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CUNA to Obama More CU biz loans could ease crunch

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WASHINGTON (2/26/09)--Following President Barack Obama’s speech Tuesday night before the Joint Meeting of Congress, the Credit Union National Association (CUNA) asked the White House to consider credit unions as a key part of the solution to the credit crunch facing America’s small businesses. A letter sent to the president Wednesday said CUNA is “very pleased that your administration is moving swiftly and aggressively to restore confidence and re-start lending.“ “We hope you support credit unions as part of the solution by calling on Congress to enact legislation that eliminates the credit union member business lending cap,” wrote CUNA President/CEO Dan Mica. Mica noted that the cap has been in place only 10 years and it was arbitrarily set in response to banking lobbyists who wanted to restrain credit unions. He noted that there is no economic or safety and soundness rationale for the 12.25%-of-assets cap. Without that ceiling, Mica wrote, "We estimate that credit unions could lend up to $10 billion in new business loans during the first year after the credit union business lending cap was eliminated." The average credit union business loan is under $200,000, which means that credit union business loans go to the small businesses that need them the most, Mica pointed out. It is not about lending to build shopping centers or sports arenas; it is about helping businesses make payroll, stay in business, expand their businesses and stimulate the economy, the CUNA letter said. “Encouraging competition by permitting credit unions to do more small business lending could go a long way to eliminate the credit crunch and restore confidence in the economy. It may even encourage America’s community banks to lend more to small businesses,” Mica suggested. Use the resource link to read the complete CUNA letter.

Inside Washington (02/25/2009)

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* WASHINGTON (2/26/09)--National Credit Union Administration (NCUA) Chairman Michael E. Fryzel encouraged credit unions to participate in America Saves Week--which ends Sunday--as a way to improve consumer saving and stress the importance of financial literacy. "I look at this initiative as one that demonstrates the credit union philosophy," he said. "A proactive focus on the members and aiding them in basic financial decision-making is central to America Saves Week. It also has an obvious connection to NCUA and industry efforts to promote improved financial literacy as a way to help members make informed decisions," he added. NCUA posted new savings resources on a Financial Education Page on its website. The section features links to government and non-profit sites listing information on saving for a number of goals ... * WASHINGTON (2/26/09)--The Internal Revenue Service (IRS) announced Wednesday that taxpayers who qualify for the first-time homebuyer credit and purchase a home before Dec. 1 this year can claim the tax credit either on their 2008 tax returns due April 15 or on their 2009 tax returns next year. Qualifying taxpayers can get up to $8,000, or $4,000 for married filing separately. IRS has posted a revised version of Form 5405, First-Time Homebuyer Credit on For more information, use the link ... * WASHINGTON (2/26/09)--House Financial Services Committee Chairman Barney Frank (D-Mass.) and more than a dozen other committee Democrats have asked a bank that received Trouble Asset Relief Program (TARP) funds to give back the government funds it spent hosting a PGA Tour event for clients. In a letter to the $68.9 billion asset, Chicago-based Northern Trust Corp.'s president/CEO, Frederick H. Waddell, the legislators expressed anger and dismay about the spending and urged the bank to "take corrective action." The letter said the behavior "demonstrates extraordinary levels of irresponsibility and arrogance." The bank said the tournament is part of a five-year contract signed in 2007 and is a business decision regarding an annual event ot show appreciation for clients (American Banker Feb. 25) … * WASHINGTON (2/26/09)--Mortgage bankers say they want the Obama administration's housing plan expanded so more struggling borrowers can refinance their loans. Mortgage Bankers Association (MBA) President John Courson sent a letter Monday to Treasury Secretary Timothy Geithner and Housing and Urban Development Secretary Shaun Donovan asking that the plan include mortgages not owned or guaranteed by Fannie Mae and Freddie Mac, as well as those exceeding the temporary conforming limit of $729,750 in certain more costly areas. MBA also suggested increasing or eliminating the plan's 105% cap on loan-to-value ratios and requested it include a "safe-harbor" provision to protect servicers that modify loans from lawsuits by investors. It recommended encouraging the Financial Accounting Standards Board to suspend temporarily accounting charges for securitizations that may affect bank capital (American Banker Feb. 25) … * WASHINGTON (2/26/09)--Three credit union CEOs from York, Pa., met Monday with U.S. Rep. Todd Platts (R-Pa.) and assistant Bob Reilly to discuss the interchange issue and mortgage cramdown legislation (Life is a Highway Feb. 24). Dave Baker, CEO of York Educational FCU; Dennis Flickinger, CEO of First Capital FCU and president of the York Chapter; and Brad Warner, CEO of White Rose CU, also discussed the National Credit Union Administration's Corporate Stabilization Program. The congressman indicated an interest in learning more about the plan. He plans to attend the next chapter meeting, where the plan will be discussed …

