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Inside Washington (03/11/2011)

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* WASHINGTON (3/14/11)--The House Financial Services subcommittee on financial institutions and consumer credit announced a March 16 oversight hearing of the Consumer Financial Protection Bureau (CFPB), at which Assistant to the President and Advisor to the Treasury Secretary Elizabeth Warren will testify. Rep. Shelley Moore Capito (R-W.V.), the subcommittee chairman, said she intends the hearing to be “the start of a robust discussion of how the (CFPB) will be implemented and what powers it should have in regulating consumer credit.” The chairman noted that some House members, herself included, have reservations about the bureau and “unintended consequences it could have on consumer choice in financial products" … * WASHINGTON (3/14/11)--During the Credit Union National Association
(CUNA) Governmental Affairs Conference in Washington, Feb. 27-March 3, about 100 North Carolina credit union advocates shared their perspectives on interchange, member business lending and supplemental capital with the state’s congressional delegation. Sen. Kay Hagan (D), who recently wrote the Federal Reserve about delaying interchange fee rule implementation, addressed North Carolina credit union representatives at a reception. Hagan expressed a strong commitment to helping small businesses in North Carolina gain access to capital to create jobs. Hagan’s appearance also gave the group an opportunity to thank the senator for the letter she wrote with Sen. Michael Bennet (D-Colo.) to Federal Reserve Board Chairman Ben Bernanke on the proposed interchange rules. The group also heard from Celia Sims, a key member of Sen. Richard Burr’s (R) legislative team in Washington. Sims highlighted the senator’s commitment to reigning in federal spending. Sims said Sen. Burr is aware that Bernanke had expressed concerns about the small issuer exemption in the board’s draft rules. Sims said that Burr supported the Fed board “getting it right.” The North Carolina credit union advocates later fanned out and met with members of Congress. The primary focus of their discussions with legislators was interchange and member business lending ... * WASHINGTON (3/14/11)--David Rainer, chairman, president/CEO of California United Bank, Encino, Calif., has been appointed to the board of directors of the Federal Reserve’s Los Angeles branch. Rainer, who has served as the head of California United Bank since its inception in 2005, joins six other directors, who meet monthly to discuss economic trends across their respective industries. Their input is compiled and shared directly with the Federal Reserve board of governors for consideration when making monetary policy decisions ...

FASB chair addresses non-public entity international rules

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WASHINGTON (3/14/11)--Leslie Seidman, a longtime Financial Accounting Standards Board (FASB) board and staff member who was appointed chairman last December, has indicated an increased priority in working directly with stakeholders as FASB focuses on improving accounting rules for nonpublic entities, including credit unions. These efforts are partially a result of the primary recommendationin a blue ribbon panel’s report (use resource link to read related News Now story) that a separate standards-setting board be established for nonpublic entities, Seidman noted. “I view the primary recommendation of the blue ribbon report as a very serious message to the FASB that we have to do a better job of listening to our private company constituents and understanding the unique needs of the users of their financial statements and the cost-benefit issues that the preparers of the financial statements are dealing with,” the FASB chairman said. Seidman, addressing a U.S. Chamber of Commerce luncheon late last week, said FASB is focusing on greater outreach with nonpublic entities and has asked FASB staff to try to articulate the different needs of the users of nonpublic entities’ financial statements as they move through the standard-setting process. Further, Seidman said that FASB is experimenting with different ways of obtaining input from nonpublic entities and that FASB is “very interested in trying to make it easier for people to participate in the [standard-setting] process.” Credit Union National Association (CUNA) Assistant General Counsel Luke Martone, who attended the Chamber’s session on the future of financial reporting, confirmed what the FASB chairman said, noting that CUNA has heard from several credit unions that they have been contacted by FASB regarding the potential impact of current and upcoming accounting proposals. Seidman also indicated that FASB is making some progress toward, as the Chamber session was titled, “achieving global harmonization of financial reporting” through a convergence of FASB rules with those of the International Accounting Standards Board (IASB). In its efforts to achieve a single set of accounting standards, she noted FASB has increased the frequency of meetings with the IASB, including several meetings scheduled for March instead of the usual one. IASB chairman Sir David Tweedie also spoke at the event, making his case for the United States to adopt international accounting standards this year. FASB's Seidman noted, however, that although FASB is interested in adopting convergent standards, it will refrain from doing so if it appears that this would not be in the best interest of entities that report under U.S. generally accepted accounting principles—or GAAP.

