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Flood insurance other programs expire as tax bill awaits Senate action

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WASHINGTON (3/1/10)—The Senate adjourned last week without taking up a temporary extension for such programs as the National Flood Insurance Program, Stimulus Act small business loan guarantee programs, as well as federal unemployment insurance and COBRA benefits. The House last week passed similar legislation that would have extended these and other federal programs through March 28. However, since the Senate did not act, those and other federal programs expired Sunday. It is expected that the Senate may vote on H.R. 4154, the American Workers, State, and Business Relief Act, this week. That bill would extend these federal programs through the end of the year. That legislation also has several other provisions that are of interest to credit unions, including language affecting the new markets tax credit. The legislation would also extend some fee reductions and eliminations associated with the small business loan programs contained in the Stimulus Act until the end of 2010. Credit unions should also note S. 3018, the Bipartisan Tax Fairness and Simplification Act, Senate tax legislation that was introduced by Sens. Ron Wyden (D-Ore.) and Judd Gregg (R-N.H.) last week. The legislation, which is a comprehensive tax reform package, would, among other things, legalize, regulate and license Internet gambling. The compliance date for the Unlawful Internet Gambling Enforcement Act (UIGEA), which would require credit unions and other financial institutions to establish and implement policies and procedures to identify and block restricted Internet gambling transactions, was recently pushed back until June 1, 2010. However, the Credit Union National Association and others have stated that simply pushing back the compliance date does not resolve the many issues that credit unions and other financial institutions have with the tenor of the UIGEA legislation.

Inside Washington (02/26/2010)

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* WASHINGTON (3/1/10)—The Financial Crimes Enforcement Network (FinCEN) is proposing revisions to its Bank Secrecy ACT (BSA) rules that address reports of foreign financial accounts. The changes are intended to clarify which persons are required under the law to file reports of foreign accounts and more clearly identify which accounts are reportable. The plan also carries an exemption—noting that certain individuals with signature or other authority over foreign financial accounts do not have to file the reports. The BSA provisions that authorize reports of foreign financial accounts reflect the concerns of federal lawmakers that Americans were using foreign financial institutions to evade domestic criminal, tax, and regulatory laws. Written comments are due to FinCEN, a bureau of the U.S. Treasury, by April 27… * WASHINGTON (3/1/10)—Those drafting a Senate version of a financial regulatory reform package are noting that they have made great progress of late—perhaps 90% done with hammering out the provisions of the legislation. (American Banker 2/26/10) However, not surprisingly, one of the looming issues still to be nailed down is just how to beef up consumer protections as they relate to financial products. That was one of the most controversial proposals when the Obama administration announced its reform plan last summer, and continues to be the most problematic section of the bill. The concept of a stand-alone consumer financial protection agency has been given up in the Senate, but there are thoughts being given to creating a division within the U.S. Treasury Department or a proposed new and powerful banking regulator that would focus on consumer protections. At a recent administration meeting with bankers, Treasury Secretary Timothy Geithner, it was reported, warned that if a final reform bill was not strong enough, he would urge the president to reject it…

BITS advises CUs on helping elderly avoid fraud

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WASHINGTON (3/1/10)--BITS, a financial service industry consortium, has released a new paper, entitled “Protecting the Elderly and Vulnerable from Financial Fraud and Exploitation." The paper addresses many means of financial abuse that specifically target older Americans, including exploitation of their finances by relatives, businesses, real or false financial institution employees, or other financial service providers. The paper advises credit unions and other financial institutions on potential enhancements to their internal training programs. The paper lists several red flags that financial institution support staff can look for to spot potentially risky situations, including changes in a customer or members account documentation, deposit or withdrawal patterns, and overall demeanor. Loss prevention and legal departments can also play a role in fraud prevention, as can local law enforcement, and the document also provides tips on how financial institutions can best interact with state and federal authorities to combat fraud. The Credit Union National Association (CUNA) is a member of BITS. To view the full document on CUNA's BITS page, use the resource link.

GAC grassroots advocacy gets results

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WASHINGTON (3/1/10)--Activists from North Carolina credit unions and the North Carolina Credit Union League (NCCUL) were among the legions of credit union representatives making Hill visits as part of last week's Credit Union National Association (CUNA) Governmental
Click to view larger image (From Left) Rep. Nydia Velazquez (D-N.Y.), head of the House Small Business Committee, spoke with representatives from New York credit unions Wednesday afternoon. Pictured with Velazquez are Mira Ness, CEO, New York University FCU, and John Gibardi, president/CEO of Entertainment Industries FCU, New York City. (CUNA photo)
Affairs Conference (GAC), and the visits by the N.C.-based group garnered great results, getting two legislators to sign on to support member business lending (MBL) legislation. One new supporter of the MBL legislation is Rep. Walter Jones (R-N.C.), who told the group that he was concerned about small businesses in his district that were in good shape financially, but were still having trouble obtaining loans. H.R. 3380, the Promoting Lending for America's Small Business Act, would raise the amount of money a credit union can devote to business lending. The legislation, which was introduced by Rep. Paul Kanjorski (D-Pa.) late last year, would provide up to $10 billion in capital to credit union member-owned small businesses, and could create as many as 108,000 new jobs, according to CUNA estimates. Rep. Larry Kissell (D-N.C.) also signed his intentions to support H.R. 3380 during an earlier visit. NCCUL Director of Political Affairs Mickey Fanney told News Now that gaining this kind of support is important for credit unions, especially in North Carolina, where it can be difficult to get credit union views through the clutter caused by the large banks that also reside in the state. "But many congressmen are starting to realize that small businesses need the funding, and credit unions are here to help," he added. Representatives from New York-based credit unions were also on Capitol Hill Wednesday. Melrose CU's Robert Nemeroff also sought congressional support for the member business lending legislation, telling Rep. Nydia Velazquez (D-N.Y.) that the level of business that his credit union works with is "the level of business that both President Obama and his administration are looking to stimulate." "Since the banks have shown that they aren't going to lend to them, let credit unions do it," he said, adding that there is "no systemic risk" in increasing lending to credit union members. "We know these people." The Wisconsin Credit Union League and representatives from Wisconsin credit unions met with Sens. Herb Kohl and Russ Feingold, both Democrats, to encourage their delegates to support raising caps on member business lending and to oppose legislation that would regulate interchange fees. They also touched on the need for secondary capital for credit unions. “I have strong sympathy for the role you play in your communities,” Feingold told credit union representatives. He also noted that the Wisconsin credit union representatives presented him with some solid arguments for raising the cap on member business lending. Kohl also commended credit unions for their work, especially efforts to improve financial literacy in schools. “All areas of Wisconsin appreciate the service that you provide,” Kohl said. “I am very proud of what you do. Our relationship has been strong, and it will continue to be strong.” More than 4,000 credit union employees and activists from across the country have attended CUNA's GAC, which ended late last week.

Small biz owners write Congress to support CUs

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WASHINGTON (3/1/10)--While Credit Union National Association (CUNA) representative Ronald Covey testified before a joint House committee hearing on Friday, credit union advocacy on the Hill was also taking place at other levels, with credit union members that are also small business owners testifying on credit union’s behalf. The testimony came in the form of 400 letters from both longtime and rookie small business owners who employ as few as 15 and as many as 100 employees in fields as disparate as medicine and manufacturing. Fourteen of the letters were collected by Rep. Paul Kanjorski and were submitted for the record during Friday’s joint House committee hearing on small business lending, and a total of 400 letters have been sent to various Representatives and Senators in Washington. In the letters, the business owners testified on the boost that credit union lending has provided to their businesses. Many of these business owners were rejected by their banks when they came looking for loans, and turned to their community credit unions for the funds needed to pay their employees and take care of both themselves and other business expenses. In his testimony delivered Friday before the House finance and small business committees, Covey said that restricting business lending by credit unions “does a great disservice to business owners everywhere, and stymies job growth.” (See related story: CUNA to Congress: MBL restrictions harm job growth.) CUNA has estimated that legislation that would increase the “de minimis” threshold of a member business loan and lift the current member business lending cap of 12.25% to 25% of a credit union’s assets could create as many as 108,000 new jobs during the first year following its enactment. Such legislation, which is currently awaiting action in both the House and the Senate, would also create as much as $10 billion in new funding for small businesses over the course of a year, and would not cost a dime of taxpayer money.

MBL backers increase after CU Hill visits

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WASHINGTON (3/1/10)--Credit union advocacy gained great results during last week’s Credit Union National Association (CUNA) Governmental Affairs Conference (GAC), with various credit union representatives securing 16 new co-sponsors for legislation that would increase the 12.25% of assets cap on member business lending by credit unions. The legislation in question, H.R. 3380 and S. 2919, 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 adding of these new cosponsors happened as 4,000 credit union representatives blanketed Capitol Hill during CUNA’s GAC, meeting with lawmakers on top credit union issues such as interchange and increasing the MBL cap. The House version of the bill is now also cosponsored by Rep. Carolyn Maloney (D-N.Y.), Rep. Chellie Pingree (D-Me.), Rep. Carolyn Kilpatrick (D-Mich.), Rep. James Langevin (D-R.I.), Rep. John Sarbanes (D-Md.), Rep. Elton Gallegly (R-Calif.), Rep. Gary Peters (D-Mich.), Rep. Larry Kissell (D-N.C.), Rep. Candice Miller (R-Mich.), Rep. Patrick Kennedy (D-R.I.), Rep. Alan Grayson (D-Fl.) Rep. Christopher Carney (D-Pa.), Rep. Steve Kagen (D-Wisc.), Fortney Stark (D-Calif.), Rep. Gus Bilirakis (R-Fl.) and Rep. Neil Abercrombie (D-Hi). Senators Bernie Sanders (I-Vt.) and Arlen Specter (D-Pa.) signed on to support S. 2919. (See related story: GAC grassroots advocacy gets results)

CUNA to Congress MBL restrictions harm job growth

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WASHINGTON (3/1/10)--Restricting credit union business lending “does a great disservice to business owners everywhere, and stymies job growth,” St. Mary's Bank CU President/CEO Ronald Covey told assembled lawmakers on Friday.
Click to view larger image Testifying on behalf of CUNA, Ronald Covey said his credit union and others should be able to put more money back into their communities through increased member business lending. (CUNA Photo)
Testifying on behalf of the Credit Union National Association (CUNA) before both the House Financial Services Committee and Small Business Committee, Covey said that his credit union does not “see a scarcity of credit-worthy business borrowers.” Rather, he said, given the demand that his credit union faces for loans, “it is difficult to understand why” his credit union “should not be able to put more money back into the community, into the hands of hard working business owners, so they can employ more people and create more opportunities.” The hearing, which took up much of the workday on Friday, centered on the condition of small business and commercial real estate lending and featured testimony from regulators, small business owners, and lenders. In his testimony, Covey said that lending to members who own small businesses is a central part of credit union business practices. Covey said that his credit union has an average loan size of under $200,000 and currently lends a total of $75 million in funds through 959 member loans. However, Covey added, with 2,201 members who own small businesses, the potential amount of loans that could be made by his credit union is “much greater.” According to CUNA estimates, lifting the member business lending cap to 25% of a credit union's assets would result in $10 billion in new capital for small businesses and could potentially create as many as 108,000 new jobs within one year. Further, CUNA estimates that 60% of the business loans in credit unions affected by the current statutory cap are in credit unions that are within one month to three years of having to sharply curtail business lending because of the cap. Regulators also addressed credit union concerns during an earlier panel, with Treasury Assistant Secretary for Financial Stability Herbert Allison saying that the Treasury intends to continue its ongoing dialogue with credit unions and the National Credit Union Administration in order to better understand the needs of credit unions. Commenting on the hearing, CUNA Senior Vice President of Legislative Affairs John Magill said, "This was a good vetting of member business lending issues for credit unions. The lawmakers did not question, not did the bankers dispute, the facts that more business lending by credit unions to their members is good for the country--good for the economy." Also at the hearing, U.S. Small Business Administrator Karen Mills said that her organization is discussing the expansion of its Community Development Financial Institution (CDFI) programs with both individual CDFIs and the U.S. Treasury.

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.

Mica notes CU boots on the ground in Hill publication

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WASHINGTON (2/25/10)--Self-declared “flaming moderate” and Credit Union National Association President/CEO Dan Mica urged his K Street colleagues to be "particularly mindful" of the need to avoid being perceived as a Republican or Democratic organization in today's more polarized political environment. Mica, who in his latest monthly installment of The Hill's "K Street Insider" column, warned against leaning too far to either the left or right, has learned to avoid this from his years of experience in an evenly split legislative district while serving as U.S. congressman from south Florida. This type of district gave him "great latitude and, at times, massive headaches" from knowing that whenever he voted, he would upset "nearly half" of his constituency. As a result, he eliminated the 10% to 15% of constituents on the fringes and stuck to the middle ground. Mica said the more than 4,000 credit union activists in Washington this week visiting Capitol Hill during CUNA's Governmental Affairs Conference would be "particularly mindful" to avoid being perceived as Republican or Democrat when lobbying on behalf of credit unions, which have bipartisan support in Congress. While "we all have our (personal) preferences," Mica said he knows that "the key to lobbying for associations such as CUNA is is keeping the eye on the agenda and what is best for the organization," adding: "There is wisdom in being neutral and keeping one’s political passions focused on the collective cause." Mica is one of a select group of former policy makers who write The Hill's "K Street Insider" column in rotation each month.

CUNA blog offers constant coverage of 2010 GAC (02/24/2010)

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WASHINGTON (2/25/10)--Up-to-the-minute coverage of the latest news and notes from the Credit Union National Association's (CUNA) 2010 Governmental Affairs Conference (GAC) will continue to be available on the GAC Blog until the conference closes later today. More than 4,000 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, Web Assistant Editor Tiffany Stronghart, and Communications Specialist Darryl Tait continue to 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. The League of Southeastern Credit Unions is also getting in on the act, posting its own videos online at www.lscu.coop. Use the resource links below to access the GAC Blog and GAC videos from the League of Southeastern Credit Unions.

Sherman MBL alt. capital opposition doesnt make sense

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WASHINGTON (2/25/10)--Rep. Brad Sherman (D-Calif.) on Wednesday told credit union advocates to be proud that they were attending the largest assemblage of financial institutions “where no one has taken any TARP money.” The assemblage, the Credit Union National Association's Governmental
Click to view larger image Click for larger view
Affairs Conference (GAC), officially ends today, and Sherman told attendees at Wednesday's general session that he would work toward legislative fixes to increase the member business lending cap, as well as provide alternative sources of capital for credit unions. “Wall Street needed more capital-we gave them more than $700 billion. Look at credit unions. No one is asking for a bailout or a federal investment of money. It doesn’t make sense how Congress can inject capital over here and serve as a barrier over there,” Sherman said. Sherman also reflected on some of his earlier work on behalf of credit unions, citing legislation to allow credit unions to provide remittances. Sherman also noted legislation he expects will pass that creates a fund to bail out failing institutions. At one time that bill included assessments on some credit unions, but now excludes every credit union in the country, he said.

Dean Scarborough agree to disagreeexcept on CUs

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WASHINGTON (2/25/10)--When Howard Dean and Joe Scarborough entered the stage to close Wednesday’s general session, they immediately agreed to disagree. But one of the things they did agree on was the fact that credit unions need the ability to expand member business lending, and they need alternative capital. Dean, former head of the Democratic National Committee, and Scarborough, host of MSNBC’s “Morning Joe,” spoke at the Credit Union National Association’s Governmental Affairs Conference in Washington, D.C., which wraps up today. The former politicians gave advice to credit unions on how to get what they need from lawmakers. Visits to Capitol Hill aren’t enough, Dean said. “You need a grassroots effort” to push your initiatives through. But get members involved because the peoples’ “votes will do it.” Scarborough advised credit unions to “use your grassroots army like nothing else.” “I’ve never seen a better lobbying effort in the late 1990s than what credit unions put forth,” Scarborough said, referring to credit unions’ campaign to pass H.R. 1151. “It wasn’t coming from K St. It came from credit union members, e-mailing me, people coming to my office.” Though Scarborough and Dean disagreed on items such as healthcare and jobs, Scarborough noted some positive bipartisan developments. He said he expects a Senate jobs bill to pass with Republican support, and Republicans and Democrats are teaming up to discuss tax cuts. With high unemployment rates, he also added that a jobs bill would help the economy grow.

Inside Washington (02/24/2010)

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* WASHINGTON (2/25/10)—Senate Banking Committee Chairman Christopher Dodd (D-Conn.) has delayed the release of his regulatory reform bill. His office said last week the bill would be introduced soon, but pending votes on health care legislation and other disputes over the reform bill will likely prevent it from surfacing (American Banker Feb. 24). Dodd has been working on a discussion draft that he released in November. He had aimed to pass the bill out of the committee in March … * WASHINGTON (2/25/10)—The Volcker rule—which aims to ban proprietary trading and is named after former Federal Reserve Board Chairman Paul Volcker--could be scrapped, according to financial observers (The Wall Street Journal). President Barack Obama proposed the rule in January as part of a broader package to reform financial regulation. Some lawmakers have resisted the measure. Next week, Senate Banking Committee Chairman Christopher Dodd (D-Conn.) and other lawmakers could introduce a plan that would provide regulators with more discretion to limit risky trading at banks. The measure wouldn’t ban trading outright, however … * WASHINGTON (2/25/10)--Commercial banks and savings institutions insured by the Federal Deposit Insurance Corporation (FDIC) reported a profit of $914 million in the fourth quarter of 2009, a $38.7 billion improvement from the $37.8 billion net loss the industry sustained in the fourth quarter of 2008, but still well below historical norms for quarterly profits, the FDIC said in a release Tuesday. More than half of all institutions---50.3%--reported year-over-year improvements in their quarterly net income. "Consistent with a recovering economy, we saw signs of improvement in industry performance," said FDIC Chairman Sheila C. Bair. "But as we have said before, recovery in the banking industry tends to lag behind the economy, as the industry works through its problem assets." Other findings FDIC noted: full-year revenues were higher than in 2008, and the number and assets of institutions on the agency’s problem list rose to 702 as of December, from 552 on Sept. 30. Assets of problem institutions increased to $402.8 billion from $345.9 billion. FDIC’s liquid resources also rose to $66 billion at year-end from $23 billion at the end of September … * WASHINGTON (2/25/10)—The Treasury Department will resume its supplementary financing account to lend to the Federal Reserve, the department said Tuesday. The department created the account in September 2008, but it was halted because it almost reached its mandatory debt ceiling, said American Banker (Feb. 24). Congress voted last year to increase the limit to $200 billion from $5 billion. The Treasury will host $25 billion auctions during the next eight weeks. The first auction was to begin Wednesday … * WASHINGTON (2/25/10)--Delivering the Federal Reserve's semiannual monetary policy report before the House Financial Services Committee on Wednesday, Fed Chairman Ben Bernanke said that the Fed will need to maintain extremely low interest rates over an "extended period" to aid the United States economy as it continues its recovery. Bernanke added that the Fed is considering additional moves to make when interest rates go back up...

NCUAs Fryzel discusses alt capital CU topics

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WASHINGTON (2/25/10)—The National Credit Union Administration (NCUA) believes it is up to the U.S. Congress to determine policy on alternative capital for credit unions and the agency stands ready to implement new options for credit unions if Congress decides it is needed.
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So says NCUA board member Michael Fryzel, who was among the Wednesday speakers at the Credit Union National Association’s (CUNA’s) Governmental Affairs Conference. “This is a tool many credit unions feel will help them build capital and remain competitive,” he said. “It is certainly not for all credit unions, and especially not for those struggling to remain viable.” Support for broadening sources of capital was among several issues discussed by Fryzel during the annual session. He said the NCUA was aware that the credit union commitment to the consumer was especially relevant during the current financial crisis. On the alternative capital issue, Fryzel said, “Congressional action (to authorize new capital sources) is required and NCUA has communicated to Congress that they may wish to explore giving this authority to credit unions.” He added, “..And if they do, we stand ready to implement the required guidelines to make acquiring alternative capital a safe and sound practice.” On another subject Fryzel said the NCUA’s study of existing merger criteria remains a high priority. He acknowledged credit union concerns that well-managed credit unions are not included in the merger-consideration process and are unable to grow because of that. He also noted there is some belief that the procedures used to consider merger candidates are not clear and that it results in distrust of the system. The NCUA is committed, Fryzel said, to implementing changes where needed to make the process open and competitive. Fryzel noted that one of the important missions of CUNA’s GAC was visits of credit union representatives to congressional offices. He said this was especially critical in this time of economic crisis. “..This year more than ever, the efforts you make and the progress you achieve will resonate for years to come,” he said.