Wis. senator CUs are real people for real reasons

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WASHINGTON (2/26/09)—Credit unions are “real people to real people for real reasons,” according to Sen. Herb Kohl (D-Wis.)
Clifford “Chip” Coenen, left, vice president of business development at Lakeview CU, Neenah, Wis., explains some of credit unions’ concerns about the future to Sen. Herb Kohl (D-Wis.) during a Hill hike Wednesday afternoon. Wisconsin credit union representatives met with both Kohl and Sen. Russ Feingold (D-Wis.)
Kohl and Sen. Russ Feingold (D-Wis.) met with a group of Wisconsin credit union representatives during an annual Hike the Hill event Wednesday afternoon, which coincided with the Credit Union National Association’s Governmental Affairs Conference. Both senators thanked credit unions for their work. “You guys do a great job,” Kohl said. “I am one of your many admirers.” Feingold echoed similar sentiments. “I’m a big fan of credit unions,” he said. “[Credit unions provide] a very important way for citizens to access financial services.” During the Wisconsin meeting, credit union representatives told their senators that they want member business lending (MBL) caps lifted from the 12.25% limit. “We believe that [by changing the MBL cap] we can play a vital part in turning the economy around,” said Brett Thompson, president/CEO of the Wisconsin league. Many credit union representatives in the audience shared their stories about member business lending. Kim Sponem, Summit CU, Madison, Wis., emphasized the need for more small business lending by noting the vacant strip malls in her city as an example. If credit unions could lend more, they could help small businesses fill those empty spaces, she said. Feingold said that he would be open to supporting credit unions on raising MBL caps, but recognized that with the economy, “this is a difficult time.”
Illinois Credit Union League representatives met with Rep. Luis Gutierrez (D-Ill.) on Capitol Hill Wednesday. League representatives discussed member business lending caps, mortgage cramdown and the effects of data breaches on credit unions with Gutierrez. From left are: Gutierrez; Ryan Donovan, Credit Union National Association vice president of legislative affairs; and David Mooney, CEO, Alliant CU, Chicago. (Photos provided by CUNA)
Credit union representatives also alerted their senators to a mortgage cramdown bill that is expected to be voted on today. Cramdown would allow bankruptcy judges to alter the terms of existing mortgages that are nearing default. Both senators were receptive—Kohl said the Senate doesn’t currently have a timeline for the bill, and Feingold noted that he would take a look at Sen. Richard Durbin’s (D-Ill.) and Sen. Arlen Specter’s (R-Pa.) list of modifications to the cramdown bill. In addition to discussing their concerns, credit union representatives also assured the senators that they would continue to do their best to serve members despite a tough economy. “When the chips are down, people get hurt, and we all have to keep moving forward,” said Clifford “Chip” Coenen, vice president of business development at Lakeview CU, Neenah, Wis.

