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Inside Washington (02/24/2009)

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WASHINGTON (2/25/09)--The Network of Latino Credit Unions and Professionals (NLCUP) signed an agreement with the Internal Revenue Service (IRS) at the Credit Union National Association's Governmental Affairs Conference Tuesday. The agreement calls for the NLCUP to assist with tax education and outreach on emerging or changing tax laws and issues. During tax season, all NLCUP member credit unions will provide information, education and services in Spanish about tax compliance. The initiative aims to help low- to moderate-income people and families to meet their tax obligation and enhance their money management skills. Front row from left are: Ana Marie Argilagos, senior consultant Annie E Casey Foundation; Winona Nava, CEO of Guadalupe CU and chair, CUNA Hispanic Advisory Board; Carlos Calderon, CEO of OAS Staff FCU and chair of NLCUP; Crystal Philcox, IRS SPEC Area 3 director; and Pablo DeFilippi, director of membership, National Federation of Community Development CUs and NLCUP Board Member. (Photo provided by the National Federation of Community Development CUs) … * WASHINGTON (2/25/09)--The House is expected to take up this week mortgage bankruptcy reform to decrease foreclosures and boost bank liquidity. Legislation by John Conyers (D-Mich.), chairman of the House Judiciary Committee, and Barney Frank (D-Mass.), chairman of the House Financial Services Committee, would enable bankruptcy judges to cram down mortgage debt and restructure terms on loans to prevent foreclosures. Government-insured mortgages, such as those backed by the Federal Housing Administration, would be permitted to cover a lender's loss when mortgage debt is crammed down. The measure also would make permanent the increase in deposit insurance coverage to $250,000 per account. The Senate has not scheduled a vote yet (American Banker Feb. 24) … * WASHINGTON (2/25/09)--Senate Banking Committee Chairman Christopher Dodd (D-Conn.) has asked the Securities and Exchange Commission (SEC) to hold off on implementing compensation rules he wrote for the economic stimulus package signed into law Feb. 17. The Treasury Department has one year to write regulations that would restrict the pay of executives at banking companies that accept government bailout funds. However, in a Feb. 20 letter to SEC Chairman Mary Schapiro, Sen. Dodd asked SEC to wait until guidance is issued before enforcing the measure. The provision requires that banking companies' CEO and chief financial officer provide written certification that they have complied with the law (American Banker Feb. 24) … * WASHINGTON (2/25/09)-- Federal Deposit Insurance Corp. (FDIC) Chairman Sheila Bair said all large U.S. banks currently are well-capitalized, but prolonged shocks to the banking system may mean more banks would require additional capital from the government. She said it would be surprising to see government take active ownership and control of large banks. Bair noted that this week's stress tests will determine whether banks have adequate capital. If they don't, the Treasury would make additional stock purchases to increase the capital buffer, she added. She made the comments during an interview on CBS's "Early Show." (American Banker Feb. 24) … * WASHINGTON (2/25/09)--The Federal Deposit Insurance Corp. (FDIC) is supposed to discuss Friday changes to its premium assessment system and set premium rates for the remainder of 2009 (American Banker Feb. 24). Board members are expected to to propose higher premiums for banks that rely heavily on brokered funding or secured liabilities such as advances from Federal Home Loan Banks. FDIC set its first-quarter rates in at between 12 cents and 14 cents per $100 of domestic deposits for healthy institutions. In October, the agency proposed a range of 10 to 14 basis points for subsequent quarters. The plan also includes an additional premium--as high as seven scents--for banks with excess noncore funding. And it includes credits for banks taking steps to reduce FDIC's resolution costs in case of failure … * WASHINGTON (2/25/09)--New York financier Steven Rattner will be the lead advisor on the auto industry bailout for Treasury Secretary Timothy F. Geithner and National Economic Council Director Lawrence H. Summers. Rattner, 56, will advise the officials on the reorganization efforts of General Motors and Chrysler, which are receiving government bailout funds. He was considered a front runner for the position of car czar in the Obama administration, but that position was eliminated.(The New York Times Feb. 24) …