Dodd CUs are good for America

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WASHINGTON (2/25/10)--Sen. Christopher Dodd (D-Conn.) encouraged credit unions to continue to expand their activism in politics and finance, and help the nation recover from current economic stresses. Dodd, who is chairman of the Senate Banking Committee, has long been
Click to view larger image CUNA honored retiring Sen. Christopher Dodd (D-Conn.) with a resolution citing the federal lawmaker's many accomplishments in both the Senate and the House. Dodd returned the compliment saying he will "always remain a strong supporter of credit unions." (CUNA photo)
involved in shaping legislation impacting financial institutions. He is retiring this year after five terms in the U.S. Senate and two in the U.S. House. During a speech Wednesday to the Credit Union National Association’s (CUNA’s) Governmental Affairs Conference (GAC), the Connecticut Democrat reminded the audience that credit unions have been a force in helping citizens realize the American dream. "Now," he said, "the dream is slipping away because of greed within the financial system, and failure of the regulatory structure." Dodd, a consistent supporter of credit unions, said the challenge to correct this fits in with the credit union mission. "Credit unions are good for America," he added. "They serve 90 million credit members who would have nowhere to turn." The senator was honored during the GAC meeting in a CUNA resolution citing his contributions. Dodd returned the compliment. "I leave the U.S. Senate without knowing what my future will be,” he said, "but I know one thing—that is I will always remain a strong supporter of credit unions." Reporting from the GAC, Reuters wrote that Dodd told reporters after his speech that he expects lawmakers will soon be able to reach a bipartisan agreement on financial regulatory reform—working past an earlier seeming impasse. When pressed for a timetable, Dodd declined to give specifics but added he expected to get agreement “soon.” Taking the GAC podium just before Dodd, Sen. Mark Udall (D-Colo.) ventured that a comprehensive Senate regulatory reform package could be on the floor of the Senate by May. (See related story: Udall ‘excited’ about MBL bill potential.)

CUs can help put Americans to work says Perlmutter

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WASHINGTON (2/25/10)--It’s time to put more Americans to work and
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that’s where credit unions come in, Rep. Ed Perlmutter (D-Colo.) said Wednesday. “We need to get money to small businesses so they can put people back to work,” he said, confirming his support for easing limitations on credit union member business lending. He was addressing the Credit Union National Association's Governmental Affairs Conference, which has drawn more than 4,000 credit union representatives to Washington, D.C. Perlmutter noted the nation’s ongoing economic challenges, but urged attendees not to forget the turmoil from which the United States has emerged:
* From 2007 to February 2009, the Dow Jones Industrial fell 7,000 points. During 2009, it gained 4,000 points; * In the fall of 2008, Fannie Mae and Freddie Mac went into conservatorship and there were several major bank failures; and * In January 2009, the economy lost 785,000 jobs. In January 2010, 20,000 jobs were lost. “That’s not good, but it’s much better,” Perlmutter said.
“There’s a light at the end of the tunnel,” he continued. “You’ll serve a great purpose in getting us to that light.” Perlmutter thanked Colorado credit unions for supporting his political career from the start, beginning with a 2004 run for the state senate. “In Colorado, if you have credit unions’ support, it’s hard not to win a campaign. There a lot of Colorado credit union people here today, and they know they have a friend in me.”

Bachus Congress has more reg reform work ahead

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WASHINGTON (2/25/10)—The ranking Republican member of the House Financial Services Committee said Wednesday that he thinks the U.S. Congress has missed the mark and has not addressed some issues that
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played a prominent role in the recent financial meltdown. “The CEO of Toyota was on Capitol Hill yesterday and he said he’s not sure if they’ve fixed all their problems,” Rep. Spencer Bachus, of Alabama, told attendees at the Credit Union National Association’s Governmental Affairs Conference here. “The same could be said of Congress--we’re not sure if we’ve fixed all the problems that caused the recent financial meltdown.” Bachus added, “We need to be careful not to paint with too broad of a brush as we try to identify the culprits and enact solutions. All financial institutions didn’t cause the meltdown. All Wall Street firms weren’t part of the problem.” Bachus identified areas that he believes need additional attention from federal lawmakers as they scrutinize the financial meltdown:
* Credit reporting agencies: “We have not adequately addressed the role they played in all this.” * Housing policy: “We all assumed everyone should own a home, but not everyone could afford a home. Consequently, people took on too much debt.” * Too big to fail: “The thinking that some institutions are too big to fail is wrong because that implies institutions like yours are too small to save.” * Spreading mortgage risk. “Taxpayers—even those who rent apartments—have now assumed 95% of the mortgage risk in the U.S., and that’s not fair.”

New financial regulation wont harm CUs Frank says

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WASHINGTON (2/25/10)—Congress is about to pass the most significant piece of financial regulation legislation since the New Deal, but the legislation will not “make it harder for you to perform your services,” Rep. Barney Frank (D-Mass.) told credit union representatives Wednesday.
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Frank spoke at the general session of the Credit Union National Association’s (CUNA’s) Governmental Affairs Conference. He also emphasized that credit unions didn’t cause the nation’s economic problems, and therefore would not be penalized. Repeating a remark he has made publicly over the last year, Frank told attendees of the conference, “If mortgages were only made by credit unions, we wouldn’t be in this crisis.” The crisis was largely caused by unregulated financial institutions—and if the new legislation is enacted, check cashers and payday lenders would be most affected by the changes. Frank also noted that in drafting the legislation, lawmakers will take the principles that credit unions operate under and apply them to all financial institutions. Frank also spoke about three significant items of interest to credit unions:
* Overdraft fees: Legislation has been proposed that would limit overdraft fees to once a month, for a maximum of six times per year. CUNA opposes this legislation because it would hinder credit unions’ ability to provide overdraft protection to members. Frank said that limiting the fees would be a mistake; * Member business lending: The issue is very controversial, and therefore lawmakers in the House “don’t want to walk the plank without knowing what the Senate will do,” Frank said. However, he encouraged credit unions to continue lobbying in favor of an increased cap on business loans to their members; * Interchange fees. CUNA opposes government intervention in setting interchange fees. Frank said they would not be in the agenda this year.
Overall, Frank expressed his support for increasing the credit union movement’s powers to benefit the economy. “Keep up your good work,” he said.

Udall excited about MBL bill potential

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WASHINGTON (2/25/10)--Sen. Mark Udall (D-Colo.) on Wednesday told credit union representatives at the Credit Union National Association's (CUNA) Governmental Affairs Conference (GAC) that Congress would pass his member business lending bill, S. 2919, with their help.
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Udall's bill would allow credit unions to increase the number and amount of loans given to members with small businesses by lifting the MBL cap to 25% of assets. The bill would also raise the "de minimis" threshold for a loan to be considered a member business loan to $250,000. Udall said that he has heard "scores of stories nationwide" that make him excited about the potential of his bill. CUNA has estimated that the MBL reforms would create over 100,000 new jobs and increase small business lending by $10 billion within the first year following enactment. For Udall, unemployment remains high on his list of concerns, and while federal stimulus funds have helped alleviate this issue somewhat, he said that Congress must help employers expand their businesses and hire again. The U.S. Congress must look for "job creation policies that are deficit neutral," and find "simple cost effective ways" to do such, Udall added. Congress should not allow any further government help for the banks until the government does more to help credit unions that could, in turn, help businesses, without spending a dime of taxpayer money. Addressing the ongoing debate over financial regulatory reform, Udall said that he is "familiar" with credit union concerns on many regulatory issues, adding that he would judge any potential regulatory reform proposals on whether or not they protect taxpayers and consumers. Udall hinted that a comprehensive Senate regulatory reform package could be on the floor of the Senate by May. Sen. Christopher Dodd, Senate Banking Committee chairman, also indicated at the GAC that a regulatory reform package would be ready “soon.” (See related story: Dodd: CUs are good for America) Closing his remarks, Udall said that he is awed by the "passion" of both credit union members and employees have for credit unions, and called the credit union movement an example of the "American spirit."

Regulators reveal hot exam topics for 2010

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WASHINGTON (2/24/10)—Staff from the National Credit Union Administration (NCUA) and two state-level financial regulators revealed some of the hottest exam topics that they will focus on this year—including indirect lending and risk concentration, which NCUA will soon provide guidance on in Letters to Credit Unions. The topics were revealed in a Tuesday breakout session at the Credit Union National Association’s Governmental Affairs Conference. The session was moderated by Tom Candon, deputy commissioner of banks for Vermont. Joining him were: Jerrie Jay, North Carolina Credit Union Division administrator; Melinda Love, director of the office of examinations and insurance at NCUA and president of the National Credit Union Share Insurance Fund; Joe Ostrowidzki, NCUA division of insurance director; and Wendy Angus, NCUA director of risk management. Regarding concentration of risk, Angus suggested that the credit unions document their board’s approved policies and concentration risk limits, and risks in totality to net worth. Credit unions also should stress-test their own portfolios. Such documentation could be valuable during an examination process, she told the session. “It doesn’t have to be fancy,” Angus said. Consider economic factors in a certain area of the portfolio and how they could have an impact on your credit union, she advised. For real estate lending, credit unions should get as much data on borrowers as they can, including credit and collateral values. Larger credit unions may want to invest in third-party models to do this, she said. Ostrowidzki noted that real estate loan modifications have increased, and credit unions generally have the greatest chances of success with modifications if they lower monthly payments for borrowers. Ostrowidzki added that for real estate portfolio risk assessment, examiners could focus on areas such as management’s process to project losses, modification policies and procedures, processes to track modified loans, abilities to segregate troubled debts, and their understanding of increased risk for modified loans. For indirect lending, the elements of a comprehensive due diligence plan for credit unions could include a planning process, a review process to assess vendor risk, and a risk management process, Ostrowidzki said. He noted that the number of credit unions participating in indirect lending is on the rise, and indirect lending can expose a credit union to a host of risks. While delinquencies have reduced, charge-offs have increased, he said.

Inside Washington (02/23/2010)

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* WASHINGTON (2/24/10)—The U.S. Treasury Department is considering changes to the Home Affordable Modification Program (HAMP), which include forcing lenders to delay foreclosures by one month if they denied a borrower a mortgage modification. Treasury also is considering allowing trial modifications to be extended by another two to five months to make up for delays in receiving paperwork from bankruptcy courts (American Banker Feb. 23). The Obama administration and the Treasury also are considering a moratorium on certain types of foreclosures. The HAMP program has been criticized by financial observers as ineffective … * WASHINGTON (2/24/10)—Financial observers are debating whether tackling a resolution process for systemically significant institutions is a national or global issue. As the U.S. Congress continues to work toward a plan to help systemically important institutions in the event of failure, the International Monetary Fund is studying whether it is feasible to charge taxes on internationally active institutions to make up resolution costs that the government normally absorbs. A report by Adair Turner, head of the United Kingdom’s Financial Services Authority, indicates why global coordination is needed. It cited the failure of Lehman Bros., which had implications for the United States and abroad. Some argue that creating a global standard is too complicated because it deals not only with how “sovereign countries regulate banks, but how they deal with bankruptcy,” Susan Krause Bell, former senior official at the Office of the Comptroller of the Currency, told American Banker (Feb. 23). Robin Lumsdaine, a former Federal Reserve Board official, said she could see why some might want to coordinate globally, but recognized challenges. She also discussed what it would entail if countries decided to create a fee standard to mitigate resolution costs. In terms of charging institutions extra fees, one must determine the principles on the banks that qualify for the fees, how the fees are based and how they would be used to resolve institutions, she said … * WASHINGTON (2/24/10)—Fannie Mae has opened a mortgage help center in Miami, Fla., to assist struggling borrowers, according to a press release. Services available at the center include reviewing the borrower's loan, discussing foreclosure alternatives, collecting the required documents for the federal Home Affordable Modification Program and reaching a decision on any pending loan workout efforts. Fannie, which is also partnering with the Neighborhood Housing Services of South Florida, will provide information and clarify expectations for the foreclosure prevention process and work to counteract local scams and groups that charge fees for modifications and foreclosure prevention services …

CUNA witness to testify on small business lending

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WASHINGTON (2/24/10)--St. Mary's Bank CU President/CEO Ronald Covey, who is testifying on behalf of the Credit Union National Association (CUNA), will be among those discussing the condition of small business and commercial real estate lending before members of the House Financial Services Committee and Small Business Committee on Friday. 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 will also testify in a separate panel. Other industry representatives and leaders will also testify dring the hearing. Small business lending will be one of the many issues highlighted by credit unions and credit union leagues as they hike Capitol Hill to meet with their state representatives 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. The House Financial Committee is also scheduled to hear Federal Reserve Chairman Ben Bernanke's Semiannual Monetary Policy Report later today, and will discuss finance industry compensation during a Thursday hearing.

CUNA blog offers constant coverage of 2010 GAC

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WASHINGTON (2/24/10)--Up-to-the-minute coverage of the latest news and notes from the Credit Union National Association's (CUNA) 2010 Governmental Affairs Conference (GAC) will continue to be available on the GAC Blog until the conference closes on Thursday. More than 4,000 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, Web Assistant Editor Tiffany Stronghart, and Communications Specialist Darryl Tait continue to 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 link below to access the GAC Blog.

Hyland The future is now

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WASHINGTON (2/24/10)—After entering the stage of the Credit Union National Association’s (CUNA) Governmental Affairs Conference (GAC) to the tune of, “It’s the End of the World as We Know It,” by rock band R.E.M, National Credit Union Administration (NCUA) Vice Chair Gigi Hyland told credit unions that the future is now. Hyland spoke during the general session of the conference Tuesday. She acknowledged that 2010 will be a tough year for credit unions, evidenced by data from previous recessions showing a lag effect on credit unions recovering from a recession. However, she encouraged credit unions to seize the future. To attendees who might not be ready to think about the future just yet, she said: “If not now, when?” The credit union movement is not the credit union stationary bicycle. “It’s the end of the world as we know it and it’s time for the movement to do something,” Hyland added. Hyland also discussed her feelings on NCUA’s role in the credit union movement. She said her vision is something called “constructive conflict.” She referenced a recent article in which Dr. Sidney Wolfe, director of health research at Public Citizen and a longtime drug industry critic, described the relationship between the Food and Drug Administration (FDA) and the companies it monitors. The FDA must maintain constructive conflict, otherwise, what’s the point of the FDA, he questioned. The same is true of NCUA, she said. NCUA must maintain constructive conflict with the credit unions it regulates and insures. “The key word is constructive. I believe ‘constructive’ means getting out of your way to serve your members. This must be balanced by ensuring you do so safely and soundly with appropriate due diligence. My vision for the future is a safe and sound credit union system that is dynamically focused on serving members,” she said. NCUA has sent out recent supervisory letters on earnings, supervision of community development credit unions, and member business lending (MBL) and its risks. Hyland supports lifting the cap on MBLs—but said that if the cap is lifted, there must be safeguards in place. Hyland also is working on a white paper about supplemental capital—capital that credit unions do not currently have access to. She has consulted with regulators in the states and internationally on the issue—and also with CUNA staff. The paper is coming soon, she said. Hyland also noted that being a credit union CEO is tougher than ever. She encouraged credit union CEOs to collaborate and educate, while encouraging credit union volunteers to check the strategic directions of their credit unions and ensure that the board and staff reflect the diversity of membership. And lastly, credit unions need to engage young people. Hyland pointed out members of “Crash the GAC,” a group of young conference attendees, in the audience. “Take a look back there,” she said. “That’s our future.”

SBAs Mills CUs critical to growing businesses

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WASHINGTON (2/24/10)--U.S. Small Business Administrator Karen Mills on Tuesday told thousands of credit union representatives gathered at the Credit Union National Association's (CUNA) Governmental Affairs Conference (GAC) that their financial institutions are "critical" to growing businesses and creating new jobs, adding that her "impression" is that "credit unions really know what is going on in their communities." Mills also commended credit unions for their shared goal of supporting small business and helping them create jobs by "giving them the tools that they need" to prosper. Mills said that credit unions represent the fastest growing segment of financial institutions taking advantage of Small Business Administration (SBA) lending programs, adding that credit unions have represented 10% of financial institutions that have returned to the SBA program over the past year and have taken part in over 1700 loans related to the recovery act. Mills also reminded credit unions that the SBA currently guarantees 90% of each loan made under its program, and that same amount of each SBA loan does not count against a credit union's business lending cap. Portions of these loans may also be sold on secondary markets, she added. Mills encouraged GAC attendees to participate in a March 25 CUNA audio conference call on SBA loans. The call, which will feature commentary from both Mills and National Credit Union Administration Chairman Debbie Matz, will provide credit unions with up-to-date information on how to make SBA loans or expand their current SBA lending programs. To register for the audio conference call, which will also feature CUNA President/CEO Dan Mica and Senior Vice President/Deputy General Counsel Mary Dunn, use the resource link.

FHFA seeks comment on changes to use of secured loans

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WASHINGTON (2/24/10)--The Federal Housing Finance Agency (FHFA) on Tuesday released for public comment proposed rules that amend its existing rules on advances to allow Community Financial Institution members to use secured loans "for community development activities as eligible collateral for advances" and to use "long term advances to fund community development activities." The amendments, which apply to the Federal Home Loan Bank Act, would also transfer the authority over advances and new business activities from the Federal Housing Finance Board's (FHFB) regulations to the FHFA and would classify secured loans from financial institutions to their affiliates or members as advances. Comments on the FHFA proposal must be received by April 26. For the announcement, as published in the Federal Register, use the resource link.

Barr Treasury backs CU help to small business

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WASHINGTON (2/24/10)--Calling credit unions an essential part of the "fabric" of communities throughout the country, Assistant Treasury Secretary for Financial Institutions Michael Barr on Tuesday told attendees of the Credit Union National Association's (CUNA) Governmental Affairs Conference that the Treasury would work with credit unions to expand their small business lending activity.
Click for slide show Michael Barr, assistant secretary for financial institutions for the U.S. Treasury Department, said a main goal of the Obama administration is to bolster the economy and create new jobs, but that it is also working to \"reform a financial regulatory system that remains fundamentally flawed.\" Specific to credit unions, BARR told attendees at the CUNA Governmental Affairs Conference (GAC) that Treasury wants to work with credit unions to expand their small business lending activities. (CUNA photo)
CUNA and credit unions are working to have legislation that would increase the cap on member business lending (MBL) to 25% of a credit unions assets added to a jobs bill in either the House or the Senate. This MBL legislation will be a key topic of discussion when credit union delegations meet with their state representatives this week. Barr also commented on the Treasury's recent work with the National Credit Union Administration (NCUA), saying that the relationship between the two regulatory bodies has never been stronger than it is today. The NCUA and Treasury have worked together to resolve issues affecting credit union legacy assets. The Treasury also offered $6 billion in funds to the NCUA to help shore up the corporate credit union system, and Treasury backed the NCUA's wishes to remain independent in the event that the ongoing financial regulatory reforms result in a single regulator for financial institutions. While a main goal at this time is buffeting the economy and creating new jobs, Barr said that the Treasury and the Obama administration are also working to "reform a financial regulatory system that remains fundamentally flawed." "These flaws, if not corrected, will weaken long-term growth and expose families, businesses, and taxpayers to unnecessary risk," Barr added. One method of correcting these flaws is through the creation of the proposed Consumer Financial Protection Agency (CFPA), and while there has been significant debate over the authority and the very existence of this proposed regulatory agency, Barr said that the CFPA bill that passed the House "leaves over 99% of credit unions with the [NCUA] as their primary federal consumer compliance supervisor." "The CFPA will concentrate supervisory resources on big banks and nonbanks" to "ensure" that the financial marketplace that credit unions compete in is "fair and competitive." Echoing the Obama Administration's opinion on the matter, Barr added that the CFPA would "make banks and credit unions safer and sounder." The proposed CFPA would seek to protect consumers of financial products through the creation of a powerful independent agency with extensive rulemaking, oversight, and enforcement tools. However, legislators are reportedly considering a wide range of alternatives to the CFPA, and it is not certain that the CFPA will be included in the Senate's financial regulatory reform package. Barr's speech was also covered in The Washington Post, Bloomberg, and Business Week.

Greenspan addresses CU questions

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WASHINGTON (2/24/10)--Former Federal Reserve Board Chairman Alan Greenspan says the nation’s economy cannot absorb another economic stimulus package because of the impact on the deficit. Furthermore, he pointed out that, in the current political climate, it is virtually impossible to raise taxes or reduce government services, and in the kind of services economy that exists now in the United States, future economic growth is likely to be slow. He made the observations during a unique question-and-answer session during the Credit Union National Association’s Governmental Affairs Conference. Greenspan, sitting on the stage in an easy chair, spoke for about 10 minutes, and then responded to questions from the audience of credit union executives for about 45 minutes. The ex-Fed chairman, who held that post for 18 ½ years, said the current economic collapse resulted primarily from the inability of the market to distribute risk. He said the structure had never been faced with this type of massive challenge and simply broke down. In response to a question, Greenspan said he did not believe that the decision to abolish the Glass-Steagall Act was responsible for the current crisis--nor would reenactment of a similar statute prevent it in the future. In the wake of the devastating stock market crash in 1929, the U.S. Congress passed what is commonly referred to as the Glass-Steagall Act. The act separated investment and commercial banking activities, among other prohibitions intended to bolster safety. Greenspan said current studies, employing state of the art research technology, have found that the involvement of commercial banks in investment markets was not as much of a factor in the Great Depression has had been believed. “Glass-Steagal set up an artificial barrier,”he added, “and putting it back on does not seem to me a constructive act.” He was asked whether government emphasis on Community Reinvestment Act (CRA) lending was a factor in creation of the housing bubble. Greenspan opined that it was. The ex-Fed chairman said that in the mid-90s, Fannie Mae and Freddie Mac accelerated efforts to meet affordable housing goals, and that this contributed to the market pressures. Greenspan said one of Washington’s biggest problems right now is the partisan gridlock. He recalled nostalgically the days when Gerald Ford was president, and Rep. Thomas (Tip) O’Neill was House Speaker. “During the day,” he said, “they attacked each other, sometimes vitriolically, but at the end of the day they had a bourbon together over at the White House.”

