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CFPBs Warren plans CU partnership

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WASHINGTON (3/2/11)--Citing credit unions as “an example of giving real value to customers and to communities,” Consumer Financial Protection Bureau (CFPB) architect Elizabeth Warren said that the agency will be an ally to credit unions and help ensure that the goals of the credit union movement become reality.
Click for slide show Consumer Financial Protection Bureau (CFPB) leader Elizabeth Warren told credit unions at CUNA's GAC that she wants to work with them. She said it is her intention that the CFPB will build the perspective of credit unions into the agency from the beginning. (CUNA Photo)
Credit unions must remain a major presence in the economy, Warren said, adding that American families will not be well served in the long run if only a few trillion-dollar financial firms survive these hard economic times. Warren spoke during the Credit Union National Association’s 2011 Governmental Affairs Conference (GAC). She covered her professional and personal work with credit unions in her remarks, saying that the CFPB will remain in constant contact with credit unions as it develops its rules. While admitting that government regulation can sometimes be part of the problem, Warren said that the CFPB is “working with credit unions from the beginning” as the agency streamlines Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA) forms into a single form and works on other financial regulations. Credit unions will be an integral part of the CFPB’s processes, and will not only become part of the process when final rules are issued, Warren said. Warren also noted that her longtime membership in her local credit union, Harvard University Employees CU, has helped her understand the fine detail of both good and bad financial business practices, and recounted a deeply personal story. When her niece got into financial trouble, Warren recommended that she talk with her local credit union. While Warren did not go into details, she did say this: “That credit union will forever be a trusted and important member of our family.” CUNA President/CEO Bill Cheney, Massachusetts Credit Union League President/CEO Dan Egan, Ohio Credit Union League President Paul Mercer, Harvard University Employees CU President/CEO Gene Foley, and senior CUNA staff met with Warren following her speech. The credit union representatives took the opportunity to further discuss regulatory burden concerns, streamlining regulatory and reporting requirements, and what sets credit unions apart from other financial institutions with Warren.

CU NCUA reps repeat CUs control corporate makeup

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WASHINGTON (3/2/11)--As the corporate credit union system continues to be restructured, natural person credit unions should remember that, as members, they own the corporates, and should tell the corporates what services they will want from them in the future, Terry West, president/CEO of VyStar CU and chairman of the Credit Union National Association’s (CUNA) Corporate Credit Union Next Steps Working Group, said on Tuesday. West appeared as part of a panel discussion at CUNA’s 2011 Governmental Affairs Conference. CUNA Chief Economist Bill Hampel moderated the panel discussion on the future of the corporate system, which also featured National Credit Union Administration (NCUA) Deputy Executive Director Larry Fazio and NCUA Office of Corporate Credit Unions Director Scott Hunt.
Click to view larger image Natural person credit unions will play a large part in determining the future of the corporate credit union system, and the structure of those corporate credit unions will be determined in the coming months, panelists at a Tuesday GAC discussion said. From left: CUNA Chief Economist Bill Hampel, VyStar CU President/CEO and CUNA Corporate Credit Union Next Steps Working Group Chairman Terry West, NCUA Deputy Executive Director Larry Fazio, and NCUA Office of Corporate Credit Unions Director Scott Hunt.(CUNA photo)
West advised natural person credit union managements to clearly understand their potential corporate’s business model, perform the necessary research, and have a secondary option if it appears that their first choice will not work out as planned. He also reminded credit unions of the risks of looking outside of the credit union industry for many of the services traditionally provided by the corporates. The NCUA last year finalized several revisions to Part 704, NCUA's rule governing corporate credit unions. The NCUA proposal established a new capital structure for corporate credit unions, including risk-based capital requirements, to provide corporates with a stronger capital base. Under the NCUA’s changes, corporate credit unions will focus more on aiding credit unions in their operations and less on making investments. Hunt said that final versions of a pair of NCUA corporate rulemaking proposals could be released at the agency’s April or May board meeting. One proposal would allow privately insured credit unions and non-credit unions, such as credit union leagues, that are members of a corporate to pay "voluntary" Temporary Corporate Credit Union Stabilization Fund (TCCUSF) assessments. A second proposal would limit credit union membership in corporates to one corporate at a time. Hunt said that while there have been reports of potential corporate credit union mergers in the works, there are currently no merger applications in his office. He also noted that the NCUA is not recommending that any of the corporates pursue consolidation, but said that some may ultimately recognize that consolidation may be a better option for them. Consolidation is ultimately a member decision, Hunt said. The NCUA will not allow the bridge corporates to be involved in any consolidation discussions while they are under agency control. However, once independent, those corporates may pursue consolidation and bring it before the agency for consideration, Hunt added. Fazio reported that the agency is engaging an outside firm to update the valuation of the legacy asset portfolios, and said that information will be available later in the year. Therefore, for now, the total loss estimate of $14 billion to $16 billion still holds. He also said that actual losses recorded thus far amount to about $2.2 billion. He also suggested that this year’s corporate stabilization assessment could be as high as 20 to 25 basis points (bp) of insured shares, rather than the average assessment of around 9 bp that would be necessary to pay down the corporate stabilization over the remaining 11 years of the plan. However, he pointed out that this was due to cash flow needs, and not to any increase in loss estimates. Future assessments, as a result, would be lower, unless future loss estimates increase. He also said that the NCUA plans to provide regular updates on the portfolios in the future.