Last Day GAC Blog LIVE

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WASHINGTON (2/26/09)—The Credit Union National Association's (CUNA's) GAC Blog wraps up its inaugural effort today, but not before bringing you the live-action report on the final sessions of the conference here. On the line up for Thursday:
* Rep. Dave Camp (R-Mich.) who is ranking minority member of the House Ways and Means Committee; * Rep. Maxine Waters (D-Calif.), House Financial Services Committee; * Rep. Ed Royce (R-Calif.), House Financial Services Committee; and * Al Roker, NBC Today Show.
CUNA Editorial Communication Vice President Lisa McCue and Communications Specialist Tiffany Stronghart will provide updates throughout the morning. Quick research shows hundreds have followed the GAC Blog. Also, for full coverage of events, read CUNA's daily online news service News Now. Use the resource links below to access the GAC Blog and to sign up for News Now headlines via email.

Maloney backs independent CU regulator

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WASHINGTON (2/26/09)— Rep. Carolyn Maloney (D-N.Y.) told a credit union group Wednesday that, as the country’s policymakers consider financial services regulatory reform, she backs retaining an independent regulatory arm just for credit unions. Maloney, who is chairman of the House Joint Economic Committee, also said that if government funds were ever needed in the uncertain future to back the National Credit Union Share Insurance Fund (NCUSIF), she was there in Congress to support such a plan. “I am part of your voice in Congress,” Maloney told attendees of the Credit Union National Association’s 2009 Governmental Affairs Conference (GAC), “and I am proud to be with you.” Maloney also endorsed the credit union tax status. She came out in favor of a plan to allow the NCUSIF to recognize its insurance costs over five years, rather than the currently required one year. That change, contained in a House bill that is expected to be voted tomorrow, would give credit unions some flexibility on when they must fund costs associated with the National Credit Union Administration’s corporate credit union stabilization plan and reflect them on their books.

Forbes proposes three economy quick-starts

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WASHINGTON (2/26/09)--Publisher Steve Forbes proposed three changes as a quick way to start the nation back on the road to prosperity, a formula that won him frequent applause during the Credit Union National Association Government Affairs Conference (GAC) Wednesday. He recommended suspending the mark-to-market accounting requirement,
Steve Forbes, chairman/CEO of Forbes, Inc., editor-in-chief of Forbes Magazine, and former Republican candidate in the U.S. Presidential primaries, told GAC attendees that he proposes three steps for resolving the economic crisis. (Knudsen photo)
restoration of the Securities and Exchange Commission uptick rule, and proposed a move by the Federal Reserve to aggressively purchase mortgage-backed securities. Forbes said the mark-to-market rule was especially grievous. “Unless we deal with it, the current problem is going to linger,” he told the CU executives attending the session. “Try to mark something to market when there is no market,” he added, “It’s insane.” “Suspend it, and restore the uptick rule, and worst of the crisis will be over,” the GAC speaker said. Forbes, who is CEO and publisher of Forbes Magazine, and a former Republican candidate for President, said the current economic emergency had its roots in Federal Reserve Policy. He said the Fed flooded markets with too much liquidity in 2004, adding: “When you have a lot of liquidity, it must go somewhere. It went into housing.” Forbes said that after the current economic problem is solved, to insure prosperity, Congress needs to simplify the tax code—a favorite topic during his campaign for president. “The Bible has 773,000 words,” he noted, “and the tax code has 9 million words, and nobody knows what’s in it.” In addition to the frequent bursts of applause, and a standing ovation, Forbes was asked during the question and answer session whether he might consider running for President again. His answer, “No, I’m content now just being an agitator.”