Kanjorski praises CUs as part of nations recovery

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WASHINGTON (2/24/10)—Rep. Paul Kanjorksi (D-Pa.), a long-time proponent of credit union issues, said Tuesday that credit unions should “pat yourselves on the shoulder” for being part of the nation’s recovery. Kanjorksi, who made his remarks to the thousands of credit union
Rep. Paul Kanjorksi (D-Pa.), a long-time proponent of credit union issues, told credit unions they have been part of the nation's recovery and they should give themselves a pat of congratulations. (CUNA photo)
representatives attending the Credit Union National Association’s Governmental Affairs Conference (GAC) here this week, recalled his appearance at the GAC last year when the country’s economy was in a bleak state. Now, he said, credit unions can take some of the credit for moving the country toward a recovery. Kanjorski, who is a principal co-sponsor of legislation in the House that would raise the credit union member business lending cap to 25%, up from 12.25% (H.R. 3380), lamented the current low cap. He said, “(W)e put the cap on member business lending” into H.R. 1151—the Credit Union Membership Access Act that Kanjorski co-sponsored about a decade ago. “It didn’t exist before then. It hasn’t worked too well.” “We need help to provide credit to businesses and provide jobs” without costing the taxpayers one cent, he said. “If we move on lifting the cap quickly, we’ll inject $10 billion into the economy through small businesses and provide 108,000 new jobs.” Kanjorski, along with two other H.R. 3380 cosponsors, Reps. Ed Royce (R-Calif.) and Marcy Kaptur (D-Ohio), sent a letter Monday to each House member asking them to urge House leadership to add an MBL provisions to a jobs-creation legislative package. (News Now Feb. 23) Also at the GAC, Kanjorski asked for support for his “too big to fail” amendment in the House financial reform legislation. The provision would give regulators authority to keep an eye on the top financial firms and take appropriate and immediate actions. If not, “we’ll never outlive the fear, anguish, and anxiety of last year,” Kanjorski warned.

House Whip tells CUs Marshall your firepower

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WASHINGTON (2/24/10)--Rep. James Clyburn urged credit unions to marshal their political firepower to help resolve the financial crisis, adding that not all pending proposals to cure the current recession are in the interest of credit unions. Clyburn made the observation in a speech Tuesday before the Credit
House Majority Whip James Clyburn tells attendees at CUNA's Governmental Affairs Conference that he and his family have been involved with credit unions for years. (CUNA photo)
Union National Association‘s (CUNA) Government Affairs Conference (GAC). The South Carolina Democrat cited regulatory reform legislation, which he said should be amended to exempt credit unions. “Credit unions should be exempt from the risk provisions of the bill because credit unions are different,” he told the GAC. Clyburn, who is the House Democratic Whip, stressed that he and his family have been involved in the credit union movement for years, and the credit union influence needs to play a role in the current redesign of the financial structure. He also cited the importance of resolving the nation’s health care problems in easing the current economic recession, and the need to enact legislation to generate more employment. CUNA is urging lawmakers to lift a statutory cap on credit union business lending to members as a means to infuse more than 100,000 jobs into the jobs market and to bring $10 billion of new lending to small business members of credit unions within the first year of enactment.

Congress this week CUNA CUs watch for jobs bill vote

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WASHINGTON (2/23/10)--The House and Senate return to work this week, and while credit unions would not usually be overly concerned by the prospects of a job creation bill, the potential attachment of member business lending changes is meriting some attention. The jobs bill, the Hiring Incentives to Restore Employment (HIRE) Act, was introduced by Sen. Harry Reid (D-Nev.) earlier this month, and would provide tax credits for businesses that create jobs by granting employers social security payroll tax exemptions for any person they hire this year that has been unemployed for at least two months. The bill on Monday passed a cloture vote of 62 to 30. The Credit Union National Association (CUNA) is working with representatives on the Hill to attach legislation that would lift the member business lending cap to 25% of a credit union's assets, and CUNA plans to attach this legislation to a jobs bill at some point this year. Both employment and lending will be covered in congressional hearings scheduled for this week, with the House Financial Services Committee on Tuesday set to discuss whether additional stimulus is needed to create greater employment growth. That same committee on Wednesday will hear from Federal Reserve Chairman Ben Bernanke as he reports on the Fed's Semiannual Monetary Policy Report. Bernanke will also appear before the Senate Banking Committee on Thursday. The House committee will also be active on Thursday and Friday, with hearings on finance industry compensation and the condition of small business and commercial real estate lending in local markets scheduled, respectively. Credit unions and credit union leagues also will be active on the Hill,with plans to hike Capitol Hill to meet with their state representatives. During a legislative update Monday afternoon at the CUNA's Governmental Affairs Conference in Washington, D.C., CUNA’s legislative affairs staff briefed attendees on major legislative issues affecting credit unions. Some of the major issues CUNA staff noted:
* Member business lending (MBL). If caps on credit union member business lending are raised to 25% of assets from 12.25% of assets, $10 billion in new loans could be generated for the economy, creating 108,000 new jobs at zero cost to taxpayers; * Overdraft protection. A proposed bill would limit overdraft charges to one account per month and six charges per year. If this is enacted, credit unions would stop offering overdraft services, which means members would lose the benefit of that program; * Interchange fees, which support the debit and credit card programs that credit unions offer their members. Credit unions need to explain how debit and credit card programs help serve members; * The Community Reinvestment Act, which governs financial institutions to ensure they are adequately serving all aspects of their communities. Credit unions already serve their members and communities, CUNA staff said; and * Regulatory restructuring. The areas credit unions will most be interested in are systemic risk regulation and consumer protection.
CUNA staff leading the session included Ryan Donovan, vice president of legislative affairs; Richard Gose, senior vice president of political affairs; John Magill, senior vice president of legislative affairs, and Elizabeth Furey, director of grassroots advocacy for political affairs.

2009 financials see CUNA in healthy shape

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WASHINGTON (2/23/10)--The Credit Union National Association (CUNA), in its 2009 financial results released on Monday, reported an operating margin of $803,000 and a $6.8 million increase in net assets, an 185% increase from the results reported in 2008, returning CUNA firmly into the black. The financial results, which were announced at the Governmental Affairs Conference by CUNA Treasurer Pat Wesenberg,president/CEO of Stevens Point, Wis.-based Central City CU, showed 2009 operating revenues totaling $53.7 million and operating expenses totaling $52.3 million. CUNA's overall 2009 operating expenses were $6.9 million, or 12.3% below what was projected in the 2009 budget, and $4.6 million, or 8.6%, below the amounts reported in 2008. CUNA's net operating revenue for 2009 was $50 million, and the net operating expenses reported for that same period amounted to $49.2 million. These net operating revenues were $6.2 million, or 11% lower than projected in the 2009 budget, and $4 million, or 7.4% lower than the results reported in 2008. Revenues from operations declined by a total of $4.3 million, or 7% from the previous year, but these revenue declines were offset by expense savings that amounted to savings of $4.8 million, or 8.4% from 2008 expenses, Wesenberg added. CUNA reported a net operating margin of $1.4 million for 2009, and Wesenberg reported that CUNA has "effectively and prudently managed member assets" and generated a total of $9 million of positive operating income over the past six years. CUNA recognized 19.9% returns on its investment portfolio, a $4.9 million increase on the investment returns recorded in 2008.

Matz CUs have reason for long-term optimism

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WASHINGTON (2/23/10)--While the National Credit Union Administration (NCUA) recently has focused more on "addressing credit unions’ immediate problems,” NCUA Chairman Debbie Matz said that both the NCUA and the credit union movement in general "have stronger reason for long-term optimism" and "can again think of the credit union industry's longer-term potential" as the economy begins to recover. Before she began her formal address, Matz saluted outgoing Credit Union National Association (CUNA) President/CEO Dan Mica for his years of devotion to credit unions. Matz also thanked CUNA for its role in confronting the myriad challenges faced by credit unions in a difficult economic environment, and, turning to those very difficulties, said that the NCUA will closely monitor credit unions for any potential red flags. Specifically, the NCUA will look "very closely" at credit unions holding too many fixed-rate, long-term mortgages, and take additional actions to avert drains on the credit union system. In spite of a difficult economy, Matz reiterated that credit unions were one of the few parts of the financial system that did not buckle under the stress of the economic crisis, and continued to make loans, provide "advice and reassurance," modify mortgages, and help Americans regain their stability and financial confidence. After addressing the recent past, Matz outlined several areas where credit unions can make headway in the near future. These include expanding their online service offerings, offering low-cost, short-term loans to consumers “that are currently dependent on often harmful payday loan providers,” expanding member business lending by increasing or outright eliminating the current 12.25% of assets cap, and supplemental capital. Specifically, Matz said that increasing online offerings will reduce credit union expense ratios, "overcome physical distance, cost less and serve more members" while appealing to a "new generation of tech-savvy consumers, who expect more than face-to-face transactions at a teller window." Matz said that the NCUA, in conjunction with CUNA's Technology Council, will discuss the potential that increased use of new technology presents at an upcoming webinar this Spring. The NCUA later this year also hopes to release a proposal "that will make it more attractive for credit unions to offer payday-loan alternatives," such as short-term loans, Matz added. In a final note on the future of the credit union system, Matz also challenged credit unions to increase the total number of members nationwide to 100 million by 2015.

CUNA task force calls for new corporate model

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WASHINGTON (2/23/10)--The Credit Union National Association's (CUNA) Corporate Credit Union Task Force has weighed in on the status of the corporate credit union system and has proposed a series of dramatic changes to bolster the future viability of the corporate credit union system. A key principle behind the work of the task force was holding the interests of natural person credit unions "above all other,” and the task force report noted that risks related to the delivery of settlement, payment, and liquidity services must be well managed. CUNA’s Board has accepted the report and recommendations of the Task Force. The Task Force is comprised of nationwide credit union leaders, including Vystar CU CEO Terry West, Teachers FCU CEO Bob Allen, Suncoast Schools FCU CEO Tom Dorety, Tennessee CU League CEO Tom Gaines, Tropical Financial CU CEO Rich Helber, GECU CEO Harriet May, Georgia CU League president Mike Mercer, Allied CU CEO Frank Michael, and Virginia CU CEO Jane Watkins. CUNA Chairman and Deseret First CU CEO Kris Mecham took part as well. One of the task force’s main premises is that credit unions are unwilling to capitalize corporate credit unions under the current corporate business model, and, under the task force's proposal, both the amount of capital required of credit unions and the risks to that capital would be limited. An essential feature of that model is for corporates to hold much smaller balances sheets than they have in the past. While the task force agreed that the central elements of the National Credit Union Administration’s (NCUA) proposed corporate changes would be consistent with that sort of model, the task force believes that the proposal does overreach in some areas, and particularly called on the NCUA to address issues regarding corporate governance, derivatives and legacy assets. The NCUA proposal, which was released late last year, would adjust the current corporate capital requirements, impose new investment concentration limits, prevent corporate credit unions from investing in certain kinds of investments, and impose new restrictions on corporate credit union board membership and compensation. The task force has recommended a new model to serve natural person credit unions that would continue to provide payment and settlement services and act as an agent to provide investment and liquidity services to credit unions rather than providing those services on the corporates’ balance sheets. All of these services could be provided through an individual entity, subsidiaries, or vendors. The task force proposal noted that many credit unions and groups of credit unions are examining how they should respond to the need for change in the corporate system. Many corporate credit unions are also investigating new models and have weighed in on the NCUA's proposed changes to the corporate system. A particular concern raised by the task force is the need for a smooth and managed transition from the current system to the new, evolving system. The task force maintains that credit unions need to be assured that they will continue to have reliable access to the services they have received from corporates up until now. While the task force has not met directly with the NCUA administration on these issues, there have been some discussions, and a comment letter, which will be based on the corporate task force report, is pending.

NCUA to host TARP call for CDCUs

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ALEXANDRIA, Va. (2/23/10)--The National Credit Union Administration (NCUA) and the National Federation of Community Development Credit Unions are offering a joint audio conference March 4 to provide low-income credit unions (LICUs) with specifics about how to access the U.S. Treasury’s new Community Development Capital Initiative. The NCUA earlier this month approved an interim final rule that allows LICUs to redeem all or part of government-funded secondary capital, along with its matching secondary capital at any time after it has been on deposit for two years. That change was made to enable certain credit unions to particpate in the new Treasury program. LICUs that wish to take part in this program must apply for funding by April 2. NCUA Chairman Debbie Matz strongly encouraged LICUs to take part in the audio conference to "learn more about how this capital infusion could help them better serve their members and reach out to more consumers." No registration is required for the 2 p.m. (ET) session. The call-in number for the free, 60-minute audio conference is 877-293-6129. To access the conference, provide Conference ID Number: 58577856. Additional details about the initiative are available on CDFI Fund’s website www.CDFIFund.gov.

Dodd asks regulators to report on CRE market

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WASHINGTON (2/23/10)--Senate Banking Committee Chair Christopher Dodd (D-Conn.) has asked federal regulators, including the National Credit Union Administration, to report on their efforts to stabilize the commercial real estate (CRE) market. Dodd sent a letter to Federal Reserve Board Chairman Ben Bernanke with his request. He cited a Congressional Research Service report that indicated delinquency rates for commercial mortgages increased to 6% in January from 4% at the end of the third quarter of 2009. He also noted that at a Congressional Oversight Panel hearing last month, a Fed official said that Fed examiners are reporting a “sharp deterioration in the credit performance of CRE loans in [financial institutions’] portfolios and loans in commercial mortgage-backed securities" and said more than $500 billion of CRE loans will mature each year over the next few years. The panel also reported that nearly half of CRE loans at present are underwater, and that the largest loan losses are projected for 2011 and beyond, Dodd said. “I believe that the weakness in the CRE market requires prompt and robust responses from the regulators to guard against harmful effects on financial institutions and the economy,” Dodd said. “I urge you to redouble your efforts to provide appropriate oversight of this vital component of our economy, and look forward to working with you to bring much-needed stability to the CRE market.”

Former presidential adviser backs more MBLs for CUs

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WASHINGTON (2/23/10)--CNN political analyst and former presidential adviser David Gergen offered a wide-ranging analysis of national politics Monday, within which he backed increase member business lending authority for credit unions as one way to stimulate the economy. Addressing the Credit Union National Association’s Governmental Affairs Conference meeting here this week, Gergen also said of credit unions, “(They) stand for thrift and discipline, and for the small-business person trying to get a loan. “You represent the spirit of people trying to do things for the country.” These are the values the country needs to get out of “this funk we’re in,” Gergen said. On another topic straight for today’s headlines, Gergen talked about jobs creations. He said the United States at one time was the great American job machine. The Clinton administration created 23 million jobs during its eight years. But since 1999 the country has “flat-lined on job creation.” The jobs problem can be solved only by becoming a more innovative and educated nation, he said. “We can’t borrow or spend or regulate our way out of it. We need jobs in the private sector.” Throughout most of the 20th century, the United States was the most educated nation in the world, but now it’s number 20 in the world in the number of high school graduates as a percent of the population. “We have to get our kids back to school.” To stay on the cutting edge, schools must emphasize science, math, and engineering—core competencies for the 21st century, Gergen opined. “We have it within us to be the most creative, entrepreneurial people in the world. It’s in our DNA.” Gergen’s Washington, D.C. experience includes posts in the Nixon and Ford administrations, as well as service as director of communications for the Reagan White House, and counselor to President William Clinton on foreign policy and domestic affairs.

Sponsors urge colleagues add MBLs to jobs bill

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WASHINGTON (2/23/10)—The primary sponsors of a House bill to increase the credit union member business lending (MBL) cap have urged their lawmaking colleagues to support adding the MBL language to a jobs-creation legislative package. Reps. Paul Kanjorski (D-Pa.), Ed Royce (R-Calif.), and Marcy Kaptur (D-Ohio) Monday sent a letter to each House member asking them to sign on to a letter to House Speaker Nancy Pelosi, of California, and Republican Leader John Boehner, of Ohio, that will seek this new approach to MBL legislation. “We need to create more jobs and help small business expand. One way to do so is to unleash the power of America’s credit unions to make more member business loan as proposed in H.R. 3380, the Promoting Lending to America’s Small Businesses Act,” the lawmakers wrote in the “dear colleague” letter. That bill would, among other things, increase the MBL cap to 25% of assets, up from the current 12.25%. The letter to Pelosi and Boehner will note that increased MBL authority, as specified in H.R. 3380, could result in credit unions lending up to $10 billion in new capital to small businesses in the first year after enactment, helping them to create more than 100,000 new jobs. “By enhancing credit unions’ ability to extend loans to America’s small businesses, we can quickly help to advance much-needed economic growth. Increasing competition in the small business loan marketplace will also increase the efficiency of capital allocation,” the letter will tell the House leaders. The letter to colleagues was sent on the first day of the Credit Union National Association’s (CUNA’s) Governmental Affairs Conference in Washington, D.C. One pivotal part of the annual CUNA session is credit union representatives’ visits to lawmakers on Capitol Hill to discuss key issues. Kanjorski has asked CUNA and the leagues to help get as many co-signers to the Pelosi-Boehner letter as possible, asking credit unions to make this a priority during their visit. The deadline for members to sign on to the letter is noon Friday.

Inside Washington (02/22/2010)

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* WASHINGTON (2/23/10)--Noting Monday's effective date of new rules under the Credit Card Accountability, Responsibility, and Disclosure Act, signed into law by last spring, U.S. Treasury Secretary Timothy Geithner said Monday the implementation of protections is a “critical step forward” in efforts “to protect American families by prohibiting the use of unfair retroactive rate hikes and late fee and over-limit fee traps by credit card companies.” He said the administration will “continue to work on strengthening consumer protections and disclosure for a wide array of financial products.” Geithner noted that work includes efforts to consolidate “the fragmented authority of seven separate agencies” into a single, independent Consumer Financial Protection Agency … * WASHINGTON (2/23/10)--National Credit Union Administration (NCUA) Board Member Michael Fryzel (pictured) commended defense credit union representatives for their leadership in the industry and their service to members, and stressed that more needs to be done during a speech at the Defense Credit Union Council’s Defense Issues Meeting in Washington, D.C. Fryzel emphasized continued commitment and involvement for credit unions. “When you put your shoulder to wheel, good things happen. The industry expects this of you, and I look forward to your continued assistance and involvement.” He also urged attendees to talk with their senators and representatives during the financial crisis to “give fresh energy to those who work here and take fresh energy home with you to do the best job you possibly can.” (Photo provided by the National Credit Union Administration) … * WASHINGTON (2/23/10)--The future of the Federal Home Loan Banks (FHLBs) may be held by Fannie Mae and Freddie Mac, according to financial observers. The House Financial Services Committee is scheduled to meet March 2 to talk about the enterprises’ futures and the housing market. Lawmakers’ conclusions on the matters will likely have significant implications for the FHLBs--including their regulator and what they will do with remaining debt. The FHLBs have suffered losses because of problems with private-label mortgage-backed securities, and the system lost $165 million in the third quarter, said American Banker (Feb. 22) ... * WASHINGTON (2/23/10)--On Friday, President Barack Obama announced a program that would place $1.5 billion into states so they can help unemployed, second-lien or underwater borrowers. The administration will move the money from the Troubled Asset Relief Program to housing finance agencies in five states that have experienced a drop in home prices of 20% on average (American Banker Feb. 22). Treasury will need to approve the programs, but then the agencies will determine how the funds will be used in their markets …

Mica With the right attitude CUs prosperous

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WASHINGTON (2/23/10)—Credit unions, with the right attitude, can create another 100 years of prosperity for their communities and their members, Credit Union National Association (CUNA) President/CEO Dan Mica told attendees of the Governmental Affairs Conference (GAC) morning session Monday. During what will be his last GAC as CUNA’s leader, Mica took the stage Monday morning during the conference opening session and asked the crowd as he has the last 14 years: “Isn’t it great to be in Washington, D.C.?” After receiving a standing ovation from the crowd, Mica reflected on credit unions’ successes in the past 100 years. He also thanked credit unions for the work they have done during the past 14 years he has served as president/CEO of CUNA, encouraging them to “think positive” and to use technology to move forward. Even the smallest credit union can seem large to its members with the right use of technology, he said. Mica also touched on two pertinent issues for credit unions: alternative capital and member business lending. Mica said regulators would likely move toward raising requirements for all financial institutions, including credit unions. He urged credit unions to be “respectful but insistent” when addressing federal lawmakers on these issues--especially in terms of generating support for raising member business lending caps. If the caps are raised, credit unions could generate an extra $10 billion into the economy and create more jobs, he added. Mica closed his speech with some advice for credit unions—to speak with one voice, and to resist partisanship. “We should never be viewed as Democrats or Republicans, but as Americans,” he said. Overall, Mica expressed his confidence in the credit union movement and what it can offer the nation. “America is crying out for a basic philosophy to live by,” he said. “We [credit unions] offer it.”