NCUA official discusses new examiner training

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WASHINGTON (3/2/11)--A National Credit Union Administration ( NCUA) official noted the agency has hired a “boatload” of new examiners in the last two years and is working to put tools in place to bring them up to speed. Melinda Love, director of the office of examination and insurance at the NCUA, said the agency is creating a nationwide training manual, forming a mentoring program, and creating a matrix that leads to better decision making by new examiners. “We try to bring them up the curve as quickly as possible, but it takes time to build a good examiner,” Love said. Love was answering an inquiry during a panel discussion on examinations during a challenging economic environment at the Credit Union National Association’s (CUNA) Governmental Affairs Conference. She said the agency tracks where it sends examiners, so younger examiners aren’t consistently sent to the same credit union. “We have to step up our game, especially at larger credit unions,” Love said. Other panel members included Thomas Candon, chairman of the National Association of State Credit Union Supervisors and deputy commissioner of the Department of Banking, Insurance, Securities & Health Care Administration in Vermont; Mary Ann Clancy, senior vice president and general counsel for the Massachusetts Credit Union League and Credit Union Association of Rhode Island; and Rod Staatz, president/CEO of SECU CU, Linthicum, Md. Staatz and Clancy are members of the CUNA Supervisory Issues Working Group. Love also said that, coming out a difficult economic cycle, the NCUA is focusing on consistency in the examination process. At the same time, the NCUA is more diligent in asking credit unions to report the ways they identify, measure, monitor, and manage risk, she said. Clancy said the examination process has become more transparent in the past decade with roundtables between credit unions and examiners, and guidance from examiners. “Overall, without question, our examinations have been healthy and they’ve been a positive experience, but if it were a perfect world I wouldn’t be sitting up here,” Clancy said. Staatz described a study done by the CUNA Supervisory Issues Working Group where 200 respondents provided answers to a series of questions on their examination's experiences. Staatz said one in five credit unions was dissatisfied with the examinations. When asked about the use of the supervisory appeals process, 3% said they used it, 76% said they didn’t feel the need to, and 21% didn’t take the time to do it. Staatz and Clancy both stressed that CUNA offers a wealth of examination resources developed in large part by the CUNA Supervisory Issues Work Group with the help of regulatory and legal professionals.

