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Treasury meets with CUNA on CU issues

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WASHINGTON (2/26/10)--High-level U.S. Treasury officials, including Secretary Timothy Geithner, met with the Credit Union National Association (CUNA) Thursday to discuss significant issues facing credit unions, including raising the statutory cap on credit union member business lending (MBL) and permitting access to secondary capital for credit unions. The meeting also included Counselors to the Secretary Jeffrey Goldstein and Gene Sperling, and Assistant Treasury Secretary for Financial Institutions Michael Barr, and from CUNA, President/CEO Dan Mica and Chief Economist Bill Hampel. Mica described for the assembled Treasury officials the public policy advantages of assisting the economic recovery by permitting credit unions to grant more loans to small businesses. Mica also refuted charges others in the financial services industry have raised to Treasury and federal legislators about raising the MBL ceiling. Mica emphasized during the meeting, "I believe there really are no good public policy reasons not to lift the cap." At an address this week at CUNA’s Governmental Affairs Conference (GAC) this week, Treasury’s Barr indicated that Treasury is committed to working with CUNA and credit unions to increase the flow of credit to communities. Barr was addressing the Tuesday general session of the GAC, CUNA’s premier legislative and governmental issues conference, which this year drew more than 4,000 credit union representatives to the nation’s capital.

Matz to Treasury Wed closely monitor increased MBLs

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ALEXANDRIA, Va. (2/26/10)--National Credit Union Administration (NCUA) Chairman Debbie Matz earlier this week said that the NCUA would “promptly revise” its regulations if legislative changes that increase or eliminate the current member business lending (MBL) cap of 12.25% of a credit unions assets were written into law. In a letter sent Wednesday to U.S. Treasury Secretary Timothy Geithner, Matz said that the NCUA would work to ensure that the “additional capacity in the credit union system would not result in unintended safety and soundness concerns.” The NCUA has “long exercised caution in monitoring MBLs” for safety and soundness, and regularly issues guidance “to ensure the credit union community and agency staff understand the risks associated with MBLs.” The NCUA is also increasing the amount of MBL training given to its staff in the near future, and is already strengthening “the regulatory qualifications that credit union officials must have to qualify as member business lenders,” Matz added. Member business lending legislation is currently awaiting action in both the House and the Senate. Each of the bills would allow credit unions to lend as much as 25% of their total assets to members that own small businesses and would raise the “de minimis” threshold related to these loans to $250,000. The Credit Union National Administration has estimated that lifting the current restrictions on member business lending would result in over $10 billion in new loans within the first year of enactment and create as many as 108,000 new jobs, stimulating the economy at no cost to taxpayers.

NCUA liquidates tiny Friendship Community FCU

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ALEXANDRIA, Va. (2/26/10)—Clarksdale, Miss.-based Friendship Community FCU on Thursday was liquidated by the National Credit Union Administration (NCUA) due to its “declining financial condition.” Friendship FCU’s members and assets, which totaled 685 and $861,696, respectively, as well as its shares, will be taken on by Shreveport FCU. Friendship is the second federally-backed credit union to be shuttered in 2010. Shreveport, which has four Louisiana-based locations, currently serves 14,500 members nationwide and holds $76 million in assets.

Small biz hearing CUNA to testify

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WASHINGTON (2/26/10)—St. Mary's Bank CU President/CEO Ronald Covey today will testify on behalf of the Credit Union National Association (CUNA) before both the House Financial Services Committee and Small Business Committee as they discuss the condition of small business and commercial real estate lending. In his testimony, Covey will advocate for lifting the current 12.25% of assets cap on member business lending, which would give well-capitalized credit unions a way to further diversify their portfolios, ultimately lowering overall risk. Covey will also underscore that business lending to members is part of the core credit union mission and that credit unions, including his own, have been been fulfillig that mission for more than a century. The hearing will also feature testimony from Treasury Assistant Secretary for Financial Stability Herbert Allison, U.S. Small Business Administrator Karen Mills, Federal Reserve Governor Elizabeth Duke, Federal Deposit Insurance Corporation Chair Sheila Bair, Comptroller of the Currency John Dugan, and Office of Thrift Supervision Director John Bowman. Other industry representatives and business leaders will testify during the hearing, which has been rescheduled for 9 a.m. E.T. Small business lending, particularly increasing credit unions’ ability to lend to their members with small businesses, was a major topic of discussion for credit union representatives that traveled to Capitol Hill this week. CUNA and credit unions have called on Congress to expand credit unions' ability to work with small businesses by lifting the current member business lending cap of 12.25% to 25% of a credit union's assets.