CUNA leaders 2009 an unprecedented year

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WASHINGTON (2/23/10)—2009 proved to be a very busy year for the Credit Union National Association (CUNA)—and one that was also the most politically challenging CUNA President/CEO Dan Mica has seen in 40 years.
Click for slide show Dan Mica greets GAC attendees with , "Isn’t it great to be in Washington D.C., and isn’t great to be a credit union professional?"--the same warm welcome the outgoing CUNA chief has used during each of his 14 years as CUNA president and CEO. Getting down to business, Mica told his audience that just as the Great Depression of the 1930s created conditions that ultimately resulted in growth, the current difficult economic years will create growth for credit unions. (CUNA photo)
Mica addressed the CUNA board and attendees of the Governmental Affairs Conference during CUNA’s annual general meeting, which took place at Monday morning’s opening session. Among CUNA’s accomplishments in advocacy, Mica noted that CUNA:
* Worked with the leagues to defuse a 21-day requirement on open-ended lending products under the Credit Card Accountability, Responsibility and Disclosures (CARD) Act, convincing Congress to enact a fix clarifying that the law applies only to credit cards; * Worked to lift the borrowing cap for the National Credit Union Administration’s Central Liquidity Fund to $41 billion from $1 billion; * Dealt a blow to Unrelated Business Income Tax (UBIT) by backing Community First CU’s, Appleton, Wis., successful federal court challenge of UBIT; and * Preserved strong congressional relations while helping to defeat cramdown legislation. CUNA maintained its integrity and as a result, Congress "called on us more than ever before," Mica said.
CUNA also successfully kept itself on track financially, despite a grim economy. CUNA projects a positive margin for year-end 2009, he said. CUNA also generated positive press coverage from national news, broadcast and on TV. "Fourteen years ago, 99% of the news [about credit unions] was in the trades," Mica said. Kris Mecham, CUNA board chairman, echoed Mica’s thoughts on the busy and challenging year CUNA has faced. But he also noted another challenge the board has--to find Mica’s replacement. Mica, who began as president/CEO of CUNA in 1996, announced in August that he would step down from his position this year. Mecham said that when he heard Mica was leaving it was "certainly a sad day in my life." However, he assured attendees that the board has a slate of talented individuals from which to pick. "[Mica] has delivered exceptional results," Mecham said. "We are very grateful to [him]."

Fed to clarify final rules under Regs E DD

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WASHINGTON (2/22/10)--The Federal Reserve on Friday released a series of proposals that would clarify the portions of Regulation E, Electronic Fund Transfers, and Regulation DD, Truth in Savings, that address overdraft services. The proposals are meant to “provide further guidance regarding compliance with certain aspects of the final overdraft rules,” with a particular emphasis on portions that prohibit financial institutions from “assessing overdraft fees without the consumer's affirmative consent.” The proposal seeks to affirm that this prohibition “applies to all institutions, including those with a policy and practice of declining ATM and one-time debit card transactions when an account has insufficient funds.” According to the Fed, the Reg E proposal would clarify that the prohibition on assessing overdraft fees without the consumer's affirmative consent applies to all institutions that charge such fees for ATM and one-time debit card overdrafts. Credit unions that do not have formal overdraft programs are also covered by this opt-in requirement if they charge any fees for ATM and one-time debit card overdrafts. The Fed also clarifies that the fee prohibition applies if a credit union falls under the regulation's exception for institutions that have a policy and practice of declining ATM and one-time debit card transactions when an account has insufficient funds. The Reg E proposal also addresses sustained overdraft, negative balance, or similar fees associated with paying overdrafts and clarifies that an institution is not prohibited from assessing a fee when a negative balance is attributable in whole or in part to a transaction that is not subject to the fee prohibition. The Fed’s proposed amendments to Reg DD clarify the application of the rule to retail sweep programs and the required use of the term “total overdraft fees” for overdraft fee disclosures. The Fed has also added references to the Reg E amendments into Reg DD. The proposals, which will be open for comment for 30 days after they are published in the Federal Register, would also make certain technical corrections and conforming amendments, the Fed added. For more on the proposals, use the resource link.

Inside Washington (02/19/2010)

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* WASHINGTON (2/22/10)--The Office of the Comptroller of the Currency (OCC) has released a consumer advisory, “Consumer Alternatives for Receiving Income Tax Refunds,” and a policy statement on tax refund related-products. The advisory provides details on alternatives that taxpayers have for receiving their income tax refunds, while the policy statement sets forth the OCC’s expectations for financial institutions that provide tax refund-related products, including refund anticipation loans (RALs). Many credit unions offer Volunteer Income Tax Assistance (VITA) programs, which provide free tax preparation services and RALs to low-income individuals as an alternative to high-priced tax preparation services and refund loan products ... * WASHINGTON (2/22/10)--Federal Deposit Insurance Corp. (FDIC) Chairman Sheila Bair said Thursday the agency is creating a principal-reduction program as part of loss-sharing agreements. Bair spoke to attendees of a Sustainable Homeownership for All conference. Including a principal-forgiveness option in loans covered in the agreements can reduce defaults and enhance the performance of modified loans, Bair said (American Banker Feb. 19). The FDIC has long supported the idea of principal reductions, although Bair said they are costly and create a moral hazard. But they maximize the loans’ value and reduce the potential of defaults, she added ... * WASHINGTON (2/22/10)--The Federal Housing Finance Agency (FHFA) expressed confidence that private investors would fill the void when the Federal Reserve Board finalizes plans to end its purchases of debt and mortgage-backed securities (MBS) from Fannie Mae and Freddie Mac, which FHFA regulates. The purchases of MBS have been credited with stabilizing the housing market, said American Banker (Feb. 19). The Fed said it would end the purchases in March, but financial observers have said they are concerned investors would not be willing to work with Fannie or Freddie. If investors don’t work with the enterprises, mortgage rates could increase. In congressional testimony two weeks ago, Fed Chairman Ben Bernanke said securities sales would be gradual. The Fed will sell the MBS when the economy’s recovery has “sufficiently advanced” ... * WASHINGTON (2/22/10)--Defense credit unions are ready to participate in Military Saves Week, which begins today and ends Friday, according to a National Credit Union Administration media advisory. The program encourages active duty, National Guard, and reserve leadership to save their money by developing a savings plan, establishing an emergency fund, or enrolling in a savings deposit program. This year’s campaign aims to help service members and their families avoid common financial pitfalls, like relying too much on credit, spending beyond one’s means, and retiring without adequate finances. Military Saves Week is a part of the America Saves Campaign. (SEE RELATED: America Saves Week helps consumers build wealth in Consumer News) ...

CUNA blog to offer constant coverage of 2010 GAC

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WASHINGTON (2/22/10)--Up-to-the-minute coverage of the latest news and notes from the Credit Union National Association's (CUNA) 2010 Governmental Affairs Conference (GAC) will be available on the GAC Blog from today until the conference closes on Thursday. More than 4,000 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, Web Assistant Editor Tiffany Stronghart, and Communications Specialist Darryl Tait 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 link below to access the GAC Blog.

2010 edition of CUNAs GAC kicks off today

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WASHINGTON (2/22/10)—As the new rules imposed by the Credit Card Accountability, Responsibility and Disclosure Act of 2009 come into effect, the Credit Union National Association (CUNA) today will also kick off the 2010 edition of its Government Affairs Conference (GAC) in Washington, D.C. Former Federal Reserve Chairman Alan Greenspan will address the GAC, and former Vermont governor and Democratic National Committee Chairman Howard Dean will take part in a lively "point-counterpoint" discussion on national issues with former Republican congressman and media personality Joe Scarborough. Also this week, National Credit Union Administration (NCUA) Chairman Debbie Matz, NCUA Vice Chair Gigi Hyland, NCUA Board Member Michael Fryzel and Small Business Administrator Karen Mills are scheduled to speak during GAC general sessions. Several key lawmakers will also address the GAC, including:
* Senate Banking Committee Chairman Christopher Dodd (D-Conn.); * House Financial Services Committee Chairman Barney Frank (D-Mass.); * Ranking Republican member of the House Financial Services Committee, Rep. Spencer Bachus of Alabama; * Rep. Brad Sherman (D-Calif.); * House Minority Whip Rep. Eric Cantor (R-Va.); * Reps. Paul Kanjorski (D-Pa.), Ed Royce (R-Calif.), and Sen. Mark Udall (D-Colo.), key sponsors of legislation that would increase the member business lending cap for credit unions; and many more.
The GAC also willfeature breakout sessions on the NCUA’s recent corporate credit union proposal, compliance issues, social media, alternative capital, and credit union advocacy, and CUNA will present a live edition of its Home & Family Finance Radio during the conference. The 2010 GAC will be the third straight GAC to take place in the Washington Convention Center. Use the resource link below for more GAC information.

CUNA compiles FAQ on CARD Act queries

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WASHINGTON (2/22/10)--As promised, the Credit Union National Association (CUNA) on Friday posted a list of frequently asked questions (FAQ) related to the Credit Card Accountability, Responsibility and Disclosure (CARD) Act of 2009, which becomes fully effective today. The questions are culled from the many questions that were received after CUNA’s recent audio conference calls, which took place on Feb. 2 and 11. Following the conference call, attorneys in CUNA’s regulatory affairs department attempted to answer more than 100 e-mailed queries. However, the answers provided below are solely the efforts of CUNA's compliance attorneys and have not been provided to the Fed for its interpretation. Topics covered by the FAQ include questions on floor rates, change-in-terms notices, increases in variable rates, limitations on increasing annual percentage rates and fees, changes in credit terms, renewal or annual fees, business credit accounts, and expedited payments. The FAQ also seeks to answer concerns on the central changes imposed by the CARD Act. They include regulations that prohibit rate increases in the first year that a credit card account is active, require co-signors for credit card accounts taken out by an individual under 21 years of age, require that creditors obtain the consent of the cardholder before charging over-the-limit fees, and limit many of the fees associated with so-called "subprime" credit cards. CUNA will submit some of the questions to the Fed for its interpretation and will continue to update or add additional answers as they come up.

Inside Washington (02/18/2010)

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* WASHINGTON (2/19/10)--The Community Development Financial Institutions (CDFI) Fund will host conference calls on its Community Development Capital Initiative. The initiative will make capital available to certain CDFIs to increase lending to small businesses and other community development projects. The calls will be held March 4, March 18 and April 1, all at 3 p.m. E.T. Each call will be a question-and-answer session to help CDFIs understand the certification and application process. Uncertified financial institutions must submit an application for certification by 5 p.m. E.T. April 16 to participate in the initiative ... * WASHINGTON (2/19/10)--The Obama administration and the Senate are moving toward an agreement to form a council of regulators that would identify systemic risk to the nation’s financial system, according to officials. If enacted, the council would be led by Treasury Secretary Timothy Geithner (The New York Times Feb. 18). The council would in essence diminish the Federal Reserve Board’s authority over banks. Some Fed officials have protested this, but Chairman Ben Bernanke has said he would support a Treasury-led council, the newspaper said. Senate Banking Committee Chairman Christopher Dodd (D-Conn.) said that with the Treasury secretary as chair and the Fed chairman as vice-chair, there will be “an early-warning system.” A senior administration official, who spoke to the Timeson condition of anonymity, said there may some danger in reducing the Fed’s power. It’s critical the Fed has hands-on supervision of the largest firms in the economy, he told the newspaper ... * WASHINGTON (2/19/10)--The Federal Family Education Loan Program (FFELP) may dissolve soon, according to American Banker (Feb. 18). The House approved a bill last year to end the program, and the Senate may follow suit soon, the newspaper said. The program allows lenders to offer student loans at low rates with partial government guarantees. If dismantled, FFELP would save the government $87 billion over 10 years. Sen. Robert Casey (D-Pa.), who has not yet taken a stance on eliminating FFELP, said that the impact on student lending and the availability of lending to help people attend college need to be examined. According to FinAid.org, 183 student lenders have suspended or exited from participating in the FFELP program. While talk of ending FFELP continues, a temporary measure--the Ensuring Continued Access to Student Loans Act--passed in 2008 that allows the U.S. Department of Education to buy student loans from lenders on the secondary market expires July 1. The department estimated that its liquidity program covered about 57% of FFELP loans, or about $112 billion. The department has said the program should not be extended ... * WASHINGTON (2/19/10)--More than 116,000 homeowners have permanent mortgage modifications, nearly double the number from December, according to a Home Affordable Modification Program (HAMP) report the Treasury Department and Department of Housing and Urban Development (HUD) released Wednesday. Roughly 76,000 permanent modifications have been offered and are waiting for borrowers’ signatures. More than one million homeowners have started trial modifications. Also, about 1.3 million homeowners have received offers for trial modifications have been extended to homeowners. More than 940,000 homeowners reduced monthly mortgage payments with a median savings of $500--an aggregate savings of more than $2.2 billion, the report said. The program is on pace to meet its goal of providing three to four million homeowners the opportunity to stay in their homes, Treasury and HUD said ...

NCUA briefed on LICU secondary capital plan

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ALEXANDRIA, Va. (2/19/10)--The National Credit Union Administration (NCUA) at its Feb. 18 board meeting was fully briefed on an interim final rule addressing secondary capital accounts for low-income credit unions. The interim final rule, which was approved by the NCUA earlier this month via notational vote, allows a low-income credit union (LICU) to redeem all or part of government-funded secondary capital, along with its matching secondary capital at any time after it has been on deposit for two years. This rule follows the U.S. Treasury Department's announcement of the Community Development Capital (CDC) Program, an initiative intended to enable LICUs, banks and thrifts to increase lending in low-income areas. NCUA Chairman Debbie Matz said that the Board adopted the interim final rule early to comply with application deadlines imposed by the Treasury. LICU’s have been given until April 2 to apply for secondary capital under the CDC Program, and the NCUA will review the LICU applications before providing their recommendations to the Treasury. These recommendations will include the NCUA’s judgments regarding an LICU’s suitability for the program, whether that LICU should acquire privately funded, matching secondary capital before it receives secondary capital through the CDC Program, and the amount funding that the Treasury should provide to the LICU through the CDC Program. The NCUA will also confer with state regulators before it issues any recommendations regarding state-chartered credit unions. The interim final rule is effective immediately upon its publication in the Federal Register and will be subject to a 30 day comment period. The NCUA may provide further details for credit unions via a webinar, Board Member Gigi Hyland said.

NCUSIF equity ratio holds at 1.24 NCUA reports

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ALEXANDRIA, Va. (2/19/10)--While the most recent National Credit Union Share Insurance Fund (NCUSIF) report showed an equity ratio of 1.24% through this January, the National Credit Union Administration’s (NCUA) Chief Financial Officer Mary Ann Woodson explained that that 1.24% equity ratio does not include the billing associated with the 1% deposit, which if included would result in a 1.26% equity ratio. Staff indicated that, in the aggregate, CAMEL 4 and 5 credit unions hold approximately $42 billion of insured shares—up slightly from the previous month. There are currently 357 CAMEL 4 and 5 credit unions, a 2.67% increase from the number reported last year. Woodson also updated the NCUA board on the status of CAMEL 3 credit unions, of which there are currently 1,665, representing 13.69% of total insured shares. Insured shares in CAMEL 3, 4, and 5 credit unions currently represent 19.5% of total insured shares. The number of CAMEL 3, 4 and 5 credit unions is a source of concern for the NCUA, and Chairman Debbie Matz reiterated her stance that the NCUA will closely monitor credit unions for potential red flags to “mitigate” any potential effects on the NCUSIF. Although Woodson reported a loss expense estimate of $750 million for 2010, she said that this amount is being used solely for budgeting purposes and does not represent expected losses. However, Woodson said that she expects 2010 to be as financially challenging as 2009 was for the NCUSIF.

750 participate in final NCUA town hall

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ALEXANDRIA, Va. (2/19/10)--National Credit Union Administration (NCUA) Chairman Debbie Matz said that more than 750 participated in the agency’s "virtual" Town Hall Thursday, the final session planned to focus on the agency’s proposed corporate credit union rule, as well as supplemental capital, proposed chartering and field of membership changes, and member business lending. The agency noted that the 90-minute session concludes its six-month series of “interactive open forums” between the credit union community and the NCUA. More than 2500 credit union representatives participated either at one of the five in-person or two web-based NCUA Town Hall events, according to NCUA figures. “Today's concluding session of this round of Town Halls was in many respects emblematic of the kind of serious, constructive conversation that we have been having with the credit union community," Matz said in a release. "The discussions were both candid and thoughtful and signal an impressive degree of commitment to work in the best cooperative tradition on the important issues we have at hand. The financial difficulties in general, and the corporate situation in particular, have called upon us all to work harder and smarter, toward solutions. Given the tone at the Town Halls, everyone involved should have reason for optimism about the challenges that lie ahead." The comment period for the proposed corporate rule ends March 9.

FFIEC FinCEN take up mortgage fraud issues

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WASHINGTON (2/19/10)--The Federal Financial Institutions Examination Council on Thursday released an updated version of its white paper on mortgage fraud detection and deterrence. The white paper, which aims to “help examiners understand, identify, and detect mortgage fraud schemes and elements,” provides details on several types of mortgage fraud methods, including builder bailouts, buy and bail schemes, double selling, equity skimming, fictitious loans, and short sale, loan modification, refinancing, mortgage servicing, property flip, and reverse mortgage frauds. The paper also details methods used to perpetrate these schemes, including asset rental, fake down payments, fraudulent documentation and appraisals, and identity theft. While the white paper “does not establish any new examination policies or procedures” and does not “impose new requirements on regulated financial institutions,” it substantially updates the information contained in a 2005 edition of the white paper, “gives examples of how individuals commit fraud, provides a list of red flags, and outlines best practices” that can be used to “detect and prevent mortgage fraud at regulated institutions and avert the losses that can result.” In related news, the Financial Crimes Enforcement Network (FinCEN) on Thursday advised financial institutions to be more aware of activities that may potentially trigger a suspicious activity report, including trade-based money laundering methods such as “misrepresenting the price and quantity of goods and services” and “double invoicing.” Other methods for obscuring the origin or destination of illegally-obtained funds include “third party payments for goods or services made by an intermediary,” and this activity may be signaled by “amended letters of credit without reasonable justification,” the inability of a customer to “produce appropriate documentation to support a requested transaction,” or “significant discrepancies between the descriptions of the goods on the transport document, the invoice, or other documents. Financial institutions should also be wary of the potential for black market funds to be transferred via money orders or wire transfers, especially when the “ordering party of the wire does not live in the country from which the wire originated.” Funds that are transferred into U.S.-based accounts and “subsequently transferred out of the account in the same or nearly the same amounts” are another potential warning sign, according to FinCEN.

House business lending hearing rescheduled for Feb. 26

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WASHINGTON (2/19/10)--The House Financial Services Committee has rescheduled for Feb. 26 a previously postponed hearing on the state of small business and commercial real estate. The hearing will also feature members of the House Small Business Committee, which is chaired by Rep. Nydia Velazquez (D-N.Y.). Also, for a second time this year, the House Financial Services Committee will scrutinize financial industry compensation. The committee announced yesterday it will conduct a hearing entitled “Compensation in the Financial Industry – Government Perspectives” next week on Feb. 25. The hearing will focus on the pay practices of both private and public financial entities including AIG, Fannie Mae and Freddie Mac where the federal government plays a role in reviewing and/or approving compensation, the committee announcement said. The House has voted on two financial industry compensation bills. Last April the body approved legislation that would have regulated compensation at Fannie Mae, Freddie Mac, and TARP recipients. In July it passed a bill intended to executive compensation, The Wall Street Reform and Consumer Protection Act. Witnesses will be announced at a later date.

Lawmakers to regulators Minimize CRE impact

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WASHINGTON (2/19/10)--Reps. Paul Kanjorski (D-Pa.) and Ken Calvert (R-Calif.) have contacted federal credit union, bank and thrift regulators asking them to work together to minimize the impact of the growing instability in the commercial real estate (CRE) market. In their letter, Kanjorski and Calvert refer to a Feb. 11 report by the Congressional Oversight Panel (COP) entitled "Commercial Real Estate Losses and the Risk to Financial Stability." The report noted that nearly $1.4 trillion in CRE loans will reach the end of their terms between now and 2014. Close to half of those, according to the COP report, are currently underwater as property values have continued to decline. Because of tough CRE market conditions in the current economy, regulators must “act proactively to address these issues before they get worse. We must work to protect our small businesses operating throughout the country as well as the nine million jobs that depend on the commercial real estate industry,” Kanjorski said in the letter. “The commercial real estate market does not need a bailout, but it is begging for a coordinated response by its financial regulators to restore stability," Calvert added. The letter to financial regulators closely follows one sent by Kanjorski and Calvert and 77 of their House colleagues to U.S. Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke regarding troubles in the commercial real estate sector, considered to be $6.7 trillion in size. The COP was established in conjunction with the Treasury’s $700 billion Troubled Asset Relief Program—known as TARP. The congressional panel was charged with review of the current state of financial markets and the regulatory system. COP can conduct hearings, review official data, and write reports on actions taken by Treasury and financial institutions and their effect on the economy.