Inside Washington (03/01/2011)

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* ALEXANDRIA, Va. (3/2/11)--Comments must be received by May 2 on the National Credit Union Administration’s proposal to remove credit ratings references from its regulations. The proposal, approved for comment at the agency’s last open board meeting on Feb. 17, and which NCUA board member Gigi Hyland acknowledged was a bear to put on paper, would implement a section of the Dodd-Frank Wall Street Reform Act. The act requires each federal agency to review: any regulation issued by such agency that requires the use of an assessment of the creditworthiness of a security or money market instrument; and any references to or requirements in such regulations regarding credit ratings … * WASHINGTON (3/2/11)--Federal Reserve Bank of Boston President Eric Rosengren, in a speech at Boston University, said there are four myths that brought the country to its economic crisis. They are: the real estate market would not decline, securitization protected mortgage-backed assets, the “originate-to-distribute” model had a protective effect on banks, and investment banks could never be hit with a run on short-term funding. Rosengren promoted better stress tests could serve to challenge those myths and shake up belief in them. He said improved stress testing could help directors and regulators better understand what drives risks, both in individual organizations and in the financial system. (American Banker March 2) … * WASHINGTON (3/2/11)--Financial Services Committee Chairman Spencer Bachus (D-Ala.), leading a hearing on the Obama administration’s report on housing finance Tuesday, said that the “new housing finance system” must be based on private capital and not government support. “A toxic combination of implicit government guarantees, lax underwriting standards, a captive (government-sponsored enterprise) GSE regulator, and misguided housing policies here in Washington has led to $150 billion in losses for the American taxpayer,” Bachus said in his opening statement. U.S. Treasury Secretary Timothy Geithner was the sole witness at the hearing …

CU strength in one voice says CUNA chairman

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WASHINGTON (3/2/11)--Credit Union National Association (CUNA) Board Chairman Harriet May told a CUNA Governmental Affairs Conference audience that credit union strength on Capitol Hill comes from presenting a unified message--speaking with one voice--to federal lawmakers on credit union issues. When a divided message comes through, May said, it makes it easy for lawmakers to say, "I'd like to help you but I'm not hearing a consensus." May said that getting legislation through this "divided" Congress will be challenge enough, and that challenge must be tackled with a unified effort and a unified message. May, president/CEO of GECU, El Paso, Texas, even offered a simple
Click to view larger image CUNA Board Chairman Harriet May urged the credit union movement to "speak with one voice" when delivering the credit union message to Capitol Hill. She said that while a united front may be easier to present on issues like interchange fee regulations, the same unity is needed to get legislation through "this divided Congress" on such issues as increased member business lending or supplemental capital. (CUNA Photo)
message--what she called Credit Unions 101--that GAC participants can deliver to their legislators while they are in Washington. "Credit unions are the best way for consumers to conduct their financial business,” May said. “It's as simple as that. And Congress, we and our 92 million members want to be sure it stays that way.” As evidence of what a unified voice can accomplish, May cited the effect of credit unions’ united opposition on the proposed interchange rule. “Key legislators are having buyers’ remorse,” May said. “Influential regulatory officials have cast serious doubts on whether the two-tier system will work. We’re not there yet, but we will continue to press this issue from every possible angle. It’s a challenge, but one made easier by the movement’s unity of purpose and message.” May pointed out how as a national trade association, CUNA has the capacity to work nationwide with state leagues to build consensus and shape the messages that the credit union movement provides to Washington. As an example, she cited the letter CUNA sent to Rep. Darrell Issa (R-Calf.), the new chairman of the House Committee on Government Reform and Oversight, listing rules and regulations that have a negative effect on job growth and efficiency in the credit union system. She acknowledged there are issues, such as business lending and supplemental capital, that don’t touch every credit union, as does the interchange proposal. “I respectfully urge you to take a broader view,” May said. “Those who do need these authorities, it will make them stronger. And that, in turn, makes the movement stronger.” The effect of victories on each of these issues--interchange, small business lending, supplemental capital--as well as others, such as the regulatory burden credit unions face, will build political capital for the future, she said. “We are all in this movement together, for all the right reasons,” May said. “Of many, we are one. One set of shared values. One unified message. One unique industry. The one financial institution that the people of this country can really count on. "Let’s be sure Congress knows it.”