Hood invites dialogue on CU issues

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WASHINGTON (2/26/09)—National Credit Union Administration (NCUA)
National Credit Union Administration Vice Chairman Rodney Hood urges credit unions to continue to make further suggestions to modify the agency's plan to stabilize the corporate credit union system. (Knudsen photo)
Vice Chairman Rodney Hood said even though the agency’s rule to stabilize corporate credit unions is a product of considerable study, the NCUA is open to suggestions on how it can be improved. During a speech before the Credit Union National Association’s (CUNA’s) Governmental Affairs Conference, Hood challenged credit union executives to submit ideas. He said credit unions have a record of success that will produce the kind of expertise vluable in a dialogue on how stability can be achieved in the corporate system. “We have to be bold. Hope is not a strategy, and failure is not an option,” Hood added. He also stressed that there was “no silver bullet” as far as resolving this kind of complicated issue. Hood noted the agency has requested credit union views in Advance Notice of Proposed Rulemaking (ANPR) on the subject of corporate solvency. “I will read those letters personally,” he pledged. “You have a voice, and I want to hear it.” Hood also urged credit unions to continue working on innovative ideas on risk management, and options for aiding members suffering hardships because of the economic down turn. He said credit unions must continue to be an alternative to pay-day lenders. Hood stressed the importance of credit union visits to congressional offices during the Washington conference. “Impress on those you talk to the importance of using the CLF (Central Liquidity Facility) not just for liquidity, but also for capital,” he encouraged. He also urged members visiting Capital Hill to lobby for legislation to give credit unions more authority to make member business loans. “Remember,” he added, “there are 90 million members counting on us.”

Fed Reg Z changes affect open-end loans

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WASHINGTON (2/26/09)--Changes to Regulation Z recently issued by the Federal Reserve Board mean changes to the way credit unions conduct their lending business.
Bill Klewin of CUNA Mutual Group speaks at the Credit Union National Association’s Governmental Affairs Conference on amended regulatory language to Reg Z and how it will affect credit union lending. (Photo provided by CUNA Mutual Group)
The amended regulatory language and how it affects lending procedures was explained Tuesday by CUNA Mutual Group Associate Counsel William Klewin during a regulatory panel discussion at the Credit Union National Association’s annual Governmental Affairs Conference in Washington, D.C. The regulatory changes specifically affect multi-featured, open-end lending--a practice used for nearly 30 years that allows credit unions to have a single lending contract with a member, covering multiple lending products. Under this plan, the member can have multiple sub-accounts with different program features and rate structures. “Some features of the program might be used repeatedly, like an overdraft line, while others might be used infrequently, such as the part of the credit line available for secured credit,” Klewin said. “On the other hand, if the program as a whole is subject to prescribed terms and otherwise meets the definition of open-end credit, the program would be considered a single, multi-featured plan.” Because regulatory observers feared a change that would negatively impact multi-featured, open-end lending practices, credit union organizations--including CUNA Mutual--worked to raise awareness of the issue and prepare for potential disruptions to credit unions’ lending practices. CUNA Mutual met with Federal Reserve Board staff to discuss the issues and propose alternatives, filed comments with the board and continued to work with credit union organizations and regulators following the comment period. Klewin said the final rule keeps the multi-featured, open-end lending program intact with some commentary changes:
* Each sub-account is not required to have a self-replenishing credit limit; * Language was retained that views the plan as a whole, while some features may be used infrequently; and * Credit unions are permitted to verify information in certain circumstances to assure continued creditworthiness.
“The rule changes require credit unions to review their products, policies and procedures to identify any necessary changes as a result of the new regulations,” Klewin said. Affected credit unions work closely with their data processing and loan origination system providers to support any needed changes, he added. In addition to communicating best practices around Reg Z change implementations, CUNA Mutual continues to post updates on these changes. Use the link.