Inside Washington (02/17/2010)

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* WASHINGTON (2/18/10)--A small financial institution has won a case against the Federal Deposit Insurance Corp. (FDIC) regarding an enforcement order the bank challenged (American Banker Feb. 17). FDIC had attempted a preemptive order against Advanta Bank in December, preventing Advanta from dealing with its bankrupt parent, Advanta Corp. The FDIC said it had special authority to preclude Advanta from challenging the order. However, U.S. District Court in Washington, D.C., Judge John Facciola sided with Advanta, saying that the FDIC misused its authority. The bank’s dealings with its bankrupt parent did not lead to the bank’s dissolution, Facciola said. The agency is reviewing the decision, said an FDIC spokesperson. The decision serves as a “wake up call” to regulators to stay within their authority when they exercise powers over financial institutions to address the financial crisis, said Advanta’s attorney, Andrew Sandler. In November, Advanta Corp. filed for bankruptcy ... * WASHINGTON (2/18/10)--Eleven lenders who received bailout money originated $178.1 billion of new loans in December, up 13% from November, according to a Treasury survey report. The gains were in home mortgages, credit cards, home equity lines of credit and other loans (American Banker Feb. 18). Total average loan balances rose 13% from December 2008, and total loan originations rose by 17%. Outstanding mortgage balances were up 29% compared with balances in December 2008, and total mortgage originations increased 81%, the survey report added ... * WASHINGTON (2/18/10)--The bulk of stimulus spending is yet to come, according to The Wall Street Journal (Feb. 18). The stimulus program turns a year old this week, and about $180 billion allocated for water projects and new rail lines will be spent this year at the earliest, the newspaper said. The infrastructure spending is scheduled to hit in the second year of the program, which means more private-sector employees will receive money. Economists say the change will not affect the unemployment rate, but the shift could be politically significant because Republicans have been critical of the lack of private business hiring as a result of the stimulus, the newspaper added. The Obama administration has said the stimulus money has helped support two million jobs. Most stimulus spending, so far, has benefited public employees, including school teachers and staff ... * WASHINGTON (2/18/10)--The Federal Housing Finance Agency (FHFA) has proposed a rule for new housing goals for Fannie Mae and Freddie Mac. The goals define the target levels of loans from different income-level groups. For this year and 2011, FHFA is proposing three single-family home-purchase goals: low-income families, very-low income families, and families in low-income/high minority/disaster areas. The rule also sets goals for single-family refinance mortgages for low-income families. Separately, the FHFA has proposed multi-family housing goals for low-income families and for very low-income families ... * WASHINGTON (2/18/10)--A U.S. District Court of Appeals has affirmed a decision by the Merit Systems Protection Board, which had affirmed a decision by the National Credit Union Administration (NCUA) to remove one of its former examiners, Margaret Considine, for poor performance. Considine had appealed the board’s decision to the court. The board said that it would not overturn any agency decision “supported by relevant evidence as a reasonable mind might accept as adequate to support a conclusion.” Considine worked for NCUA as an examiner at the Region 1 office in Albany, N.Y. She contends that NCUA removed her for reprisal in whistleblowing activities, and because she had filed grievances against her supervisors from 1998 to 2008. On March 18, 2008, Considine was given a notice of unacceptable performance and was placed on a 120-day performance improvement plan. On Sept. 20, 2008, she was notified by the associate regional director that her performance had not improved and recommended that she be removed. She appealed to the Merit Systems Protection Board on Dec. 29, 2008 ...

Fed Chair Bernanke to report on economic monetary policy

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WASHINGTON (2/18/10)--Federal Reserve Chairman Ben Bernanke on Feb. 24 will deliver the semiannual report on the state of the economy and monetary policy before the House Financial Services Committee. The Humphrey Hawkins hearing, which is held on a bi-annual basis, was announced by Committee Chair Rep. Barney Frank (D-Mass.) on Wednesday. Bernanke earlier this month was sworn in for a second four-year term as Fed chairman. His term as chairman ends Jan. 31, 2014, and his 14-year term as member of the board ends Jan. 31, 2020.

OMB approves new self-cert form for private education loans

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WASHINGTON (2/18/10)--The Office of Management and Budget (OMB) this week presented a new Private Education Loan Applicant Self-Certification form which, according to OMB, may be used by both educational institutions and private educational loan lenders, including credit unions. The Higher Education Opportunity Act of 2008 amended the Truth in Lending Act and the Federal Reserve’s Regulation Z to require private education lenders to obtain completed and signed self-certification forms from the applicant before that lender may complete a private education loan for the student that is receiving the loan. A portion of the form will require applicants to include the "cost of attendance for the period of enrollment covered by the loan, any estimated financial assistance for the period of enrollment covered by the loan, and the difference between the cost of attendance and the estimated financial assistance," according to the OMB. Applicants may obtain the new form from either the educational institution or the private educational lender. Educational institutions must provide the applicant with any necessary information required to properly complete the form, effective immediately. However, colleges will not be required to track the status of private education loans once they have provided the self-certification form to either the lender or the loan applicant. The form may be provided either in person, as a paper copy, or as an online .pdf file, and can be obtained through either an on-campus financial aid office or the applicant’s credit union or other financial service provider.

SBAs Mills to take part in CUNA lending conference call

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WASHINGTON (2/18/10)--The Credit Union National Association (CUNA) will provide credit unions with up to date information on how to make Small Business Administration (SBA) loans or expand their current SBA lending program during a March 25 audio conference call. The call, which will feature the insight of National Credit Union Administration Chairman Debbie Matz and SBA Administrator Karen Mills, will give credit unions the opportunity to discuss working within the SBA loans programs directly with these high-ranking staff members. CUNA President/CEO Dan Mica and Senior Vice President/Deputy General Counsel Mary Dunn will also lead discussion and participate in the call. To register for the audio conference call, which will take place at 2 p.m. ET, use the resource link.

Rep. Sherman of California added to GAC lineup

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WASHINGTON (2/18/10)--Rep. Brad Sherman (D-Calif.) will join fellow lawmakers House Majority Whip Rep. James Clyburn (D-S.C.), House Financial Services Committee Chairman Barney Frank (D-Mass.), House Minority Whip Rep. Eric Cantor (R-Va.), and Rep. Spencer Bachus (R-Ala.), among others, as a speaker at the Credit Union National Association’s Government Affairs Conference (GAC), which begins this Sunday in Washington, D.C. National Credit Union Administration Chairman Debbie Matz, U.S Small Business Administrator Karen Mills, and Reps. Paul Kanjorski (D-Pa.) and Ed Royce (R-Calif.) are also among those scheduled to speak at the GAC. Sherman, who is a senior member of the House Financial Services Committee, has repeatedly called for Congress to lift the credit union member business lending cap, which currently stands at 12.25%, and has been a proponent of permitting credit unions to access secondary forms of capital. The GAC, which will take place Feb. 21-25, will give credit union leaders the opportunity to learn the latest, first hand, from influential policymakers, as well as a platform to advocate for credit union issues. The GAC will also feature former Federal Reserve Chairman Alan Greenspan and a point-counterpoint discussion between former Congressman Joe Scarborough and ex-presidential candidate and former Democratic National Committee Chairman Howard Dean.

Cleveland designated an underserved community by NCUA

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ALEXANDRIA, Va. (2/17/10)--The National Credit Union Administration (NCUA) late last year added Cleveland, Ohio to its list of areas that are underserved by financial institutions. The NCUA decision follows a request from Cleveland-based Steel Valley FCU for the NCUA to include the majority of the city, as well as close-in suburbs, as an underserved area. Steel Valley FCU will now be able to take on any Cleveland resident as a member under its new membership structure. The urban population of Cleveland, as estimated by the U.S. Census, stood at 478,403 in 2000, and cleveland.com reported that the metropolitan Cleveland area has lost 59,852 residents between 2000 and 2008.

Reverse mortgage guidance generally helpful CUNA

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WASHINGTON (2/17/10)--The Credit Union National Association (CUNA) in a Feb. 16 comment letter to the Federal Financial Institutions Examination Council (FFIEC) said that it generally supports the FFIEC’s proposed guidance for reverse mortgages. While the majority of credit unions do not currently offer reverse mortgage loans and those that do “are likely already compliant with the principles outlined in the guidance,” Bloch said that CUNA understands the need for the FFIEC guidance, as the complexity of reverse mortgage loans may create greater opportunities for “abuses and excessive fees” by some lenders. Citing the complexity of reverse loans, which can often come with significant fees, CUNA said it supports the FFIEC’s requirement for financial counseling “and believes that, with limited exceptions, such counseling should be done in-person, as opposed to telephone conversations,” CUNA Senior Assistant General Counsel Jeff Bloch said. CUNA has argued that telephone counseling is ineffective. “However,” Bloch added, “although consumers should receive general information and guidance about reverse mortgages before the application is submitted, much of the required counseling should occur after the application is submitted for a proprietary reverse mortgage loan, since the counseling will be more targeted and, therefore, more beneficial after the consumer applies for a specific loan.” Additionally, CUNA supports portions of the guidance that address potential conflicts of interest as well as the FFIEC’s recommended policies, procedures, and internal controls that lenders should take on, including recommendations on how lenders can manage third-party relationships. For the full CUNA comment letter, use the resource link.

Speakers named for NCUA virtual meeting on corporates

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ALEXANDRIA, VA. (2/17/10)--The National Credit Union Administration (NCUA) on Tuesday announced the agenda for its Feb. 18 virtual town hall webinar, the last in a series of public discussions on the proposed changes to its corporate credit union rules. Following opening remarks by NCUA Chairman Debbie Matz, NCUA officials, including Deputy Executive Director Larry Fazio, General Counsel Bob Fenner, and Office of Corporate Credit Unions Director Scott Hunt, will provide background on the current corporate credit union situation and discuss both the recently proposed changes to the NCUA’s corporate credit union and field of membership rules. A question and answer session will follow the NCUA staff presentations. The webinar continues the NCUA’s "nationwide listening tour," which also included live town hall meeting sessions in which the proposed corporate rule and related issues, such as the proposed field-of-membership rule, alternative capital, and continuing economic challenges facing natural-person credit unions, were discussed. To sign up to participate in the virtual session, which is scheduled to begin at 3 p.m. ET on Feb. 18, use the resource link.

CUNA survey CUs gaining ground with voters

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WASHINGTON (2/17/10)—Just 39% of voters who responded to a Credit Union National Association (CUNA)-sponsored survey indicated that they would favor banks over credit unions if a disagreement over financial legislation broke out in the U.S. Congress or their state legislature, CUNA reported on Tuesday. CUNA’s national voter survey, which was conducted between Jan. 24 and 28 and surveyed 1,000 registered voters across the nation, showed that half of the 1,000 voters who responded said that they would side with credit unions over banks in that potential legislative disagreement. Large numbers of respondents also favored credit unions on more specific issues, with a mere 27% of them agreeing with banking industry claims that removing restrictions on credit union business lending would give credit unions, which do not pay taxes, an unfair advantage. Those same respondents overwhelmingly supported giving credit unions the opportunity to assist the economy by helping to create jobs through greater business lending by credit unions, and 69% favorably viewed the MBL legislation that, if approved, would create 108,000 new jobs. The CUNA survey, which has been taken for 11 years, “has never shown an environment more complimentary to credit unions,” CUNA Senior Vice President of Political Affairs Richard Gose said. “Clearly, jobs and the economy are the issues voters are most concerned about,” Gose said, adding that while additional surveys clearly show that “voters support credit unions,” the CUNA survey “goes beyond that, showing voters support credit unions’ ability to help the economy and grow jobs.” While consumers trust in banks continues to slip, their favorable views of credit unions have not decreased during the past year, with 56% of respondents saying that they would classify credit unions as “safe and sound” financial institutions. The number of consumers who judged banks to be “safe and sound” fell to 50%, down from 55% in the 2009 edition of the survey. Credit unions have remained steady with 42% of registered voters identifying themselves as credit union members, and 22% saying that credit unions were their primary financial institution. However, there is room for growth. A large majority of voters had positive impressions of several credit union-specific business practices, including returning earnings to members, specifically working with underserved communities, and the collective, member-owned structure of credit unions, rated extremely favorably among survey respondents. Surveys by Forrester Research and the Chicago Booth/Kellogg School also noted high customer approval ratings, and Michigan's American Customer Satisfaction Index, which was also released on Tuesday, found that credit unions rated near the top of scale for their customer service. (See related story: CUs at top of customer satisfaction heap--new survey.)

Biliouris named as special aide to NCUA exec director

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ALEXANDRIA, Va. (2/17/10)— Matthew Biliouris, who first starting working for the National Credit Union Administration (NCUA) about 18 years ago, has a new position at the agency starting March 8. He’ll be Special Assistant to NCUA Executive Director Dave Marquis. Biliouris, who, in the newly-created position, will advise executive director David Marquis and serve as a senior assistant and program specialist with policy and strategic responsibilities, was hailed by NCUA Chairman Debbie Matz for “his breadth of experience and exceptional work ethic,” traits that Matz said “will be on display during these challenging times.” Biliouris first worked for the NCUA as an examiner in 1992, and over the years served as a supervision analyst, information systems officer, and recently as special assistant to NCUA Board Member Michael Fryzel. Biliouris’ name may be familiar to credit unions because he was NCUA’s “point man” on Bank Secrecy Act matters for several years.

Inside Washington (02/16/2010)

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* WASHINGTON (2/17/10)--The Senate has confirmed three Treasury officials: Charles Collyns, assistant secretary for international finance; Marisa Lago, assistant secretary for international markets and development; and Mary Miller, assistant secretary for financial markets. Collyns was previously deputy director of the International Monetary Fund’s Research department, Lago was president/CEO of Empire State Development, and Miller worked at T. Rowe Price Group Inc. as director of its fixed income division ... * WASHINGTON (2/17/10)--Creating an agency to collect and analyze data needed to monitor systemic risk will be costly and complex, said Federal Reserve Board Gov. Daniel Tarullo at a Senate subcommittee meeting Friday. The financial crisis has underscored gaps in the data collection, and an independent data collection agency might be more effective than the current process where each regulator collects its own data (American Banker Feb. 16). However, such an agency would be expensive, Tarullo said. Separation of data collection and regulation also could diminish accountability if supervisors don’t have the authority to shape reporting requirements with supervisory needs, he added. Some policymakers have supported creating such an agency. Sen. Jack Reed (D-R.I.) introduced a bill Feb. 4 to establish the National Institute of Finance for data collection. Reed said regulators did not have the data they needed during the financial crisis ...

Inside Washington (02/15/2010)

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* WASHINGTON (2/16/10)--The Obama administration will soon be challenged to fill key financial regulatory positions, according to American Banker. In August, leadership roles will be open at the Federal Housing Finance Agency (FHFA), the Office of Thrift Supervision and the Office of the Comptroller of the Currency (OCC). The OCC may be the highest priority on the administration’s list because it oversees the biggest, most systemically significant banks. Another priority will be filling the top role at the FHFA (American Banker Feb. 15). The future of Fannie Mae and Freddie Mac--which FHFA regulates--is not certain. Edward DeMarco, who took over FHFA temporarily starting in August, said in a letter to top lawmakers that it’s Congress’ and the Obama administration’s job to figure out what to do with the enterprises. Also, Federal Deposit Insurance Corp. (FDIC) Chairman Sheila Bair’s term will expire in June 2011. Bair, a Republican, has made allies in both political parties, and it’s not certain who will succeed her, Banker said ... * WASHINGTON (2/16/10)--Sen. Bob Corker (R-Tenn.), top negotiator on legislation to revamp financial regulation, said he is considering taking away the Federal Reserve Board’s oversight powers. During an interview with Bloomberg Television’s “Political Capital with Al Hunt,” Corker said he does not support President Barack Obama’s proposed consumer protection action (Bloomberg Feb. 15). He also said he would not back the president’s call for mandatory limits on banks’ sizes and trading. Corker said he could be nearing an agreement with Senate Banking Committee Chairman Christopher Dodd (D-Conn.) on bank failure resolution processes. He hopes to bring other Republicans to support reform legislation, but many of them, led by Senate Minority Leader Mitch McConnell (R-Ky.) oppose Obama’s reform proposals ...

All systems even weatherGo for GAC

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WASHINGTON (2/16/10)—After expected precipitation last night, the remainder of this week calls for warmer temperatures and sunny skies as the Credit Union National Association’s (CUNA's) Governmental Affairs Conference prepares to get underway this Sunday. As of yesterday the snow was plowed, the streets were clear, airports remained open and taxi, bus, and Metro services continued in full swing. “Everything is ready to go for our Governmental Affairs Conference next week,” said CUNA President/CEO Dan Mica Monday. “Travel into and around the city is back to normal, and we have an absolutely stellar event waiting for our attendees when they arrive.” The conference runs from Sunday evening Feb. 21 through midday Thursday, Feb. 25, at the Washington Convention Center. The program features influential members of the U.S. Congress, the administration and the regulatory agencies, the largest exhibit hall in the financial services industry, a raft of on-point educational breakout sessions, top-flight entertainment, and an afternoon devoted to visits with members of Congress and their staffs on Capitol Hill. Use the resource link below for more information on the schedule of events.

Congress this week Recess returns

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WASHINGTON (2/16/10)--As Washington continues to dig out from the recent snows, the U.S. Congress remains quiet, with both the House and Senate taking their first recesses of 2010. Still, a number of issues that are of importance to credit unions, including financial regulatory reforms and member business lending, remain on the horizon. While the exact legislative vehicle has not yet been determined, the Credit Union National Association (CUNA) continues to look for legislation to carry reforms of the current MBL rules. CUNA also expects a House Financial Services Committee/House Small Business Committee joint hearing on the "Condition of Small Business and Commercial Real Estate Lending in Local Communities” to be rescheduled for late next week.

Compliance CUNA answers CARD Act credit concerns

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WASHINGTON (2/16/10)--In this month's Compliance Challenge, the Credit Union National Association (CUNA)addresses whether the Federal Reserve's recent Regulation Z final rule, which covers provisions of the Credit Card Accountability, Responsibility and Disclosure Act of 2009 that become effective on Feb. 22, contain any exceptions for share-secured credit card accounts with regard to determining an underage consumer's "ability to pay." According to CUNA, there is no exception to the rules that soon will restrict creditors from opening a credit card account for a consumer under the age of 21. Such an account will be prohibited unless that young consumer submits a written application, obtains the signature of a cosigner, guarantor, or joint applicant who is at least 21 and has the means to repay the debt and agrees to joint liability, or proves that the consumer has the income needed to make the required payments. These rules would apply to all credit card accounts, including share-secured credit card accounts. Regarding Regulation E rules that address overdraft fees, CUNA has indicated that credit unions may begin to collect consent forms for members to opt-in to overdraft services, provided they clearly communicate the effective date of the change, which will take place on July 1. As of that date, credit unions will be required to provide an opt-in notice and obtain the member’s affirmative consent before charging any fees for paying ATM and one-time debit card overdrafts. A separate deadline of August 15 will apply to accounts that are opened before the July 1 compliance date. The Compliance Challenge also addresses another Fed rule, Regulation B, which does not require credit unions to send an adverse action notice if a member requests a reduction in their line of credit, according to CUNA. Currently, Regulation B would require an adverse action notice if there is a refusal to grant credit in substantially the amount or on substantially the terms requested in an application, absent a counteroffer from the credit union. A refusal to increase the amount of credit available to an applicant that has applied for an increase would also trigger an adverse action notice, according to Regulation B. Changing the terms of a given account, as agreed to by the applicant, would not cause a credit union to file an adverse action notice, CUNA said. For the full Compliance Challenge, use the resource link.

CUNA continues pursuit of MBL opportunities

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WASHINGTON (2/15/10)--While Sens. Max Baucus (D-Mont.) and Charles Grassley (R-Iowa) released a bipartisan jobs bill last week, Sen. Harry Reid (D-Nev.) dismissed it in favor of his newly-released jobs amendment that he hopes will be attached to H.R. 2847, the Jobs For Main Street Act. Reid's substitute amendment, the Hiring Incentives to Restore Employment (HIRE) Act, introduced last week, includes tax credits for businesses that create jobs by granting employers social security payroll tax exemptions for any person they hire this year that has been unemployed for at least two months. The dismissed Baucus/Grassley jobs bill included significant defined benefit pension plan funding relief for employers, and there is a chance that this funding relief could be included in a later bill. Credit Union National Association (CUNA) Senior Vice President of Legislative Affairs John Magill said that CUNA is aware that the Congress will continue to discuss job creation legislation as the year wears on, and CUNA "will continue to work to get member business lending (MBL) legislation on one of those legislative vehicles." MBL-related legislation remains active in both the House and the Senate. The bills, which were introduced late last year by Sen. Mark Udall (D-Colo.) and Rep. Paul Kanjorski (D-Pa.), would increase the credit union MBL cap to 25% of assets and raise the "de minimis" threshold for MBLs to $250,000. Both pieces of legislation have bipartisan support.