Royce CUs holding the bag on interchange rule

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WASHINGTON (3/2/11)--Speaking before the 2011 Credit Union National
Click to view larger image Speaking to the morning general session Tuesday, Rep. Ed Royce told the CUNA GAC audience that the Federal Reserve Board's proposed interchange feed rule has left small financial institutions “holding the bag.” (CUNA Photo)
Association's Governmental Affair's Conference, Rep. Ed Royce (R-Calif.) said the proposed interchange rule has left small financial institutions “holding the bag.” Royce said Federal Reserve Board Chairman Ben Bernanke has echoed the same concerns as the National Credit Union Administration and the Federal Deposit Insurance Corp.: that the exemption in the proposal for financial institutions under $10 billion in assets is unworkable. “To ensure that small institutions are truly exempt, to ensure that fraud costs are truly accounted for, we have got to slow the process, study the issue and get this right in legislation,” Royce said. “If we fail to do that, then the debit network is going to be weaker and small institutions are going to be at a disadvantage.” Royce also said credit for small businesses is “a way to build our communities.” Business owners in his district have told him they lack access to credit, he said. Introduced by California/Nevada CU League President Diana Dykstra as a “friend of credit unions,” Royce said he will continue to work to expand business lending authority for credit unions. “We have gained a great deal of traction on this issue, and this is just the beginning of our efforts. Sometimes it takes a while to get common sense through the process,” Royce said. Royce railed against the newly formed Consumer Financial Protection Bureau (CFPB), which he called “a massive new government agency” that creates competing sets of regulators. He opined that with the CFPB in place, the government is more likely to dictate the price of financial products, increase the cost of credit and decrease its availability. Also, revisions to the Community Reinvestment Act are “off the table,” according to Royce. He said expansion would be artificial intervention in the housing markets, similar to government-sponsored enterprises that contributed to the financial crisis. Instead, he said, credit unions should focus their efforts on telling legislators how they give back to their communities and talk about legislation that affects their day-to-day operations. “You’re here in force this week,” Royce said. “You’re one of the most engaged groups we see in Washington D.C.” The CUNA GAC wraps up today with credit union visits to Capitol Hill to discuss credit unions' key legislative issues.

Cheney testifies today on Dodd-Frank impact on CUs

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WASHINGTON (3/2/11)--Credit Union National Association (CUNA) President/CEO Bill Cheney is scheduled to testify today before a House Financial Services subcommittee, which is studying the impact of the Dodd-Frank Act on small financial institutions and small businesses. The House financial institutions and consumer credit subcommittee has set three panels of witnesses and representatives from the financial industry and D.C.-based think tanks will also weigh in. The 2,200 pages of the Dodd-Frank financial regulatory reform package, signed into law last year, contains numerous changes to current financial laws, but only about 35 directly impact credit unions. However, Cheney is expected to testify that, for credit unions and their members, the most chilling effect of the Dodd-Frank Act would be the implementation of government controls on interchange fees. He will also detail other statutory restrictions that contribute to the overall regulatory burden of credit unions, or restrict how credit unions may serve their members, such as an arbitrary legislative restriction on credit union member business lending.

