applied for community credit union charters have in the past provided “reams of information – hundreds of pages long – in order to demonstrate evidence of a community,” NCUA Chairman Debbie Matz said that the new NCUA standards will provide credit unions with a defined set of objective and quantifiable criteria to determine the existence of a well-defined local community. Credit unions also will no longer need to provide a narrative statement with their application.
Click to view larger image NCUA Chairman Debbie Matz, center, and the board discuss the community credit union charter changes with NCUA staff. (CUNA Photo)
The redesigned process will also shorten the amount of time needed to approve an application to “a couple of months” in most situations, with the more difficult situations needing slightly more time to be resolved, NCUA staff said. NCUA staff estimated that the previous application process resulted in an ordeal that took as long as 18 months in some cases. Commenting on the improved timeline, Matz said that “this proposed rule would dramatically improve the future process for credit unions to apply for community charters – and improve the standards for NCUA to evaluate them.” Under the proposal, a “community” could be a single political jurisdiction or multiple political jurisdictions within a single Metropolitan Division, as long as the total population does not exceed 2.5 million. To qualify for a new “rural district” standard, the area that a credit union looks to serve must be a contiguous area with over 50% of its population in “rural” census blocks. Additionally, the population of the area in question must not exceed 100,000. These limits, Matz said, “would ensure that a Rural District’s population is fairly small, yet still large enough to support a full-service credit union.” Credit unions must also detail how they will implement their business plan to serve the community in question and the unique needs of the various demographic groups in that community. Credit unions must also provide details on their community outreach and marketing plans, and an NCUA Regional Office will verify that these plans are being followed for the first three years that the new community credit union is in business. The NCUA will also allow credit unions that are insolvent or in danger of insolvency to merge with another credit union if its net worth is declining at a rate that will render it insolvent within 24 months or will reduce its total net worth under 2% within one year. The NCUA will also allow a merger if the credit union’s net worth is “significantly undercapitalized” under Prompt Corrective Act (PCA) requirements and there is no reasonable prospect of the credit union becoming “adequately capitalized” under PCA within the next 36 months. The NCUA will collect public comment on the rule for 60 days. The NCUA during the meeting also made final a rule that creates a limited exception to the 20-year maturity limit on second mortgage loans. Under the final rule, federal credit unions that take part in the U.S. Treasury Department's Making Home Affordable (MHA) Program would be permitted to extend second mortgages beyond 20 years to match the terms of modified first mortgages, which can have up to a 40-year maturity. This rule is unchanged from the interim final rule that the Board issued at its June meeting and was effective as of June 24, 2009. NCUA Chief Financial Officer Mary Ann Woodson also updated the NCUA on the status of its National Credit Union Share Insurance Fund (NCUSIF) and Temporary Corporate Credit Union Stabilization Fund (TCCUSF). According to Woodson, the NCUA has received $1.7 billion of the $2 billion dollars expected from the payment of NCUSIF 1% deposits and premium assessments. Those payments were due to the NCUA from federally insured credit unions this week. The NCUSIF’s equity level was at 1.27% as of November 30, 2009 and is expected to remain at that level through the rest of the year, Woodson said. Woodson also reported 328 CAMEL 4 and 5 credit unions, which hold nearly $41 billion of insured shares, as of November 2009, a 27% increase over the amount of CAMEL 4 and 5 credit unions reported as of November 2008. Woodson also reported that there was little to no change in the TCCUSF’s retained earnings since they were reported at last month’s board meeting.

Inside Washington (12/17/2009)

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* WASHINGTON (12/18/09)--The Senate Banking Committee Thursday approved Federal Reserve Board Chairman Ben Bernanke for a second term by a vote of 16-7. Sen. Richard Shelby (R-Ala.) voted against Bernanke. Shelby said he disapproves of some the Fed’s actions and is not confident in Bernanke’s future plans (The Wall Street Journal Dec. 17). Sen. Kay Bailey Hutchison (R-Texas) said she voted against Bernanke because she feels misled by the Troubled Asset Relief Program. Six of the opponents were Republicans. One Democratic panel member, Sen. Jeff Merkley (D-Ore.) opposed the renomination. Sen. Bob Corker (R-Tenn.) supported Bernanke, but said he has made mistakes, as has every other financial regulator. However, Corker said he couldn’t think of another person who could do a better job. Sen. Jim Bunning (R-Ky.) urged the committee to delay the renomination until the Fed gives more information on last year’s activities ... * WASHINGTON (12/18/09)--Sens. John McCain (R-Ariz.) and Maria Cantwell (D-Wash.) introduced legislation Wednesday that would reverse a provision of the Gramm-Leach-Bliley Act by prohibiting commercial banks from affiliating with investment banks (American Banker Dec. 17). The bill, the Banking Integrity Act of 2009, also would prevent banks from engaging in insurance activity and force them to eliminate any investment or commercial banking operations within one year of enactment. The act would reinstate the Glass-Steagall Act of 1933, which separated commercial banking from securities and insurance industries. McCain said the bill would prevent banks from being bailed out by Americans ... * WASHINGTON (12/18/09)--Policymakers appear to be moving ahead on financial regulatory reform, but some financial observers say the approach misses key issues. For instance, Federal Deposit Insurance Corp. (FDIC) Chairman Sheila Bair testified at a hearing last week about a Bank of America Corp. deal with Merrill Lynch. The hearing was the fifth the House Oversight and Government Reform Committee had conducted regarding the deal (American Banker Dec. 17). In contrast, the committee has held only one hearing this year on the Troubled Asset Relief Program (TARP). The government contributed $20 billion to the BoA deal, while TARP cost $700 billion. Robert Hockett, professor at Cornell University Law School, said policymakers’ work is misdirected. Congress is spending time on matters that later become “tangential,” he said. Also, lawmakers also are moving ahead with financial reform but haven’t found the cause of the financial crisis. However, some say Congress must act “when the iron is hot” or lawmakers may lose their chance to legislate when the public loses their “appetite for change,” said Brian Gardner, Keefe, Bruyette and Woods Inc. analyst ... * WASHINGTON (12/18/09)--The Federal Reserve Board has named 10 new members to its Consumer Advisory Council for three-year terms, and has designated a new chair and vice chair. Michael D. Calhoun was designated chair. Calhoun is the President of the Center for Responsible Lending in Durham, N.C., a nonprofit research and policy organization focusing on consumer lending issues. Jim Park was designated vice chair. His term on the Council ends in December 2011. Park is CEO of New Vista Asset Management in San Diego, which provides community-focused real-estate owned disposition services and works to turn foreclosures into affordable housing options for minority and low- and moderate-income families. His term on the council ends in December 2010. Other new members include: Joanne Budde, William Dana, Tino Diaz, Kerry Doi, Mike Griffin, Brian Hudson, Dory Rand, Phyllis Salowe-Kaye, Corey Stone and Mark Wiseman ...

FinCEN FY2009 annual report is available

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WASHINGTON (12/18/09)—The Financial Crimes Enforcement Network (FinCEN) has released its annual report for fiscal year 2009--complete with what the agency sees as its accomplishments, as well as its continuing goals. Within its 77 pages, is a subhead reading “BSA Data
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Security.” This section reiterates the agency’s commitment to safeguarding the data collected under provisions of the Bank Secrecy Act (BSA) and a pledge to continue to review procedures to enhance security. The agency said increased awareness of the value of BSA information to detect financial crimes or oversee BSA compliance has resulted in more requests for access. As the fiscal year closed, the report said, FinCEN had more than 300 memoranda of understanding with external client agencies. In order to safeguard BSA data, FinCEN said it conducts onsite inspections at each agency to assess the proper and efficient use and security of BSA information, legitimate and documented purposes for utilization and re-dissemination, and appropriate retention and destruction procedures. Click below to take a look at the full report.

Realtors group joins CUNA-led MBL coalition

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WASHINGTON (12/17/09)--In what Credit Union National Association (CUNA) President/CEO Dan Mica called a “highly significant development,” the National Association of Realtors (NAR) joined a coalition of organizations that support lifting the cap on credit union member business lending. The NAR joins 15 other think tanks and associations, including the National Farmers Union, the National Cooperative Grocers Association, the National Association of Manufacturers, the National Association of Mortgage Brokers, the League of United Latin American Citizens, and the National Cooperative Business Association, in calling for lifting the business lending cap and providing much-needed credit into the economy. The National Cooperative Business Association also backed MBLs by joining the coalition of associations last week. In a recent open letter to President Barack Obama and members of Congress, CUNA and its associates advocated lifting the current cap on MBL for credit unions. While the bill is still awaiting congressional action, Rep. Paul Kanjorski’s (D-Penn.) H.R. 3380, the Promoting Lending to America's Small Businesses Act, would raise the current MBL ceiling of 12.25% of total credit union assets to 25%. CUNA has estimated that expanding the capacity of credit unions to make business loans could result in $10 billion in new business loans through credit unions and at least 108,000 new jobs in the first year after enactment, with no additional costs to taxpayers. The NAR supported Realtors FCU, a credit union that serves NAR members, their families, and staff, with a $15 million gift when the credit union opened in May of this year. NAR has 1.2 million registered members nationwide.

House appropriations bill extends SBA funding

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WASHINGTON (12/17/09)--Funding for some U.S. Small Business Administration (SBA) programs will continue for another two months after the House of Representatives passed a $636.3 billion defense appropriations bill by a vote of of 395-34 on Thursday. While the bill is aimed to fund the Department of Defense for 2010, portions of legislation added to the bill would grant the SBA $125 million in funds for its business loan program. The funds will, according to a House summary, allow the SBA to “continue two temporary enhancements to its loan guarantee program through February 28, 2010 to make loans more attractive to borrowers and lenders and to free up capital.” Recognizing that “small businesses represent a major engine for the U.S. economy,” but have “had a difficult time securing needed loans in these tight economic times,” the legislation would permit the SBA to raise the percentage of loan amounts that it can guarantee to 90%. The SBA would also be given the authority “to waive or reduce loan fees.” The SBA extension is “fully offset,” according to the House summary. Speaking at the National Press Club earlier this week, SBA Administrator Karen Mills said that involving additional lending partners, including credit unions, in SBA guaranteed loan programs is the "right formula" to get more credit to markets currently being underserved. The Credit Union National Association has also supported lifting the member business lending cap for credit unions, which currently stands at 12.25%, as another means of providing the funding that many small businesses need.

Inside Washington (12/16/2009)

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* WASHINGTON (12/17/09)--The Federal Deposit Insurance Corp. (FDIC) Tuesday delayed a proposal to put new restrictions on securitizations. John Bowman, Office of Thrift Supervision acting director, and John Dugan, Comptroller of the Currency, convinced the board to issue an advance notice of proposed rulemaking asking for comment on how to proceed (American Banker Dec. 16). The proposal’s goal is to curb improper mortgage underwriting before mortgages are sold into the secondary market, but Dugan and Bowman said the proposal could hurt the securitization market and conflict with other regulatory reform legislation. Chairman Sheila Bair, Vice Chairman Martin Gruenberg and board member Thomas Curry supported the proposal. The proposal stems from a Financial Accounting Standards Board rule, which takes effect next year and requires lenders to report securitized assets on their balance sheet in the event of failure. Normally, FDIC would not touch those assets. However, with the new rule, FDIC must have a plan to handle the assets ... * WASHINGTON (12/17/09)--House Financial Services Committee Chairman Barney Frank (D-Mass.) said the panel likely would tackle the issue of creating a covered-bond market in the U.S. next year (American Banker Dec. 16). The committee met Tuesday and briefly talked about the bond market. Rep. Scott Garrett (R-N.J.) introduced legislation this year aimed at enhancing the market for covered bonds, which add liquidity for loans without securitization risks. In an interview after the meeting, Garrett said Congress needs to act quickly or investors could lose interest before covered bonds become an option. Covered bonds are popular in Europe but have not caught on in the U.S. ... * WASHINGTON (12/17/09)--Troubled Asset Relief Program (TARP) funds should be used to help community banks, said Sen. Carl Levin (D-Mich.) in a letter to Treasury Secretary Timothy Geithner. Treasury needs to provide help for small banks so they can offer credit to small businesses, Levin said. TARP has only helped large financial firms, and financial institutions with assets of $100 billion or only accounted for 22% of small business lending, Levin added. Credit Union National Association President/CEO Dan Mica has urged lawmakers to lift credit unions’ caps on business lending because credit unions have money to lend to the businesses, which would create jobs and help the economy ...

CDFI Fund certifies 11 new CUs

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WASHINGTON (12/17/09)--The U.S. Treasury Department’s Community Development Financial Institutions (CDFI) Fund has announced that 11 credit unions have been certified as CDFIs during the fund’s most recent round of certifications, which took place between August and November of this year. The newly certified credit unions are Brewton Mill FCU, Fairfax County FCU, First Peoples Community FCU, Kerr County FCU, Maine Highlands FCU, Marvel City FCU, NCI Community Development CU, New Covenant Dominion FCU, New Pilgrim FCU, Table Rock FCU, and Union Baptist Church FCU. All of the credit unions serve low-income communities or other various groups in their states, which include Alabama, Indiana, Maryland, Maine, Missouri, New York, Texas, and Virginia. A total of 160 credit unions are currently certified under the CDFI program, which helps locally based financial institutions offer small business, consumer and home loans in communities and populations that lack access to affordable credit. The program added a total of 34 new certified CDFIs between August and November of this year. The new CDFIs are spread throughout the country, with headquarters in Alabama, Arkansas, California, Colorado, Washington D.C., Illinois, Indiana, Kentucky, Louisiana, Massachusetts, Maryland, Maine, Michigan, Missouri, North Carolina, New Hampshire, New York, Ohio, Pennsylvania, Texas, Virginia and Washington. The CDFI program will make a total of $113 million in funding available in 2010.

Charter FOM process on NCUA agenda today

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ALEXANDRIA, Va. (12/17/09)--The National Credit Union Administration (NCUA) has revised its board meeting schedule for 2010, rescheduling its July 2010 meeting to 10 a.m. ET on Thursday, July 29. The NCUA will open 2010 with a board meeting scheduled for Jan. 29, with the usual August recess scheduled. According to the schedule, the NCUA will conclude 2010 with a board meeting on Dec. 16. The NCUA’s December board meeting, which will take place in Alexandria, Va. this morning, will include discussion of ways to streamline the community credit union charter process as part of a revision of the NCUA's chartering and field of membership policies. The agency board will also consider a final rule that would create a limited exception to the 20-year maturity limit on second mortgage loans. Under the new final rule, federal credit unions that take part in the U.S. Treasury Department's Making Home Affordable (MHA) Program would be permitted to extend second mortgages beyond 20 years to match the terms of modified first mortgages, which can have up to a 40-year maturity. The board also will be updated on the status of its insurance fund during the meeting. A closed meeting of the board will follow the open session. For the NCUA’s full 2010 board meeting schedule, use the resource link.