Freddie Mac 30-year mortgage rates dip below 5

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WASHINGTON (2/15/10)--In its weekly release on the state of the home loan market, Freddie Mac disclosed that the average rate of 30-year fixed-rate mortgages was 4.97% for the week ended Feb. 11, a slight drop from the previous week's average of 5.01%. Freddie Mac vice president/chief economist Frank Nothaft said that this was the third time in 2010 that the weekly mortgage rate average had fallen below 5%, "which helps a number of homeowners to refinance their existing housing debt." Fifteen-year mortgages averaged 4.34% during the week, a slight drop from the 4.4% average reported during the previous week. Thirty-year and 15-year fixed rate mortgages averaged 5.16% and 4.81%, respectively, this time last year. Freddie Mac also released numbers on less conventional mortgages, noting that the 5-year Treasury-indexed hybrid adjustable-rate mortgage averaged 4.19% for the week, with the 1-year Treasury-indexed ARM averaging 4.33%.

LICU capital rule on NCUA meeting agenda

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ALEXANDRIA, Va. (2/15/10)--The National Credit Union Administration (NCUA), at its upcoming board meeting at 10 a.m. ET on Thursday, Feb. 18, will be briefed on an interim final rule addressing secondary capital accounts for low-income credit unions. Section 701.34 of the NCUA's regulations determines the criteria that credit unions must meet to be considered low-income credit unions. The NCUA early last week approved the interim final rule via notational vote. The interim rule, which allows low-income credit unions (LICUs) to redeem all or part of government-funded secondary capital, along with their matching secondary capital at any time after it has been on deposit for two years, follows the U.S. Treasury Department's announcement of an initiative intended to enable LICUs, banks and thrifts to increase lending in low-income areas. The board will also be updated on the status of the National Credit Union Share Insurance Fund during the meeting. A closed meeting of the board--during which the NCUA will discuss supervisory activities and personnel matters--will follow the session.

Inside Washington (02/12/2010)

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* WASHINGTON (2/15/10)--If a regulatory reform bill is not enacted this year, Sen. Richard Shelby (R-Ala.) may lose his chance to crack down on the Federal Reserve, according to financial observers. Shelby has voiced his intent to cut the Fed “down to size,” arguing that it failed to stop the financial crisis and therefore should lose its supervisory powers, said American Banker (Feb. 12). Sen. Christopher Dodd (D-Conn.) has been working on a reform bill with Shelby, but negotiations between Dodd and Shelby have broken down. Dodd said he will work on legislation with Sen. Bob Corker (R-Tenn.). While the Senate may support provisions to cut the central bank’s power, it’s likely the Fed’s political power will increase as the financial crisis goes away. Also, if Shelby supports a reform bill, it may be because he wants to strip the Fed of its power, Banker said ... * WASHINGTON (2/15/10)--Calling for a ban on proprietary trading is too difficult, said Sen. Mark Warner (D-Va.). Last month, President Barack Obama proposed banning the trading, an action referred to as the Volcker Rule after former Federal Reserve Board Gov. Paul Volcker, who championed the idea (American Banker Feb. 12). Warner is working on reform legislation with Sen. Bob Corker (R-Tenn.) He said the trading would be addressed in other legislation or through regulatory structure changes ... * WASHINGTON (2/15/10)--Credit unions interested in national disaster preparedness rules can comment on the Federal Emergency Management Agency’s draft National Disaster Recovery Framework. The framework is intended to work with the National Response Framework to provide organizing constructs and principles focused on disaster recovery (Federal Register Feb. 12) ...

Compliance Hot topics vetted in CUNA call

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WASHINGTON (2/12/10)--Pressing credit union compliance issues, including Truth in Lending (Regulation Z) changes, new overdraft rules, and revamped model privacy notices, were vetted for 90 minutes during yesterday’s Credit Union National Association (CUNA) “hot topics” audio conference. Mike McLain, CUNA’s assistant general counsel, addressed numerous issues regarding the credit card rules that go into effect on Feb. 22, including if under-aged consumers could be given shared-secured credit cards without going through a separate creditworthy analysis, and how allocations of payments must be handled. McLain also reviewed four provisions in the new Regulation Z rules that become effective Feb. 22 that apply to all open-end loans, including the new requirement for a 45-day change-in-terms notice, rather than the current 15 days. McLain indicated he is preparing a lengthy compilation of “Frequently Asked Questions” to address the tremendous number of inquiries CUNA has received about the new Regulation Z rules. The topic that produced the most questions from the audience involved the Federal Reserve Board’s overdraft restrictions that become effective July 1. Valerie Moss, CUNA’s director of compliance information, reviewed the Fed’s restrictions on charging any fees connected with honoring or declining overdrafts triggered by ATM withdrawals or one-time debits without first obtaining the member’s consent. Moss discussed how and when credit unions could send out consent forms for existing accounts, although participants questioned how many members would actually provide consent and worried about the impact on credit union revenue. McLain, on a third topic, reviewed the impact that the Fed’s decision to consolidate its checking processing operations has on complying with Regulation CC, the expedited funds availability rule. With the elimination of “nonlocal” checks, credit unions need to review their new account disclosures and determine whether they need to send a notice by March 29 advising members that check holds at the credit union have been reduced. McLain also discussed why a five-day hold is still permitted for checks deposited in nonproprietary ATMs. Nichole Seabron, CUNA’s federal compliance counsel, discussed the federal agencies’ new “model” privacy forms. Although use of the new format isn’t mandatory, Seabron pointed out that the existing sample privacy notice clauses will be removed from the privacy regulation on January 1, 2011, and therefore credit unions will lose the “safe harbor” of using their current privacy notices. She noted that while the National Credit Union Administration has not said how it will instruct its examiners about usage of the privacy form, credit unions should expect consumer groups to press for use of the new forms by all types of financial institutions to allow consumers to compare privacy policies across-the-board. The CUNA lawyers also provided quick reviews of two new rules implementing provisions of the Fair and Accurate Credit Transactions Act (FACTA) that go into effect later this year, and updates on what is happening with the Internet gambling regulation and the mortgage registration rules. The archived version of the winter 2010 “Pressing Compliance Issues” program should be available today or Monday on CUNA’s website (see “training/audio-conferences”).

Dodd tries new alliance for reg reform

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WASHINGTON (2/12/10)—Senate Banking Committee Chairman Christopher Dodd (D-Conn.) announced Thursday a new bi-partisan alliance intended to get financial regulatory reform back on track. Just about a week ago it was widely reported that Dodd’s months-long efforts on reform with the ranking minority member of the banking panel, Sen. Richard Shelby of Alabama, had fallen apart. Shelby also continues to garner much press attention right now with his “blanket hold” on dozens President Obama’s s nominees awaiting confirmation before the Senate. In a press release yesterday Dodd said, "For over a year, the Senate Banking Committee has been grappling with how best to address the many problems that led to the financial crisis. In that time Sen. Corker has proved to be a serious thinker and a valuable asset to this committee. “For that reason, I called him Tuesday night and asked him to negotiate the financial reform bill with me. We met in my office on Wednesday, and given the importance of these issues, he agreed." (American Banker, Feb. 11)

Fannie and Freddie will buy more delinquent loans

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WASHINGTON (2/12/10)—Fannie Mae and Freddie Mac have announced that they are gearing up their efforts to purchase as much as $200 billion of delinquent loans that carry their guarantees. The government-sponsored enterprises are required to buy out nonperforming mortgages, which have been packaged into mortgage-backed, when they modify the loans or when the loan has been delinquent for two years. However, now Fannie and Freddie say they will buy loans that are just 120 days past due on payments. (Wall Street Journal Feb. 11) The change in operations is the result of an accounting change that became effective Jan. 1 that makes it less costly for Fannie and Freddie to purchase delinquent loans. Previously, it was more cost effective to make principal and interest payments to bondholders on nonperforming loans because buyouts sparked steep write-downs.

Inside Washington (02/11/2010)

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* WASHINGTON (2/12/10)--A commercial real estate (CRE) crisis may be on the horizon, and there are no easy solutions to mitigate the risks CRE may pose to the financial system or the public, according to a Congressional Oversight Panel report released Thursday. The report said that CRE markets will likely suffer “substantial difficulties” over the next few years. Any approach to the problem raises the risk of moral hazard, subsidization of financial institutions or providing a floor under otherwise undercapitalized institutions. The alternative is to accept bank failures and sell the assets at a discount, the panel said. “The panel is concerned that until Treasury and bank supervisors take coordinated action to address forthrightly and transparently the state of CRE markets--and the potential impact that a breakdown in those markets could have on local communities, small businesses and individuals--the financial crisis will not end,” the paper concluded ... * WASHINGTON (2/12/10)--Federal Reserve Board Chairman Ben Bernanke’s written statement--released Wednesday--regarding the central bank’s exit strategy has garnered mixed views from economists (The New York Times Feb. 11). Though his testimony before the House Financial Services Committee--originally scheduled for Wednesday--was postponed due to snow, Bernanke released a statement that indicated, among other things, that the Fed could raise the discount rate. Bernanke didn’t specify when the exit plan would be implemented. If interest is paid on excess reserves, inflation could skyrocket, according to Laurence J. Kotlikoff, Boston University economist. Hyperinflation could happen overnight because the supply of money would be increased by a factor of three, he said. The Fed also printed new money and distributed it to banks, and is now trying to prevent the banks from releasing the bills into public stream. That’s what the interest rates on the reserves are, he added. Ricardo Reis, Columbia University economist, said that with the proposed changes, the Fed can now return to its “boring” balance sheet. The increase in reserves plus interest on the reserves are good things and should remain, he added ...

Snow shuts down House and Senate financial services panels

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WASHINGTON (2/11/10)-- The Senate Banking Committee postponed a subcommittee hearing planned for yesterday during which current and former regulators were expected to weigh in on financial systemic risk. The hearing was meant to study ways to better equip financial regulators to oversee systemic risks posed by large, complex companies, products, and activities On the House side, the Financial Services Committee postponed all hearings scheduled this week due to the heavy snow and blizzard conditions, The District of Columbia and some outlying districts announced just after 10 a.m. that plowing services were suspended until further notice because of the dangers posed by blizzard conditions, including high winds.’ The committee had scheduled a Wednesday hearing on the Federal Reserve’s strategy for exiting from extraordinary lending and monetary policies implemented to combat the financial crisis and support economic activity. Federal Reserve Board Chairman Ben Bernanke did release his prepared testimony (see Inside Washington). Also cancelled was a joint hearing with the Small Business Committee on small business and commercial real estate lending in local markets. New dates for the postponed session have not been announced.

FinCEN broadens 314 a reporting rule

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VIENNA, Va. (2/11/10)--There is a new Bank Secrecy Act (BSA) rule on the books, one that expands the list of law enforcement agencies that can submit 314(a) information requests to credit unions and other financial institutions. The rule, effective last week, permits foreign law enforcement agencies, and state and local law enforcement agencies to utilize Section 314 (a) requests. Section 314 (a) of the USA PATRIOT Act gives FinCEN the authority to request that a financial institution search its records to determine if the institution has maintained accounts for, or engaged in transactions with, certain individuals or entities suspected of terrorism or money laundering. The new rule also clarifies that FinCEN, on its own behalf and on behalf of other appropriate components of the U.S. Department of the Treasury, has authority to submit such requests. In a Federal Register document, FinCEN declared its modification of the information-sharing rules is part of Treasury’s “continuing effort to increase the efficiency and effectiveness of its anti-money laundering and counter-terrorist financing policies.” For details, use the resource link below.

Inside Washington (02/10/2010)

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* WASHINGTON (2/11/10)—Although the House Financial Services Committee hearing scheduled for Feb. 10 was postponed because of a blizzard that engulfed the Washington, D.C. region, Federal Reserve Board Chairman Ben Bernanke still released his prepared testimony that, in part, previewed what would be the first interest-rate adjustment in more than a year. He also detailed several other steps that might be used to tighten credit.(Bloomberg.com, Feb. 10) Bernanke’s written statement said the Fed may raise the discount rate “before long” as part of the “normalization” of Fed lending. The Fed leader also reiterated a message sent at a recent Federal Open Market Committee meeting--that low rates are warranted “for an extended period.” Bernanke, who just this month started his second four-year term as Fed chairman, said he and fellow policymakers are preparing—at some point--to remove unprecedented monetary stimulus as the U.S. economy is forecast to grow at the fastest pace since 2006...

NCUA approves low-income CU interim capital rule

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ALEXANDRIA, Va. (2/11/10)—Closely following the U.S. Treasury Department’s announcement of an initiative intended to enable low low-income credit unions (LICUs), banks and thrifts to increase lending in low-income areas, the National Credit Union Administration (NCUA) Tuesday approved by notational vote an interim final rule regarding use of secondary capital by LICUs. Last week Treasury announced the Community Development Capital (CDC) Program under which it plans to set aside up to $1 billion in Troubled Asset Relief Program (TARP) funds for use by Community Development Financial Institutions (CDFIs). Under the Treasury plan, CDFI-designated credit unions would be able to borrow as much as 3.5% of their total assets over an eight-year period. The interim rule changes NCUA rules concerning redemption of secondary capital by LICUs to facilitate the credit unions’ participation in the administration’s initiative. The new regulation permits, with approval of an NCUA Regional Director, redemption of all or part of government-funded secondary capital along with its matching secondary capital at any time after it has been on deposit for two years. Prior to the NCUA’s action, LICUs were limited with respect to the percentage of secondary capital they could redeem prior to maturation. The NCUA announcement noted that the amended rule also allows LICUs to redeem secondary capital accepted under the CDC Program before interest rates on program secondary capital escalate to 9% over the last five years to maturity. And the amended rule changes the loss distribution procedures applicable to secondary capital by making CDC Program secondary capital senior to any required matching secondary capital. NCUA Chairman Debbie Matz urged, “The time is now for eligible credit unions to utilize this additional capital tool and give consumers greater access to mainstream financial services." The interim final rule will have a 30-day comment period. When the Treasury program was unveiled, Credit Union National Association (CUNA) President/CEO Dan Mica said that while CUNA appreciates the Treasury's announcement, CUNA "continues to contend that the most effective way to help many more credit unions help the economy is by giving credit unions greater capacity to make business loans." "Doing so – through legislation raising the amount of loans credit unions can make in business loans to 25% of total assets--would inject more than $10 billion into the economy and create 108,000 new jobs in the first year. There is no public policy reason to deny credit unions this, while at the same time giving banks--who are not lending -- $30 billion as an enticement to do what credit unions are already doing, and are willing to do more of," he added.

Assistant Treasury Secretary Barr to address GAC

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WASHINGTON (2/11/10)—Assistant Treasury Secretary for Financial Institutions Michael Barr is scheduled to address the Credit Union National Association’s (CUNA’s) Governmental Affairs Conference (GAC) on Tuesday morning, Feb. 23. As Assistant Secretary for Financial Institutions, Barr is responsible for developing and coordinating Treasury's policies on legislative and regulatory issues affecting financial institutions. Barr previously served as Treasury Secretary Robert E. Rubin's Special Assistant, as Deputy Assistant Secretary of the Treasury, as Special Advisor to President William J. Clinton, as a special advisor and counselor on the policy planning staff at the U.S. State Department. Barr joins an already high-voltage GAC lineup that includes key financial regulators and top credit union regulators. Among the featured speakers scheduled for the conference, to be held in Washington, D.C> from Feb. 21-25, are:
* House Majority Whip Rep. James Clyburn (D-S.C.); * House Minority Whip Eric Cantor (R-Va.); * Senate Banking Committee Chairman Christopher Dodd (D-Conn.); * House Financial Services Committee Chairman Barney Frank (D-Mass.); * Reps. Paul Kanjorski (D-Pa.), Spencer Bachus (R-Ala.), and Ed Royce (R-Calif.); * NCUA Chairman Debbie Matz; * Financial Accounting Standards Board Chairman Robert Herz, and many more.
Also featured are former Federal Reserve Chairman Alan Greenspan and Richard Phillips, captain of the Maersk Alabama, which was hijacked by Somali pirates in 2009, and former congressman and current host of MSNBC's Morning Joe, Joe Scarborough, will debate politics and the economy with presidential candidate and former Democratic National Committee Chairman Howard Dean. The GAC will kick off with a CUNA Council-sponsored concert by the World Classic Rockers, featuring member of Santana, Journey, Boston, Steppenwolf, Toto and Lynyrd Skynyrd. Use the resource link below for more 2010 GAC information.

Inside Washington (02/09/2010)

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* WASHINGTON (2/10/10)--Federal Reserve Board Chairman Ben Bernanke was scheduled to appear before the House Financial Services Committee today for a hearing in which he was expected to lay out the central bank’s exit strategy. However, the House Financial Services Committee announced that all hearings for this week would be cancelled due to weather. The hearings have not yet been rescheduled. Also, no votes are expected in the House this week ...

Go Direct month good time to encourage direct deposit says Treasury

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WASHINGTON (2/10/10)—February is Go Direct month. The U.S. Treasury Department's "Go Direct" direct deposit campaign is highlighting the month’s designation to encourage consumers to take advantage of the safety benefits of direct deposit for Social Security payments and other federal benefits. Valentines Day had to move over in 2006 to share the February stage with the government’s drive for direct deposit after the Senate passed a resolution naming the month and showing its support of the Treasury Department and Federal Reserve Banks drive to increase use of direct deposit. The resolution, sponsored jointly by Sens. Norm Coleman (R-Minn.) and the late Edward Kennedy (D-Mass.), urged Americans to learn more about direct deposit and noted that direct deposit eliminates the risk of lost or stolen checks, helps protect against fraud, and gives people more control over their money. The Credit Union National Association (CUNA) is a Go Direct national partner and supports the check-safety and cost-savings goals for the program. Go Direct has made available free materials credit unions and other financial institutions can use to inform members or customers about the advantages of electronic payments “Encourage senior citizens, people with disabilities and others to get their federal benefits electronically – it’s safer, easier and gives them more control over their money,” the government direct-deposit supporters urge. Use the resource link below to access the Go Direct Tool Kit for Partners. Scroll down to see material specifically suited to financial institutions.

CFA-CUNA card survey reveals consumer reaction to rule changes

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WASHINGTON (2/10/10)-- A recent survey commissioned by the Consumer Federation of America (CFA) and Credit Union National Association (CUNA) revealed that, while most consumers (61%) are aware there are new credit card protections, most (65%) don’t know they take effect later this month and don’t understand the specific protections the U.S. Congress approved last year. “We are especially concerned that some consumers will base their future credit card use on protections that don’t exist,” said CFA Executive Director Stephen Brobeck. He noted, for example, that 36% of credit card users think that the new law caps late fees at $35, while 31% believe it caps interest rates at 20%. The new law does neither. The survey also revealed, however, that a large majority of consumers who have noticed disadvantageous changes in the terms of their most frequently used credit card are taking or plan to take some kind of remedial action, most frequently using the card less frequently (69%) and/or paying off the remaining balance faster (62%). “We are encouraged that 85% of consumers reported planning or taking action when aware of a rate hike, new fee, lower credit limit, fewer rewards, or other disadvantageous terms,” said CUNA Chief Economist Bill Hampel. Some issuers, Hampel warned, have used the interim period between the signing of the new law and its Feb. 22 effective date to change the terms of use on their cards. The survey was conducted for CFA and CUNA by Opinion Research Corporation, which polled a representative sample of 1,013 adult Americans Jan. 28-31. Of those respondents who use credit cards, half said they have noticed some type of recent change in terms by the card issuer. Twenty-eight percent of those respondents say they have been notified of an increase in their interest rate. The three other most likely changes noted by card users were a new fee or fees (18%), an increase in existing fees (18%), or a reduction in rewards (17%). “Considering all the credit card mailings they typically receive and the complexity of some of these disclosures, it’s a positive sign that many consumers have noticed the changes,” said CUNA’s Hampel. He also noted that the new card rules make rate comparisons between cards more possible and encouraged consumers to make such comparisions. He said that credit unions often offer more favorable card rates to consumers, but encouraged across the boared comparisons. Also of note, the CUNA/CFA survey indicates consumers are taking or planning action in response to those recent changes by the card issuers. Nearly seven out of eight (85%) of credit card users who reported a change in terms are doing so. That group of consumers says the two most likely actions are to use the card less frequently (69%) and to pay off the remaining balance faster (62%). Other frequently mentioned responses are to stop using the card (45%) and to use another card (34%). Less frequent reactions are to cancel the card (22%) or apply for a different card (12%). “The new rules are leading to changed behavior by card companies, and consumers would be very well advised to pay particular attention to terms and conditions, fees and rates on their cards to make sure they have the best deal,” said Hampel. “Our data show more consumers are turning to credit unions’ credit cards, which typically do offer lower rates and compare more favorably than other issuers’ cards.” The CFA and CUNA offered two key consumer tips for smart credit card use. The most important practices to adopt, the groups said, are to make monthly payments on time and try hard to pay down, and pay off, balances on all cards. Just one late payment can trigger not only a late fee but also an interest rate hike on the card, an interest rate hike on other cards, and a lower credit score. Some consumers just don’t understand how important it is to make their credit card payments on time,” noted CFA’s Brobeck. FOr more details on the survey, and on the Fed's new credit card rules, use the resource links below.

