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House spending vote Wednesday to include CLF cap

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WASHINGTON (2/24//09)—A draft spending bill circulating in the U.S. House would continue borrowing authority for the National Credit Union Administration’s (NCUA’s) Central Liquidity Facility (CLF) to its full authority of $41 billion through FY 2009. The CLF is authorized by the Federal Credit Union Act to lend up to 12 times its paid-in capital—an amount that translates today to about $41 billion. However, beginning in FY2001 and until last year, Congress has set the annual cap at $1.5 billion. In 2008, then-President George W. Bush signed a funding bill that increased the loan limitation for the CLF to its statutory cap of $41 billion through March 6, 2009. The Credit Union National Association (CUNA) has urged lawmakers to extend the full authority for FY 2009. Increasing the CLF cap to its statutory ceiling is a prudent measure, CUNA maintains, to prevent any credit union liquidity problems during this period of market turmoil in the credit market. CUNA and its Corporate Credit Union Task Force strongly support using CLF funds as a back up to help fund corporate credit union liquidity. The House is scheduled to vote on it spending bill Wednesday. Once passed by the House, the bill goes to the Senate for consideration.

Inside Washington (02/23/2009)

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* WASHINGTON (2/24/09)--National Credit Union Administration (NCUA) Vice Chairman Rodney E. Hood's third annual NCUA Risk Mitigation Summit was Thursday at the Federal Reserve Bank of Atlanta. "I take risk management very seriously and believe that risks should be managed, not avoided. Implemented successfully, enterprise risk management enables management to effectively deal with uncertainty and associated risks," Hood said. Owen Cole, director of the NCUA Office of Capital Markets and Planning, and John Kutchey, acting director of NCUA's Office of Examination and Insurance, explained the agency's Corporate Stabilization Program and answered questions. Robert D. Manning, director of the Center for Consumer Financial Services, Rochester Institute of Technology, and a Filene Research Institute fellow, discussed his responsible debt relief (RDR) algorithm report, saying it "gives credit unions the opportunity to recalibrate and get their members on an even keel during this extraordinarily difficult recessionary period." Richard Dorfman, president/CEO of the Federal Home Loan Bank of Atlanta, noted that credit unions represent Federal Home Loan Banks' fastest-growing segment. "Study yourselves," he said, "because you will be called upon by regulators and others who want to know 'how did you do that.'" … * WASHINGTON (2/24/09)--Mid-Atlantic Corporate FCU will conduct a 'mini town hall' meeting today during the Credit Union National Association's Governmental Affairs Conference in Washington, D.C. The corporate will meet at 2:30 p.m. EST at the Grand Hyatt in the Latrobe Room. The corporate said credit unions are welcome to attend (Life is a Highway Feb. 23) … * WASHINGTON (2/24/09)--In a joint statement Monday, a group of federal regulators pledged to launch a revised program that would shore up struggling banks and include the option of increasing government ownership in a bank. The plan is in line with the Obama administration's plan to strengthen banks without nationalizing them (Associated Press Feb. 23). The Treasury Department, Federal Deposit Insurance Corp., Office of the Comptroller of the Currency, Office of Thrift Supervision and the Federal Reserve issued the statement as more concerns surfaced about some of the nation's largest banks needing more assistance. The new program, which begins Wednesday, would give regulators the option to allow the government to boost its ownership in banks without having to inject more taxpayer funds into them. Still, the regulators suggested keeping banks private as a priority … * WASHINGTON (2/24/09)--The Federal Housing Finance Agency (FHFA) says that government-sponsored enterprises (GSE) Fannie Mae and Freddie Mac are allowed to let homeowners in trouble with mortgage payments to refinance their loans without requiring they obtain new mortgage insurance policies. James Lockhart, FHFA director, said that under the GSEs' charter, a borrower need not obtain an additional credit enhancement on a refinanced loan in excess of what is already in place for that loan. Generally, the GSEs' charters require them to obtain credit enhancement for loans they buy or guarantee that are worth more than 80% of a home's value. The Obama administration's housing plan calls for Fannie and Freddie to allow refinancing by four million to five million borrowers whose loans they guarantee (American Banker Feb. 23) … * WASHINGTON (2/24/09)--Citigroup has proposed to regulators that the federal government could expand its ownership of the bank to as much as 40% of the struggling bank's common stock. However, bank officials hope the government's stake would be more like 25% (American Banker Feb. 23). Any deal would increase federal officials' influence over one of the world's largest financial institutions. Currently the government has $45 billion in preferred shares, or about a 7.8% stake, obtained when it injected capital into the troubled bank. The government's preferred shares would be converted into common stock. The bank's officials hope to persuade private investors to follow the government's lead and convert their preferred shares into common stock, said people familiar with the negotiations … * WASHINGTON (2/24/09)--The Federal Reserve Board Monday launched a new section on its website to expand information about the policy tools it has employed to address the financial crisis. The new section also simplifies access to that information, said the Fed in a press release. The section, "Credit and Liquidity Programs and the Balance Sheet," has a detailed explanation of the Fed's balance sheet; descriptions of its liquidity and credit facilities; a discussion of its risk-management practices; information on the types and amounts of collateral being pledged at various lending facilities; and links to congressional reports and other resources …