Matz responds to CUNA letter on corporates budget

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WASHINGTON (12/16/09)—Responding to a Dec. 3 letter from the Credit Union National Association (CUNA), Chairman Debbie Matz of the National Credit Union Administration (NCUA) reiterated that the agency is "continuing the process of evaluating the future disposition" of corporate credit union assets. Matz, in her letter addressed to CUNA President/CEO Dan Mica, said her agency's efforts to elicit stakeholders' views on future asset distribution have yielded "constructive if not conclusive" examinations of the options. She told Mica, "...let me assure you that we continue broad-based explorations of ways in which 'legacy' assets can be addressed." CUNA has continued to push the NCUA for a reasonable approach regarding possible recoveries on corporate credit union legacy assets if confirmed future losses are below current estimates of those losses. In her letter to Mica, Matz assured she is confident that the agency will find a "workable, practical, legal solution...despite the complex and evolving financial situation before us." The NCUA chairman also responded to concerns CUNA has communicated about the agency's proposed 2010 budget. Mica had written that some budget increase is to be expected to support agency efforts to handle additional safety and soundness concerns wrought by troubled financial times. But he urged the agency to consider it a priority to determine how to reduce spending once the crisis has passed. Matz said of the 2010 budget, it balances "the needs for additional personnel and oversight with a recognition that the resources present are limited and the industry NCUA supervises is under financial duress." The total 2010 budget proposed Nov. 19 by the NCUA is $200,923,512, an increase of 13% over the 2009 budget. CUNA has raised credit unions’ concerns regarding the size of the increase for agency staff compensation next year—a 6.6% net growth in merit pay and locality adjustment. The agency needs to be sensitive, Mica has said, to the fact that credit unions across the nation are scaling back expenses, including employee benefits, and have been forced to reduce salaries, enforce unpaid furloughs, as well as execute reductions in the number of workers.

Compliance Statements must comply with new overdraft rules Jan. 1

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WASHINGTON (12/16/09)--On Jan. 1, 2010, all credit unions that offer overdraft services will have to comply with new Truth-in-Savings (TIS) requirements for disclosing aggregate overdraft fees on periodic statements. Under the National Credit Union Administration’s (NCUA’s) revised Part 707, all credit unions--not just those that promote overdraft services as previously required—must disclose on periodic statements the aggregate dollar amount totals for “overdraft fees” and for “returned item fees,” both for the statement period as well as for the calendar year-to-date. Banks must comply with similar rules under the Federal Reserve Board’s Regulation DD. The regulations require that the periodic statement disclosure be provided in tabular format, as illustrated in NCUA’s model form B-12. "Credit unions have asked whether they can omit the gridlines in the table, or use alternate terminology to describe the fees disclosed," according to Valerie Moss, CUNA's director of compliance information. "According to both the Fed and NCUA, credit unions must follow the model format--including showing gridlines-- and use the terms 'overdraft fee' and 'returned item fee,' even if the credit union doesn't have a formal overdraft program but still covers overdrafts for a fee," she added. This is intended to help consumers understand which items are overdrafts honored for a fee and which ones are returned unpaid. The TIS regulation also requires account balances disclosed through automated systems, such as ATM, website, or telephone response system, to exclude additional amounts the credit union may provide to cover overdrafts. Credit unions may, however, disclose a second balance that includes funds provided by an overdraft service or line of credit, so long as the institution prominently states that the balance includes these additional amounts. Use the resource links below for more information. Note that in the December Credit Union Magazine article there is an artwork error in Table 1: the gridlines were removed, but should appear in the model form.

Inside Washington (12/15/2009)

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* WASHINGTON (12/16/09)--During a meeting with the heads of the nation’s largest financial institutions, President Barack Obama expressed that he was frustrated with the banks because while their CEOs have said they support financial reform, their lobbyists have resisted. Obama said that there is a large gap between lobbying activities and what he has heard in the White House. “I urged them to close that gap,” he said (American Banker Dec. 15). Administration officials say banks are not lending enough money--especially when it comes to small businesses. Credit unions could inject more than $10 billion into the economy and create more than 108,000 jobs if their member business lending caps were raised, according to Credit Union National Association President/CEO Dan Mica. Currently credit unions can lend no more than 12.25% of their assets. Regarding Monday’s meeting, Mica said: “The very people who met with the president today are the same people who oppose allowing credit unions to help” (News Now Dec. 15) ... * WASHINGTON (12/16/09)--The board of directors of the Federal Deposit Insurance Corp. (FDIC) approved a $4 billion budget for 2010. It also revised the 2009 budget to $2.6 billion. The 2010 budget is an increase of more than 55% from 2009 because of bank failures. The receivership funding component of the 2010 budget, the vast majority of which is funded by receiverships, will be $2.5 billion, up from $1.3 billion in 2009. This includes funding for the continuing work associated with bank failures that have occurred the past two years. The budget also contains contingency funding for the possible continuation of an elevated number of bank failures in 2010. The 2010 budget increase also is partially attributable to increased supervisory activity related to the rising number of troubled banks which the FDIC oversees. The board also approved an authorized 2010 staffing level of 8,653 employees, up from 7,010 in 2009. Almost all the additional staff will be hired on a temporary basis. They will be hired primarily to assist with bank closings; to perform follow up work related to the management and sale of failed bank assets; and to conduct bank examinations and perform other bank supervisory activities. There were 25 bank failures in 2008 and 133 so far this year ... * WASHINGTON (12/16/09)--The Shadow Financial Regulatory Committee Monday criticized Congress and the Obama administration for not addressing the government-sponsored enterprises as a part of regulatory reform. It also said that curbing compensation packages at large financial firms could actually hurt firms’ value (American Banker Dec. 15). Government subsidies could ruin the value in the firms in which the government has the greatest stakes, the committee said. The committee is a group of independent experts on the financial services industry who meet regularly to study and critique regulatory policies...

SBA wants to draw in more CUs banks says Mills

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WASHINGTON (12/16/09)—U.S Small Business Administrator Karen Mills said this week that involving more of its lending partners, including credit unions, in SBA guaranteed loan programs is the “right formula” to get more credit to markets currently being underserved. Mills, speaking at the National Press Club here, plugged her agency’s efforts to increase guarantee amounts for SBA loans and to waive fees as a way to get more lenders to participate. Prior to her address, Mills spoke to Credit Union National Association (CUNA) President/CEO Dan Mica and thanked him for his recent letter to the president noting credit unions' willingness to lend to small businesses. CUNA has underscored that while banks have pulled back on lending at a time the nation’s communities sorely need it to ride out the economic turbulence, credit unions are still lending. In fact, CUNA is working vigorously to raise credit unions’ statutory authority for making small business loans to 25% of assets, up from the current 12.25%. Lifting of the member business lending (MBL) cap could infuse as much as $10 billion in credit and create at least 108,000 new jobs, according to CUNA studies. An increased cap would also enable credit unions to participate more heavily in SBA programs. Regarding SBA programs, CUNA has a longstanding effort to address with the SBA issues of complex applications and high fees as a roadblock to credit union participation to 7 (a) and 504 guaranteed loan programs. Mills reiterated to Mica her willingness to work with CUNA and credit unions more closely. In her address Tuesday, Mills said increased involvement by SBA lending partners is the "right formula to serve the marketplace that's not being served today."

Lawmakers back higher MBL power on CNN Tonight

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WASHIINGTON (12/16/09)—Reps. Brad Sherman (D-Calif.) and Thaddeus McCotter (R-Mich.) on "CNN Tonight" Monday gave a positive nod to increasing the ability of credit unions to provide member business lending (MBL). While expressing his opinion that some aspects of the Troubled Asset
Rep. Brad Sherman (D-Calif.) addresses credit union advocates participating last week in CUNA's National Hike the Hill effort. (CUNA Photo.)
Relief Program—known as TARP—have worked, Sherman added that what must be done now to help the economy is “take some action so we have small business lending.” “One key element,” Sherman said, “is to let credit unions make small business loans. I think that could provide over 100,000 jobs and we wouldn’t even have to have a meeting at the White House.” Sherman was alluding to President Barack Obama’s meeting that day with whom the president called “fat cat” bankers. Obama was trying to get the bankers to loosen their tight grip on credit. Rep. Thaddeus McCotter (R-Mich.), also a guest on the show, seconded Sherman’s credit union endorsement. McCotter said, “One of the things we should look at, as Brad (Sherman) pointed out, is ways that we can get credit unions to continue to help us with this.” He added, “They’ve been very smart citizens throughout trying to make business loans and loans for consumer purchases.” During the Credit Union National Association’s (CUNA’s) recent National Hike the Hill, hundreds of credit union advocates blanketed Capitol Hill to encourage lawmakers to back legislation to lift the MBL cap to 25% of assets, up from the current 12.25% limit. CUNA research has shown that the change could infuse $10 billion of credit into markets and, as noted by Sherman, create at least 108,000 new jobs.

GAO says FinCEN could do better in reporting

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WASHINGTON (12/16/09)—Credit unions and other financial institutions that may struggle to keep up with reporting requirements under the Bank Secrecy Act (BSA) may or may not have a sympathetic response to recent government findings regarding the Financial Crimes Enforcement Agency (FinCEN). The Government Accountability Office (GAO) found in a recent study that FinCEN does not always do such a great job reporting detailed information to law enforcement agencies (LEAs). The Treasury Department bureau also sometimes fails to communicate adequately about the various types of products it can provide. On the plus side, the GAO report noted that of the 20 LEAs that responded to a question about which FinCEN services they found most useful, 16 cited direct access to BSA data--records of financial transactions possibly indicative of money laundering that FinCEN collects--as the most valuable service FinCEN provides. This backs up what FinCEN has been telling financial institutions for years regarding the value and use of the data providing through Suspicious Activity Reports and Currency Transaction Reports. . Additionally, 11 federal LEAs said a FinCEN tool that allows them to go through FinCEN to contact financial institutions nationwide to locate information related to ongoing investigations is an important service. And 16 said they value FinCEN’s increased development of complex analytic products, such as reports identifying trends and patterns in money laundering. However, three of five LEAs—of those identified by the bureau as its top users--complained that FinCEN does not provide detailed information about the various types of products it can provide. They also stated that they would like more information about when completed products become available. Two of these top users reported that FinCEN fails to communicate why it accepts some requests for support and rejects others. Nor does the agency seek law enforcement advice on planned analytic work, even though doing so, the report said, “could improve the quality and relevance of its products to its LEA customers”. “Communicating more detailed information to LEAs could help FinCEN ensure that it is effectively carrying out its mission to support the investigation and prosecution of financial crimes,” stated a summary. For more on the GAO report, use the resource link below.

CUs offer how about us for biz lending

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WASHINGTON (12/15/09)--As President Barack Obama met with bankers Monday to urge them to loosen unnecessary restrictions on credit to help the economy recover, credit unions pointed out that they are, in fact, lending to business – and could be doing much more. In fact, according to Credit Union National Association (CUNA) President/CEO Dan Mica, credit unions could be pumping more than $10 billion into the economy and creating more than 108,000 jobs if Congress would agree to expand credit union capacity to make business loans. However, Mica pointed out, “The very people who met with the president today are the same people who oppose allowing credit unions to help.” “The only lobbyists who oppose giving credit unions the opportunity to do more small business lending represent the banks with whom the president met today,” Mica said. “That’s right: The same ‘fat cat’ bankers -- as President Obama put it on national television Sunday night -- who accepted billions of dollars of taxpayer money while restricting access to credit for consumers and small businesses, oppose allowing well-capitalized, not-for-profit credit unions to lend money to their small business-owning members. “It is absolutely unconscionable that these bankers would block credit unions from helping the nation, while simultaneously being rebuked by the president for not doing enough to help. Were we in the room, the president could have easily pointed to us and said ‘these guys want to help – why can’t you be more like them?’” Mica noted that credit unions have worked closely with both the U.S. Congress and the Obama administration as financial regulatory restructuring legislation has taken shape, looking out for credit union interests – but choosing to remain neutral on the overall bill. “By not opposing the regulatory restructuring bill in the House, we kept the door open to the administration to work on our needs,” Mica said. He pointed out that credit unions are part of the solution for consumers, and now is the time to let them be part of the solution for their members who own small businesses. “Credit unions are subject to a 12/25% -of-assets statutory cap on the amount of small business lending they can do. This cap restricts not only the credit unions which are approaching the cap, but it also discourages other credit unions from offering this type of lending to their members. There is no economic or safety and soundness rationale for the cap. “In fact, recently the top federal regulator for credit unions -- the chairman of the National Credit Union Administration -- endorsed lifting the statutory cap,” Mica added. Mica noted that credit unions are joined in their quest for more business lending capacity by groups across the political spectrum, as well as those representing business itself, including:
* Americans for Tax Reform * League of United Latin American Citizens (LULAC) * National Association of Manufacturers * National Cooperative Business Association * National Association for the Self-Employed * National Association of Mortgage Brokers * Competitive Enterprise Institute
Mica reminded that credit unions are urging Congress to support HR 3380, introduced by Rep. Paul Kanjorski (D-Pa.) and Rep. Ed Royce (R-Calif.), which would increase the capacity of credit unions’ business lending by raising the statutory cap on business loans to 25% of assets, and treat as business loans only those of $250,000 or less, up from the current ‘de minimus’ amount of $50,000.

Inside Washington (12/14/2009)

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* WASHINGTON (12/15/09)--National Credit Union Administration (NCUA) Board Member Michael Fryzel met with Illinois credit unions Dec. 7 in Springfield, Ill. He visited Heartland CU, Springfield, where he met with President/CEO Ed Gvazdinskas; Keith Sias, director of state and governmental affairs for the Illinois Credit Union League; and other league officials. Fryzel then addressed a group of Illinois credit union representatives at a league event. “Having a clear understanding of the challenges consumers are facing aids in the decision-making process as we work with credit unions throughout these difficult times,” Fryzel said. Pictured are (from left): Steve Olson, Illinois league executive vice president, general counsel and chief operating officer; Fryzel; and league President/CEO Dan Plauda during a luncheon with Sangamon Valley Chapter credit union managers after Fryzel's tour of Heartland CU. Heartland CU has $180 million in assets. (Photo provided by the Illinois Credit Union League) ... * WASHINGTON (12/15/09)--Federal Deposit Insurance Corp. (FDIC) Chairman Sheila Bair said Friday that her agency at first hesitated to provide federal aid for Bank of America Corp.’s takeover of Merrill Lynch (American Banker Dec. 14). The FDIC raised questions about whether assistance was necessary, she said. The agency later consented when the Federal Reserve Board expressed concerns that BoA posed a systemic risk. The FDIC agreed to help BoA Jan. 16 ...

Congress Committees show a slower week for CUs

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WASHINGTON (12/15/09)--With H.R. 4713, the Wall Street Reform and Consumer Protection Act, passing the full House on Friday, this week will provide a legislative respite for credit union-related issues. Although the Senate may continue to work into next week, this is expected to be the last House weeklong session of the year, with the Defense Department Appropriations Act being the largest piece of potential legislation on the docket at this time. However, there is some speculation that a jobs bill could be attached to the appropriations bill. The Credit Union National Association (CUNA) has urged House members to include expanded business lending authority for credit unions in the jobs bill, and Rep. Paul Kanjorski (D-Penn.), who authored legislation that would expand the current member business lending cap for credit unions, has also asked his colleagues to address MBL through this legislation. It will also be quiet on the Committee front, as the House Financial Services Committee on Thursday will hold hearings on H.R. 476, the Housing Fairness Act. The Senate Banking Committee has also planned some business for Thursday, with a vote on the nomination of Ben Bernanke to serve another term as Chairman of the Federal Reserve Board of Governors scheduled.

What does H.R. 4173 do

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WASHINGTON (12/15/09)--The House late last week passed H.R. 4173, the Wall Street Reform and Consumer Protection Act, which the House in a release hailed as “a comprehensive set of measures that will modernize America’s financial regulations and hold Wall Street accountable.” The final vote on the legislation followed over 50 hours of debate in the House Financial Services Committee, and while the Senate is expected to begin its debate on regulatory reform soon, the schedule for that debate is unknown at this time. A main goal of the legislation is the creation of the proposed Consumer Financial Protection Agency, which would seek to protect consumers of financial products through the creation of a powerful independent agency with extensive rulemaking, oversight, and enforcement tools. The bill also creates an interagency Financial Stability Council to identify and regulate firms that pose a significant risk to the overall financial system and would establish an “orderly process” for dissolving so-called too big to fail financial entities. Investors would be further protected by a strengthened, reformed Securities and Exchange Commission, and investors would be further supported by new rules that would grant them a “an advisory vote on pay practices including executive compensation and golden parachutes.” Potentially harmful compensation practices would also be banned, and firms would be forced to disclose any incentive-based compensation arrangements. The legislation also takes “strong steps to reduce conflicts of interest” regarding credit rating agencies and would also require hedge fund, private equity, and private pool of capital advisors, who currently operate in an essentially regulation-free manner due to a regulatory loophole, to register with the Securities and Exchange Commission. These funds and their advisors would also fall under new systemic risk regulations. Over-the-counter derivatives would also be regulated for the first time ever. The bill also increases oversight of the insurance industry via a Federal Insurance Office and would increase oversight of the mortgage industry as well. Under this portion of the bill, lenders would be required to ensure that the terms of a mortgage benefit the borrower. The lenders must also be certain that their borrowers can repay the mortgage loan that they have been sold.