New hot topics compliance session slated for Feb. 11(1)

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WASHINGTON (2/9/10)--Pressing credit union compliance issues will be the subject Thursday of a Credit Union National Association (CUNA) audio conference. Through this audio conference, credit union compliance professionals can learn about the current hot topics and will have an opportunity to ask questions of the panel. On the call will be a panel of experts from CUNA's compliance department lead by Kathy Thompson, senior vice president for compliance. Participants in the call will receive an overview of recent compliance developments that will affect credit union operations. The 90-minute audio conference, scheduled to begin 3 p.m. (ET), will be broken into two parts, with the first segment covering areas that currently require special attention by credit unions, including:
* Credit cards: Troublesome areas in the Fed's new credit card rules; *July's open-end Regulation Z changes; *New model privacy notices; *Overdrafts rules; and *Consolidation of the Fed's check processing operations.
The second part of the audio conference will provide a quick update on developing compliance issues, such as:
* Proposed internet gambling regulations; *Risk-based pricing; and * The Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE Act).
For more information or to register for the audio conference, use the resource link.

Snow closes federal offices CUNA Washington

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WASHINGTON (2/9/10)--An historic snowstorm that dumped almost 36” at one local airport over 36 hours forced the federal government to close offices Monday and again today, and local jurisdictions have urged residents not to travel due to treacherous road conditions. Public transportation—both bus systems and Metro Rail—have been running on limited schedules and the Credit Union National Association, in response to the problems, closed its Washington, D.C. office Monday and Tuesday. CUNA's Madison, Wisc. office is operating under a normal schedule.

Inside Washington (02/08/2010)

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* WASHINGTON (2/9/10)--Federal Reserve Board Chairman Ben Bernanke is expected to lay out an exit strategy to tighten credit this week. The plan will be implemented when the Fed decides that the economy has sufficiently recovered. According to The Wall Street Journal, the Fed likely won’t raise interest rates for several months, but officials have been discussing for months what to do when the economy strengthens (Feb. 8). When the economy has recovered, the Fed plans to raise the interest rate paid on excess reserves--currently at 0.25%. The rate aims to entice banks to tie up money they would otherwise lend, which would in turn limit credit. If the Fed moves too quickly, it could trigger an economic downturn. Otherwise, if the Fed waits too long, it could trigger inflation ... * WASHINGTON (2/9/10)--Though the Obama administration has predicted a $1.6 trillion budget deficit this year, Treasury Secretary Timothy Geithner said the U.S. will not lose its Aaa debt rating (Bloomberg.com Feb. 8). Investors worldwide turn to the U.S. when they are concerned about global stability, which reflects basic confidence in the U.S. and its ability to withstand the global recession, Geithner said. Last week, Moody’s Investors Service said the U.S. government’s bond rating will be under pressure unless budget deficits are reduced. The nation plans to tackle the deficit once the labor market improves, Geithner added. Tax cuts and small business assistance are among the proposed measures to jumpstart the economy. Geithner has said a cut in spending could hurt the economy ... * WASHINGTON (2/9/10)--Rep. John Murtha (D-Pa.), 77, died Monday after being hospitalized for several weeks with a gall bladder infection (Politico Feb. 8). He was the longest-serving member of the Pennsylvania delegation and was chair of the House Appropriations Subcommittee on Defense. In 1974, he was the first Vietnam War combat veteran elected to Congress. One of Murtha’s most noteworthy efforts included bringing jobs to western Pennsylvania, which was hit by the loss of steel and coal jobs during the 1970s and 1980s ...

Congress this week Three hearings to watch

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WASHINGTON (2/9/10)—Although the schedule in the U.S. Congress should be viewed as tentative this week as Washington, D.C. digs out from its historic snowstorm, the Credit Union National Association (CUNA) will following several hearings on both sides of the Capitol. Of particular note, Ronald Covey, President/ CEO of St. Mary's Bank CU, Manchester, NH, is among the witnesses scheduled to testify Thursday at a House Financial Services Committee/ House Small Business Committee joint hearing on the “Condition of Small Business and Commercial Real Estate Lending in Local Communities Other hearing of note to credit unions include:
* On Wednesday, the House Small Business Committee will conduct a hearing on the Small Business Administration's budget for fiscal year 2011. SBA Administrator Karen Mills is scheduled to testify; and * Also, on Wednesday, the Senate Banking Committee subcommittee on security and international trade and finance has scheduled a hearing on “Equipping Financial Regulators with Tools Necessary to Monitor Systemic Risk.”

CUNA ire on administrations plan noted in iAmerican Bankeri

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WASHINGTON (2/9/10)—The Credit Union National Association’s (CUNA’s) ire on behalf of credit unions when a recent Obama administration plan proposed to funnel $30 billion into community banks for business lending--but do nothing for credit unions—was highlighted in Monday’s “People” section of American Banker. The article contrasted CUNA’s heated outrage to the National Association of Federal Credit Union’s more muted response to the president’s announcement. NAFCU, said American Banker, responded by “politely sending a letter to the president” asking for credit union inclusion. CUNA, on the other hand, “went for the jugular,” noting its outrage that the administration's plan did not help credit unions engage in more business lending, the newspaper pointed out. It further noted that CUNA President/CEO Dan Mica underscored that credit unions can inject more than $10 billion into the economy through increased business lending if the cap on such loans is increased to just 25% of assets. "But the administration overlooked — or snubbed — the opportunity," Mica said in a public statement.

Consumer card awareness study revealed by CFACUNA today

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WASHINGTON (2/9/10)-- The Credit Union National Association (CUNA) and the Consumer Federation of America (CFA) postponed until today the release of its new study on the level of consumer awareness of protections offered by new credit card statutory requirements. The survey results will be revealed today by CUNA Chief Economist Bill Hampel and CFA Executive Director Stephen Brobeck via teleconference at 12 p.m. (ET). The presenters also will offer tips for prudent consumer credit card use under the new regulatory regime. The study release was originally scheduled for a press conference Monday, but was delayed by the Washington, D.C.-area snow emergency.

Regulators to ease criticism of small biz loans

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WASHINGTON (2/8/10)--The National Credit Union Administration (NCUA) on Friday joined federal and state banks and thrift regulators in a message meant to emphasize “that financial institutions that engage in prudent small business lending after performing a comprehensive review of a borrower’s financial condition will not be subject to supervisory criticism for small business loans made on that basis.” In a joint statement, the regulators said that they “recognize that small businesses play an important role in the economy and know that some are experiencing difficulty in obtaining or renewing credit,” and, in response, are “working with the industry and supervisory staff to ensure that supervisory policies and actions do not inadvertently curtail the availability of credit to sound small business borrowers.” The statement added that “financial institutions should understand the long-term viability of the borrower’s business and focus on the strength of a borrowers’ business plan to manage risk rather than using portfolio management models that rely primarily on general inputs, such as a borrower’s geographic location or industry.” In the guidance, the regulators also recommended that financial institutions focus on the borrower’s “plan for the use and repayment of borrowed funds,” and maintain “an understanding of the competition and local market conditions affecting the borrower’s business” rather than simply basing their lending decisions “solely on national market trends when local conditions may be more favorable.” The regulators also told financial institutions that their examiners “will not discourage prudent small business lending by financial institutions,” will not “criticize institutions for working in a prudent and constructive manner with small business borrowers,” and, for the most part, “will not adversely classify loans solely due to a decline in the collateral value below the loan balance.” While the examiners will “not classify loans due solely to the borrower’s association with a particular industry or geographic location that is experiencing financial difficulties,” they will “expect institutions to employ sound underwriting and risk management practices, maintain adequate loan loss reserves and capital, and take appropriate charge-offs when warranted.”

New hot topics compliance session slated for Feb. 11

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WASHINGTON (2/9/10)--Pressing credit union compliance issues will be the subject Thursday of a Credit Union National Association (CUNA) audio conference. Through this audio conference, credit union compliance professionals can learn about the current hot topics and will have an opportunity to ask questions of the panel. On the call will be a panel of experts from CUNA's compliance department lead by Kathy Thompson, senior vice president for compliance. Participants in the call will receive an overview of recent compliance developments that will affect credit union operations. The 90-minute audio conference, scheduled to begin 3 p.m. (ET), will be broken into two parts, with the first segment covering areas that currently require special attention by credit unions, including:
* Credit cards: Troublesome areas in the Fed's new credit card rules; * July's open-end Regulation Z changes; * New model privacy notices; * Overdrafts rules; and * Consolidation of the Fed's check processing operations.
The second part of the audio conference will provide a quick update on developing compliance issues, such as:
* Proposed internet gambling regulations; * Risk-based pricing; and * The Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE Act).
For more information or to register for the audio conference, use the resource link.

Inside Washington (02/05/2010)

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* WASHINGTON (2/8/10)--Senate Banking Committee Chairman Christopher Dodd (D-Conn.) expressed his frustration at the slow pace of financial reform during a hearing Thursday with bank executives. Dodd has worked on a bill the past few months that would overhaul financial regulation. The White House is on the right track with reform, but many big banks refuse to work with Congress on the effort, Dodd said. Many industry lobbyists also are working to kill “common-sense financial reforms” the public is demanding, Dodd added (The New York Times Feb. 5). Barry Zubrow, chief risk officer and executive vice president of JPMorgan Chase, said President Barack Obama’s proposal to ban proprietary trading and limit bank risk would diverge from policymakers’ work to address the roots of the financial crisis. The activities the administration wants to ban didn’t cause the crisis, he added ... * WASHINGTON (2/8/10)--Resolution of large financial firms was again a hot topic among lawmakers at a Senate Banking Committee hearing Thursday. Hal Scott, a Harvard Law School professor, said interconnectedness among financial firms is a more important issue than the Volcker Rule, which has garnered much debate from policymakers in the past week. President Barack Obama proposed two weeks ago to ban proprietary trading. If banks are too big to fail, Obama’s proposal will have no effect, Scott said. Also during the hearing, Gerald Corrigan, managing director of Goldman Sachs Group Inc., offered some perspective on what is needed to resolve big banks in the event of a failure. A critical hurdle in resolving institutions is getting financial details to regulators on short notice, said Corrigan. Needed disclosures include valuations of asset classes, legal agreements, liquidity information, exposure to all counterparties, risk management frameworks and financial positions with exchanges and clearing houses, he added (American Banker Feb. 5). The reason nobody has been able to figure out a way to wind down institutions is because it’s “hard to do,” Corrigan said. He also recommended that firms conduct their own stress tests ...

Inside Washington (02/04/2010)

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* WASHINGTON (2/5/10)--The National Federation of Community Development Credit Unions commended the Treasury Department for allowing community development credit unions (CDCUs) to access Troubled Asset Relief Program funds. Cliff Rosenthal, federation president, said up to $200 million could be invested in qualifying CDCUs as a result. There are more than 150 credit unions certified as community development financial institutions. More credit unions could qualify for the designation, and the federation plans to work with interested credit unions to help them become certified. Investments through the program will take the form of secondary capital at a rate of 2% for eight years ... * WASHINGTON (2/5/10)--Federal bank and thrift regulators were expected to issue guidance on small business loans as early as yesterday (American Banker Feb. 4). The guidance is expected to caution banks against tightening credit for small business as a result of the financial crisis. Banks should judge borrowers’ creditworthiness and not base loan decisions on a borrower’s industry or geography. Banks also will not be criticized by examiners for lending to small-business, creditworthy borrowers. President Barack Obama has said banks may have tightened credit too much after the market experienced trouble ... * WASHINGTON (2/5/10)--Federal Reserve Board Gov. Kevin Warsh faulted lawmakers for focusing too much time on attempting to combine financial regulators instead of tackling more critical issues (American Banker Feb. 4). Warsh made the comment while speaking to the New York Association for Business Economics. Real regulatory reform depends on figuring out how many regulators are needed or determining the makeup of an oversight council, he said. He also criticized policymakers for not addressing the future of Fannie Mae and Freddie Mac. Also, giving regulators more power to resolve big banks does not go far enough. Greater market discipline is needed to accompany stricter regulation, he added ...

NCUA extends comment period for FOM proposal

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ALEXANDRIA, Va. (2/5/10)--The National Credit Union Administration (NCUA) on Thursday announced that it has extended the comment period for its recently proposed changes to its chartering and field-of-membership rules until April 15. The comment period for the chartering and field of membership changes, which would speed up, simplify, and enhance the objectivity of the community CU charter application and review process, was originally slated to end on March 1. In comments accompanying the announcement, NCUA Chairman /Debbie Matz said that the NCUA has extended the comment deadline “to allow the credit union community ample opportunities to give appropriate consideration” to both the field of membership proposal and proposed revisions to the corporate credit union rule. The comment period for the corporate revisions ends on March 9. If approved, the new rule would set objective and quantifiable criteria to determine the existence of a well-defined local community (WDLC) for areas that encompass multiple group areas. Single political jurisdictions, such as a county, could continue to be the basis for a community charter or addition without having to meet further statistical standards. A new, objective definition for rural districts is also proposed. The NCUA also further clarified its position on the U.S. Treasury’s decision to expand financial institution lending in low-income areas by allowing community development financial institutions, including credit unions, to access funds from its Troubled Assets Relief Program, announcing that the NCUA will “consider an interim final rule” that would “set forth guidelines for participation” at this month’s board meeting, which will take place on Feb. 18.

Consumer awareness of card changes revealed in CFACUNA study

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WASHINGTON (2/5/10)--The level of consumer awareness of protections offered by new credit card requirements, mostly going into effect Feb. 22, is revealed in a fresh survey conducted by the Credit Union National Association (CUNA) and the Consumer Federation of America (CFA), the results of which will be released during a press conference Monday, Feb. 8 at 10 a.m. The Credit Union National Association (CUNA), along with the Consumer Federation of America, on Monday will detail just how much consumers know about the protections imposed by the Credit Card Accountability, Responsibility and Disclosure Act, announcing the results of a recently completed survey at 10 A.M. ET at the National Press Club in Washington. CUNA Chief Economist Bill Hampel and Consumer Federation of America Executive Director Stephen Brobeck will disclose the results of the survey and will also offer tips for prudent consumer credit card use. The survey, which was conducted between Jan. 29-31, reveals consumer awareness of recent changes to the terms of lines of credit, interest rates, fees, and other terms of credit account agreements. The survey also asked whether or not consumers acted as a result of these changes.

New insights from final corp CU town hall

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WASHINGTON (2/5/10)—The National Credit Union Administration (NCUA) continued its frank discussions on corporate credit union issues Thursday and revealed that the agency hopes soon to work out its formal position on legacy assets. At its final live town hall session on corporate issues in Florida yesterday, NCUA Chairman Debbie Matz kept up her call to credit unions to comment on proposed changes to the corporate rules. Matz underscored the value to the agency of all credit union comment and specifically cited the agency’s anticipation of comments to be drafted under the auspices of the Credit Union National Association’s (CUNA’s) Corporate Credit Union Task Force, said VyStar CU President/CEO Terry West, who attended the meeting. West is chairman of the CUNA task force. The deadline for comments submitted directly to NCUA is March 9. CUNA has identified two areas of concern regarding legacy assets. First is the question: Can former capital holders, whose capital has been depleted, have their capital restored in the future if ultimate losses on the legacy assets turn out to be much less than expected. The second issue is whether, going forward, new capital depositors will be at risk if further losses occur on the legacy assets, that is, if losses turn out to be worse than expected. At a previous meeting in Dallas, Texas, NCUA staff said before a new rule is in place, the agency must find a way to wall off new capital from further losses if natural-person credit unions are to continue to capitalize the system—and that such credit union participation is crucial to an ongoing system. (News Now Jan. 25) At this week’s meeting, agency staff reiterated that the NCUA is working closely with the U.S. Treasury Department on this issue. Agency staff also said they anticipate the future looses for the corporates will aggregate between 80-100 basis points over a 5-7 year period. Although the meeting Thursday is the last live meeting offered by the NCUA, stakeholders have one last chance to participate in the discussions via an online session scheduled for Feb. 18. (See related story: Final chance for an NCUA session on corp CUs) Use the resource links below for more information on the NCUA corporate credit union restructuring plan.

Final chance for an NCUA session on corp. CUs

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ALEXANDRIA, VA. (2/5/10)—The National Credit Union Administration (NCUA) wrapped up its series of live Town Hall meetings on corporate credit union issues in Florida yesterday, and reminds stakeholders there is one more change to participate before the comment period on proposed changes to the system ends March 9. The NCUA will conclude its series of two-way conversations with the credit union industry by hosting a virtual Town Hall meeting Thursday, Feb. 18, 2010. The agency encourages those who were unable to attend a live Town Hall meeting, or those with additional thoughts or comments to register for the online session. This series of meetings, the second initiated by the NCUA, started in September and has been billed by the agency as a “nationwide listening tour." The final session in Florida featured a crowd of over 125 credit union stakeholders and detailed discussion of the proposed corporate rule and related issues, such as the proposed field-of-membership rule, alternative capital, and continuing economic challenges facing natural-person credit unions. To participate in the virtual session, register meeting by accessing “Upcoming Events” using the link below.

Financial Services to study future of housing finance

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WASHINGTON (2/5/10)—The House Financial Services Committee Thursday announced new upcoming hearings including one that will scrutinized the future of housing finance on March 2. The hearing will begin a process, according to the committee announcement, that will focus on all private and public entities that support the mortgage market, a list that includes the Federal Housing Administration, Ginnie Mae, Fannie Mae, Freddie Mac, the Federal Home Loan Banks, and private lenders and securitizers. Saying it is a first step in a legislative process to determine the future of housing finance and the federal government’s role in responsible homeownership and the supply of affordable rental housing, Committee. Chairman Barney Frank (D-Mass,) noted the panel has invited Treasury Secretary Timothy Geithner and Housing and Urban Development Secretary Shaun Donovan to testify on the administration’s perspective. Although a witness list is not expected to be made public until closer to the hearing date, the committee notice said representatives of the advocacy community, academia, and industry are being asked to present their ideas on the future of housing finance. Also newly announced, the committee has scheduled a Feb. 10 hearing on “Unwinding Emergency Federal Reserve Liquidity Programs and Implications for Economic Recovery.” Expected to testify are Federal Reserve representatives, academics, economists and “other experts on the policy implications of unwinding emergency Federal Reserve liquidity facilities and the potential impact on inflation, job growth and overall economic recovery.” And on Feb. 11, the House Small Business Committee will conduct a joint hearing with the Financial Services Committee to examine the condition of small business and commercial real estate lending in local markets.

NCUA to set guidelines for new CDFI capital program

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ALEXANDRIA, Va. (2/4/10)—The National Credit Union Administration (NCUA) announced Wednesday it would act with “appropriate speed” to develop a rule that enables qualifying credit unions to make full use of the U.S. Treasury Department’s program aimed at expanding financial institution lending in low-income areas. Details of the TARP Initiative for Community Development Financial Institutions were announced yesterday. (See related story: $1B TARP plan includes CDFI CUs) As the program name suggests, participation is open to financial institutions, including low-income credit unions, which have been designated as Community Development Financial Institutions, and its funding will be available under the Troubled Assets Relief Program (TARP). NCUA Chairman Debbie Matz applauded the program, calling it a “bold and innovative proposal” and stating it will provide “significant benefits to low-income credit unions as they strive to find new ways to reach consumers in disadvantaged communities.” “Now that the program has been unveiled, the NCUA board will move with all appropriate speed to develop a rule that enables qualifying credit unions to make full use of this program. I am confident that credit unions will see the promise and possibilities in this initiative, and will utilize the new funding to enhance service to those who need credit unions the most," Matz said in a statement. The Credit Union National Association (CUNA) also on Wednesday noted its appreciation of the Treasury’s announcement. However, CUNA President/CEO Dan Mica added that CUNA maintains that “the most effective way to help many more credit unions help the economy is by giving credit unions greater capacity to make business loans.”