Instant online convention coverage--GAC Blog (02/23/2009)

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WASHINGTON (2/24/09)--Credit unions are encouraged to check in on the Credit Union National Association's (CUNA's) GAC Blog to get the latest news on happenings at the 2009 Governmental Affairs Conference Feb. 23-26. More than 4,200 credit union representatives are in town for CUNA's premier conference featuring addresses by top policymakers, and more. CUNA Editorial Communication Vice President Lisa McCue and Communications Specialist Tiffany Stronghart will provide frequent convention updates. Also, for full coverage, read CUNA's daily online news service News Now. The CUNA GAC Daily will be distributed to conference attendees and News Now readers will have access to its electronic version. Use the resource links below to access the GAC Blog and to sign up for News Now headlines via email.

Loan mods TARP funds subject of Hill hearings

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WASHINGTON (2/24/09)—Loan modifications and the Troubled Asset Relief Program (TARP) will be the topic of two hearings on Capitol Hill Tuesday. The House Financial Services Oversight and Investigations Subcommittee Chairman Dennis Moore (D-Kan.) announced the first hearing, “A Review of TARP Oversight, Accountability and Transparency for U.S. Taxpayers.” Witnesses scheduled to testify include:
* Neil M. Barofsky, special inspector general, Office of the Special Inspector General, TARP; * Gene L. Dodaro, acting comptroller general, Government Accountability Office; and * Elizabeth Warren, Chair, congressional Oversight Panel, Leo Gottlieb professor of Law, Harvard University.
The second hearing is, “Loan modifications: Are Mortgage Servicers Assisting Borrowers with Unaffordable Mortgages.” Witnesses scheduled to testify include:
* Vance Morris, director for Single Family Asset Management, U.S. Department of Housing and Urban Development; * Grovetta Gardineer, managing director, Corporate and International Activities, Office of Thrift Supervision; * Joseph H. Evers, deputy comptroller for Large Bank Supervision, Office of the Comptroller of the Currency; and * Patrick J. Lawler, chief economist, Federal Housing Finance Agency.