CU work noted by final 2010 GAC speakers

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WASHINGTON (2/26/10)—The Credit Union National Association’s final day of its 2010 Governmental Affairs Conference featured two congressmen who noted credit unions' work to keep the economy moving forward, House Minority Whip Eric Cantor (R-Va.) and Rep. Thaddeus McCotter (R-Mich.). Cantor briefly touched on pending financial regulatory reform legislation and the importance of expanding credit unions’ roles in helping their communities. “More than 600,000 businesses are started each year—about one per minute,” Cantor said. “Those individuals need you [credit unions].” McCotter provided similar thoughts. He thanked credit unions for the work they do—especially in his home state. Michigan has the nation’s highest unemployment rate and a struggling auto industry, McCotter said. Despite the state’s problems, “we knew we could rely on credit unions,” he said. “They were there to try and help the industry sell cars.” Many Michigan credit unions participated in Invest in America, which provided discounts to buyers who received financing through credit unions for select Chrysler and GM vehicles. The answer to America’s economic problems will be family and community-oriented financial institutions—like credit unions, he said. He also noted the human-to-human relationships that credit unions maintain—and that those relationships will help America overcome its challenges. Wrapping up this year’s GAC, Captain Richard Phillips of the Maersk Alabama, who was at the center of an international drama last April when his ship was hijacked by Somali pirates, told conference attendees that true leaders must hope for the best and plan for the worst. Part of those plans should include reviewing routines, he added. “Don’t just do something” because that’s the way you’ve always done it, Phillips recommended. The GAC featured speakers from across the political spectrum, including Reps. Brad Sherman (D-Calif.)and Spencer Bachus (R-Ala.), and outgoing Sen. Chris Dodd (D-Conn.). Current regulators, such as Small Business Administrator Karen Mills and National Credit Union Administration Chairman Debbie Matz also addressed the GAC, as did former Federal Reserve Chairman Alan Greenspan.

Snowe CUs play role of economic anchor

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WASHINGTON (2/26/10)—Maine credit unions help to play a “pivotal role in being the economic anchor of their communities,” said Sen. Olympia Snowe (R-Maine), during a congressional breakfast sponsored by the Maine Credit Union League Tuesday on Capitol Hill. Snowe joined her Maine colleagues, Sen. Susan Collins (R-Maine) and Democratic Reps. Chellie Pingree and Mike Michaud, to meet with credit union representatives and commend them for their work. The event was held by the league in conjunction with the Credit Union National Association’s Governmental Affairs Conference in Washington, D.C., this week. Member business lending was one of the topics Maine delegates discussed. Collins and Snowe are original co-sponsors of the bill. Lifting the MBL cap “can make all the difference. It is long overdue and clearly it is something that needs to get done. It will have a profound impact on lending,” Snowe said. Collins agreed. “I know Maine’s credit unions will take advantage of member business loans to provide more loans to the business community,” she said. She also commended Maine credit unions for collecting donations to help victims of the Haiti earthquake. “No matter what the need is, Maine credit unions answer the call.” Rep. Mike Michaud (D-Maine) expressed his support for raising the MBL caps, and said it’s very important for credit unions to lend more to small businesses to create competition between them and banks. “Thanks to credit unions for all you do, and I look forward to working with all of you to get the economy moving,” he said. Credit unions are one place that people can walk in and still see a friendly face, Pingree said. “I know what an essential role you play.” She also spoke of the significance of credit unions who visit their representatives to tell their stories. “As a freshman member [of Congress], I can say that the most important thing in our visits are people who come to visit us,” she said. “Tell us your stories. It makes it more real for us and helps us move forward with legislation.” The meeting was one of many that thousands of credit union representatives held with their constituents coinciding with the conference.