Congress approves funding for CU programs

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WASHINGTON (12/15/09)--The U.S. Senate on Sunday passed H.R. 3288, an appropriations bill that will, among other things, remove the borrowing cap on the National Credit Union Administration’s Central Liquidity Facility (CLF) funds and increase the amount of funding available to the NCUA’s Community Development Revolving Loan Fund (CDRLF). The House approved the same appropriations package by a very narrow 219-208 vote in July of this year. Under the legislation, the CLF will be given $43.8 billion in contingent liquidity to lend to eligible credit unions. These funds will be available until Sept. 30, 2010. The amount of funding given to the CDRLF tops off at $1.25 million for the 2010 fiscal year, a $250,000 increase from the amount of funding provided in fiscal 2009. The CDRLF, which was established by Congress in 1979, makes non member deposits and loans at a rate of 1% for five-year terms. Responding to the developments, National Credit Union Administration Chairman Debbie Matz said the passage of the appropriations bill was “a continuing sign that Congress is committed to working with NCUA to mitigate the effects of the economy on credit unions and their 90 million members." Matz also commended Congress “for lifting the CLF cap and authorizing NCUA to fulfill the essential role of providing additional liquidity for the credit union system, and was "pleased” by the increased CDRLF funding.

Inside Washington (12/11/2009)

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* WASHINGTON (12/14/09)--The Treasury is falling short on its small business lending programs, according to the Troubled Asset Relief Program’s (TARP) Congressional Oversight Panel. Elizabeth Warren, who chairs the panel, questioned Timothy Geithner about the Obama administration’s plan to use TARP money for small business lending. Treasury has announced three plans to help, but small businesses are closing every day, Warren said (American Banker Dec. 11). Geithner blamed banks, saying that many are afraid to use TARP money to spark Small Business Administration lending because they fear Congress or Treasury will add to their regulatory restrictions. For the plans to work, banks must be able to get capital from the government to support lending, Geithner said. He announced Wednesday that TARP would be extended to Oct. 3 and appeared before the panel Thursday. The Treasury has announced several small business lending assistance programs, including the Term Asset-Backed Securities Loan Facility ... * WASHINGTON (12/14/09)--Executives from 12 banking companies were slated to meet with President Barack Obama today to discuss his plans to boost small business lending. Represented institutions include Citigroup, JPMorgan Chase and Co., Goldman Sachs and Bank of America. The Credit Union National Association (CUNA) has urged House members to include expanded business lending authority for credit unions in a jobs created bill being drafted by Reps. Nancy Pelosi (D-Calif.) and George Miller (D-Calif.). “Credit unions have been providing business loans to their members for over 100 years. In fact, as banks have pulled back credit from small businesses, credit unions have continuedt o lend and they have the available funds and expertise to do more,” said CUNA President/CEO Dan Mica in a letter to the House ...

Go Direct Spread direct deposit for the holidays

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WASHINGTON (12/14/09)—The U.S. Treasury Department’s direct deposit program,Go Direct, reminds credit union and other national campaign partners that the holiday season is a great time to promote peace of mind through automatic check deposits. “This holiday season, help senior citizens, people with disabilities and others who receive federal benefit checks gain peace of mind,” Go Direct advises in recent published materials. “Encourage them to switch to direct deposit or the Direct Express Debit MasterCard card for their federal benefit payments.” Direct deposit of Social Security or other federal benefits not only helps guard against theft, loss and fraud, it also assures the money will be “on time, every time.” Credit unions can inform their members through lobby displays and newsletters of the easy steps to signing up for the Direct Express® card for Social Security and Supplemental Security Income (SSI) payments by calling 1-877-212-9991 or visiting www.USDirectExpress.com.

Senate sets 2010 calendar

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WASHINGTON (12/14/09)--The Senate last week released the schedule for its 2010 legislative session, which will convene on Tuesday, Jan. 19. That initial work period will last until Feb. 12, when the Senate leaves for its President’s Day recess. The Spring/Easter recess will begin on March 29 and continue through April 12, with the Senate remaining in session for a seven week period, ending on May 28. A four week work period will commence on July 12, with the Senate leaving for its August recess early in the month. That recess will continue until September 13. While the Senate has not determined its target date for adjournment at this time, it will be in session, barring two federal holidays, Columbus Day on Monday, October 11 and Veterans Day on Thursday, November 11. The House released its calendar for 2010 earlier this month. (See related story: House sets 2010 schedule)

NCUA to take up charter second mortgage maturity rules

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ALEXANDRIA, Va. (12/14/09)--The National Credit Union Administration (NCUA) at its upcoming board meeting, which will take place at 10 a.m. ET on Dec. 17, will consider a final rule on exceptions to the maturity limit on second mortgages. The NCUA final rule would create a limited exception to the 20- year maturity limit on second mortgage loans, allowing federal credit unions that are taking part in the Treasury Department’s Making Home Affordable (MHA) Program to extend second mortgages beyond 20 years in order to match the term of a modified first mortgage , which can have up to a 40-year maturity. The Credit Union National Association supported this exception in a comment letter on the final rule, and added that the exception outlined in the rule should apply to all loan modifications, regardless of whether they are undertaken as part of the MHA Program. The NCUA will also discuss a proposed rule on its chartering and field of membership policies, and it is believed that this proposed rule will streamline the community credit union charter process, as discussed by NCUA Chairman Debbie Matz at the Nov. meeting. The board will also be updated on the status of its insurance fund during the meeting. A closed meeting of the board will follow the open session, during which the NCUA will discuss supervisory activities, personnel matters, and Cedar Point FCU’s appeal of a denied request to convert to a community charter.

Cramdown effort fails House passes reg reform

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WASHINGTON (12/14/09)--An amendment that would have changed the bankruptcy code to permit judicial mortgage modification in Chapter 13 bankruptcy proceedings was not added to H.R. 4173, the Wall Street Reform and Consumer Protection Act, on Friday. While the Credit Union National Association (CUNA) recognizes the need for Congress to take steps to help keep people in their homes, CUNA was "deeply concerned" that adoption of the amendment offered by Rep. John Conyers (D-Mich.), which failed by a vote of 188 to 241, would "upset the balance" achieved in H.R. 4173. CUNA last week reached out to members of Congress on the cramdown issue, saying in a letter that CUNA considered the Conyers Amendment vote "a key credit union vote." Hundreds of credit union advocates in Washington for a CUNA National Hike the Hill also expressed their opposition to cramdown in their discussions with House members. CUNA President/CEO Dan Mica thanked the leagues and credit unions that contacted Congress during the past week, saying that their efforts, which "made the difference on this key vote," showed "the power of the movement working together." An amendment offered by Rep. Walter Minnick (D-Idaho), which would have replaced the proposed Consumer Financial Protection Agency with 12-member Consumer Financial Protection Council of existing regulators, also failed of Friday. The House also passed H.R. 4173 by a vote of 223 to 202. The provisions of H.R. 4173, if passed into law, would provide sweeping reforms to the financial regulatory landscape and would address financial stability,over-the-counter derivatives, and capital markets. The legislation also proposes the creation of a Consumer Financial Protection Agency. The Senate is expected to take up financial regulatory reform early next year, and Senate Banking Committee Chairman Chris Dodd (D-Conn.) is reportedly revising his own regulatory reform proposals after some colleagues criticized his proposals. Dodd has been unable to earn support from Republicans and some Democrats with ties to industry groups affected by the bill.

Inside Washington (12/10/2009)

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* WASHINGTON (12/11/09)--Lawmakers are working on a policy that could reverse two major thrift deals of 2008 if enacted (American Banker Dec. 10). Rep. Barney Frank’s (D-Mass.) reform legislation includes a provision that would require regulators to consider thrift deposits when analyzing whether a merger would violate a federal ban that prevents institutions from holding more than 10% of the nation’s deposits. The measure would close a “loophole,” Frank said. Financial observers said if the provision had been enacted earlier, it would have blocked the purchases of Washington Mutual and Countrywide Financial Corp. Last year, Bank of America bought Countrywide to prevent it from failing. JPMorgan Chase and Co. bought Washington Mutual, which had failed. However, Ralph MacDonald, partner at Jones Day law firm in Atlanta, said if the reform is enacted, it may not have a large effect. There aren’t that many big thrifts to worry about, he said ... * WASHINGTON (12/11/09)--Treasury Secretary Timothy Geithner testified before the Congressional Oversight Panel about the Troubled Asset Relief Program (TARP). During his testimony, Geithner presented a TARP exit strategy. The strategy had four elements: terminating and winding down programs that support large financial institutions; limited new investments to housing, small business, and securitization markets that facilitate consumer and small business loans; maintaining the capacity to respond to potential financial threats; and continuing to manage equity investments acquired through TARP in a commercial manner while protecting taxpayers and unwinding the investments as soon as practicable, Geithner said. He announced Wednesday that TARP would be extended to Oct. 3 ...

Grant requests for Native American program jump

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WASHINGTON (12/11/09)—One credit union was among the 61 lenders applying to the U.S. Treasury Department's Community Development Financial Institutions (CDFI) Fund applications for the fiscal year (FY) 2010 funding round of the Native American CDFI Assistance (NACA) Program. The applications represent a 27% increase over the 48 the fund received in the original application solicitation of the FY 2009 round. Applicants requested more than $23.7 million in financial and technical assistance for FY 2010, and that is up 30% over the $18.3 million requested last year. The application process began in August and the deadline was Oct. 7. The CDFI Fund intends to award $12 million this round. A House-Senate conference panel earlier this week voted to adopt a higher CDFI funding level than proposed by the House, as well a more money for the National Credit Union Administration’s Community Development Revolving Loan Fund. The appropriations were ratified yesterday by a House vote and the Senate is expected to take up the legislation soon. (See related story: CDFI, CLF, CDRLF funding moves forward). The increase would provide the $12 million in 2010 NACA funds, up from $10 million last year. “The NACA Program is vital for reaching and helping our nation’s most distressed Native communities, helping them start to move toward economic recovery and economic self-sufficiency,” said CDFI Fund Director Donna Gambrell in a release. “The $23.7 million is the most funding ever requested in the history of the program and clearly demonstrates the critical need for these resources.” Applications were received from 19 states and in addition to the credit union, 31 applicants were loan funds, three were a bank, thrift or holding company, and 26 were sponsoring entities.

Co-ops unite in support of MBL increase

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WASHINGTON (12/11/09)--The National Cooperative Business Association (NCBA) has joined the Credit Union National Association (CUNA) to advocate for lifting the current 12.25% cap on credit union member business loans (MBL). In a recent action alert, the NCBA called upon its members to “help stimulate business lending” and come to the aid of “businesses and cooperatives around the country” by “urging” their Congressional representatives to support H.R. 3380, the Promoting Lending to America's Small Businesses Act. Rep. Paul Kanjorski (D-Pa.) is working with Reps. Nancy Pelosi (D-Calif.) and George Miller (D-Calif.) to include his MBL cap legislation, which would, among other things, increase the cap on credit union member business lending to 25% of a credit union's total assets, in a developing jobs bill. CUNA has estimated that expanding the capacity of credit unions to make business loans could result in $10 billion in new business loans through credit unions and at least 108,000 new jobs in the first year after enactment, with no additional costs to taxpayers. NCBA Spokesman Adam Schwartz told News Now that the NCBA “has seen firsthand the need for credit and loans to businesses,” adding that lifting the MBL cap for credit unions would serve as a “very positive development for job creation and cooperative growth.” The NCBA is the latest in a growing number of trade associations to back the MBL cap lift. These organizations, including the National Farmers Union, the National Cooperative Grocers Association and the National Association of Manufacturers, spoke in support of the vital role that credit unions play in providing capital to underserved communities and small businesses in an "open letter" ad published on Wednesday in various D.C.-based publications. CUNA has also communicated directly with legislators and the Obama Administration to state its case for lifting the MBL cap.

Supreme Court debates when student debt is dischargeable

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WASHINGTON (12/11/09)—In a case of interest to credit unions, Espinosa v. United Student Aid Funds (USAF), Inc., the U.S. Supreme Court last week heard oral arguments involving a dispute on when non-dischargeable student loan debt may be discharged in bankruptcy proceedings. Under the bankruptcy law, student loans cannot be discharged unless denying such relief would impose an “undue hardship.” However, the U.S. Courts of Appeals are sharply divided on whether debtors can discharge student loan debt through a Chapter 13 plan. The federal bankruptcy rules require that the debtor’s effort to discharge student loan debt be an “adversary proceeding,” requiring that the lender be served with a summons and complaint. In this case, the debtor in a Chapter 13 plan proposed to repay $13,000 in principal over five years but to have all accrued and post-petition interest on the student loan discharged. USAF had filed a claim for the full amount including interest. The trustee told the lender that it would be paid what was listed in the plan, and USAF did not object to the plan. The bankruptcy court confirmed the plan as submitted. The court did not make an undue hardship finding, and the debtor never initiated an adversary proceeding with the lender. The debtor completed the plan over five years and received a discharge, but three years later USAF attempted to collect the remaining amount due under the student loan contract by garnishing the debtor’s federal income tax refunds, setting off a volley of conflicting rulings. In reopening the case, the bankruptcy court ruled that USAF had violated the discharge order, and directed the lender to cease all collection activities, saying that the plan became final when it was confirmed and USAF should have objected to any procedural defect prior to confirmation. The federal district court reversed the bankruptcy court, ruling that USAF had been denied due process. The Ninth Circuit Court of Appeals reversed that decision, ruling in favor of the debtor’s discharge and directing the bankruptcy court to determine if USAF had willfully violated the discharge order. In oral argument to the Supreme Court last week, USAF attorneys argued that student loan debt cannot be discharged without a showing of undue hardship in a court proceeding, and that the bankruptcy court did not apply the statute properly. The U.S. Justice Department entered the case on the side of the lender, noting that there is an important public interest at stake here because the U.S. Department of Education is reinsuring student loans. The borrower’s attorney, while acknowledging that the bankruptcy court violated the law, said that once the plan is confirmed, it is final and creditors cannot later – perhaps years later – object. This case was one of two on bankruptcy laws taken up by the high court last week. The other involved a bankruptcy law restriction on attorneys’ advice to clients to incur more debt in anticipation of bankruptcy. (See News Now 12/8/09: Supreme Court hears case on bankruptcy attorneys’ advice restriction.)