CU voices will be heard on Hill Perlmutter

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WASHINGTON (3/2/11)--Rep. Ed Perlmutter encouraged credit unions to fight proposed new interchange fees rules, but he stressed revising them won’t be easy. Addressing the Tuesday morning general session of the Credit Union
Click to view larger image Noting that there was no debate in the U.S. Congress on interchange fee issues prior to their inclusion in a major reform bill late last year, Rep. Ed Perlmutter (D-Colo.) told credit union representatives attending CUNA's 2011 GAC that he backs the idea of delaying implementation. He said credit union voices "will be heard" on the important issue. (CUNA Photo)
National Association’s (CUNA) Governmental Affairs Conference, Perlmutter said credit unions should continue to expect tough opposition from interest groups on the other side of the issue. “There are sympathetic stories on the other side, too,” Perlmutter said of some small merchants who come to Capitol Hill to complain about the free-market system of interchange fees. “You have to recognize this. This is what politics is all about.” But, he encouraged his credit union audience, “Your words will carry a lot of weight as you speak to members of Congress this week.” The Colorado Democrat said the best option for credit unions is to lobby for a delay of the implementation date. He said repeal at this time does not seem likely. "It’s going to be difficult," but credit unions do have influence on this issue, Perlmutter added. Perlmutter also thanked credit unions for their service to their communities and members: “You serve them both well.”

Stivers backs MBL increase to help economy

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WASHINGTON (3/2/11)--Rep. Steve Stivers (R-Ohio) said the nation’s economic problems will be solved a lot faster if the government gets out of the way and allows credit unions to do their job. He said the small business sector can be more effective in easing unemployment if given the opportunity. Stivers added that the U.S. Congress can help speed up growth of this sector by broadening credit union authority to make small business loans to members. Stivers was addressing the Credit Union National Association’s (CUNA) Governmental Affairs Conference (GAC), which concludes tomorrow. Also at the CUNA GAC, CUNA Vice President of Legislative Affairs Ryan Donovan said that CUNA expects that both the House and Senate will see introduction of new legislation to increase the MBL cap “very soon.” CUNA supports efforts to increase the MBL cap to 27.5%, a change
Click to view larger image Rep. Steve Stivers (R-Ohio) said the Federal Reserve Board must "step back and give careful study" to its proposed rules to implement the interchange fee rules carried in the Dodd-Frank Act. (CUNA Photo)
that CUNA has noted would bring $10 billion of new capital to small business in the first year, and add more than 100,000 jobs. CUNA will work in 2011 to get such a provision attached to any congressional legislation intended to stimulate the economy or job growth, Donovan said. Bills that were still pending final action when the final session of the 111th Congress adjourned last year, as was MBL legislation in the House and Senate, need to be reintroduced in the new 112th Congress. On another topic, Stivers, a member of the House Financial Services Committee, also questioned proposed efforts to reform financial regulation. “Only in the federal government can you bring in new people to replace those who have not done their jobs, and still keep the old people around,” he told the Tuesday session of CUNA’s GAC conference. He also said that current proposals to revise interchange fees needed to be revised “in a thoughtful way.”

FinCEN BSA rule reorganization effective now

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WASHINGTON (3/2/11)--As expected,the Financial Crimes Enforcement Network’s (FinCEN) streamlined reorganization of its Bank Secrecy Act (BSA) rules became effective March 1. As part of the reorganization, FinCEN transferred its BSA regulations into a new Chapter X of Title 31 of the Code of Federal Regulations (CFR). The reorganization split the regulations "into general and industry-specific parts, ensuring that a financial institution can identify its obligations under the BSA in a more organized and understandable manner." However, FinCEN has emphasized that it "has not made any substantive changes to the BSA rules." For more on the reorganization, use the resource link below.

Huffington and Matalin give perspective on politics

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WASHINGTON (3/2/11)--Arianna Huffington and Mary Matalin come from opposite ends of the political spectrum but they agreed more than disagreed during a joint appearance Tuesday before the Credit Union National Association’s Governmental Affairs Conference here. Huffington is co-founder and editor-in-chief of The Huffington Post, and Matalin is a political contributor for CNN. In response to questions, both said President Barak Obama misjudged the mandate of his lop-sided presidential victory in 2008. “The president miscalculated about the death of the right and did not respond to the need for jobs,” said Huffington, the liberal commentator. Matalin, a conservative pundit, said voters were “largely satisfied with health care…but Obama thought he would translate his popularity into policy.” Matalin and Huffington became dear friends, they said, when their teenage daughters developed a friendship. Both stressed during the GAC appearance the need for the nation to return to the ideals of the country’s founding fathers.