NCUA sees growth in CUs but decline in net income

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ALEXANDRIA, Va. (2/25/09)—The National Credit Union Administration (NCUA) reported growth in federally insured credit unions’ loans and savings in 2008, though return on average assets declined as loan loss reserves were increased. Net income decreased 47.5%, based primarily on a 112.3% increase in a provision for loan and lease losses as credit unions prepare for possible losses. Significant increases in delinquencies and charge-offs indicate ongoing stress in the financial sector, NCUA said. “Membership grew and lending expanded as credit unions readily fulfill their mission of serving members in these difficult financial times,” said NCUA Chairman Michael Fryzel. “Adverse economic conditions and distress in the financial sector places credit unions at greater risk; however, net worth remains high helping to stabilize the industry. “With safety and soundness the priority, NCUA has proactively adopted a more frequent examination contact schedule and activated a national examination team with the knowledge, skill, and experience to effectively deal with current issues,” he added. Details of major balance sheet categories and membership growth in federally insured credit unions from Dec. 31, 2007, to Dec. 31, 2008:
* Assets increased 7.7% to $813.4 billion from $755.0 billion; * Loans increased 7.08% to $566.0 billion from $528.6 billion; * Investments increased 16.7% to $166.3 billion from $142.5 billion; * Shares increased 7.71% to $681.1 billion from $632.4 billion; * Net worth increased 3.26% to $88.9 billion from $86.1 billion; and * Membership increased 2.0% to 88.6 million members.
Reviewing 2008 asset figures, loan and investment activity fluctuated by category. Lending expanded in most categories, with the largest a 14.5% increase recorded in first mortgage real estate loans and lines of credit. Used vehicle loans increased 5.8% while new vehicle loans declined 6.2%. Reflecting stress in the economic sector, foreclosed real estate grew 112.4% and repossessed automobiles increased 27.8% during 2008. While both indices saw significant gains, they continue to represent a relatively low percentage of the total loan portfolio. Delinquent loans as a percentage of total loans increased to 1.37% at year-end 2008 from 0.93% at year-end 2007, while net charge-offs to average loans grew to 0.84% from 0.51%. The loan-to-share ratio remains a strong 83.1%, as total loans and total shares expanded at a similar pace. Regular shares increased 5.7% while money market shares increased 15.6%, share certificates increased 4.7% and IRA/KEOGH accounts increased 13.7% during 2008. The return on average assets ratio declined to 0.31% from 0.63% primarily due to increased funds set aside for loan and lease losses and other non-operating expenses. For more information, use the link.

Instant online convention coverage--GAC Blog (02/24/2009)

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WASHINGTON (2/25/09)--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.

Mecham CUs need to advocate for CUs

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WASHINGTON (2/25/09)—Credit Union National Association (CUNA) Chairman Kris Mecham told Government Affairs Conference participants that the Washington, D.C. meeting offers credit unions the opportunity to prove they can contribute more to getting the economy on track. He encouraged credit unions to join CUNA and the leagues in their advocacy work and help tell the credit union story on Capitol Hill. The traditional visits to Congressional offices, in conjunction with the GAC, are especially important this year, he said. Mecham said credit unions must stress the stability of the credit union system in the midst of the current turmoil, and the fact that Congress can help the system make an even larger contribution. ‘We do have a story to tell,” he added. “We are the solution. We are not broken. We should stress that we want their support.” Mecham said a perfect example was the current federal limit on credit union member business lending, at a time when a capital crunch was one of the big causes of the current economic tensions. “With a mere stroke of a pen, we have the ability to put millions of dollars into the economy,” he added, referring CUNA’s efforts to get a legislative change. Mecham also said members must stress during the Capitol Hill visits credit union opposition to legislation that would allow bankruptcy judges to rewrite mortgage contracts—the so-called “cramdown” bill. A House vote is expected Thursday. He said the bill would only interfere with the traditional time-honored credit union process of negotiating loans with members suffering financial setbacks. The chairman, newly installed to that position, stressed that credit unions visits have a special influence on Congress because the politicians often react positively to grassroots lobbying efforts. “Ask yourself during this meeting,” Mecham told the conferees, “What have I done to promote advocacy. If we do that, we will be and important part of the overall solution.”