CDFI CLF CDRLF funding moves forward

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WASHINGTON (12/11/09)—The House voted 221-202 to approve funding legislation covering the Community Development Revolving Loan Fund (CDRLF), the Central Liquidity Facility (CLF), and Community Development Financial Institutions (CDFI) Fund for 2010. The Senate is expected to vote soon. Some of the targeted appropriations are higher than first proposed in the House, with a House-Senate conference committee nudging funding levels up while working out differences between the two chamber’s bills prior to a final vote. For instance, the conference bill agreed to $1.25 million for the National Credit Union Administration’s (NCUA) CDRLF through fiscal year 2011, up from $1 million in the House bill. The compromise also sets $246.75 million for the U.S. Treasury Department’s CDFI Fund program, while the House had proposed $243.6 million. Of the CDFI Funds, $80 million will be transferred to the Capital Magnet Fund, authorized under the Housing and Economic Recovery Act (HERA) of 2008 to support affordable housing. The conference agreement provides this funding in lieu of contributions from Fannie Mae and Freddie Mac. The conference report stated that the Congress intends the funding to provide the start-up capital for the magnet fund, and that it expects it to operate without additional appropriations in the future when Fannie Mae and Freddie Mac begin their required contributions as outlined in HERA. Also, of the total amount CDFI amount, $4. 15 million is included for a competitive grants pilot program aimed at providing financial counseling services to prospective homebuyers, as authorized by HERA. The funding increase also provides $12 million, up from $10 million, in funds for assistance to the Native American, Native Hawaiian and Alaskan Native communities. (See related story: Grant requests for Native American program jump.) Regarding the NCUA’s CLF, the compromise bill allows the liquidity facility to lend in FY2010 up to the maximum provided for by section 307(a)(4)(A) of the Federal credit Union Act.

Kanjorski Bachus Royce join GAC lineup

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WASHINGTON (12/11/09)--The Credit Union National Association this week added further starpower to its upcoming Governmental Affairs Conference (GAC), with Reps. Paul Kanjorski (D-Penn.), Spencer Bachus (R-Ala.), and Ed Royce (R-Calif.) agreeing to speak at the event. Kanjorski and Royce, longstanding friends of the credit union movement, recently collaborated to introduce H.R. 3380, a bill that would lift the current cap on member business lending for credit unions. Bachus has also backed credit unions by working to maintain credit union independence in this year’s ongoing regulatory reform process. All three are senior members of the House Financial Services Committee; Bachus is the panel's ranking Republican and Kanjorski is the number-two Democrat behind Chairman Barney Frank (D-Mass.) The GAC, which will take place between Feb. 21 and 25 in Washington, D.C., will give credit union leaders the opportunity to learn the latest, first hand, from influential policymakers, as well as a platform to advocate for credit union issues. Financial Accounting Standards Board Chairman Robert Herz, Larry Kudlow, economist and host of CNBC's The Kudlow Report, former Federal Reserve Chairman Alan Greenspan, and Richard Phillips, Captain of the Maersk Alabama, which was hijacked by Somali pirates earlier this year, are also scheduled to speak at the event. A political point-counterpoint discussion between Joe Scarborough, former Congressman and current host of MSNBC's Morning Joe, and Presidential candidate and former Democratic National Committee Chairman Howard Dean, will also liven up the GAC. The festivities will begin on Feb. 21 with a CUNA Council-sponsored concert by the World Classic Rockers, featuring member of Santana, Journey, Boston, Steppenwolf, Toto and Lynyrd Skynyrd. Use the resource link below for more 2010 GAC information.

New low-income FCU chartered in New York

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ALEXANDRIA, Va. (12/11/09)--The National Credit Union Administration (NCUA) on Thursday announced that it has approved the charter of Queens, New York’s East River Development Alliance FCU, a credit union that will serve the citizens of Queens Districts 1 and 2. East River, which will open in April 2010, will offer regular shares, club accounts, share certificates, personal loans, credit builder loans, credit repair loans, and share secured loans, according to the release. The credit union will also provide direct deposit, money orders, and check cashing services, and will offer share draft accounts, ATM services, online banking with bill payment, audio response and wire transfers by 2013, the NCUA said. East River, which is the second new federal credit union chartered this year, was organized by the East River Development Alliance, a Long Island, New York-based non-profit that seeks to improve public housing neighborhoods within New York City through “educational, support, counseling, and referral services to encourage youth development, workforce development, wealth building, and community revitalization.” In a statement accompanying the release, NCUA Chairman Debbie Matz said that the credit union, which is “clearly well-positioned to reach out, to serve and to fill a need for fairly priced alternative financial services,” will “serve a vital role in assisting low- and moderate-income consumers in an area that has been unfortunately overlooked by traditional financial institutions.”

Cramdown to stand alone as big reform progresses

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WASHINGTON (12/11/09)--The House Rules Committee has elected not to marry cramdown language with Rep. Barney Frank's (D-Mass.) manager's amendment to H.R. 4173, the Wall Street Reform and Consumer Protection Act. The decision came after several credit unions leagues and credit union advocates in Washington for the National Hike the Hill reached out to Members of the House to object to combining the two measures. The cramdown amendment, which was presented by Rep. John Conyers (D-Mich.) earlier this week, would modify the bankruptcy code to permit judicial mortgage modification in Chapter 13 bankruptcy proceedings. However, the Rules Committee on Thursday did make the Conyers Amendment in order during debate of H.R. 4173 as a stand alone amendment, and there will be a vote on the cramdown amendment during the regulatory restructuring debate. CUNA President/CEO Dan Mica on Thursday reached out to members of Congress on the cramdown issue, saying in a letter that CUNA considers the Conyers Amendment vote “a key credit union vote.” “H.R. 4173 has been delicately balanced to meet the needs of the proponents of financial regulatory reform and address several of the concerns that credit unions and others have raised throughout the process,” and CUNA is “deeply concerned that adoption of the Conyers Amendment could upset the balance that we feel has been achieved in H.R. 4173.” CUNA recognizes “the need for Congress to take steps to help keep people in their homes” and has attempted to work with proponents of this proposal on a compromise that would address foreclosures. However, Mica added, “the Conyers Amendment has the potential to do long-term damage to the mortgage market and undermine the safety and soundness of credit unions, and therefore we must oppose it.” CUNA recently communicated with Rep. Louise Slaughter (D-N.Y.), telling the legislator that including cramdown language in Frank's manager's amendment could force credit unions to strongly oppose the broader regulatory restructuring measures proposed in H.R. 4173. Credit union league representatives from across the nation also spoke out against the cramdown legislation, meeting directly with legislators during CUNA's National Hike the Hill, which concluded yesterday. Thirty five additional amendments are also expected to be considered during debate on H.R. 4173. A final vote, and, possibly, final passage of H.R. 4173 could happen as soon as Friday, but the legislation may also linger into early next week.

Matz asks directors to protect CUs safetysoundness

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ALEXANDRIA, Va. (12/10/09)--National Credit Union Administration (NCUA) Chairman Debbie Matz encouraged credit unions' volunteers to actively work with their management to ensure the "short-term perseverance and long-term success of our nation's credit unions." Matz made the comments while speaking to 500 attendees at the CUES Directors Conference in Palm Desert, Calif., this week. She updated volunteers on NCUA's recently proposed regulatory framework for corporate credit unions, and on examiners' increasing supervision of retail credit unions. Matz also reminded that both initiatives are intended to protect credit union members, and she called on credit union volunteers to do their part. "The policies I have outlined will provide support and, when necessary, intervention to prevent potential crises that could impact the financial security of credit union members," she said. "But at the end of the day, we look to credit union directors as the ultimate guardians of the industry's fiscal health." Matz focused on three areas where volunteers can play critical roles:
* Risk management. "Be active, well-informed and visionary," she said. "Question and challenge assumptions of your credit union's managers. You are your members' first line of defense in risk management. Right now, your utmost diligence is an absolute necessity." * Diversification. "Focus on your fields of membership and their diversity. Help make sure that our board and staff reflect that diversity so they can better understand your members' needs and respond to them," Matz advised. * Succession planning. "Engage in diligent succession planning. The safety and soundness of credit unions will depend in large measure on a healthy, well-planned continuity of leadership on volunteer boards," she said, adding, "Volunteer leaders should make this a high priority of service."
Matz noted that "this is a lot of work to ask of volunteers," and added she is "well aware that you volunteer not for any form of compensation but for your sense of civic duty and your belief that America's credit unions are worth fighting for. "You've never forgotten that credit unions were created to serve people too often ignored by for-profit financial institutions. Together we can seize this opportunity to safeguard their financial well-being and grow credit union membership from 90 million to 100 million and beyond." To access the full text of the speech, use the link.

CUNA seeks presidential support of MBL cap lift

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WASHINGTON (12/10/09)--In a Wednesday letter to President Barack Obama, Credit Union National Association (CUNA) President/CEO Dan Mica said that while “credit unions are working very hard to continue making loans, including business loans,” these efforts are being hampered by statutory restrictions on member business lending. This MBL ceiling, which currently stands at 12.25%, “limits credit unions business lending at the very time small businesses around the country are reaching out to credit unions for loans since often they cannot get credit from their bank,” Mica added. Legislation that would, among other things, increase the cap on credit union member business lending to 25% of a credit union's total assets, is currently in committee, and the bill’s sponsor, Rep. Paul Kanjorski (D-Pa.), is working with Reps. Nancy Pelosi (D-Calif.) and George Miller (D-Calif.) to include the MBL cap legislation in a developing jobs bill. CUNA has estimated that expanding the capacity of credit unions to make business loans could result in $10 billion in new business loans through credit unions and at least 108,000 new jobs in the first year after enactment, with no additional costs to taxpayers. President Obama will reportedly meet with bankers early next week to “cajole them into making more loans,” and Mica said that credit unions “would welcome the opportunity to be part of that meeting.” Unlike banks, Mica said that “credit unions do not need to be persuaded that lending to small businesses is the right thing to do, from a community service as well as an economic standpoint.” “Credit unions just need a greater opportunity to do more -- an effort that banking trade groups are trying to block, not based on substance,” but rather, “on pure politics.” In the letter, which was also sent to Treasury Secretary Tim Geithner, Assistant to the President and Chief of Staff Rahm Emanuel, Counselor to the Treasury Secretary Gene Sperling, and Treasury Assistant Secretary for Financial Institutions Michael Barr, Mica commended Obama for his recent speech which outlined job growth initiatives, adding that CUNA is “particularly supportive of efforts to reduce or eliminate fees as well as increase the guarantees associated with Small Business Administration loans.”

CUNA to Congress Oppose extraneous additions to H.R. 4173

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WASHINGTON (12/10/09)--With significant regulatory reform action set to take place this week, the Credit Union National Association (CUNA) has reached out to legislators through a Wednesday letter on H.R. 4173, the Wall Street Reform and Consumer Protection Act. In the letter, Credit Union National Association (CUNA) President/CEO Dan Mica urged House members to oppose extraneous and unrelated amendments to H.R. 4173, which combines a total of seven financial regulatory reform and restructuring bills into one mammoth piece of legislation. Mica also sought congressional support of language that would explicitly direct the CFPA to streamline and simplify regulation and disclosure, and thanked the House Financial Services Committee for giving “serious consideration” to credit union concerns during the regulatory debate. While many credit union concerns regarding the CFPA were addressed in the committee process, CUNA believes that some require more thorough review, and advocated for legislative language that better ensures that the new agency will reduce regulatory burden and eliminate regulatory duplication, and in general simplify compliance with regulation. CUNA “strongly” prefers maintaining the National Credit Union Administration as sole regulator for credit unions, but nonetheless said it is pleased with Chairman Frank's Manager's amendment, which would retain the NCUA’s examination and enforcement authorities for credit unions with less than $10 billion in total assets. Mica said that while CUNA would have preferred that credit unions were “excluded from the scope” of pending systemic risk legislation, CUNA again thanked the Committee for adopting an amendment that would exclude any institution with assets of under $50 billion from inclusion in the systemic risk dissolution fund. That amendment was offered by Reps. Brad Sherman (D-Calif.) and Daniel Maffei (D-N.Y.). Over 250 amendments to H.R. 4173 have been filed, and work on those amendments continued at press time. A vote and possibly final passage of H.R. 4173 could happen as soon as Friday, but the legislation may linger into early next week. For the full letter, use the resource link.

Mica in iThe Hilli Even in recession plan for better days

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WASHINGTON (12/10/09)--In his most recent monthly K Street Insider column in The Hill, Credit Union National Association President/CEO Dan Mica writes that while “ambitious plans and initiatives can fall victim to tight budgets,” especially in times like these, “those of us on K Street still must plan for better times,” no matter how long the recession may last. Mica said that while there was some apprehension that the financial crisis could reduce the amount of lobbying activity undertaken by credit union executives, CUNA found that its members “remained engaged” and “continue to make the time and absorb the costs necessary to maintain a regular, active presence on Capitol Hill.” A clear example of this engagement is the heavy credit union participation in this week’s National Hike the Hill, during which over 600 representatives from state credit union leagues and associated credit unions are visiting with House and Senate legislators and their staffs. CUNA also resisted the urge to cut some funding for its yearly legislative conference, and has seen an uptick in registration compared to last year. Overall, Mica said, “sometimes there is a gamble,” and CUNA has had to make some tough budgetary decisions. However, “planning for growth, even when the going seems tough, is a must,” and “all trade association and lobbying firm heads should have several fiscal models in place.” These models, Mica suggested, “should include a best-case scenario with concrete plans included and a worst-case scenario with drastic budget cuts projected.” “Yes, you may be cutting now, but next year, even next month, your services, skills and organization could be more in demand than ever before,” Mica concluded.

Alabama CUs among those taking case to Congress

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WASHINGTON (12/10/09)--Credit unions took their case to Congress on Wednesday, much like representatives from the League of Southeastern Credit Unions and various credit unions within the state of Alabama who met with key legislators on Capitol Hill. The group reiterated the need for changes to the current member business lending (MBL) structure, telling the congressmen that while credit unions did not create the current economic problems, they can be part of the solution if the MBL cap is lifted.
Click to view larger image Representatives from Alabama-based CUs and the League of Southeastern Credit Unions pose with Rep. Robert Aderholt (R-Ala.), center. (CUNA Photo)
H.R. 3380, which was introduced earlier this year and may be added to developing jobs legislation, would, among other things, increase the credit union MBL cap to 25% of a credit union's total assets. Credit Union National Association (CUNA) has said that lifting the MBL cap would inject over $10 billion into the economy in the first year, and help create more than 108,000 jobs – at no cost to taxpayers. Listerhill CU President Brad Green said that his credit union could provide as much as $50 million in new loans if the MBL cap was lifted, and the Alabama group estimated that 17,000 jobs could be created statewide as a result of the MBL cap lift. Responding to the comments, Rep. Robert Aderholt (R-Ala.) said that he was aware that the credit union MBL issue “is a problem that needs to be dealt with.” The credit union representatives also sought support for a managers’ amendment, offered by Rep. Barney Frank (D-Mass.), that would exclude credit unions with $10 billion or less in assets from the examination and supervision authority of the proposed Consumer Financial Protection Agency. The Alabama delegation also covered hot button issues such as overdraft protection, interchange fee legislation, and the proposed Consumer Financial Protection Agency with Aderholt, and, later, with Sen. Richard Shelby (R-Ala.). Addressing the group, Shelby said that while he is working with Democrats in anticipation of the regulatory reform debate moving to the Senate, he believes strongly that regulatory authority over credit unions and other financial institutions should remain with their prudential regulators. The Alabama group was one of 42 state-based credit union groups taking part in CUNA's National Hike the Hill.