CUNA leaders share message of unity

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WASHINGTON (2/24/09)—Exiting Credit Union National Association (CUNA) Chairman Tom Dorety and CUNA President/CEO Dan Mica took the stage during the Annual General Meeting at the Governmental Affairs Conference (GAC) Monday and provided attendees with a message of unification.
Click for slide show Tom Dorety, exiting CUNA chairman, and Dan Mica, CUNA president/CEO, encouraged credit unions to come together and help provide a solution to the nation’s economic crisis during Monday’s annual general meeting during the CUNA Governmental Affairs Conference. (CUNA photo)
Credit unions may have different ideas about how they can help members and communities weather a troubled economy, but “we need to do this together,” Dorety said. Credit unions can and should be a part of the solution to the economic crisis, because they’ve “always been here for members,” Dorety said. Dorety empathized with some of the economic strains credit unions have been experiencing by using his own credit union, Suncoast Schools FCU in Tampa, Fla.--which he heads as president/CEO—as an example. Suncoast has always focused on providing the best fees, rates and services to members. The credit union takes great pride in offering the narrowest interest rate spread possible while giving back to members. Keeping a net worth of 8% to 9% was reasonable, he said. But things changed. Florida became an epicenter of the credit crisis, and the credit union had to change its focus. Suncoast began making tougher decisions, increasing rate spreads and trying to find ways to reduce expenses. “Other credit unions are doing the same,” he said. “It’s not fun.” For the first time, many credit unions may be posting a negative net income, scrutinizing expenses, or cutting staff. But while credit unions are making tough decisions to ensure a successful future, members do not want them to cut back. “They need for us to be here for them,” Dorety said, noting that one solution may be to move toward capital reform. Mica’s message to the meeting participants was to remember credit unions’ strength and the need to work together through tough economic times, such as credit unions currently face. “Our future is bright,” Mica said, “but it is clouded just now by very real problems.” He added that “under the surface of bleakness” credit unions are “a shining light.” Mica noted that credit unions membership numbers are up, as are saving and lending volumes. “More than ever before, members love (credit unions), and are looking toward us.” Public opinion, Mica said, is shifting more in favor of credit unions now than at any time in the last 10 years. He reiterated that the credit union movement has a capital position of more than 11%, a strength that other businesses would love to have right now, he added. However, Mica noted that that system-wide high capital level should not mask the needs of individual credit unions struggling because of tough market conditions. “Here’s the key: We have to stay together,” Mica told the packed general session. “We are a cooperative system. We have to find ways to work together.” Quoting 16th U.S. President Abraham Lincoln, Mica said, “A house divided cannot stand.” Even in the general economy, Mica said, there are some positive “glimmers” that should be noted. For instance, Mica said, the current global effort to address economic turmoil is, by best estimates, the most coordinated response ever executed by world leaders. He also said that, while painful for individuals, the balance sheet corrections consumers are making to recognize a new economic environment will be valuable into the future.

IRS asked by CUNA Address UBIT issues

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WASHINGTON (2/24/09)—Internal Revenue Service (IRS) Commissioner Douglas Shulman was asked to comment on the contrast between the IRS’s recent expansion of tax deductions for commercial banks and the agency’s simultaneous attempts to expand the application of the Unrelated Business Income Tax to credit unions, in a letter from Credit Union National Association (CUNA) President/CEO Dan Mica. The CUNA letter was a follow up to the group’s query last week at an Exchequer Club luncheon at which the IRS Commissioner spoke and then welcomed questions. CUNA Counsel for Special Projects Michael Edwards referrer 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. Edwards asked, "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." 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 follow up letter reiterated CUNA’s concern that the IRS “may not understand that credit unions are an integral part of the credit markets, especially for consumers, and have been playing a vital role in keeping credit flowing to consumers.” “Tax policies that undermine credit unions’ ability to lend are completely at odds with current efforts to free up the credit markets and can contribute to pro-recessionary credit shortages,” said the Mica letter. Credit unions, Mica noted, are among the few financial institutions that have done exactly what both the Bush and Obama administrations have wanted and have increased their lending. “This vital contribution to the fight against the credit freeze cannot continue at the same level, however, if credit union dollars are diverted to questionable tax payments imposed by the IRS,” Mica noted. “Every dollar that credit unions must pay toward shaky interpretations of UBIT is a dollar that cannot be directed toward consumer loans, or toward capital adequacy in support of such loans,” the CUNA CEO wrote.

NCUF presents four Wegner awards

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WASHINGTON (2/24/09)--For only the third time in 21 years, the National Credit Union Foundation (NCUF) presented four Herb Wegner Memorial Awards at its annual dinner Monday night. Nearly 1,100 credit union leaders and supporters attended the event. “This year’s winners join an elite group of 44 individuals and 20 organizations whose extraordinary efforts over the past 21 years have earned the credit union movement’s highest national honors,” said emcee Bob Schumacher, CEO of MountainCrest CU, Arlington, Wash. Awards and recipients include:
* Lifetime Achievement Award: Bill Sterner, late president/CEO of Elevations Credit Union in Boulder, Colo.; * Individual Achievement Award: Rita Haynes, treasurer, manager and CEO of Faith Community United Credit Union in Cleveland, Ohio; * Individual Achievement Award: Tom Sargent, president/CEO of First Tech Credit Union in Beaverton, Ore.; and * Outstanding Organization Award: Montana Credit Unions for Community Development in Billings, Mont.
Schumacher, who also chairs NCUF’s Awards and Recognition Committee, explained why NCUF chose to present two Individual Achievement Awards this year. Hayne’s achievements in payday loan alternatives, second chance auto loans, and foreclosure preventions are shining examples of how credit unions can change lives in low-income communities, he said. Sargent has achieved what only the most effective national credit union leaders have done throughout our history: uniting credit unions across the country around a single cause, Schumacher added. “We truly appreciate the enthusiasm from credit union supporters who understand how important it is—even in the worst economic times—to share and celebrate the best practices and the best people that credit unions have to offer,” said NCUF Executive Director Steve Delfin.

