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CU tax status helps small biz workers CUNA to Treasury

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WASHINGTON (3/1/12)--The Credit Union National Association (CUNA) contacted U.S. Treasury Secretary Timothy Geithner this week to address the Obama administration's corporate tax reform proposal and to emphasize its good policy approach to the federal credit union tax status.

'We appreciate that the proposal does not identify the credit union tax exemption for elimination. We also appreciate the fact that your staff reached out to (CUNA) following the release of the proposal. We urge you to take steps to further clarify the intention of the administration to preserve and support the credit union tax status," wrote CUNA President/CEO Bill Cheney in a Feb. 28 letter.

Cheney noted that in 1917 the U.S. Attorney General--and later the U.S. Congress--granted credit unions an exemption from federal income tax because of their organization Structure: Credit unions are member-owned, not-for-profit financial cooperatives. The exemption, in effect since credit unions' inception in the United States, has been reaffirmed many times, including in 1935, 1936, 1937, 1951 and 1998.

The administration has noted its new tax reform proposal starts from the presumption that reform should eliminate all tax expenditures for specific industries, with the few exceptions that are critical to broader growth or fairness.

Cheney wrote that it is entirely consistent with the administration's goals to continue the credit union tax status, and would be a disservice to the American public to discontinue it.

"(W)e believe that each component of corporate tax reform should be evaluated not only on the basis of the revenue it may bring to the government – which would be relatively small in the case of credit union taxation – but also on the basis of the costs in terms of lost benefits to the economy, the country, consumers and small businesses," the CUNA leader wrote.

"If taxed, a very significant number of larger credit unions are expected to convert to banks and an equally significant number of smaller credit unions would simply liquidate," therefore reducing consumer access to credit unions and their benefits, Cheney said.

He added, "The remaining credit unions would have to pass the burden of taxation through to their members because they are wholly owned cooperatives, increasing the cost of accessing mainstream financial services."

Cheney underscored that it is not only credit union members--94 million working-class Americans--that benefit from credit unions generally higher savings rates and lower loan rates: "Even those consumers and small businesses that do not belong to a credit union benefit from the credit union tax exemption because the presence of credit unions in a market motivates banks to keep their rates and fees competitive."

"Taxing credit unions would amount to a gift of tens of millions of customers to the for-profit banking industry at a time when the public is exceptionally dissatisfied with that industry and actively pursuing alternatives," CUNA wrote.

CUNA backs joint FI bill bankers balk

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WASHINGTON (3/1/12)--Senate Banking Committee Chairman Tim Johnson (D-S.D.) has announced that his panel will conduct a hearing next week to study a community bank bill that would, in part, increase a 500-shareholder threshold that requires a small bank to register with the Securities and Exchange Commission (SEC).

There have been widespread reports this week that Senate Majority Leader Harry Reid (D-Nev.) has signaled he will soon make time for a vote in that chamber for a larger legislative package, designed to spur small business growth, that could include the community bank measure.

John Magill, executive vice president of government affairs for the Credit Union National Association (CUNA), in response to reports reiterated CUNA's position that credit unions would support a package as long as it combined a credit union legislative priority with that of the banking industry.

CUNA backs an increase in credit union member business lending (MBL) as a means to help small businesses and create new jobs. Increasing the current 12.25%-of-assets cap to 27.5% would inject $13 billion in new credit and create 140,000 new jobs within the first year of enactment, according to CUNA estimates.

"If combining credit union and bank interests in a single bill is what it takes to help the economy by helping small businesses with increased MBL authority," Magill said," then we favor it. That would be fine by us."

According to the Feb. 29 issue of American Banker, there is an effort afoot in the Senate to create such a dual package.  The Banker reported that Sen. Mark Udall (D-Colo.), sponsor of MBL legislation in the Senate, has placed a hold on the community bank bill, thereby impeding its progress.

The newspaper reported that its sources said Udall is conditioning support of the package on the inclusion of an increase in MBL authority for credit unions.

The community bank, SEC-registration bill is strongly backed by the Independent Community Bankers of America (ICBA). That group has estimated that SEC registration can cost small banks around $100,000 in the first year and $50,000 in subsequent years.

However, the ICBA said Tuesday that it will withdraw support for the entire pro-small business package if the credit union MBL provision is included, according to the article.

Both the U.S. House and Senate have conducted hearings on CUNA-backed MBL Legislation. The House bill, the Small Business Lending Enhancement Act (H.R. 1418), was introduced by Rep. Ed Royce (R-Calif.) and has 120 additional co-sponsors. Udall's bill of the same name (S. 509) has 22 co-sponsors.

For more information on the Senate Banking Committee hearing and the MBL bills, use the resource links below.

FinCEN considers due diligence changes

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WASHINGTON (3/1/12)--The Financial Crimes Enforcement Network (FinCEN) is considering codifying, clarifying, consolidating, and strengthening its current customer due diligence (CDD) regulatory requirements, and has released an advanced notice of proposed rulemaking (ANPR) to collect public comment on potential CDD rule enhancements.