NCUAs Marquis CUs cant afford not to invest in corporates

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WASHINGTON (2/25/09)—During a packed question-and-answer session about the corporate credit union system at the Credit Union National Association’s (CUNA) Governmental Affairs Conference Tuesday, National Credit Union Administration (NCUA) Executive Director Dave Marquis encouraged credit unions to support the corporate credit union system. “Credit unions can’t afford not to invest in corporates,” he told an almost-full room of conference attendees. He noted that about 98% of credit unions depend on corporates for their payment systems. During the session, credit union representatives had the opportunity to ask questions about the corporate credit union network and receive answers from a panel of NCUA senior staff. The session was moderated by Kathy Thompson, CUNA senior vice president of compliance. Panelists included:
* Owen Cole, NCUA Central Liquidity Fund president; * Larry Fazio, NCUA deputy executive director; * Bob Fenner, NCUA general counsel; * Scott Hunt, Office of Corporate Credit Unions director; * Marquis; and * John Kutchey, acting examination and insurance director.
Credit unions’ questions to the panel ranged from how the corporate credit union system and the Central Liquidity Facility works, to how the NCUA’s corporate stabilization plan would affect credit unions’ balance sheets. In one example, Marquis suggested credit unions present their members with a balance sheet explaining that their return on assets was affected due credit unions’ cooperation in helping the corporate system. Marquis also noted that results of PIMCO, which NCUA has engaged to analyze corporate investments, would be as transparent as possible without exposing individual credit union exam information. However, PIMCO will not release its methodologies, Marquis noted. At the end of the session, Thompson encouraged credit unions to submit their comments about an Advanced Notice of Proposed Rulemaking (ANPR) to CUNA regarding the structure of operation of corporate credit unions. The ANPR focuses on the role of corporates in the credit union system and details possible changes to the regulations governing corporates. Comments on the ANPR are due April 6.

Interchange heating up CUNA says

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WASHINGTON (2/25/09)—While there is no bill introduced in the House or Senate yet this year on interchange fees, Credit Union National Association (CUNA) Vice President of Legislative Affairs Ryan Donovan said Tuesday that it is only a matter of time until one is unveiled. Donovan, speaking to reporters covering CUNA’s 2009 Governmental Affairs Conference here, said “the merchants are ramping up” for the next round of effort to push for government intervention to cap fees charged merchants by the payment card network each time a consumer uses a card for a purchase. CUNA opposes such intervention and argues that the free market should set interchange fees, not the federal government. CUNA, and other opponents of government interference in interchange fees, say the fees have assisted the growth of universal acceptance of cards and the innovation of super-fast authorization technology and enhanced security measures—all benefits to card-using consumers. At its Tuesday afternoon GAC sessions, CUNA offered a breakout program on interchange fees, moderated by CUNA Federal Legislative Affairs Director Michele Johnson. The information session focused on what is likely to happen with interchange legislation in the 111th Congress, and what it means for credit unions. Johnson reiterated the expectation that there will be a bill introduced this year. Addressing the session participants were:
* Daniel Swanson, counsel to Sen. Dick Durbin of the Judiciary Committee who was a sponsor of interchange legislation in the last Congress; * Mark Caverly, executive vice president of Local Government FCU, Raleigh, N.C.; * Jennifer Hatcher, senior director, government relations, for the Food Marketing Institute; and *Jeffrey Tassey, of Tassey & Associates, also manager of the Electronic Payments Coalition (EPC) which advocates for the payment card industry on interchange legislation. CUNA is a member of EPC.
Caverly, the credit union executive, got a rousing favorable response when he said, “This is not a fight to be waged by MasterCard, Visa, or the large card issuers – it’s our fight.” He warned that the Merchants Payment Coalition, in favor of capping fees, is attempting to link the interchange issue to predatory lending and the sub-prime mortgage crisis. “Credit unions have much to lose, but perhaps more importantly, our members have much to lose,” Caverly said, and encouraged, “ It’s time to tell our story on Capitol Hill.”