Inside Washington (02/03/2010)

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* WASHINGTON (2/4/10)--Ben Bernanke was formally sworn in for a second four-year term as chairman of the Board of Governors of the Federal Reserve System Wednesday in Washington. Bernanke began his second term on Monday following his confirmation by the Senate on Jan. 28 and a hearing on Dec. 3 by the Senate Committee on Banking, Housing and Urban Affairs. His term as chairman ends Jan. 31, 2014, and his 14-year term as member of the board ends Jan. 31, 2020 ... * WASHINGTON (2/4/10)--Lawmakers are criticizing President Barack Obama’s proposal to tax big banks and told Treasury Secretary Timothy Geithner on Tuesday that the proposal is counterproductive. The tax applies to financial service companies with more than $50 billion in assets. Sen. John Kyl (R-Ariz.) asked why banks that did not receive Troubled Asset Relief Program funds or that repaid the funds would be taxed. Sen. Robert Menendez (D-N.J.) said he fears the tax will be passed on to consumers (American Banker Feb. 3). Bankers could reduce compensation payments to make up for the tax, Geithner said. Modest reductions would help absorb the fee, he added. Sen. Bill Nelson (D-Fla.) said the administration could tie a bank’s tax rate to its compensation practices. Banks that have responsible practices would see no loss in benefits, he said ... * WASHINGTON (2/4/10)--Edward DeMarco, acting director of the Federal Housing Finance Agency (FHFA), said his hands may be tied on the future of Fannie Mae and Freddie Mac in a letter to Senate Banking and House Financial Services Committees Tuesday that (American Banker Feb. 3). While there are some options available for the two post-conservatorship, the only option that FHFA may implement is to bring the two companies back under their current charters. DeMarco’s letter comes after lawmakers questioned the futures of Fannie Mae and Freddie Mac. The enterprises have been in conservatorship since 2008 ... * WASHINGTON (2/4/10)--Policymakers should work on creating tougher underwriting standards instead of proposing to require lenders to retain a portion of loans they securitize (American Banker Feb. 3). The proposals are “indirect and imprecise,” said John Dugan, Comptroller of the Currency. If policymakers want to achieve quality underwriting, they should establish minimum standards that can be applied to all mortgages for a level playing field, he added. There are four areas where regulators can mandate the minimum standards: down payments, income verification, debt-to-income ratios and qualifying borrowers for higher rates if their monthly payments will increase ...

1B TARP plan includes CDFI CUs

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WASHINGTON (2/4/10)--The U.S. Department of the Treasury on Wednesday announced that it will set aside up to $1 billion in Troubled Asset Relief Program (TARP) funds for use by Community Development Financial Institution (CDFI) credit unions and other financial institutions. Under the Treasury plan, credit unions would be able to borrow as much as 3.5% of their total assets over an eight-year period. Commenting on the announcement, Credit Union National Association (CUNA) President/CEO Dan Mica said that while CUNA appreciates the Treasury’s announcement, CUNA “continues to contend that the most effective way to help many more credit unions help the economy is by giving credit unions greater capacity to make business loans.” “Doing so – through legislation raising the amount of loans credit unions can make in business loans to 25 percent of total assets – would inject more than $10 billion into the economy and create 108,000 new jobs in the first year. There is no public policy reason to deny credit unions this, while at the same time giving banks – who are not lending -- $30 billion as an enticement to do what credit unions are already doing, and are willing to do more of,” he added. National Federation of Community Development Credit Unions President/CEO Clifford Rosenthal met with Treasury Secretary Tim Geithner just prior to the announcement, and was among those in attendance during the announcement. The program will not require legislative approval and is not connected to the Obama administration’s proposal to channel billions to community banks to support small business lending. The Treasury's CDFI Fund helps locally based financial institutions offer small business, consumer and home loans in communities and populations that lack access to affordable credit. The Treasury last year announced a total of $113 million in funding would be made available through the CDFI Fund during 2010, and under National Credit Union Administration regulations, credit unions that are certified to take part in the CDFI program may apply for as much as $2 million in funding that will help maintain their credit union's presence in the community.

NCUA seeks recoup of 10M following Conn.-based fraud case

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ALEXANDRIA, Va. (2/4/10)--The National Credit Union Administration (NCUA) has filed suit against Wells Fargo Investment Advisors seeking the repayment of $10 million in insurance-fund losses related to the now-deceased Edwin Rachleff's theft of funds from New London Security FCU. The NCUA sought the recovery of $12 million in losses from his estate in early 2008. Rachleff, a former employee of A.G. Edwards, which is now owned by Wells Fargo, created fraudulent account statements, according to the NCUA. The current suit, which was filed on Jan. 29 in the U.S. District Court for the District of Connecticut, makes many of the same claims, alleging that Rachleff’s fraud against the credit union began in 1998 and continued into 2008. Rachleff, allegedly stole $7.5 million from one of his clients, and also managed investments for New London. However, it was later found that the investment vehicle that Rachleff managed for the credit union did not exist, and the resulting loss of funds caused the credit union to fail. New London Security FCU was closed in July 2008 with the NCUA serving as the liquidating agent, and, at that time, assuming coverage of all losses associated with the credit union failure through its National Credit Union Share insurance Fund. According to the complaint, A.G. Edwards, and, later, Wells Fargo failed to notify the credit union that the investment accounts maintained by Rachleff did not exist. The NCUA has also accused Wells Fargo of neglecting to properly supervise Rachleff and of ignoring the possibility that this lack of supervision could result in fraud. The NCUA has requested a jury trial.

CUNA blankets Capitol Hill with MBL letters

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WASHINGTON (2/4/10)--Responding to the Obama administration’s recent decision to funnel $30 billion of unspent Troubled Asset Relief Program (TARP) funds into smaller banks for business lending, Credit Union National Association President/CEO Dan Mica said that “there is no good public policy reason to deny credit unions greater capacity for making business loans to their members, while at the same time giving community banks a subsidy to do so.” Under the Obama administration’s plan, which was released on Tuesday, the TARP funds would be available as capital investments for community banks, pending congressional approval. The majority of credit unions would not be eligible for these TARP funds, as the Federal Credit Union Act defines capital as only the retained earnings of the credit union. In a letter sent to all members of Congress on Wednesday, Mica said that credit unions do not oppose the subsidy for the banks out of hand – but they do question not including credit unions in proposals to foster more business lending. Mica added that pending legislation in the Senate and House, which would raise the cap on credit union business lending to 25 percent of total assets “could provide up to $10 billion in new loans to small businesses and create as many as 108,000 jobs – without costing the taxpayers a dime, or increasing the size of government.” “Credit unions’ impediment to additional small business lending is not the need for more capital but an arbitrary statutory limit on business loans of 12.25% of their total assets,” Mica said, adding that they “do not need the taxpayer assistance to do more business lending because, unlike some banks, credit unions remain generally well capitalized.” For the full letter to Congress, use the resource link.

Inside Washington (02/02/2010)

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* WASHINGTON (2/3/10)--The Obama administration’s 2011 budget proposal does not specify plans for Fannie Mae and Freddie Mac’s futures. Housing and Urban Development Secretary Shaun Donovan said the administration will soon release its strategy. A statement will be coming “very shortly,” Donovan told reporters Monday (American Banker Feb. 2). Currently, the enterprises have obligations of $3.9 trillion to investors who purchased the mortgage bundles the two assembled (The New York Times Feb. 2) ... * WASHINGTON (2/3/10)--Paul Volcker, former Federal Reserve chairman, told the Senate Banking Committee Tuesday that hedge funds and private-equity funds should profit and fail without government support. Volcker supports President Barack Obama’s plan to tax big banks and limit their growth. He called on policymakers to strengthen regulation of financial firms whose failure would threaten the economy. Stricter requirements that govern capital and liquidity are needed, he said. Volcker also called for authority to take control of big financial firms--“euthanasia” as opposed to a rescue. The institutions should not assume the public will save them, he added (Bloomberg Feb. 2) ...

NCUA announces 2010 triennial review topics

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ALEXANDRIA, Va. (2/3/10)--The National Credit Union Administration (NCUA) on Tuesday released its list of regulations that will be reviewed during 2010 as part of its ongoing triennial reviews. Included in the list of regulations up for review are rules addressing credit union service organizations, Fair Credit Reporting, member business loans, the Central Liquidity Facility, fidelity bond and insurance coverage for federal credit unions, and share insurance. Management official interlocks, leasing, supervisory committee audits and verifications, consumer privacy, incidental powers, appraisals, insurance requirements and the regulatory flexibility program are also on the docket. The NCUA has asked that those who wish to submit comments do so by Aug. 6.

CUNA supports Fed term deposit plan with caveats

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WASHINGTON (2/3/10)--The Credit Union National Association (CUNA) announced its support for the Federal Reserve’s (Fed) plans to amend Regulation D, Reserve Requirements of Depository Institutions, to authorize the establishment of interest-bearing term deposits at Federal Reserve Banks, but cautioned the Fed to “consider any unintended effects of the plan.” According to the Fed, these term deposits “are intended to facilitate the conduct of monetary policy by providing a tool for managing the aggregate quantity of reserve balances,” and credit unions are among the financial institutions that are eligible to invest in term deposits. While CUNA believes that the term deposit authorization “may provide a favorable option for institutions to earn interest on short term investments without credit risk,” CUNA is concerned that selecting those who may invest in term deposits via an auction process could lead to domination of that auction process by larger financial institutions. CUNA suggested that the Fed include in the final rule a process to allow smaller financial institutions to participate in these auctions as a group. CUNA also would favor allowing participating institutions to use term deposits as collateral for borrowing from the Fed’s discount window if a process that would give smaller financial institutions a chance at "winning" an auction is included in the final rule. CUNA also recommended that the maturity rate of these investments should be measured in 30-day increments, and asked the Fed to consider allowing early redemption of term deposits, with a corresponding penalty, under certain limited circumstances. For the full comment letter, use the resource link.

CUs outraged over biz lending snub by administration

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WASHINGTON (2/3/10)--Credit unions are outraged, baffled and feeling “snubbed” by the Obama administration’s proposal to funnel $30 billion into smaller banks for business lending--but do nothing for credit unions, Credit Union National Association President/CEO Dan Mica said Tuesday. President Obama at a town hall meeting in Nashua, N.H., Tuesday announced a proposal to channel billions to community banks to support small business lending. Specifically, the president’s initiative would create a $30 billion Small Business Lending Fund using unspent Troubled Asset Relief Program (TARP) money that would be available as capital investments for community banks as an incentive to increase their small business lending. The proposal is subject to review and legislation by Congress. However, as Mica pointed out, the proposal is entirely focused on small and community banks, and includes nothing for credit unions, ignoring the potential contribution that credit unions could make toward national economic recovery. “Credit unions tell me that they are not asking for a taxpayer bailout; they did not receive TARP money and did not want it anyway. Yet now, the administration wants to give taxpayer money to banks through TARP to convince them to make more loans--the same banks that have been refusing to make loans over the last year when it was needed most by an economy starved of capital,” Mica said. “Credit unions have been making loans over the past year and can make even more if legislation expanding their capacity to make small business loans is enacted. I hear credit unions say: ‘Don’t just subsidize the banks; let us help this country get back on its feet--without using taxpayers’ money,’” he added. Mica said he is sure that the White House, and Congress, will soon start hearing from credit unions about their disappointment. “Credit unions across the nation say they deserve to be treated with respect and should be part of the administration’s solution. I know they will be contacting the White House and the Congress to deliver that message,” Mica said. “In the meantime: I am respectfully requesting a meeting with the president about this entire issue--and seek the administration’s support for more business lending capacity for credit unions.” Use the resource link below to read CUNA's new Action Alert on MBLs.

CUNA analyzes CARD Act rule for CUs

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WASHINGTON (2/2/10)—A comprehensive breakdown of the Federal Reserve Board’s recently published final rules that restrict a number of credit card practices has been posted to the Credit Union National Association’s (CUNA’s) website. The CUNA analysis involves the second set of Fed rules to implement the Credit Card Accountability, Responsibility and Disclosure Act of 2009 (CARD Act). They become effective Feb. 22. CUNA is offering an audio conference call today on the provisions covered in the Fed’s new rule. The conference call, scheduled for 1-2:30 p.m. (CT), will feature Benjamin Olson and Amy Henderson, senior attorneys in the Fed’s division of consumer and community affairs, Mary-Lou Heighes, a Credit Union Compliance Expert (CUCE) and president of Compliance Plus, Inc., Jeff Bloch. senior assistant general counsel for CUNA, and Mike McLain, assistant general counsel and senior compliance counsel for CUNA. The rules include:
* Restrictions on some changes in interest rates; * A requirement for minimum payment warnings on credit card statements; * A requirement for a co-signers for consumers under the age of 21 opening a card account; and * A requirement that payments above the minimum amount be applied to balances with the highest interest rate, in addition to a number of other requirements.
The CUNA analysis points out that the Fed made a significant change to its proposed rule before making them final. In the official staff commentary there is a new restriction for credit unions that use variable rates with a fixed minimum rate, or “floor.” Attached to the end of the CUNA Final Rule Analysis is a separate memorandum that outlines guidance from the Fed on this issue. The rule also finalizes the earlier interim final rule that implements the CARD Act provisions that were effective as of Aug. 20, 2009. This includes the requirement to send periodic statements at least 21 days before the payment is due and the requirement to provide a 45-day notice when the rate and certain terms of a credit card account are changed. Most of the CARD Act provisions apply only to credit cards. However, it notes, early last year the Fed issued comprehensive rules to amend the Regulation Z open-end credit rules, which encompass credit card, as well as other open-end plans, and a number of those are also addressed in the CARD Act. Provisions of earlier Regulation Z rules that are not addressed in the CARD Act will remain in effect. The provisions of these rules that are inconsistent with the CARD Act provisions have been amended or withdrawn to ensure consistency. The applicable provisions of the unfair and deceptive acts and practices (UDAP) rules that were issued by the National Credit Union Administration (NCUA) early last year have been withdrawn, since they address similar issues. Use the resource links below to read CUNA complete analysis of the new CARD Act rules and for more CARD Act conference call information.

Blockbuster CUNA campaign school wraps up in Montana

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WASHINGTON (2/2/10)--In the first round of campaign schools to take place in 2010, the Credit Union National Association (CUNA) last week combined forces with the Montana Credit Union Network to introduce prospective candidates for local office to the key techniques and the rigors of running their own campaign. The campaign schools, which took place in Billings, Mont. on Friday, and other locations during the week, were covered extensively by The Billings Gazette and the Bozeman Daily Chronicle, and were attended by over 170 potential candidates, the largest number that CUNA has seen for some time. Additional sessions of the campaign school, which was also backed by the Montana Electric Cooperative Association and the Montana Chamber of Commerce, took place last week in Great Falls, Missoula, and Bozeman. Topics covered during the campaign school sessions included campaign management, fundraising, message development, and get-out-the-vote planning, and potential candidates at the Montana sessions planned to contend for a broad swath of positions, from local Justice of the Peace to State Representative. CUNA's Vice President of Political Affairs Trey Hawkins said the main goal of the campaign schools, which have been held in Montana every-other year since 2000, "is to give first-time candidates an overview of how to put together an effective campaign. Ultimately, though, we think it sends a message to these candidates that credit unions are sophisticated when it comes to politics and elections. Hopefully they will remember that once they are in office." CUNA has also scheduled its first ever campaign schools to be held in North Carolina this month and additional campaign school sessions have been tentatively set to take place in Ohio as well.

CDFI CU program funding could increase in fiscal 2011

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WASHINGTON (2/2/10)--The Obama Administration's fiscal 2011 budget, which was released on Monday, contains modest budgetary increases for both the U.S. Treasury's Community Development Financial Institutions (CDFI) Fund and the National Credit Union Administration's (NCUA) Community Development Revolving Loan Fund (CDRLF) program. Under the proposed budget, the amount of funds made available to the CDFI during fiscal 2011 would increase to $250 million, up from the $246.75 million that was made available for fiscal 2010. The CDFI fund, which provides grants to support the work of community development financial institutions, has set high goals for 2010, with CDFI Fund Director Donna Gambrell saying that the CDFI Fund is "aiming to meet and exceed the accomplishments of last year with greater internal operating efficiencies and by expanding our assistance to underserved communities with new initiatives," including the first round of the Capital Magnet Fund and awards under a new Financial Education and Counseling (FEC) Pilot Program. NCUA programs would also benefit, with the amount granted to the CDRLF for 2011 increasing to $2 million and the NCUA's Central Liquidity Facility also slated for an increase in funding. The Senate late last year removed the borrowing cap on the CLF and gave the CLF $43.8 billion in contingent liquidity to lend to eligible credit unions as part of an appropriations bill. The CDRLF, which was established by Congress in 1979, makes non member deposits and loans at a rate of 1% for five-year terms, and the NCUA employs the CLF, as needed, to inject capital into the credit union system. While the Senate has not yet acted on tax extenders, President Obama has requested a two year extension of the New Markets Tax Credit, which expired on December 31, 2009, and Congress is expected to complete an extenders package, which will be retroactive to Jan. 1, 2010, later this year.

Student loan bill support slipping in Senate

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WASHINGTON (2/2/10)--Legislation that would effectively end government-subsidized support of student lending by credit unions and other financial institutions passed the House with ease last September, but has seemingly stalled in the Senate. The House version of the bill, H.R. 3221, the Student Aid and Fiscal Responsibility Act of 2009, which would terminate the Federal Family Education Loan Program (FFELP) in favor of increased funding for government-run Pell Grant programs, passed the House by a 253-171 vote late last year. While a similar bill has not yet been introduced in the Senate, Sen. Tom Harkin (D-Iowa) is known to support the goals of the bill. The Credit Union National Association last year warned against the consequences of eliminating FFELP, saying that doing so would limit the choices presented to prospective college students. Specifically, the over 1,000 credit unions that provide, service, and support student loans, would likely be forced out of the student loan business. The Obama administration also supports eliminating FFELP, and various estimates indicate that doing so could save the federal government as little as $47 billion or as much as $81 billion over a ten-year period.

House Senate see stacked committee schedules

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WASHINGTON (2/2/10)--While credit unions may be awaiting action on several pieces of pending legislation, including financial regulatory reforms, there will be no shortage of other action in the congressional committees this week. The Senate Banking Committee on Tuesday will hold a hearing on "Prohibiting Certain High-Risk Investment Activities by Banks and Bank Holding Companies," with the House Budget Committee discussing President Barack Obama's budget for the 2011 fiscal year. Thursday will be heavy on finance for the Senate side of Congress, with the Senate Banking Committee scheduled to discuss constraining risky investment activity by banks and financial institutions and the the Senate Commerce, Science and Technology Committee set for a hearing on the role of the Federal Trade Commission in protecting consumers of financial products. The House Financial Services Committee and the House Small Business Committee on Friday were scheduled to end the week by holding a joint hearing on small business and commercial real estate lending in smaller markets, but that hearing has been postponed until further notice. However, credit union issues will be presented directly to members of Congress during a Friday joint Credit Union National Association / World Council of Credit Unions congressional staff briefing on the state of credit unions in Afghanistan. On the political end, the Senate Rules and Administration Committee, the House Judiciary Committee Subcommittee on the Constitution, Civil Rights and Civil Liberties, and the House Administration Committee will all hold separate hearings this week on the recent Supreme Court decision to allow unlimited corporate and non-profit spending in elections.

Inside Washington (02/01/2010)

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* WASHINGTON (2/2/10)--Policymakers should consider raising the amount of money the Federal Deposit Insurance Corp. (FDIC) has to deal with bank failures, the Obama administration said in its 2011 budget, which was released Monday (The Wall Street Journal Feb. 1). The current reserve ratio range of 1.15% to 1.5% is inadequate, the proposal said. If the reserve ratio is increased, banks may have to pay higher premiums. At the end of September, the deposit insurance fund ratio dropped to 0.16%. The FDIC has worked to increase its fund by charging special fees and mandating a three-year premium pre-payment to raise $45 billion. However, bank failures continue. Last month, there were 15 failures, ahead of the 2009 pace that had 140 failures at year-end ... * WASHINGTON (2/2/10)--Four liquidity programs implemented by the Federal Reserve Board to prevent economic collapse shut down Monday. The programs are: The Primary Dealer Credit Facility, the Term Securities Loan Facility, the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility and the Commercial Paper Funding Facility. The Term Asset-Backed Securities Loan Facility and the Fed’s purchases of debt and mortgage-backed securities from Fannie Mae and Freddie Mac will end in March. Last week, President Barack Obama likened the government programs helping banks to a “root canal,” but financial observers said the programs were vital in preventing economic collapse (American Banker Feb. 1). The Fed was able to meet the market’s needs with the programs, said Song Won Sohn, lecturer in business and economics at California State University Channel Islands ... * WASHINGTON (2/21/10)--Lawrence Summers, White House economic adviser, said the Obama administration’s proposals to overhaul financial regulation are not an attack on banks (American Banker Feb. 1). Rather, they are an attempt to create a better financial system. Obama has proposed taxing big banks and limiting their growth. Summers said the constraints will reduce risk-taking and will not interfere with institutions’ abilities to serve customers. Also, it doesn’t make sense for banks to feel as though they have enough capital to pay bonuses to employees but not enough to reimburse taxpayers, he added. Summers spoke at the World Economic Forum in Davos, Switzerland ... * WASHINGTON (2/21/10)--Banks need to prepare for a changing rate environment, said participants at a Federal Deposit Insurance Corp. (FDIC) symposium Friday. Some banks that have held onto long-term assets may not be prepared for rates to normalize (American Banker Feb. 1). Panelists recommended that bankers form a committee to focus on the mix of assets and liabilities, using hedging instruments such as interest rate derivatives and focus on core depositors to mitigate risk ...