Comments on NCUA corporate CU plan due March 9

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WASHINGTON (12/10/09)--The National Credit Union Administration (NCUA) has given a deadline of March 9, 2010 for all comments on its proposed changes to corporate credit union rules to be submitted. The Credit Union National Association (CUNA) has re-formed its Corporate Credit Union Task Force, which will be led by VyStar CU President/CEO Terry West, to analyze the NCUA proposal and develop its own comment on the proposal. Comments that are directed to CUNA must be submitted by Jan. 20. The proposed rules for corporate credit unions, which were presented at the NCUA’s board meeting last month, would amend Part 704 of the NCUA's rules, adjusting the current corporate capital requirements by replacing the current 4% minimum total capital ratio with a 4% minimum leverage ratio, a 4% tier one risk-based capital ratio, and an 8% total risk-based capital ratio for adequately capitalized corporate credit unions. Corporate credit unions would be required to demonstrate capital ratios of 5%, 6% and 10%, respectively, to be considered well capitalized. The proposal would also prevent corporate credit unions from investing in collateralized debt obligations and net interest margin securities, and would limit so-called “golden parachutes” for troubled corporates and require corporate credit unions to disclose their executive compensation packages. The NCUA rules would also seek to ensure that corporate boards are mainly comprised of natural person credit union employees, and would require any of these board members to hold the position of CEO, CFO, or COO at their member entity. For CUNA's summary of the proposed rule, along with a copy of the proposed rule, as published in the Federal Register, use the resource link.

Inside Washington (12/09/2009)

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* WASHINGTON (12/10/09)--House Financial Services Committee Chairman Barney Frank (D-Mass.) said Tuesday he plans to introduce a bill that would encourage mortgage modifications by designating one investor to represent the interests of others (American Banker Dec. 9). Frank also planned to add an amendment Wednesday to regulatory reform legislation to allocate $3 billion of Troubled Asset Relief Program (TARP) money to help unemployed homeowners. Assistance would be capped at $50,000 per homeowner. The amendment also would use $1 billion from TARP to stabilize neighborhoods and redevelop foreclosed and abandoned homes … * WASHINGTON (12/10/09)--The Senate Banking Committee is slated to meet Dec. 17 to vote on President Barack Obama’s nomination of Federal Reserve chief Ben Bernanke to serve in his role another four years. Bernanke's nomination is expected to earn approval. His current term ends Jan. 31 (American Banker Dec. 9) … * WASHINGTON (12/10/09)--The Troubled Asset Relief Program (TARP), though flawed, served its purpose to stop an economic panic, according to a report released by the Congressional Oversight Panel. Treasury Secretary Timothy Geithner was criticized for failing to articulate specific goals for the program, and the program’s foreclosure mitigation efforts were cited as inadequate (The New York Times Dec. 9). Geithner is slated to testify today before the panel. The panel, headed by Elizabeth Warren, was created in 2008 to track TARP’s effectiveness … * WASHINGTON (12/10/09)--The Troubled Asset Relief Program (TARP) will be extended through Oct. 3, the Treasury Department announced Wednesday. The economy has improved, but TARP needs to be extended to help homeowners and small businesses, Treasury Secretary Timothy Geithner said. He noted he does not expect the program to extend more than $550 billion. The program will be limited to helping small businesses and community banks, mitigating foreclosures, and increasing the Term Asset Backed Securities Loan Facility. TARP will be used only for items deemed necessary to help the financial industry. If other actions are needed, Geithner said he would first consult with the Federal Reserve Board chairman and submit a notification to Congress (American Banker Dec. 9) …

CUNA urges House to include MBL changes in jobs bill

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WASHINGTON (12/9/09)--The Credit Union National Association (CUNA) has urged House members to include expanded business lending authority for credit unions, as presented in H.R. 3380, in a jobs creation bill that is being drafted by Reps. Nancy Pelosi (D-Calif.) and George Miller (D-Calif.). The jobs bill is titled Promoting Lending for America’s Small Business Act. “Congress turned to credit unions during the Great Depression to give consumers access to financial services because the banks would not serve them,” CUNA President/CEO Dan Mica wrote. “Today, small businesses face the same dilemma – they need access to credit, but it is not available through banks. Credit unions have been providing business loans to their members for over 100 years. In fact, as banks have pulled back credit from small businesses, credit unions have continued to lend and they have the available funds and expertise to do more,” he added. H.R. 3380, which was introduced by Reps. Paul Kanjorski (D-Penn.) and Ed Royce (R-Calif.) earlier this year, would increase the credit union member business lending cap to 25% of a credit union’s total assets, raise the “de minimis” threshold for a loan to be considered a “member business loan” to $250,000, and exempt loans made in qualified underserved areas from the cap. In the letter, Mica repeated CUNA claims that including the credit union business lending provision in the jobs bill would inject more than $10 billion into the economy in the first year, and help create more than 108,000 jobs – at no cost to taxpayers. Further supporting H.R. 3380, CUNA said that the bill “recognizes that credit unions have a track record that demonstrates they can help in a safe and sound manner and that they should be part of the solution to the credit crunch small businesses face.” Kanjorski recently discussed H.R. 3380 with President Barack Obama, and the U.S. Treasury and the Small Business Administration have also mentioned lifting the MBL cap as one of many ways that the Obama administration could assist small businesses. The House is scheduled to begin votes on regulatory reform measures today.

At pre-Hike briefing CUNA CU reps and congressmen connect

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WASHINGTON (12/9/09)--Credit union representatives are using this week's National Hike the Hill as a platform for member business lending cap increase advocacy above all else, as they come to Washington just before key financial regulatory reform votes are set to take place.
Rep. Paul Kanjorski (D-Pa.) speaks at the National Hike the Hill kickoff on Tuesday night. (Photo provided by the Pennsylvania Credit Union Association)
The Credit Union National Association (CUNA) hosted a briefing and reception for the over 600 credit union activists coming to Washington. The reception was also attended by Reps. Paul Kanjorski (D-Penn.), Ed Royce (R-Calif.) and Brad Sherman (D-Calif.), who briefly addressed the crowd. CUNA Senior Vice President of Legislative Affairs John Magill said that CUNA, associated credit unions and state leagues would approve of changes that CUNA ”affected” on legislation addressing systemic risk and the proposed Consumer Financial Protection Agency, but oppose potential legislative action on interchange fees and overdraft protection. CUNA is also opposing a bankruptcy amendment to H.R. 4173, the Wall Street Reform and Consumer Protection Act, which would modify the bankruptcy code to permit judicial mortgage modification. The amendment was submitted by Rep. John Conyers (D-Mich.) on Tuesday. Over 235 amendments to H.R. 4173 have been filed with the Rules Committee, but votes on these amendments have not yet been scheduled.
CUNA President/CEO Dan Mica makes a point as he briefs some of the almost 650 credit union representatives that have come to Washington, D.C. this week to "Hike the Hill" on key credit union issues, such as increased member business lending authority. The credit union reps also heard from Reps. Paul Kanjorski (D-Pa.), Ed Royce (R-Calif.) who have introduced legislation to lift the MBL cap, and Rep. Brad Sherman (D-Calif.), who supports increased member business lending. (CUNA Photo)

Cramdown amendment to HR 4173 opposed by CUNA

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WASHINGTON (12/9/09)--The Credit Union National Association (CUNA) has urged Rules Committee Chairwoman Rep. Louise Slaughter (D-N.Y.) not to allow an amendment to H.R. 4173 that would grant bankruptcy judges power to modify--or "cramdown"--terms of existing mortgages. H.R. 4173 is the comprehensive financial institutions regulatory reform package, the Wall Street Reform and Consumer Protection Act. The House begins discussion of the massive bill today and it has been reported that more than 250 amendments have been filed to the legislation. Rep. John Conyers (D-Mich.) on Tuesday submitted the amendment to H.R. 4173 that would modify the bankruptcy code to permit judicial mortgage modification in Chapter 13 bankruptcy proceedings. The House is scheduled to begin votes on regulatory reform measures today. In a Tuesday letter to Slaughter, CUNA President/CEO Dan Mica noted that cramdown legislation, which was “controversial and bitterly divisive” when it was introduced earlier this year, could force credit unions to strongly oppose the broader regulatory restructuring measure. According to Mica, “the specter of a well underwritten loan to a deserving borrower being adjusted through a judicial process is simply abhorrent to most credit union executives and volunteers.” CUNA said credit unions are sympathetic to the financial needs of their members and “work each day to extend credit on terms which are in the best interest of the borrowing member and the membership at large.” CUNA also said it recognizes the need for Congress to take steps to help keep people in their homes. However, Mica said that CUNA with a cramdown amendment, CUNA oppose the legislation as it “has the potential to do long-term damage to the mortgage market and undermine the safety and soundness of credit unions.” “We have tried in good faith to work with proponents of this proposal on a compromise that would address the foreclosure crisis ignited by the sub-prime lending crisis and perpetuated by the unemployment crisis, without jeopardizing the safety and soundness of credit unions or having other adverse consequences to the mortgage lending market,” Mica wrote. “Unfortunately, that compromise remains elusive.”

Inside Washington (12/08/2009)

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* WASHINGTON (12/9/09)--Roughly 6% of trial mortgage modifications have become permanent or likely will be permanent under the Obama administration’s Making Home Affordable Program (HAMP), according to Treasury Department data scheduled to be released Thursday. About 11% of trial modifications that were extended under HAMP have been cancelled, 49% lack documentation to convert them to permanent loans, and 33% have the required documents but haven’t been converted yet (American Banker Dec. 8). Under HAMP, servicers must finish three months of trial modifications where the loan was reduced to 31% of the debt-income ratio before a workout can be made permanent. So far, 650,000 trial modifications have been extended ... * WASHINGTON (12/9/09)--The Troubled Asset Relief Program (TARP) is slated to recover all but $42 billion from its capital infusions to financial institutions, a Treasury Department official said Monday (American Banker Dec. 8). In August, the department projected it would lose $110 billion on the program. So far, banks have repaid $71 billion. Bank of America Corp., who plans to repay by the end of the year, will bring the figure to $116 billion ... * WASHINGTON (12/9/09)--The Small Business Administration (SBA) needs to improve its lender risk rating system, according to a Government Accountability Office (GAO) study. The study found that the system uses some of the same information that federal financial regulators and selected large lenders use to conduct off-site monitoring, but its usefulness is limited because SBA has not followed common industry standards when validating the system. SBA hasn’t assessed the system’s ability to accurately predict outcomes, the report said. GAO recommends that SBA ensure its contract, consistent with industry standards, follows sound model validation practices, use its own data to assess the lender risk rating system, develop a strategy for targeting lenders for onsite reviews that relies more on its lender risk ratings, and consider revising its on-site review policies and procedures. SBA responded to the report, GAO noted, saying that it agreed with the recommendations and plans to take steps to address them ... * WASHINGTON (12/9/09)--The Federal Reserve Board stands to lose some of its power if financial reform legislation is enacted, observers said. On Monday, Fed Chairman Ben Bernanke told the Economic Club of Washington that he opposes a plan that would subject the central bank to audits by the Government Accountability Office (GAO). He also stressed the importance of the Fed’s role as a supervisor. However, observers said the Fed’s powers will be narrowed (American Banker Dec. 8). The Fed will lose some political battles and will have a tougher time arguing against the proposed measures, said Brian Gardner, Keefe, Bruyette and Woods. Inc. analyst. The House is expected to vote on a bill this week that would reform the financial system and subject the Fed to GAO audits. On the Senate side, Sen. Bernie Sanders (I-Vt.) has just won two co-sponsors, Blanche Lincoln (D-Ark.) and Russ Feingold (D-Wis.), on similar reform legislation. The Fed also opposes legislation by Senate Banking Committee Chairman Christopher Dodd (D-Conn.), which would strip the Fed’s bank supervisory powers completely ...

CUNA Matz alt capital letter invaluable to talks

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WASHINGTON (12/9/09)— As the Credit Union National Association (CUNA) continues to push for change on key credit union issues including alternative capital, clear support for such capital as articulated by the chief federal regulator will be an invaluable addition to that effort, the trade group said Tuesday. CUNA has been aggressively pursuing credit union reforms through meetings with top Obama administration officials and federal legislators. CUNA President/CEO Dan Mica commended National Credit Union Administration Chairman Debbie Matz for her letter Monday to House Financial Services Committee Chairman Barney Frank (D-Mass.). Mica said the letter clearly draws the connection between increased credit union service to the American public and the need for prompt corrective action (PCA)reform and additional sources of capital for credit unions. Regarding PCA changes, the Matz letter informed Frank that in some instances healthy credit unions are finding it necessary to refuse new deposits because the increase is skewing net worth levels under current PCA rules. "In effect, the reward for their success in attracting new shares is the risk of a demotion to a lower net worth category if accepting those shares drives down the credit union's net worth ratio," Matz wrote, adding that the reputational risk of that situation is having a “chilling effect” on some credit union service. She urged changes to PCA that would mitigate that affect. CUNA’s Mica said, “Chairman Matz has precisely and quickly defined the negative impact current capital rules are having on consumers at a time when increased savings is vital. She has also taken a leadership role on alternative capital. CUNA commends her for her timely letter to federal lawmakers as they consider broad financial institution regulatory reforms.”

Presidents SBA fee waiver idea could help CUs CUNA

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WASHINGTON (12/9/09)—President Barack Obama’s Tuesday announcement that he supports waiving or eliminating fees and increasing guarantees associated U.S. Small Business Administration (SBA) lending programs could ease restrictions some credit unions run into when interested in participating in SBA lending programs. The Credit Union National Association (CUNA) has consistently advocated with the SBA and Congress that fees for the agency’s 7 (a) and 504 guaranteed lending programs should be lower and guarantees increased. Although eligible to participate in these programs, some credit unions have found the fees, as well as the complexity of the application process, to be prohibitive to their involvement. CUNA has testified before the U.S. Congress repeatedly that changes to the SBA's 7 (a) guaranteed lending program that would enable more credit unions to participate and could serve as an essential tool for helping credit unions achieve their mission of serving all the credit needs of members. CUNA maintains that the SBA loans could particularly help with serving low- to middle-income individuals and underserved communities.

Inside Washington (12/07/2009)

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* WASHINGTON (12/8/09)--Charles Plosser, president of the Federal Reserve Bank of Philadelphia, said the Fed’s actions to stop the financial crisis exacerbated problems at large companies because creditors of those institutions now expect the government to protect their losses (American Banker Dec. 7). This means they will not monitor the firms’ risk-taking as closely, Plosser said during a policy forum. Plosser said Congress must create a resolution process for large financial companies. The legislation policymakers enact must place pressure on creditors. Plosser’s comments come after Fed Chairman Ben Bernanke defended the central bank’s actions during the financial crisis ... * WASHINGTON (12/8/09)--Creditors oppose a measure that would grant government regulators the ability to unwind systemically risky financial companies. They argue that the existing process is better because creditors can negotiate payments. The process also contains an independent judicial review (American Banker Dec. 7). Creditors also are concerned that the legislation would allow the Federal Deposit Insurance Corp. (FDIC) to decide how creditors of a failed bank are paid. Michael Krimminger, special adviser for policy to the chairman at FDIC, said that although the process could disadvantage creditors, it is a better way to avoid systemic collapse. No large firms have been allowed to fail because nobody has enough confidence in the bankruptcy code to handle it, he said ... * WASHINGTON (12/8/09)--The Treasury Department and the Department of Housing and Urban Development (HUD) launched a campaign to help borrowers in the trial phase of their modified mortgages under the Obama Administration’s Home Affordable Modification Program convert to permanent modifications. HUD and Treasury will implement new outreach tools and borrower resources to help convert as many modifications as possible. The administration also has extended the period for trial modifications started on or before Sept. 1; streamlined the application process; developed new metrics to hold servicers accountable for their performance; and enhanced resources on the MakingHomeAffordable.gov website and the Homeowner’s HOPE Hotline. The conversion drive also will include servicer accountability, web tools for borrowers and engagement of state, local and community stakeholders ...