GAC Corporate CU session packs the house

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WASHINGTON (2/24/09)—A special Monday session on the regulator’s
Click to view larger image CUNA President/CEO Dan Mica (left) is shown on stage for the early-morning Governmental Affairs Conference update on the NCUA’s Corporate CU Stabilization plan. The session packed the Washington Convention Center hall with thousands of credit union representatives, illustrating the heightened concerns regarding the plan. Shown from left: Mica, CUNA General Counsel Eric Richard, CUNA Corporate CU Task Force Chairman Terry West, CUNA Deputy General Counsel Mary Dunn, CUNA Chief Economist Bill Hampel, and CUNA VP of Legislative Affairs Ryan Donovan. (CUNA photo)
corporate credit union stabilization plan drew a packed crowd at an early bird presentation at the Credit Union National Association’s (CUNA’s) Governmental Affairs Conference (GAC) Monday. CUNA and its Corporate Credit Union Task Force continue to investigate possible funding alternatives to the federal regulators’ corporate stabilization plan. The task force by late last week completed its third brain-storming session to detail reasonable ways to make the plan less of a burden on credit unions CUNA President/CEO Mica said Monday that CUNA is well aware of the strong feelings credit unions have about the corporate stabilization plan announced in January by the National Credit Union Administration (NCUA). CUNA also acknowledges, he said, the strong and opposing views credit unions have regarding accepting the U.S. Treasury Department’s Troubled Asset Relief Funds (TARP). CUNA recently executed a survey in which credit unions weighed in on whether or not to seek access to funds from TARP. The poll attracted almost 1,400 responses. The findings:
* Sixty-six percent of respondents strongly opposed an infusion of TARP funds into natural person credit unions to bolster their capital. * Sixty-two percent opposed using TARP to purchase credit unions’ troubled assets.
Survey participants were more favorable toward setting aside TARP funds to backstop the NCUA’s guarantee of deposits by credit unions in corporate credit unions. Forty-two percent favored this, while 29% came out against it. Credit unions were more divided about TARP funds injected to help stabilize corporates or to buy their troubled assets. When asked if CUNA should advocate for these approaches, about one-third indicated a high level of agreement, about one-third had neutral views, and the remaining third reported a high level of disagreement. Mica and Task Force Chairman Terry West urged the GAC gathering to back efforts to open TARP funds to credit unions in case they need them in the uncertain future. West is CEO of Vystar CU in Jacksonville, Fla. The legislation that set up TARP last year included credit unions as eligible institutions, but as implemented by the Treasury Department to date, credit unions have not been included. “This is a train leaving the station," Mica has warned.

Rep. Holmes Norton notes CUs responsible lending

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WASHINGTON (2/24/09)—U.S. Rep. Eleanor Holmes Norton (D-D.C.) told a crowd of more than 4,200 credit union representatives Monday, “Congress knows credit union have been responsible” financial institutions. Addressing the opening general session of the Credit Union National Association’s (CUNA’s) 2009 Governmental Affairs Conference (GAC), Holmes Norton praised credit unions for being responsible lenders. “You serve your members. You serve your communities. You are cooperatives.” She noted that credit unions are not responsible for the current problems in the country’s mortgage markets, because they did not make the kinds of loans that have caused the upheaval. During an introduction of the congresswoman, Mike Beall, Maryland and District of Columbia Credit Union Association president, reminded attendees that Holmes Norton was instrumental in turning around a credit union conversion.

Mecham elected CUNA board chairman

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WASHINGTON (2/24/09)--The Credit Union National Association (CUNA) has elected Kris Mecham as its new chairman. Mecham previously served as CUNA vice chairman. He is president/CEO of Deseret First FCU in Salt Lake City. CUNA also elected new officers to join Mecham on the CUNA Executive Committee. The officers are:
* Vice chair: Harriet May, president/CEO, GECU, El Paso, Texas; * Treasurer: Pat Wesenberg, president, Point Plus CU, Stevens Point, Wis.; * Secretary: Mike Mercer, president, Georgia Credit Union Affiliates; * At-Large: Dennis Pierce, CEO, CommunityAmerica CU, Lenexa, Kan.