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Washington Archive

Washington

Inside Washington (02/19/2009)

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* WASHINGTON (2/20/09)--Under a housing plan President Barack Obama released Wednesday, government-sponsored enterprises Fannie Mae and Freddie Mac would receive a larger funding commitment--to $200 billion each--and would assist struggling borrowers refinance loans under them (American Banker Feb. 19). The enterprises had been placed into conservatorship and financial observers say their future may still be uncertain. Robert Litan, senior fellow at the Brookings Institution, noted that the Obama administration is using the enterprises to help the housing market, which will in turn help financial institutions ... * WASHINGTON (2/20/09)--Ben Bernanke, chairman of the Federal Reserve Board, defended the Fed’s actions to help the struggling economy during a speech at the National Press Club this week (The New York Times Feb. 19). The Fed has, and will continue, to do everything it can to help the nation’s financial stability, he told reporters. Bernanke also said the unemployment rate would likely increase to 8%. The Fed also released projections indicating that the economy is expected to grow 2.5% to 2.7% annually during the next five or six years, and that unemployment would be at about 5% ... * WASHINGTON (2/20/09)--Industry trade groups are urging the Department of Housing and Urban Development (HUD) to move backward on a Real Estate Settlement Procedures Act (RESPA) rule (American Banker Feb. 19). In a letter to HUD Secretary Shaun Donovan, the groups said the department and the Federal Reserve Board should band together to make disclosures more effective. RESPA requires that consumers receive disclosures in transactions and outlaws kickbacks that increase settlement service costs. The statute aims to help homebuyers be better shoppers in the home buying process, according to HUD ...

NCUA to vote on insurance signage rule

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ALEXANDRIA, Va. (2/20/09)--The National Credit Union Administration (NCUA) is expected to vote at a board meeting Thursday on a final rule that would change how credit unions display their insurance coverage signs. NCUA was scheduled to vote on the rule at last month’s meeting, but it was pulled from the agenda to reflect President Barack Obama’s halt to implement pending regulations under the Bush administration during its last days. The rule would require that credit unions change their insurance signs to reflect the temporary increase Congress approved in October to insure credit union deposits. The increase, which insures deposits up to $250,000 from $100,000, is effective until Dec. 31. The rule, if adopted, is expected to give credit unions more flexibility in advertisements. NCUA also is scheduled to discuss the status of the National Credit Union Share Insurance Fund and a proposed rule regarding the operating fee calculation for natural person federal credit unions. For more information, use the link.

Compliance Challenge IRAs and minimum distributions

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WASHINGTON (2/20/09)--Are consumers with an Individual Retirement Account (IRA) at a credit union required to take minimum distributions from the account if they reach retirement age this year? No, says the Credit Union National Association’s (CUNA) Compliance Challenge team. Though account owners were previously penalized for not taking out the correct required minimum distribution (RMD) annually at age 70.5, a new law--the Worker, Retiree, and Employer Recovery Act of 2008, signed last year--changes the requirement by suspending the required minimum distributions from qualified retirement accounts including 401(k) plans, 403(b) plans and IRAs for 2009. However, account holders are required to take the RMD scheduled for 2010 by Dec. 31, 2010. IRA holders who reached age 70.5 last year also are required to take their RMDs by April 1 or face excise taxes. The taxes for 2009 will be waived. Credit unions are encouraged to make their members aware of the change, according to CUNA.

CUNA queries IRS on UBIT stance

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WASHINGTON (2/20/09)—Internal Revenue Service (IRS) Commissioner Douglas Shulman was asked by a credit union representative to explain the tax agency’s discrepancy in the tax treatment of banks compared with credit unions. Credit Union National Association Counsel for Special Projects Michael Edwards said that Shulman, in a speech Wednesday, referred to a series of IRS issuances that included IRS Notice 2008-100, a tax policy document which allows special tax breaks for bank acquisitions. For instance, under the Notice 2008-100 tax guidance, Wells Fargo & Co. received an approximately $79 billion tax deduction because of its purchase of Wachovia Corp. “How does IRS justify its policy of loosening the tax laws as they pertain to banks, at least in some respects, while simultaneously attempting to expand taxation of credit unions?” Edwards inquired during a Q-and-A session following the speech. The commissioner was addressing The Exchequer Club in Washington, D.C. Shulman responded that the notice was due to “the priorities of the Secretary” at the time, Henry Paulsen, and that he disagreed the bank and credit union issues were comparable. “The real purpose of the question was to make sure Commissioner Shulman was personally aware of what the IRS staff is doing on credit union unrelated business income tax (UBIT),” Edwards said later. He said CUNA intends to follow up the interaction with a letter to the commissioner asking him to review the IRS's position on UBIT. Two credit unions have presented legal challenges to the IRS stance on UBIT. Bellco CU of Greenwood Village, Colo. file a lawsuit last May that seeks a $199,000 refund for UBIT taxes paid 2001-2003. And in Appleton, Wisc., Community First CU filed a similar complaint in January 2008 seeking a $54,000 refund on UBIT taxes from several insurance products.