FinCEN said appropriate CDD policies, procedures, and processes assist financial institutions "in identifying, detecting, and evaluating unusual or suspicious activity" by accountholders.

While many institutions have adequate policies, FinCEN said it is concerned that there is a lack of uniformity and consistency in how financial institutions address their CDD policies.

The proposed CDD rule would cover financial institutions, brokers or dealers in securities, mutual funds, futures commission merchants, and introducing brokers in commodities. Establishing a uniform CDD regulation would strengthen the ability of financial institutions to identify and report illicit financial transactions and comply with all existing legal requirements, and help federal authorities as they investigate potential crimes. A uniform regulation would also promote greater global financial transparency and aid efforts to combat transnational illicit finance, FinCEN added.

The new regulations, if created, would be one part of a broader U.S. Treasury strategy to enhance financial transparency in order to strengthen efforts to combat financial crime, including money laundering, terrorist financing, and tax evasion, FinCEN said.

Comments on the ANPR will be accepted for 60 days after the proposal is published in the Federal Register.

For the full FinCEN release, use the resource link.

Inside Washington (02/29/2012)

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  • WASHINGTON (3/1/12)--Fannie Mae Wednesday released its fourth-quarter and full-year 2011 financial results, which included a full-year net loss of $16.9 billion, compared with a loss of $14 billion for 2010. The increase was attributed mainly to a $6.1 billion increase in net fair value losses in 2011. For the fourth quarter, Fannie reported a net loss of $2.4 billion, compared with a net loss of $5.1 billion in the third quarter of the year. The company's fourth-quarter net loss was reflected in $5.5 billion in credit-related expenses, "the substantial majority of which were related to its legacy (pre-2009) book of business and due largely to a decline in home prices" …
  • WASHINGTON (3/1/12)--Although federal and state officials have yet to release the final terms of the national mortgage servicing settlement, Wells Fargo provided some details in its annual report, filed with the Securities and Exchange Commission Tuesday. Servicers will be released from several servicing and origination claims, Wells Fargo said. The releases given by the states and the federal agencies primarily apply to "covered servicing conduct" and "covered origination conduct." The federal release for covered origination depends on which agency and which law is involved, Wells Fargo said. The Department of Justice (DOJ) and the Treasury are releasing claims under federal consumer credit laws governing loan origination. DOJ has offered limited release for possible claims of intentional fraud under the Financial Institutions Reform, Recovery and Enforcement Act. The Federal Trade Commission is releasing claims relating to origination conduct. The Department of Housing and Urban Development's (HUD) release of claims relating to origination conduct is limited to claims based on false annual certifications of compliance that are submitted to the agency. HUD retains the right to pursue individual loan-level violations of the Federal Housing Administration origination rules and regulations, Wells Fargo said …
  • WASHINGTON (3/1/12)--Two Obama administration housing officials offered assurances on the financial stability of the Federal Housing Administration (FHA) on Tuesday. During questioning from Republican senators about the FHA's finances in a Senate Banking Committee hearing, Shaun Donovan, secretary of the Department of Housing and Urban Development said he was confident that the agency was taking steps to protect the FHA fund while helping the housing market recover. On Monday, the FHA announced that on April 1 it will increase premiums on all single-family loans that it insures. The increase will cost homeowners an average of $5 per month, FHA Acting Commissioner Carol Galante said Tuesday in testimony before the House Financial Services Committee. Although the FHA has projected substantial losses on loans made from 2006 to 2008, loans made in the last two and a half years are performing well, Galante said …

2012 Small CU Workshop schedule announced

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ALEXANDRIA, Va. (3/1/12)--The National Credit Union Administration's (NCUA) Office of Small Credit Union Initiatives (OSCUI) has announced the schedule for the 2012 round of Credit Union Workshops and Roundtables, with 31 daylong workshops and roundtables set to take place between March 3 and October 27.

CUNA Mutual Group is teaming with the OSCUI to present a series of fraud prevention training sessions during these meetings, entitled "Don't Give Fraud the Green Light – Mitigating Fraud in Your Credit Union." These sessions will "focus on best practices and solutions that help smaller credit unions manage risk and avoid fraud," CUNA Mutual Group senior risk management services manager Brad Mundine said.

During the sessions, credit unions will learn about the latest fraud concerns and control techniques. Best practices to help avoid fraud in the areas of wire transfer, fraudulent deposit, lending and employee dishonesty will be addressed.

"The power of collaboration can't be overstated, and we're proud to be a part of this effort and remain committed to providing risk management resources for credit unions of all asset sizes," Mundine added.

NCUA OSCUI director William Myers said "tapping into the expertise of external groups, like CUNA Mutual Group's specialists on fraud prevention, is a great way to improve the effectiveness of OSCUI's training programs."

The first workshop will be held this Saturday in Phoenix, Arizona. The workshops are free, and while they are geared toward smaller credit unions, representatives from any credit union may attend.

Other 2012 topics include:
  • Issues facing credit unions;
  • What OSCUI is, and what the office can do for credit unions;
  • Examination issues;
  • Asset and liability management; and
  • The duties of federal credit union directors.
For more information and to register, use the resource link.