Fryzel asks CUs for help in assisting corporate network

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WASHINGTON (2/25/09)—During his speech at the morning session of the Governmental Affairs Conference Tuesday, National Credit Union Administration (NCUA) Chairman Michael Fryzel asked credit unions for help in assisting the corporate network.
Click for slide show NCUA Chairman Michael Fryzel speaks at the CUNA GAC. Click for a slideshow of speakers who addressed the conference.
Specifically, Fryzel asked credit unions to submit their feedback and ideas to help the corporate credit unions. NCUA Board Member Gigi Hyland reiterated similar thoughts when she addressed the crowd at a later session. “I read every single comment letter that comes in because I believe it makes me a better policymaker,” she told credit union attendees during her speech. The NCUA is working on ideas regarding its corporate stabilization program and wants feedback from credit unions. One approach the agency is considering is using the National Credit Union Share Insurance Fund as a collection fund for the Central Liquidity Facility to align expenses. As a part of this approach, credit unions would be asked to deposit their premiums into a new, separate insurance fund to shift the expense burden over a five-year time frame. Fryzel told credit unions to be prepared for more losses and asked them to be flexible with their approach in helping the corporate credit union network weather the economic crisis. “There are no easy choices,” Fryzel said. “We must stay calm, brace ourselves and take necessary action when called upon. “Credit unions are always good at driving the charge. We must rise to the occasion, and the credit union industry has done that before,” he added. Fryzel also asked credit unions for three items: to help generate ideas on how to help the corporates, lobby Capitol Hill for the tools credit unions need so they can solve the economic crisis “ourselves,” and extend more credit to people who depend on it. “You come to Washington the most capitalized and sound financial institutions,” Fryzel said. “You are not the problem—you are the solution.”

Fire it up Kanjorski tells CUs

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WASHINGTON (2/25/09)—“Fire it up!” Rep. Paul Kanjorski (D-Pa.) emphatically told credit union attendees during the morning session at the Governmental Affairs Conference Tuesday, to which attendees responded: “Ready to go!” Kanjorski, who was introduced to attendees as “a true credit union champion,” by Pennsylvania Credit Union Association President/CEO Jim McCormack, fired up attendees to solve the problems plaguing the nation’s financial sector. Credit unions started out 100 years ago by solving the problems of middle class Americans, and “that’s how we’re going to win this. We’ve met challenging times before and won. We know how to do it,” he said. Kanjorski recognized credit unions’ banker battles, saying that “if bankers don’t want us to give loans, they’ll make a big mistake.” But, he noted, “We’ve got battles and that’s got to wait for another day.” “Finding who’s at fault” for the economic turmoil won’t help, either. “We’ve got a very sick patient on the floor [the U.S. economy],” Kanjorski said. “We need to save the patient.” To help the economy, credit unions need to make smart decisions and lead the cause for America. Credit unions also must make Congress realize that they want to lead Americans “out of the darkness.” “Don’t leave Washington, D.C., in doubt, or think, ‘woe is me,’ ” Kanjorski said. Credit union representatives need to return to their homes and find ways to help homeowners get out of a predatory mortgage, or help the unemployed find new jobs. “You have to get this economy going,” he said. “If we put all our energies forward and make the right decisions, we’ll do it.” Kanjorski, who was re-elected to his position as a U.S. representative this past year, also thanked credit unions for their support during his campaign. “The most important people in my political life were my friends—the credit unions,” he said.