Business associations back MBLs in CUNA ad

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WASHINGTON (12/08/09)—Backing up its National Hike the Hill effort with an “open letter” ad supporting increased member business lending (MBL), the Credit Union National Association (CUNA) today launched a campaign in Washington, D.C. publications with Capitol Hill readerships. CUNA is advocating that Congress include greater MBL
Click to view larger image Click for larger view
authority for credit unions—up to 25% of assets--in legislation that could be passed during the closing legislative days of 2009. CUNA specifically favors adding in MBL language to an anticipated Obama administration job-stimulus bill. According to CUNA, 108,000 jobs could be added to the nation’s workplace if the current 12.25% of assets MBL cap were lifted. The ad, backed by the signatures of 15 small business and policyorganizations, says in part: We urge you to allow credit unions to expand lending to their business members.
* Credit unions continue to lend even when banks have cut back; * Credit unions play a vital role in providing capital to underserved communities and small businesses; and, * Credit Unions understand the special needs of their business members and can make loans that banks will not.
The ad appears in conjunction with CUNA’s and the leagues’ Dec. 8, 9 and 10 National Hike the Hill. With House votes scheduled this week on financial regulatory reforms, more than 600 credit union representatives will visit their legislators to urge greater MBL capacity, as well as to discuss the financial regulatory reform plan, overdraft protection legislation, and credit union opposition to government interference in interchange fees. CUNA also helped feature credit union business lending on The Hill’s “CongressBlog” Monday. CUNA President/CEO Dan Mica blogged that Congress and the Obama administration this week have a ‘golden opportunity to do something for small business and jobs that will have a quick and significant impact: Support legislation that gives credit unions more capacity for making business loans to their members.” Mica noted that Reps. Paul Kanjorski (D-Pa.) and Ed Royce (R-Calif.) have introduced H.R. 3380, the “Promoting Lending for America’s Small Business Act,” which, CUNA says, if enacted would generate up to $10 billion in business loans from credit unions in the first year, and create the 108,000 jobs in the process. The Hill is a Washington-based, semi-daily newspaper that covers Congress, lobbying and the Capitol Hill community, and circulates broadly among congressional offices and lobbying organizations. Use the resource link to see the complete blog posting.

Supreme Court hears case on bankruptcy attorneys advice restriction

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WASHINGTON (12/8/09)--The Supreme Court was asked last week to declare unconstitutional a provision in 2005 federal bankruptcy amendments that forbid lawyers from advising their clients to “incur more debt…in contemplation of bankruptcy.” U.S. Courts of Appeals have split on this provision of the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005, which imposes restrictions on the advice which people being paid to file bankruptcy cases can give to their clients. The Credit Union National Association (CUNA) supported adding this provision to the bankruptcy law to protect creditors from having people take out loans in anticipation of bankruptcy. In 2008, the 8th Circuit Court of Appeals ruled that the BAPCPA provision that prohibits “debt relief agencies” from counseling consumer debtors to incur additional debt violates the First Amendment’s free speech clause as applied to attorneys (Milavetz, Gallop & Milavertz v. United States). The law firm plaintiff argued that the law is unconstitutional because it prohibits attorneys from relaying “truthful information about entirely lawful activity,” and there may be times when taking on more debt is the appropriate thing to do, such as buying a car to get to work or refinancing a mortgage loan to get a lower rate. The U.S. Justice Department defended the provision, saying that the intent of the law isn’t to prohibit lawful advice but to protect clients from “improper, unethical, abusive or even…criminally fraudulent advice by the attorney.” Several justices posed a number of hypotheticals including when a lawyer could advise a client to get needed medical attention or what a lawyer was supposed to do if a client talked about filing for bankruptcy and taking a trip to Tahiti. They also raised the issue of the person borrowing to pay the fee of the bankruptcy attorney. The Supreme Court will rule on this case in 2010.

Fed agencies collaborate to fight financial fraud

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WASHINGTON (12/8/09)--The federal government will seek to enhance its mortgage, corporate, and securities fraud fighting abilities through a newly established federal financial fraud task force composed of the Department of the Treasury, the Securities and Exchange Commission (SEC), the Department of Housing and Urban Development (HUD), and the Department of Justice. The task force will also involve leadership from a bevy of other federal agencies, including the Department of Homeland Security and the Federal Deposit Insurance Corporation, among others. Credit Union National Association (CUNA) Deputy General Counsel Mary Dunn Monday questioned why the National Credit Union Administration was excluded from the task force composition and said CUNA will follow up with the task force on this matter. The fraud task force, which replaces the existing Corporate Task Force, will, according to Attorney General Eric Holder, bring those responsible for the last financial meltdown to justice through investigations and enforcement actions and prevent future financial circumstances from arising. The task force will also, according to the release, collaborate with federal agencies, regulatory authorities, and inspectors general, and work with state and local partners to “investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, address discrimination in the lending and financial markets and recover proceeds for victims.” The task force is part of an Obama administration effort to prevent financial fraud before it becomes widespread, Treasury Secretary Tim Geithner added. The task force, which takes the place of the Corporate Task Force created in 2002, will meet within the next 30 days.

CU financial issues at the legislative forefront

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WASHINGTON (12/8/09)--The regulatory restructuring debate returns to Washington this week, beginning what Credit Union National Association (CUNA) Vice President of Legislative Affairs Ryan Donovan said “could be the most intense fortnight of legislative activity related to credit unions in several years.” H.R. 4173, the Wall Street Reform and Consumer Protection Act, which combines a total of seven financial regulatory reform and restructuring bills, is the largest item on the docket. The legislative items that have been included in this bill address Financial Stability Improvements, Over-the-Counter Derivatives Markets, the Consumer Financial Protection Agency, Capital Markets Improvements, and the Federal Office of Insurance, and have been approved by the House. A pair of remaining bills, H.R. 1728, the Mortgage Reform and Anti-Predatory Lending Act, and H.R. 3269, the Corporate and Financial Institution Compensation Fairness Act, were also previously approved by the House of Representatives. CUNA has worked with legislators to address credit union concerns, gaining legislative approval of an amendment that protects the majority of credit unions from paying into a too-big-to-fail dissolution fund. CUNA has addressed or is working to address concerns regarding the examination and enforcement of consumer protection regulation for credit unions, agency funding mechanisms, plain vanilla product requirements, regulation of the Community Reinvestment Act, credit union representation within the agency, and regulatory consolidation within the proposed Consumer Financial Protection Agency. House Financial Services Committee Chairman Rep. Barney Frank (D-Mass.) reportedly expects a minimum of ten amendments, one of which would increase the CFPA examination and enforcement threshold to $10 billion for credit unions, and a full list of the amendments will be available after the House Rules Committee meets today. While amendments addressing overdraft protection and interchange fees are not expected during debate on the regulatory restructuring bill, CUNA is on the lookout for a potential mortgage bankruptcy "cramdown" amendment, and would strongly oppose this amendment if it is introduced. The House will also consider the Tax Extenders Act of 2009 on Wednesday, and the Obama administration this week is also expected to join key members of Congress to release a jobs creation bill. Legislation addressing member business lending, as recently suggested by Rep. Paul Kanjorski (D-Penn.), also could be included in that bill. CUNA believes that this employment legislation could be brought up in the House next week. A number of hearings are scheduled to take place during the week, including:
*A House Financial Services Committee hearing entitled "The Private Sector and Government Response to the Mortgage Foreclosure Crisis;" *A Senate Judiciary Committee hearing entitled "Mortgage Fraud, Securities Fraud, and the Financial Meltdown: Prosecuting Those Responsible;" *A Senate Banking Committee hearing entitled "Weathering the Storm: Creating Jobs in the Recession;" and *A House Judiciary Committee Subcommittee on Commercial and Administrative Law hearing entitled "Home Foreclosures: Will Voluntary Mortgage Modifications Help Families Save Their Homes? Part II."

Matz seeks alt. capital PCA reform

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ALEXANDRIA, Va. (12/8/09)--In a Dec. 7 letter to Rep. Barney Frank (D-Mass.), National Credit Union Administration Chairman Debbie Matz asked for legislators to address issues with Prompt Corrective Action capital standards by allowing qualified credit unions “to issue alternative forms of capital to supplement their retained earnings.” Legislators could also modify the Federal Credit Union Act “to permit qualifying credit unions to offer uninsured alternative capital instruments subject to regulatory restrictions” and expand the Act’s “definition of ‘net worth’ to include those instruments.” While the intent of PCA is to control potentially “accelerated, unmanageable growth of credit union assets,” PCA can at times “discourage manageable asset growth by financially healthy credit unions in times of economic distress,” Matz said. In the letter, Matz states that “the risk of reputational damage from being branded less than ‘well capitalized’ and in need of ‘restoring’ net worth, and from being subjected to the mandatory and discretionary restrictions that accompany a falling net worth ratio, is reportedly having a significant chilling effect on the willingness of some “well capitalized” credit unions to accept new share deposits.” “In effect, the reward for their success in attracting new shares is the risk of a demotion to a lower net worth category if accepting those shares drives down the credit union’s net worth ratio,” she added. Declines in net worth ratio can expose a given credit union to a “range of mandatory restrictions imposed by law, as well as discretionary restrictions imposed by regulation—all designed to restore net worth,” according to the letter. Another potential legislative remedy proposed by Matz was “allowing qualifying credit unions to exclude from the ‘total assets’ denominator those assets that have a zero risk-weighting, exposing the credit union to virtually no risk of loss.”

Inside Washington (12/04/2009)

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* WASHINGTON (12/7/09)--National Credit Union Administration (NCUA) Board Member Michael Fryzel met with Andrews FCU President/CEO Chris McDonald and Defense Credit Union Council President/CEO Arty Arteaga at the credit union’s headquarters in Suitland, Md. They discussed member services, real estate trends and potential concerns for credit unions in the future. “Credit unions continue to listen to the concerns of their members and work to meet their needs regarding certain products and services, a task that during these challenging economic times remains a focus for credit unions across the country,” Fryzel said. Andrews FCU has $860.6 million in assets. From left are McDonald and Fryzel. (Photo provided by the National Credit Union Administration) ... * WASHINGTON (12/7/09)--After Bank of America Corp. announced it will pay back the funds it received in the government bailout by year-end, financial observers predict that its rivals will follow suit. BoA may have set a new benchmark for leaving the Troubled Asset Relief Program (TARP), they added. BoA has projected a Tier 1 common capital ratio of 8.5%, something that rival Citigroup could match, observers said. Citigroup posted Tier 1 capital at 9.1% at the end of the third quarter (American Banker Dec. 4). Ethan Heisler, managing director at Hexagon Securities, said that every bank will repay its funds--but many haven’t been approved to do so yet. Heisler noted that BoA’s plan to repay the funds doesn’t mean the company is healthier than its counterparts ... * WASHINGTON (12/7/09)--Bank of America Corp.’s plan to repay its Troubled Asset Relief Program (TARP) debt by the end of the year seems like a safe move, but analysts said the move places a “big bet on the economy.” Alois Pirker, research director at Aite Group LLC, said there are benefits to repaying the funds, but questioned if the benefits outweigh the risks because nobody is sure what the markets will do next year (American Banker Dec. 4). William Fitzpatrick, analyst at Optique Capital Management, was stunned at BoA’s move to leave TARP, he said. He questioned whether BoA would need the government’s help again if the economy tanked. However, the Fed felt that BoA is in a good position to repay its TARP money, said Federal Reserve Board Chairman Ben Bernanke. Robert Stickler, BoA spokesman, noted the company can survive regardless of the economy, and has never made secret its desire to leave TARP ... * WASHINGTON (12/7/09)--Some lawmakers are working to block Federal Reserve Board Chairman Ben Bernanke’s reconfirmation as Fed chief (American Banker Dec. 4). Sen. Jim Bunning (R-Ky.) said he’d do everything to drag out the reconfirmation process, while Sen. Bernie Sanders (D-Vt.) put a hold on the nomination, forcing Senate leaders to get 60 votes before moving forward. The question is whether Bernanke is the best one to lead the nation out of financial crisis, said Sen. Richard Shelby (R-Ala.). Sen. Kay Bailey Hutchison (R-Texas) indicated she would wait on deciding how to vote o the matter, while Sen. Jim DeMint (R-S.C.) said he would “probably” vote for Bernanke. However, Senate Banking Committee Chairman Christopher Dodd (D-Conn.) said Bernanke is the right leader “for this moment in our nation’s economic history” ... * WASHINGTON (12/7/09)--The Federal Deposit Insurance Corp. (FDIC) said it will release more information about failed bank bids (American Banker Dec. 4). However, the cover bid, or second-best offer, will be withheld for one year. The names of losing bidders will be public after the failure of the bank, but it will be unclear which bidder belongs to each bank. Dan Bass, managing director of Carson Medlin Co.’s Houston office, said the changes the FDIC has made are a “good compromise” because they provide information about what is taking place ... * WASHINGTON (12/7/09)--Competition regarding 529 college-savings plan management fees is intensifying, financial observers said. Fidelity Investments, Vanguard Group and TIAA-CREF have been lowering fees (American Banker Dec. 4). Fidelity cut its program management fees by a third to a half for its five state-sponsored plans on Tuesday. The cuts are good for consumers because they will encourage investment in the plans said, Mark Kantrowitz, founder and publisher of FinAid.org. Many credit unions offer private student lending programs. CU Student Choice, a credit union service organization that offers lending services, has more than 80 credit unions in its network (News Now Aug. 21) ... * WASHINGTON (12/7/09)--The Internal Revenue Service (IRS) Friday issued the 2010 optional standard mileage rates to calculate the deductible costs to operate an automobile for business purposes. The standard mileage rates for the user of a car (including vans, pickups or panel trucks) will be 50 cents per mile for business miles driven, 16.5 cents per mile driven for medical or moving purposes, and 14 cents per mile driven in service or charitable organizations. The rates for 2010 reflect lower transportation costs than a year ago, the IRS said ...

BSA e-filers have new SAR validations process

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WASHINGTON (12/7/09)—As of Dec. 12, the Financial Crimes Enforcement Network (FinCEN) will launch the second phase of its Bank Secrecy Act (BSA) E-Filing Suspicious Activity Report (SAR) Acknowledgements and Validation process. Phase I was implemented in September and provided BSA E-Filers with an acknowledgement of receipt for a submitted SAR. This second phase, according to FinCEN, applies data quality checks and will provide filers with information on the quality of their submissions for electronically filed SARs of all types: Suspicious Activity Report by Depository Institutions (SAR-DI), Suspicious Activity Report by the Securities and Futures Industries (SAR-SF), Suspicious Activity Report by Casinos and Card Clubs (SAR-C), and Suspicious Activity Report by Money Services Businesses (SAR-MSB). The BSA E-Filing system offers filers a self-enrollment feature. There is no enrollment deadline at this time; however, FinCEN strongly encourages filers to enroll to receive critical error feedback through this feature.

Mica responds to banker criticisms of CUs

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WASHINGTON (12/7/09)--Credit Union National Association President/CEO Dan Mica on Friday responded to banking organizations attempt to dissuade legislators from supporting lifting the member business lending cap for credit unions, saying that their doing so does “a grave disservice not just to America’s credit unions, but to the nation’s small business owners that are the key to our nation’s economic recovery.” The American Bankers Association (ABA) and affiliated state bank associations on Friday attempted to discredit credit union claims in a letter sent to House Speaker Rep. Nancy Pelosi (D-Calif.) and Rep. George Miller (D-Calif.). The ABA letter came in response to Rep. Paul Kanjorski’s (D-Penn.) recent letter which urged the two legislators to consider including his H.R. 3380, the “Promoting Lending to America's Small Businesses Act of 2009,” in their forthcoming jobs bill. While bankers attack credit unions throughout their letter, they say “not a word” on what they would do to help small businesses, Mica said. By objecting to credit union efforts to meet members' increased loan demand, Mica said the bankers, “as they have too often throughout the nation’s financial crisis… are thinking only of themselves at a time when small businesses are in dire need of access to credit.” “Rather than stepping forward to meet the demand, banks have curtailed their lending, a sad fact acknowledged by policymakers, regulators and business leaders alike,” Mica said. “Simply put: lifting the cap is good public policy, especially now. Congress should not be dissuaded by the bankers’ narrow self interest,” Mica concluded.