Inside Washington (02/25/2010)

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* WASHINGTON (2/26/10)--The Federal Financial Institutions Examination Council Thursday issued updated guidance for financial institutions and others on risks associated with retail payment systems. The Retail Payment Systems Booklet is an update of a 2004 version that provided guidance on the risks and risk-management practices applicable to financial institutions’ retail payment systems activities--including checks, electronic payments related to credit cards and debit cards, and automated clearinghouse. The booklet also contains exam procedures … * WASHINGTON (2/26/10)--New details have surfaced on Senate Banking Committee Chairman Christopher Dodd’s (D-Conn.) regulatory reform bill. The latest draft of the bill would create a Financial Institutions Regulatory Administration, or FIRA, which would essentially combine the Office of the Comptroller of the Currency, the Office of Thrift Supervision and the Federal Reserve Board’s banking responsibilities (American Banker Feb. 25). The Federal Deposit Insurance Corp. (FDIC) would oversee state-chartered banks, but FIRA would oversee everything else, including systemically significant banks and non-banks. The bill also would call for the establishment of a systemic risk council, lead by the Treasury, which would write rules for large financial companies. The Fed would have a seat on the council, but no direct oversight of any company. Dodd negotiated with Sen. Bob Corker (R-Tenn.) on the bill, and financial observers said negotiations could continue with other policymakers … * WASHINGTON (2/26/10)--With a vote of 3-2 Wednesday, the Securities and Exchange Commission (SEC) voted to restrict short sales of company stock once it drops 10% from the previous day’s closing price. When the threshold is triggered, traders could execute sales only for stock at prices above the market’s best bid. Short-selling can play an important role in the market, but the agency is concerned that excessive downward price pressure on individual securities and the fear of unconstrained short-selling can destabilize markets, said SEC Chairman Mary Schapiro … * WASHINGTON (2/26/10)--Federal Reserve Board Chairman Ben Bernanke again advocated for broader Fed powers while being pressed by lawmakers at a hearing Wednesday (American Banker Feb. 25). The Fed must keep its powers because the Fed tries to get the information it needs to ensure creditworthy borrowers can get credit. Bernanke told the House Financial Services Committee that one reason why the Fed values its supervisory role is because it has the ability to understand what’s happening in the market. Bernanke was scheduled to testify again Thursday before the Senate Banking Committee. The Senate has considered stripping the Fed of its oversight powers …

House adds compensation hearing delays housing finance

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WASHINGTON (2/26/10)—The House Financial Services Committee this week announced a couple of changes to its hearing schedule, including a new hearing on compensation in the financial industry added to yesterday’s agenda. During that session, entitled “Compensation in the Financial Industry – Government Perspectives,” the financial services panel’s focus was on the pay practices of both private and public financial entities, such as AIG, Fannie Mae and Freddie Mac where the federal government plays a role in reviewing and approving compensation. The Thursday hearing was the committee’s second this year on the issue of financial industry compensation. Witnesses for this go around included: Kenneth Feinberg, Special Master for TARP Executive Compensation, U.S. Department of the Treasury; Scott Alvarez, general counsel, Federal Reserve Board; and Edward DeMarco, acting director, Federal Housing Finance Agency. A scheduling change announced this week involved a delay of the committee’s planned hearing entitled, “Housing Finance and the Path to Reform: Part 1-Government and Stakeholder Perspectives.” Originally scheduled for March 2, the hearing has been rescheduled, date and time to be announced at a later date.