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Inside Washington (02/02/2010)

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* WASHINGTON (2/3/10)--The Obama administration’s 2011 budget proposal does not specify plans for Fannie Mae and Freddie Mac’s futures. Housing and Urban Development Secretary Shaun Donovan said the administration will soon release its strategy. A statement will be coming “very shortly,” Donovan told reporters Monday (American Banker Feb. 2). Currently, the enterprises have obligations of $3.9 trillion to investors who purchased the mortgage bundles the two assembled (The New York Times Feb. 2) ... * WASHINGTON (2/3/10)--Paul Volcker, former Federal Reserve chairman, told the Senate Banking Committee Tuesday that hedge funds and private-equity funds should profit and fail without government support. Volcker supports President Barack Obama’s plan to tax big banks and limit their growth. He called on policymakers to strengthen regulation of financial firms whose failure would threaten the economy. Stricter requirements that govern capital and liquidity are needed, he said. Volcker also called for authority to take control of big financial firms--“euthanasia” as opposed to a rescue. The institutions should not assume the public will save them, he added (Bloomberg Feb. 2) ...

NCUA announces 2010 triennial review topics

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ALEXANDRIA, Va. (2/3/10)--The National Credit Union Administration (NCUA) on Tuesday released its list of regulations that will be reviewed during 2010 as part of its ongoing triennial reviews. Included in the list of regulations up for review are rules addressing credit union service organizations, Fair Credit Reporting, member business loans, the Central Liquidity Facility, fidelity bond and insurance coverage for federal credit unions, and share insurance. Management official interlocks, leasing, supervisory committee audits and verifications, consumer privacy, incidental powers, appraisals, insurance requirements and the regulatory flexibility program are also on the docket. The NCUA has asked that those who wish to submit comments do so by Aug. 6.

CUNA supports Fed term deposit plan with caveats

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WASHINGTON (2/3/10)--The Credit Union National Association (CUNA) announced its support for the Federal Reserve’s (Fed) plans to amend Regulation D, Reserve Requirements of Depository Institutions, to authorize the establishment of interest-bearing term deposits at Federal Reserve Banks, but cautioned the Fed to “consider any unintended effects of the plan.” According to the Fed, these term deposits “are intended to facilitate the conduct of monetary policy by providing a tool for managing the aggregate quantity of reserve balances,” and credit unions are among the financial institutions that are eligible to invest in term deposits. While CUNA believes that the term deposit authorization “may provide a favorable option for institutions to earn interest on short term investments without credit risk,” CUNA is concerned that selecting those who may invest in term deposits via an auction process could lead to domination of that auction process by larger financial institutions. CUNA suggested that the Fed include in the final rule a process to allow smaller financial institutions to participate in these auctions as a group. CUNA also would favor allowing participating institutions to use term deposits as collateral for borrowing from the Fed’s discount window if a process that would give smaller financial institutions a chance at "winning" an auction is included in the final rule. CUNA also recommended that the maturity rate of these investments should be measured in 30-day increments, and asked the Fed to consider allowing early redemption of term deposits, with a corresponding penalty, under certain limited circumstances. For the full comment letter, use the resource link.

CUs outraged over biz lending snub by administration

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WASHINGTON (2/3/10)--Credit unions are outraged, baffled and feeling “snubbed” by the Obama administration’s proposal to funnel $30 billion into smaller banks for business lending--but do nothing for credit unions, Credit Union National Association President/CEO Dan Mica said Tuesday. President Obama at a town hall meeting in Nashua, N.H., Tuesday announced a proposal to channel billions to community banks to support small business lending. Specifically, the president’s initiative would create a $30 billion Small Business Lending Fund using unspent Troubled Asset Relief Program (TARP) money that would be available as capital investments for community banks as an incentive to increase their small business lending. The proposal is subject to review and legislation by Congress. However, as Mica pointed out, the proposal is entirely focused on small and community banks, and includes nothing for credit unions, ignoring the potential contribution that credit unions could make toward national economic recovery. “Credit unions tell me that they are not asking for a taxpayer bailout; they did not receive TARP money and did not want it anyway. Yet now, the administration wants to give taxpayer money to banks through TARP to convince them to make more loans--the same banks that have been refusing to make loans over the last year when it was needed most by an economy starved of capital,” Mica said. “Credit unions have been making loans over the past year and can make even more if legislation expanding their capacity to make small business loans is enacted. I hear credit unions say: ‘Don’t just subsidize the banks; let us help this country get back on its feet--without using taxpayers’ money,’” he added. Mica said he is sure that the White House, and Congress, will soon start hearing from credit unions about their disappointment. “Credit unions across the nation say they deserve to be treated with respect and should be part of the administration’s solution. I know they will be contacting the White House and the Congress to deliver that message,” Mica said. “In the meantime: I am respectfully requesting a meeting with the president about this entire issue--and seek the administration’s support for more business lending capacity for credit unions.” Use the resource link below to read CUNA's new Action Alert on MBLs.