House sets 2010 schedule

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WASHINGTON (12/7/09)--The House will begin 2010 by reconvening for votes at 6:30 p.m. ET on Jan. 12, according to the 2010 legislative calendar, which was released on Friday by House Majority Leader Steny Hoyer (D-Md.). The first major work period will begin on Feb. 15, President’s Day, and will last through the end of that week. The Passover/Easter district work period will begin on March 29 and last until April 9, and the lengthy summer district work period will take place between Aug. 9 and Sept. 10. With 2010 elections looming, the voting session for next ear is set to end on Oct. 8. The Senate has not yet released its 2010 voting calendar.

National Hike the Hill greets active Congress

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WASHINGTON (12/7/09)--With House votes on a bevy of financial regulatory reforms drawing close, the Credit Union National Association and the state leagues will bring over 600 credit union activists to Washington on Dec. 8, 9 and 10 for a “National Hike the Hill.” A main goal of this round of CUNA’s “Hike the Hill” campaign is to urge legislators to give credit unions more capacity to help the economy by giving them more capacity to make business loans to their members. Congressional action on H.R. 3380, the Promoting Lending to America's Small Businesses Act of 2009, is pending. The bill would increase the MBL cap to 25% of a credit union's total assets, would raise the "de minimis" threshold for MBL loans to $250,000, and would exempt loans made to non-profit religious organizations as well as loans made in qualified underserved areas from the cap. CUNA has estimated that credit unions would generate up to $10 billion in business loans in the first year that the MBL cap is lifted, creating about 108,000 jobs in the process. Rep. Paul Kanjorski (D-Pa.) last week asked Reps. Nancy Pelosi (D-Calif.) and George Miller (D-Calif.) to help credit unions assist small businesses by including portions of H.R. 3380 addressing MBL in their upcoming job creation legislation. Other recent grassroots advocacy initiatives by CUNA and the Leagues include individual state League “Hike the Hill” events and a postcard campaign addressing interchange fees.

CDFI Fund requests nearly double for fiscal 2010

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WASHINGTON (12/7/09)--The U.S. Treasury's Community Development Financial Institutions Fund (CDFI Fund) on Friday announced that it has received applications from a total of 408 financial institutions requesting a total of $467 million in funds for the 2010 fiscal year round of the program. A total of 51 of the financial institutions that applied for the CDFI funds are credit unions. According to the NCUA, credit unions that are certified to take part in the CDFI program may apply for as much as $2 million in funding that will help maintain their credit union's presence in the community. The CDFI Fund received requests for just over $237 million in funds during the 2009 fiscal year. CDFI Fund Director Donna Gambrell said that the “extraordinary demand” for CDFI Program funds “shows the great need in distressed communities for capital to provide affordable financial products and services.” "Today’s economy is creating a need for CDFIs to expand their impact as low-income people and communities across the nation continue to bear a disproportionate burden and rely on CDFIs to provide critically needed support,” she added. The Treasury's CDFI Fund helps locally based financial institutions offer small business, consumer and home loans in communities and populations that lack access to affordable credit. The CDFI Fund is currently evaluating applications, and awards will be announced in the summer of 2010.

CUNA MBL plan noted to Obama and in report

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WASHINGTON (12/7/09)--The U.S. Treasury and the Small Business Administration (SBA) have incorporated the Credit Union National Association’s (CUNA) recommendation that the government lift the current credit union member business lending (MBL) cap of 12.25% of total assets into their report to the President following the recent Small Business Financing Forum. The report recommendation is included among a long list of recommendations made to Treasury by participants of a recent Obama administration meeting on small business intiatives. CUNA has long advocated lifting the member business lending cap for credit unions, a move which CUNA estimates could provide $10 billion in new small business loans once it is completed. Also, Rep. Paul Kanjorski (D-Pa.) advocated for lifting the MBL cap on Friday, discussing his pending bill, H.R. 3380, the Promoting Lending to America's Small Businesses Act of 2009, directly with President Obama aboard Air Force One. H.R. 3380 would increase the MBL cap to 25% of a credit union's total assets, would raise the "de minimis" threshold for a loan to be considered a "member business loan" to $250,000, and would exempt loans made to non-profit religious organizations as well as loans made in qualified underserved areas from the cap. Commenting on the MBL developments, CUNA President/CEO Dan Mica said that credit unions were “clearly” gaining traction “on the issue of raising the capacity of credit unions to make business loans." The joint Treasury/SBA report, which was submitted following President Obama’s recently completed White House jobs summit, also suggested expanding eligibility for the Emergency Economic Stabilization Act’s (EESA) Troubled Asset Relief Program funds to all credit unions. Some eligible credit unions currently access government-based funding through the Treasury’s Community Development Financial Institution fund. The report also provided recommendations on expanding and improving Small Business Administration programs, tax policy changes that could benefit small businesses, and supporting small business in underserved markets, expanding rural access to credit. The forum, which was held at the White House last week, included a guest list of over 100 academics, CEOs, small business leaders, and union leaders. In an interview following the summit, Google CEO Eric Schmidt told CNBC that the government could do more to "solve the loan problem" facing small- and medium-sized businesses. "They used to get loans from banks, the banks aren’t really lending to them anymore, for lots of reasons, and anything that they can do to accelerate that needs to be done right now." CUNA's Senior Vice President of Legislative Affairs John Magill and National Credit Union Administraion Chairman Debbie Matz were also present at the forum. President Obama addressed the forum, saying that his administration is “looking for fresh perspectives and new ideas” as it seeks ways to reinvigorate the job markets and economy. Vice President Joe Biden, Treasury Secretary Tim Geithner, SBA Administrator Karen Mills, Labor Secretary Hilda Solis, and Federal Deposit Insurance Corporation Chairman Sheila Bair also spoke prior to the forum. House Small Business Committee Chairman Nydia Velazquez (D-N.Y.) also remarked that credit unions and small financial institutions “are facing unprecedented challenges,” adding that the government must “look for ways to channel more resources to help smaller institutions.”

FHFA FHLB director elections draw CUNA comment

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WASHINGTON (12/4/09)--The Credit Union National Association has published a final rule analysis on the Federal Housing Finance Board’s final rule on the election of Federal Home Loan Bank (FHLB) directors. The Federal Housing Finance Agency’s amendment, which became effective on Nov. 6, will divide FHLB boards of directors into two categories, member directors and independent directors. Member directors will be elected on a state-by-state basis, and independent directors will be elected at-large by FHLB members. Directors will be limited to three consecutive terms of four years. To read the full analysis, use the resource link.

Lawmakers positive on reg reforms at CUNA breakfast

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WASHINGTON (12/4/09)--Speaking at a Thursday “Power Breakfast” sponsored by the Credit Union National Association (CUNA) and the National Journal Group, Reps. Ed Perlmutter (D-Colo.) and Brad Miller (D-N.C.) expressed optimism at the prospect of House passage of pending regulatory reform legislation on derivatives, systemic risk, the Consumer Financial Protection Agency (CFPA), and other initiatives. Both legislators said that Rep. Barney Frank (D-Mass.) is “certain” that the legislation will be on the floor next week, and Miller said that he does not expect that a vote on the bills will be delayed by any other matters. A vote is expected on Thursday. House members are expected to be given a chance to amend any of the bills before they are voted on. Miller, who is a member of North Carolina-based State Employee’s Credit Union, said that legislation to exclude credit unions with $10 billion or less in assets from the examination and supervision authority of the proposed CFPA would be offered as a managers’ amendment. The Federal Reserve’s role will likely change somewhat as a result of these regulatory reforms, especially the creation of the CFPA, and Miller said that there is also strong support in the House for Rep. Ron Paul’s (R-Tex.) amendment that would seek a Government Accountability Office audit of the Fed. Fellow “Power Breakfast” guest Perlmutter said that the balance of the regulatory reform package is so important that he would still ask his colleagues to support the legislation, even if the proposed CFPA is removed. Addressing the potential political impact of the ongoing regulatory reform work, Miller said that if Democrats cannot make the case to the American middle class that Republican opposition credit card and overdraft fee legislation is not in the best interest of the people, then they “really aren’t very good” at their job.

CUNA publishes final rule analysis on Reg E

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WASHINGTON (12/4/09)--The Credit Union National Association (CUNA) has analyzed a final rule by the Federal Reserve Board that would require consumers' affirmative consent (opt-in) before institutions could charge overdraft fees for ATM and one-time debit card transactions. The opt-in right applies to all account holders, including existing ones. However, before opting-in, the consumer must be given a notice explaining the overdraft service, including fees and the consumer's choices. The final rule also includes a model notice that is to be used. Financial institutions cannot require the opt-in as a condition for paying overdrafts for checks or other transactions, and consumers who do not opt-in must be provided with the same type of account that is provided to those who do opt-in. Consumers will have an ongoing right to revoke the consent. The final rules will be effective as of Jan. 19, 2010, and compliance will be mandatory as of July 1, 2010. However, fees may be assessed until Aug. 15, 2010 on accounts that were opened before July 1, 2010, regardless of whether the consumer has opted-in to the overdraft plan. For the full analysis, use the resource link. The Federal Reserve Board will discuss its recently enacted final rules on overdraft protections during its "Outlook Live" Audio Conference, which is scheduled for Dec. 10 from 1 until 2 p.m. ET. Use the link to register for the conference.

Inside Washington (12/03/2009)

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* WASHINGTON (12/4/09)--Federal Reserve Board Chairman Ben Bernanke defended the Fed’s response to the nation’s financial crisis during his reconfirmation hearing as Fed chief. The crisis would have been much worse without strong action from the Fed, Bernanke told the Senate Banking Committee (The Wall Street Journal Dec. 3). The Fed has been trying to learn from the crisis, and if confirmed for a second term, Bernanke said he would work with Congress to improve oversight. The Fed also must be ready for an exit plan for the stimulus pumped into the financial system to counter the recession, he added ... * WASHINGTON (12/4/09)--Financial observers question whether Government Accountability Office (GAO) audits of the Federal Reserve Board would threaten the central bank’s independence (American Banker Dec. 3). Under legislation pushed by Rep. Ron Paul (R-Texas), the Fed would be subject to audits on its operations, including monetary policymaking. The Fed has said if the audits are mandated, investors may lose faith in the central bank. Brian Gardner, KBW Inc. analyst, said a GAO report would have some significance. However, Mark Calabria, director of financial regulation studies at the Cato Institute, said the GAO may not have as much clout as some think. It has no “magic wands to wave,” he said. Markets are concerned that the audits would cause the Fed to use low-interest rate policies that benefit politicians running for office but trigger inflation. Calabria said the Fed already faces tremendous political pressure ... * WASHINGTON (12/4/09)--A regulatory reform report by the Pew Economic Policy Group said the Fed should be stripped of its bank regulatory authority, and a Financial Services Oversight Council should be created to regulate systemic risk. The Fed should still be allowed to collect any information from financial institutions to monitor systemic risk, however. The report also recommended that large financial institutions maintain higher capital standards. Back-up resolution and strengthened bankruptcy processes should be used to help systemically important firms that fail (American Banker Dec. 3). A recent Pew Charitable Trusts study favorably noted credit unions, saying that consumers should consider them when choosing a credit card (News Now Oct. 29) ...

Staatz warns overdraft bill has consequences

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WASHINGTON (12/4/09)--Consumer groups that favor overdraft
Rod Staatz, CEO of SECU in Linthicum, Md., talks about unintended consequences of a legislative proposal to ban some overdraft protection plan practices. He was addressing this week’s Consumer Federation of America conference on financial services. (CUNA Photo)
protection reform legislation need to be mindful of negative unintended consequences, cautioned Rod Staatz, CEO of SECU in Linthicum, Md., during a panel discussion at this week’s Consumer Federation of America conference on financial services. “Any time you propose legislation, you must think it through and be sure there are no unintended consequences, which could ultimately harm consumers in the end,” said Staatz, who also serves on the Credit Union National Association (CUNA) board. He participated in a CFA panel on overdraft protection issues and policy consequences along with Jean Ann Fox, CFA’s director of financial services, and Barbara Ryan, deputy to the vice chairman of the Federal Deposit Insurance Corp. Ryan summarized the results of a November 2008 FDIC study on use and cost of overdraft programs among FDIC-insured institutions. Fox explained why CFA supports overdraft protection legislation proposed by Rep. Carolyn Maloney (D-N.Y.) and Sen. Christopher Dodd (D-Conn.) over recent regulations adopted by the Federal Reserve Board requiring opt-in for ATM and debit transactions. "We welcome the Fed’s rule, but it doesn’t go far enough,” Fox said. Panel moderator Will Ogburn of the National Consumer Law Center noted the Fed rule only applies to one-time rather than recurring charges, does not cover checks, and places no limit on the number or size of overdraft fees. Staatz emphasized the Fed’s rules are preferable to the legislation, which contain some elements CUNA could support but also include provisions that would be extremely problematic for credit unions, such as limiting the number of a consumer’s ODP fees to one a month and six a year. The cost and compliance issues raised by theses legislative provisions could drive responsible providers like credit unions away from offering a service their members value, he explained. Noting again that many institutions offer the product responsibly, Staatz outlined the steps SECU takes to intercede when members over-use the service. He also highlighted voluntary ethical guidelines the CUNA board establisehd in 2004. Rep. Maloney, who addressed the CFA conference prior to the overdraft panel, called the new Fed rules “tremendously important” but said her bill is broader than the Fed approach and is still necessary.

CUNA Recovery should bring lower NCUA spending

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WASHINGTON (12/4/09)—In a letter addressing aspects of the National Credit Union Administration’s (NCUA) proposed 2010 budget, the Credit Union National Association (CUNA) acknowledged that some increase in the spending plan reflects current economic conditions, but urged assurances that the agency will reduce expenditures when the country returns to a more stable operating environment. CUNA President/CEO Dan Mica wrote that some budget increase is to be expected to support agency efforts to handle additional safety and soundness concerns wrought by troubled financial times. But once the crisis has passed, Mica urged, the agency must consider it a priority to determine how to reduce spending. CUNA also noted credit unions concerns regarding the size of the increase for agency staff compensation next year—a 6.6% net growth in merit pay and locality adjustment. The agency needs to be sensitive, Mica said, to the fact that credit unions across the nation are scaling back expenses, including employee benefits, and have been forced to reduce salaries, enforce unpaid furloughs, as well as execute reductions in the number of workers. Mica stated clearly that CUNA has no intention to try micromanage the NCUA’s financial resources, just as CUNA believes it would be inappropriate for the NCUA to micromanage individual credit unions’ budgets. However, Mica reminded that NCUA is in a unique stewardship position among agencies because it is credit unions, and not the federal government, that funds its general operations. The total 2010 budget proposed Nov. 19 by the NCUA is $200,923,512, an increase of 13% over the 2009 budget. At an open board meeting, NCUA Chairman Debbie Matz said the increased budget is a response both to past budget cuts as well as a current need for more funding due to the "state of the credit union industry." Over $14 million of the $23 million funding increase is related to NCUA program changes.

