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Inside Washington (02/28/2008)

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* WASHINGTON (2/29/08)--The Office of the Comptroller of the Currency (OCC) Thursday outlined steps aiming to help investors who suffered losses from “super senior” tranches of collateralized debt obligations (CDOs) backed by subprime mortgages. The agency recommended stronger underwriting and less reliance on credit rankings of rating agencies. Packagers of CDOs should not retain large concentrations of the tranches on their balance sheets, said Comptroller John Dugan. Regulators also should raise risk profiles of the CDOs under Basel II capital rules, Dugan said. CDO tranches appealed to many investors when they held triple A ratings but were affected by problems in the subprime mortgage market ...

Co-sponsors hit 145 before CURIA hearing

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WASHINGTON (2/29/08)—One week before a scheduled hearing on the Credit Union Regulatory Improvements Act (CURIA, H.R. 1537), two more first-time co-sponsors signed on in support of the bill. Rep. Kathy Castor (D-Fla.) and Rep. Allyson Schwartz (D-Pa.) drove the number of official backers of the bill to 145. That number includes prime sponsor Rep. Paul Kanjorski (D-Pa.), who with Rep. Ed Royce (R-Calif.) introduced the bill March 25 in the 110th Congress. The House Financial Services Committee has set a hearing for March 6 on the need for credit union regulatory relief and improvements. Major discussion is expected to be devoted to CURIA provisions. CUNA Vice Chairman Tom Dorety, CEO of Suncoast Schools FCU, Tampa, Fla., will testify for CUNA. Other groups expected to testify include the National Credit Union Administration, the National Association of State CU Supervisors, the National Association of Federal Credit Unions and the American Bankers Association. The hearing is scheduled to take place on the final day of CUNA's 2008 Governmental Affairs Conference in Washington. Both CURIA chief sponsors Royce and Kanjorski will be addressing the GAC. CUNA VP of Legislative Affairs Ryan Donovan said the regulatory improvements likely to be discussed at the hearing will not be limited to those in CURIA. "We expect to discuss additional ways Congress can provide regulatory relief to credit unions," he said. "New ideas will be put on the table and we look forward to having that discussion with committee members."

Mica in iHilli Lobbying sunshine is here

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WASHINGTON (2/29/08)—No matter who is in the White House this time next year, there will be a closer look at campaign dollars and what those dollars represent, according to Credit Union National Association (CUNA) President/CEO Dan Mica in his most recent regular guest column in The Hill. Mica said one point is clear: Change really is coming. “And for K Street, there is no way to sugarcoat it. For some lobbyists, this change will be quite dramatic, possibly even the end of the road,” he wrote. Associations and interest groups with questionable agendas—such as a defender of pollution—will be under more direct public scrutiny and will have greater difficulty gaining access to lawmakers, Mica said. “The Jack Abramoffs of the world cannot survive in the new environment, nor can those perceived to be playing along the dark gray edges,” he warned, referring to a disgraced Washington lobbyist. But Mica also called on those groups who work hard to make their voices heard “loudly but fairly” to think even harder about “doing business the right way.” Citing CUNA’s political action committee (CULAC) as a good example, Mica noted that it is one of the largest in Washington, on track this cycle to reach $4 million in contributions. And yet, he underscored, the average donation is around $10, showing the grassroots nature of the effort. Mica appears regularly in the Capitol Hill publication The Hill's as a guest columnist for its K Street Insiders feature. "K Street" refers to an area in Washington, D.C. known as a base for influential lobbyists, think tanks and advocacy groups stationed in the nation's capital.

Under veto threat Senate stalls on mortgage bankruptcy

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WASHINGTON (2/29/08)--With banker opposition and a threat of a Presidential veto, the Senate Thursday was unable to proceed to consider a housing stimulus bill that included mortgage bankruptcy language supported by the Credit Union National Association (CUNA). The Senate voted 48 to 46 on a motion to proceed to consideration of S. 2636, the Foreclosure Prevention Act of 2008. Sixty yes votes were needed to proceed to consideration. The bill, introduced by Senate Majority Leader Harry Reid (D-Nev.) earlier this month, would provide $200 million for housing counselors to help families about to lose their homes to foreclosure. It would also raise the cap on mortgage revenue bonds, permit Community Development Block Grants to be used on foreclosed properties, and require improved disclosures to mortgage borrowers. The bill included mortgage bankruptcy provisions modeled on language drafted by Senate Majority Whip Richard Durbin (D-Ill.) in his bill called the Helping Families Save Their Homes in Bankruptcy Act (S. 2136). After months of negotiations with Senate lawmakers, CUNA had thrown its support behind the proposed substitute amendment language to the mortgage bankruptcy title of the bill. In a letter to Senate Leadership, CUNA said credit unions recognize the need to be responsive to the current crisis in the subprime mortgage market and appreciated the effort that Durbin and his staff made over the last several weeks to address many credit union concerns. The mortgage bankruptcy substitute language would allow a bankruptcy court to adjust the terms of certain mortgage loans made before the enactment of the law. The proposal covered subprime and nontraditional mortgages and excluded all other mortgage loans, including interest-only loans originated with proper underwriting to a fully-indexed rate. Under the plan, a subprime mortgage loan would be one that has an annual percentage rate greater than 3% over the yield on a comparable security issued by the Treasury Department. If it is subordinate loan, subprime would be defined as a loan greater than 5% plus the equivalent Treasury security. The bill also includes a "means test" to qualify for the special relief and the bankruptcy court would have the authority to reduce the claim to an amount no lower than the current market value of the property. Last December, the House Judiciary Committee passed H.R. 3609, a similar although not identical bill to S. 2636. On Tuesday, President George W. Bush threatened to veto the package if passed by the House and Senate, according to Feb. 28 American Banker.

Corporate governance comment period extended

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ALEXANDRIA, Va. (2/29/08)-- The National Credit Union Administration (NCUA) has extended the comment period to April 30 from March 31 as it considers amending its rules to more clearly define a credit union board's fiduciary duties in the face of major decisions, such as mergers or conversions to mutual thrifts. The agency approved an advanced noticed of proposed rulemaking (ANPR) on the subject at its January open board meeting. The Credit Union National Association (CUNA), as well as other concerned groups, requested the comment period extension so credit unions can carefully consider the important ANPR before commenting. In its ANPR, the NCUA asks for comment in the following areas:
* Credit union conversion into a financial institution other than an MSB. The agency said it is considering establishing an administrative framework and procedures rather than continue its case-by-case approach, and asks for comment on such things as whether such conversions are beneficial to credit union members; * Issues that affect member interests in restructuring transactions; * Is there a need for a regulation to address the fiduciary obligations a credit union director owes members and/or a need for additional regulatory provisions to guard against insider enrichment? * Communications to members. The NCUA is considering, for instance, a need to specifically state a prohibition against credit union officials stating or implying that the NCUA has endorsed the charter change or accompanying credit union materials; and * Member voting rights, such as the right to request a recount and the use of interim tallies.
CUNA will be reviewing the ANPR with several of its subcommittees during its Governmental Affairs Conference in Washington, D.C. next week.