Frank CUs will feel like brother of prodigal son

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WASHINGTON (2/26/09)—Credit unions will likely feel like the brother of a “prodigal son” this year as Congress works to clean up the subprime mortgage mess, Rep. Barney Frank (D-Mass.) told attendees of the Credit Union National Association’s (CUNA) Governmental Affairs Conference Wednesday.
Click for slide show Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee spoke to the Governmental Affairs Conference Wednesday. Click to see a slideshow of more speakers.
Frank, chairman of the House Financial Services Committee, continually complimented credit unions for helping Americans, especially low-income Americans, access affordable financial services. But although credit unions “in no way contributed” to the subprime mortgage meltdown, they will likely feel the effects of it. Such as in the story of the prodigal son, “well-behaved” credit unions will continue their responsible financial activities as other institutions that “behaved badly” and triggered the credit crisis receive help. “You’re the good son,” Frank said. But, “you are the victim of other’s mistakes. You’ve been damaged.” As the “good son,” credit unions will not experience a change in tax status. And because credit unions did not contribute to the current financial crisis, there is no reason to impose additional restrictions on them, Frank said. “If credit unions made all of the mortgage loans, then there would have been no subprime crisis and therefore no economic crisis,” he said. Frank also briefed attendees on the way Congress will have to handle the financial crisis—by first dealing with the crisis, and then finding ways to prevent it from happening again. Congress’ high priority is getting the credit system functioning again. Frank assured credit unions that Congress would work with them to minimize any damage they are experiencing because of others’ mistakes. It’s important to remind legislators that credit unions play a significant role in legitimate community-oriented financial activities, he said.

Boehner Cramdown will lead to uncertainty for CUs

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WASHINGTON (2/26/09)—A mortgage cramdown bill expected to be voted on today could lead to uncertainty for credit unions as mortgage lenders, according to Rep. John Boehner (R-Ohio). Speaking to a group of credit union representatives at the Credit Union National Association’s (CUNA) Governmental Affairs Conference Wednesday, Boehner—a lifelong credit union member—outlined the reasons why the mortgage cramdown bill would be detrimental to credit unions. Mortgage cramdown—which allows bankruptcy judges to modify the terms of a struggling homeowner’s existing mortgage—would increase interest rates, Boehner said. “[Cramdown] would lead to lower liquidity in a time when we need more liquidity,” he said. Boehner briefly discussed mortgage cramdown as a method that was used “for a reason more than 100 years ago to keep interest rates low and keep liquidity in the market.” However, cramdown is now an outdated method, and could allow judges “to do almost anything” with mortgages if the bill if passed, he said. Rep. Eric Cantor (R-Va.) echoed similar thoughts during a later speech. Cramdown “does not make sense,” and will “make it more difficult for you to provide members with credit,” he told credit unions. CUNA opposes mortgage cramdown because it believes it could lead to borrowers’ gaming of the lending system. An unsatisfied homeowner could stop payments on a home and still keep it, CUNA has said.

Dodd says CUs serve all Americans

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WASHINGTON (2/26/09)—Chairman Christopher Dodd of the Senate Banking Committee, noting a scheduled Wednesday afternoon meeting between federal lawmakers and Obama administration officials about restructuring the financial services regulatory scheme, assured credit unions that they have standing in those discussions. “As we modernize the regulatory structure, there will be a seat at that table for America’s credit unions,” Dodd declared to attendees of the Credit Union National Association’s (CUNA’s) Governmental Affairs Conference. He addressed the Wednesday morning general session. Dodd praised the work of credit unions. “You serve all Americans,” the Democrat from Connecticut said, adding that credit unions make sure to provide financial services to low-income and underserved communities. For all that has changed because of the country’s economic upheaval, and for all that will change as policymakers modernized the financial “architecture” of the country, the credit union vision of economic inclusiveness remains unchanged, Dodd said. He added that in ordinary times, the credit union philosophy is important, and it just becomes more so in extraordinary times. Dodd said, “You’ve been successful. You’ve done a good job. You’re strong. You’re vibrant. You’ve been conservative in the management of your financial affairs.” However, the banking panel chairman acknowledged that credit unions, in the current economic upheaval, are “paying an awful price” for a problem created by other, less responsible lenders. “That is why Congress made credit unions eligible for TARP funds,” Dodd said, referring to the 2008 passage of the of the Emergency Economic Stabilization Act, which, in part, established the U.S. Treasury Department’s Troubled Asset Relief Program (TARP). As implemented by Treasury Department to date, credit unions have not been included, and CUNA continues to work for credit union access to the program.