CFPA oversight limited to CUs with 10B assets

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WASHINGTON (12/3/09)—The head of the House Financial Services Committee has agreed to exclude credit unions with $10 billion or less in assets from the examination and supervision authority of the proposed Consumer Financial Protection Agency (CFPA), a move strongly advocated by the Credit Union National Association (CUNA). An earlier version of the bill set the threshold at $1.5 billion. Committee Chairman Barney Frank (D-Mass.) said he would modify the current language of his CFPA bill so that credit unions with $10 billion or less in assets would not be subject to examination and supervision by the CFPA. Instead, their primary regulator would enforce rules established by the CFPA. CUNA has learned that the bill is being modified at the request of many Democratic members. This change boosts the current carve out up from $1.5 billion in assets and puts credit unions on equal footing with community banks, who were given the higher exemption under a recently adopted amendment. CUNA President/CEO Dan Mica thanked Frank, saying that Frank’s decision, which “effectively eliminates more than 99% of all credit unions from direct examination and supervision” by the CFPA, “is a clear indication he recognizes credit unions did not ‘start the fire’ of the current financial debacle and that their current regulatory regime, coupled with their cooperative structure, argues against credit unions contributing to a financial crisis in the future.” CUNA Senior Vice President of Legislative Affairs John Magill also today lauded Frank’s action, calling it “a very significant and positive development.” However, Magill added that credit unions must “bear in mind that legislation is a process not an event, and that process continues.” CUNA has opposed unnecessarily dividing credit unions by asset size in the legislation. “However,” Magill said, “once it became apparent that the legislation was going to move forward with an asset threshold, CUNA fought to secure parity for credit unions with the higher level established for banks.”

Kanjorski seeks House help on CU MBL cap

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WASHINGTON (12/3/09)--Rep. Paul Kanjorski (D-Pa.) has asked Reps. Nancy Pelosi (D-Calif.) and George Miller (D-Calif.) to help credit unions assist small businesses by including portions of H.R. 3380, the Promoting Lending to America’s Small Businesses Act of 2009, addressing member business lending (MBL) in their still-developing jobs creation legislation. In the letter sent today, Kanjorski said that “credit unions are already helping their members start businesses, as well as helping their members with established businesses.” He added that credit unions could “do even more if Congress raised the member business lending cap.” “Unfortunately, an arbitrary restriction imposed in 1998 has so far limited their ability to promote greater economic growth during the current economic downturn. Prior to the enactment of this statute, credit unions had no cap on their member business lending activities,” he added. Credit Union National Association (CUNA) President/CEO Dan Mica thanked Kanjorski for his support and called the letter “a significant indication of Representative Kanjorski's continued support of credit unions and increasing the MBL cap.” H.R. 3380, which was introduced by Kanjorski and Rep. Ed Royce (R-Calif.) earlier this year, would increase the MBL cap to 25% of a credit union's total assets, would raise the "de minimis" threshold for a loan to be considered a "member business loan" to $250,000, and would exempt loans made to non-profit religious organizations as well as loans made in qualified underserved areas from the cap. CUNA estimates that if the cap were eased, approximately $10 billion could be provided in new small business loans.

Inside Washington (12/02/2009)

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* WASHINGTON (12/3/09)--The House Financial Services Committee approved legislation Wednesday that will put an end to “too big to fail” financial firms. The Financial Stability Improvement Act, H.R. 3996, aims to prevent the failure of large institutions from becoming a systemwide crisis and ensure that taxpayers are not responsible for the collapse of large banks. Under the bill, any costs for dismantling a failed financial company will be repaid from the assets of the failed firm at the expense of shareholders and creditors. Any shortfall would then be covered by a dissolution fund pre-funded by large financial companies with assets of more than $50 billion and hedge funds with assets of more than $10 billion. Big banks will be affected the most by the legislation, observers said. It requires big banks to retain more capital, hold convertible debt instruments, pay assessments to a systemic risk insurance fund and pay more in deposit insurance premiums. Karen Shaw Petrou, Federal Financial Analytics managing partner, said prior to the legislation’s approval that if such measures were enacted, some of the largest banking organizations would “pull themselves apart” because the legislation would force them to undergo “strategic reassessment” (American Banker Dec. 2) ... * WASHINGTON (12/3/09)--The Treasury Department has announced that it will sell its warrants for Capital One common stock today. The auction will begin at 8 a.m. EST and will end at 6:30 p.m. The Treasury is selling 12,657,960 warrants, all of which expire on Nov. 14, 2018. The Treasury will not receive any proceeds from the sale ... * WASHINGTON (12/3/09)--A longtime debate regarding industrial loan companies (ILCs) may be ended with the approval of a regulatory reform bill by the House Financial Services Committee The bill would prohibit new commercial owners of banks and subject existing ILCs to holding company restrictions (American Banker Dec. 2). The ILC issue surfaced two years ago when Wal-Mart submitted an application for an ILC. Opponents demanded legislation to prevent Wal-Mart from ownership of a depository institution. The bill, by House Financial Services Committee Chairman Barney Frank (D-Mass.), includes provisions that ban the creation of new ILCs. Commercial firms would not be able to apply to own depository institutions. Nonfinancial companies that own a bank could keep it, but ILC owners would be subject to tougher scrutiny ... * WASHINGTON (12/3/09)--Sen. Christopher Dodd (D-Conn.), head of the Senate Banking Committee, convened a meeting Saturday evening with his committee to try and revive legislation that would reform the financial regulatory system (The New York Times Dec. 2). Dodd assigned one Democrat and one Republican to each of the legislation’s main chapters to forge compromises and bring back the measure. Dodd said he hoped that the debate over financial regulation overhaul would reach a turning point. Dodd’s approach to financial legislation is opposite that of House Financial Services Committee Chairman Barney Frank (D-Mass.), who spent months going through each chapter of the legislation with his committee. He said in a recent interview that he hopes to take the legislation to the floor later this month. Dodd has been unable to earn support from Republicans and some Democrats with ties to industry groups affected by the bill ... * WASHINGTON (12/3/09)--The Federal Reserve Board issued a prompt corrective action against Bank of Illinois in Normal, Ill., to raise its capital ratios. The bank failed to submit a capital restoration plan to the Fed and now must raise its equity. Bank of Illinois is required to submit a progress report to the Fed within 30 days, detailing its plan to comply with the Fed’s directive ...

Kohls payday loan bill means better access to CUs

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WASHINGTON (12/3/09)—Sen. Herb Kohl (D-Wis.) on Wednesday introduced legislation aimed at increasing access to mainstream financial institutions by encouraging credit unions and community banks to provide low-level loans to low- and moderate-income Americans. The legislation, known as the Safe Affordable Loan Act, would “mitigate some of the risk associated with offering small dollar loans” by allowing financial institutions to recover as much as 60% of a lost loan through a to-be-created central loan-loss reserve fund. To be granted access to the fund, financial institutions would be required to offer loans that are under $2,500 in value, with “reasonable” interest rates. The loans must also be free of prepayment penalties, with repayment periods of over 60 days. The proposal applies primarily to community development financial institutions, but other credit unions may be able to apply. A Federal Deposit Insurance Corp. (FDIC) study has found that 21 million U.S. households, or 17.9%, reported that they have checking or savings accounts but use “nonbank money orders, nonbank check-cashing services, payday loans, rent-to-own agreements, or pawn shops at least once or twice a year or refund anticipation loans at least once in the past five years.” Kohl said that the FDIC survey results were “not surprising,” as low-income Americans have “typically been left out of mainstream financial services for a variety of reasons.” “Without better access to banks or credit unions, consumers will continue to rely on other financial services which might be quicker, but often carry larger financial consequences,” he added. According to the FDIC survey, nine million U.S. households, or 7.7%, do not currently have a checking or savings account. In total, the FDIC found that one in four U.S. households are either unbanked or underbanked, with a disproportionately high number of those households being comprised of minorities or low-income citizens. The FDIC survey, which is conducted by the U.S. Bureau of the Census on the FDIC’s behalf, is the first to collect information on unbanked and underbanked households and the first to provide estimates of the national, regional, state and metropolitan distribution of these households. In a statement accompanying the release, FDIC Chairman Sheila Bair said that “better understanding” unbanked and underbanked households will help the FDIC be “better positioned” to help them take “an important first step toward achieving financial security--the opportunity to conduct basic financial transactions, save for emergency and long-term security needs, and access credit on affordable terms." FDIC Vice Chairman Martin Gruenberg said the survey "breaks new ground in the effort to expand access to basic financial services" and "will provide the information base for future efforts to address the financial services needs of unbanked and underbanked households in the U.S." Households with income under $30,000 account for 71% of unbanked households, with the amount of unbanked households declining “considerably” as household income increases. Under 1% of households with yearly income of $75,000 or higher are unbanked, according to the survey. Households with yearly incomes of $30,000 to $50,000 were almost as likely as lower-income households to be underbanked, the survey found. A similar FDIC survey, published in February, found that the majority of financial institutions were aware of opportunities to serve unbanked and underbanked individuals in their area, but admitted that more could be done to serve these individuals. Additional data from the survey, including state-by-state and regional breakdowns of the data, can be found at the link.

CUNA keeps push on for sound legacy asset approach

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WASHINGTON (12/2/09)--The Credit Union National Association (CUNA) continues to push the National Credit Union Administration (NCUA) for a reasonable approach regarding possible recoveries on corporate credit union legacy assets, encouraging the NCUA in a Dec. 1 letter to develop an approach that addresses legacy assets and also allows capital holders to benefit if confirmed losses are below estimates. In the letter to NCUA Chairman Debbie Matz, CUNA President/CEO Dan Mica said that it is “unfair to require credit unions to irretrievably write down their capital” in corporate credit unions “on the basis of the agency’s estimates of future losses, with no avenues of future recovery should those estimates prove to be overstated.” The NCUA in its letter No. 09-CU-10 stated that NCUA corporate rules support the depletion of corporate capital. While CUNA is aware that the NCUA is “dealing with a range of difficult issues,” Mica said that “how NCUA ultimately decides this issue will have ramifications of the utmost significance for corporate as well as natural person credit unions.” CUNA also aired concerns over legacy assets at an NCUA meeting on capital depletion held in early November, and NCUA Chairman Debbie Matz responded, saying that a successful solution would hinge on whether or not current holders of depleted capital accounts can legally retain some form of rights to any future earnings on corporates' "legacy assets." Matz said that it was “unlikely that earnings or losses from legacy assets can be isolated or set aside in ongoing corporates. Nor can corporates' depleted capital be frozen in a way that would preserve the integrity of their capital going forward." "However," Matz added, the NCUA is “exploring creative ideas to address legacy assets as well as to allow affected capital holders to benefit if confirmed losses are less than recognized losses. Any such alternative approach must be consistent with all legal and accounting requirements, and uphold the fundamental purpose of capital." For the full letter, use the resource link.

New UIGEA date doesnt erase problems CUNA

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WASHINGTON (12/2/09)--While last week’s announcement that the Federal Reserve and the U.S. Department of Treasury would push back the compliance date for the Unlawful Internet Gambling Enforcement Act (UIGEA) until June 1, 2010, is a positive development, the Credit Union National Association (CUNA) continues to work for more substantive changes to the bill. Portions of the UIGEA would require credit unions and other financial institutions to establish and implement policies and procedures to identify and block restricted Internet gambling transactions, or rely on those procedures established by the payments system. CUNA has warned that the postponement does not mean that credit unions should postpone moving ahead with compliance efforts in the hope that the UIGEA requirements will be delayed further or eliminated. According to the Federal Register, the effective date of the final rule remains Jan. 19, 2009. Frank also earlier this year introduced a second bill, H.R. 2267, the Internet Gambling Regulation, Consumer Protection and Enforcement Act, which would allow Internet gambling companies to accept bets from persons in the United States if they are licensed by the U.S. Treasury Department and maintain effective protections against underage and compulsive gambling and money laundering and fraud. It is believed that Frank favors passage of H.R. 2267 over any additional changes to UIGEA. While CUNA is neutral on the legality of internet gambling, CUNA has warned that aspects of UIGEA are difficult, if not impossible, to implement, and has said that an increased policing role, as demanded by UGIEA, could interfere with financial institutions' fundamental business to provide financial services to their communities.

Fed sets overdraft protection audio conference

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WASHINGTON (12/2/09)--The Federal Reserve Board will discuss its recently enacted final rules on overdraft protections during its "Outlook Live" Audio Conference, which is scheduled for Dec. 10 from 1 until 2 p.m. ET. The Fed rules, which will come into effect on July 1, would require credit unions and other financial institutions to obtain consent from consumers before they could be charged overdraft fees for ATM and one-time debit transactions and also require credit unions and other financial institutions to fully disclose the overdraft services, the fees, and the consumer's right to opt-in to the overdraft program. Federal Reserve Managing Counsel David Stein and Attorney Dana Miller will detail compliance issues and respond to audience questions during the conference. The Fed said it plans to hold additional audio conferences on consumer compliance issues. While legislation that could address overdraft fees remains active in both the House and Senate, the Credit Union National Association has said that a regulatory approach to these issues is far preferable than legislative initiatives. To register for the audio conference, use the resource link.

CU comment sought on BSA rule

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WASHINGTON (12/2/09)—The Financial Crime Enforcement Network (FinCEN) is amending Bank Secrecy Act (BSA) information-sharing rules to expand the list of parties allowed to submit 314(a) requests for information to financial institutions and the Credit Union National Association (CUNA) is seeking credit union comment on the plan. FinCEN has proposed to allow certain foreign law enforcement agencies, as well as state and local law enforcement agencies, to submit information requests to credit unions and other financial institutions. The proposed rule also clarifies that FinCEN, on its own behalf and on behalf of other appropriate U.S. Departmentof Treasury components, may submit information requests to financial institutions. Under the current rule, FinCEN may require U.S. financial institutions to search their records to determine if they have maintained or conducted a transaction with a person that a federal law enforcement agency has certified is engaging in money laundering or terrorist activity. The proposed new rule seeks to broaden access to the information-sharing program beyond federal law enforcement agencies because, FinCEN maintains, it has resulted in significant investigative benefits in major money laundering and terrorist financing cases. CUNA requests comment by Dec. 7; comments are due to FinCEN by Dec. 16. Use the resource link below to read the complete CUNA comment call.

Inside Washington (12/01/2009)

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* WASHINGTON (12/2/09)--Revised language of a House bill expected to be approved Wednesday by the Financial Services Committee would allow the Federal Deposit Insurance Corp. (FDIC) to lend to a failing company to unwind it. Originally, House committee Chairman Barney Frank (D-Mass.) proposed giving the FDIC authority to help failing companies without closing them, and to act as a receiver for companies compromising the financial system. However, amendments approved Nov. 18-19 have curbed the FDIC’s powers to help keep a company afloat (American Banker Dec. 1). Financial industry critics said the House amendment would allow the FDIC to create a debt guarantee program. The legislation has loopholes allowing “regulators to pay off creditors,” said Peter Wallison, American Enterprise Institute fellow. However, John Douglas, former FDIC counsel, said it’s difficult for the FDIC to offer liquidity guarantees. It has been reluctant to use “systemic exceptions.” The Senate Banking Committee is expected to adopt a similar measure. The Senate legislation does not contain provisions on FDIC assistance, but sources expect that Chairman Christopher Dodd (D-Conn.) will change his bill to match the House version ... * WASHINGTON (12/2/09)--The Federal Reserve Board plans to sell securities into financial markets soon through reverse repurchase agreements. The sales will test the central bank’s ability to absorb extra cash (American Banker Dec. 1). The transactions are expected to be small, with no material impact on market rates or availability of reserves, said the Fed. The tests are “advanced planning” and do not represent changes in the Fed’s stance on monetary policy ... * WASHINGTON (12/2/09)--Large regional and community banking firms that have built up concentrations of commercial real estate (CRE) loans will be affected by emerging conditions in real estate markets, said Joe Greenlee, a Fed official, during a speech Monday before the House Financial Services subcommittee on oversight and investigations. Demand for commercial property has declined and vacancy rates have increased, which pressures construction and development projects that don’t generate income until after completion, he said. At the end of the second quarter, about $3.5 trillion of outstanding debt was in CRE losses. Of the amount, $1.7 trillion was held on the books of banks and thrifts. Nine percent of CRE loans in bank portfolios were delinquent, doubling last year’s levels ...