Hyland vows to look at corporate plan alternatives

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WASHINGTON (2/25/09) — National Credit Union Administration (NCUA) board member Gigi Hyland urged credit unions to comment on her agency’s Advanced Notice of Proposed Rulemaking (ANPR), which addresses a reform of the corporate credit union system. Hyland, addressing a packed house during the Credit Union National Association’s (CUNA’s) Governmental Affairs Conference (GAC) here, said it is vital for credit unions to take a role in defining the future of the corporate credit union system. She assured the audience of more than 4,200 credit union representatives that she reads each comment letter addressed to the agency before she votes on a regulatory issue. The deadline for comment is April 6. “Tell us (the NCUA) how you use the corporate credit unions. Do you use them? How do they fit into your strategic plan,” said Hyland. Hyland also told the GAC attendees that she understands how difficult it is for a credit union to face members and explain why the credit union has to pay for problems in another part of the credit union system, referring to liquidity problems in the corporate credit union system. In January, the NCUA announced a plan to stabilize the corporate credit unions. To date, the agency intends to fund the program through a share insurance premium assessed against natural-person credit unions, a plan that CUNA believes imposes too great a burden on credit unions. Hyland, and earlier in the morning NCUA Chairman Michael Fryzel (see related story: Fryzel asks CUs for help in assisting corporate network), expressed willingness to consider alternative plans. “I will devote my energy to reviewing every viable option,” Hyland vowed. She also pledged transparency in NCUA decisions, “so you are as informed as possible” about agency actions. The NCUA board member reminded her credit union audience that it is the cooperative spirit behind the cooperative system—the synergies in the system—that have made credit unions “ the success that they are” and gotten the movement through other tough economic times. CUNA has issued a comment call urging credit unions to share their ideas about restructuring the corporate system. Use the resource links below to read the NCUA ANPR and the CUNA request for comment.

CUNA urges House Beware of cramdown dangers

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WASHINGTON (2/25/09)—Every member of the U.S. House was urged Tuesday by the Credit Union National Association (CUNA) to consider changes to mortgage “cramdown” provisions in H.R. 1106 that are overly broad in scope, application and duration. CUNA supports other provisions of H.R. 1106, which includes measures that would help families stay in their homes, including improvements to the Hope for Homeowners programs and a safe harbor for lenders that modify certain types of mortgages. The bill also includes language that makes permanent the $250,000 deposit insurance limit enacted on a temporary basis in October as part of the Emergency Economic Stabilization Act, as well as language which would allow the National Credit Union Administration (NCUA) as much as five years to replenish the National Credit Union Share Insurance Fund (NCUSIF) when the fund drops below the statutorily required level. CUNA strongly supports these provisions. The House is expected to vote Thursday on the bill. In a letter to each House member, CUNA, however, encouraged lawmakers to consider amendments that would limit the application of the bill’s cramdown proposal to the subprime and nontraditional mortgages that caused the housing crisis and that would provide a firm sunset on the authority conveyed to the bankruptcy courts through this legislation. CUNA President/CEO Dan Mica wrote that since late 2007, when the subprime mortgage crisis developed, credit unions have recognized the need for Congress to take steps to try to keep people in their homes. “In fact, credit unions were the first group of mortgage lenders to be open to legislation that would provide limited loan modifications in bankruptcy,” Mica wrote, referring to an action known as a “cramdown.” “We have worked since that time to ensure that this legislation be targeted to the mortgages that have caused the problem, and limited to address the crisis at hand,” the Mica letter said. He noted that a major housing initiative announced by President Barack Obama last week proposes a more focused approach, and views bankruptcy as borrowers’ last option to retain their house. “A lender that made a mortgage loan using good underwriting standards should not bear the risk of a decline in the house’s value. The adoption of a broad amendment could result in a number of bankruptcy filings by people who are capable of paying their current mortgages,” Mica warned the House members.