NCUA Ponzi scheme helped close St. Paul Croatian

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CLEVELAND, Ohio (3/14/11)—The National Credit Union Administration (NCUA) has filed an adversarial action in the U.S. Bankruptcy Court in an attempt to preclude a debtor from discharging include loans that he allegedly fraudulently obtained from the failed St. Paul Croatian FCU as part of his Chapter 7 bankruptcy filing. The debtor, Stanley Paulic, took out and refinanced several loans between July 10, 2008 and Feb. 25, 2010, all of them allegedly under false pretenses. The NCUA has alleged that Paulic owes the credit union a total of $1.2 million in unpaid loans and is asking that these loans not be discharged based on provisions in bankruptcy code pertaining to debts procured through fraud. Paulic was a co-owner of Arizona-based Integrity Financial AZ, LLC, a onetime real estate investment firm that the Securities and Exchange Commission has said raised over $8 million in funds from nearly 60 investors. Many of the investors were also members of the now-failed credit union. Those investors were sold promissory notes that were “purportedly secured by real estate in Tonopah, Arizona, a town 55 miles west of Phoenix,” the SEC said. Integrity financial used these individual investments to pay dividends to their clients, in a manner SEC characterized as a “ponzi scheme.” The SEC charged Paulic and three others with securities fraud for making false and misleading statements about the safety and performance of a real estate-based investment program. St. Paul Croatian was placed into conservatorship by the NCUA on April 23, 2010, and closed on May 1. The credit union held $238.8 million in funds from 5,400 members when it was closed. The NCUA’s Office of the Inspector General last year reported that fraudulent loans pushed the credit union into liquidation. A Cleveland-based federal grand jury has indicted nine individuals on related fraud charges. (See related March 4 story: Nine indicted in St. Paul Croatian FCU collapse)

CUNA trades file anti-interchange amicus brief

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WASHINGTON (3/14/11)--The Credit Union National Association (CUNA) on Friday joined several other financial trade associations, as expected, in filing a statement in support of TCF National Bank's (TCF) lawsuit against the debit card interchange fee provisions of the Dodd-Frank Act. A federal court granted the “amicus brief” request last week. CUNA is joined in the statement by The Clearing House Association L.L.C., American Bankers Association, Consumer Bankers Association, The Financial Services Roundtable, Independent Community Bankers of America, Midsize Bank Coalition of America, and the National Association of Federal Credit Unions. The TCF filed suit last October, alleging that portions of the Dodd-Frank Act that would require the Federal Reserve Board to set restrictions on card swipe-related debit card fees are unconstitutional. The bank argues that the Fed's implementation plan restricts a financial institution’s ability to recover costs associated with providing the debit card service. CUNA and the other groups are backing TCF in an effort to explain the detrimental effect that the Fed's interchange provisions would have on the "stability of the electronic payment structure that undergirds literally trillions of dollars of our economy, as well as the serious constitutional issues the (Fed's) action raises." The Fed proposal could cap interchange fees at as little as seven cents per card transaction. The Fed is expected to release a final interchange fee proposal in April, and that proposal should be enacted in July. CUNA and others have urged Congress to take time to further study the various issues that the interchange changes could create for consumers and financial institutions.

CDFI Fund to hold certification conference calls

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WASHINGTON (3/14/11)--The U.S. Treasury's Community Development Financial Institutions (CDFI) Fund last week announced a series of five CDFI Certification Conference Calls, the first of which will take place on March 17. The CDFI Fund said that the monthly calls are meant to “serve as a forum for potential CDFI Certification Applicants, certified CDFIs, and other CDFI certification stakeholders to ask questions and discuss CDFI certification and the CDFI certification process.” Additional CDFI Certification Conference Calls will take place on the following dates:
* Thursday, April 14; * Thursday, May, 19; * Thursday, June 16; and * Thursday, July 21.
All calls will begin at 3 p.m. ET and are scheduled to last for one hour. The Obama administration has sought $250 million in CDFI funding for fiscal 2011, but House Republicans have proposed cutting the CDFI Fund’s funding to $50 million. The CDFI Fund helps locally based financial institutions offer small business, consumer and home loans in communities and populations that lack access to affordable credit. According to the Treasury Department in January, credit unions represent 13% of the total applicant pool for the 2011 round of the CDFI Fund program. Potential participants can call the toll-free number, (888) 677-5132, and enter in pin number 1458624 to join the calls. For more on the conference calls, use the resource link.

Improving employment evens mortgage averages

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WASHINGTON (3/14/11)—Thirty-year fixed-rate mortgages averaged 4.88% during the week ended March 10, a slight increase from the 4.87% mortgage rate average reported last week. Those same mortgages averaged 5.05% during the week ended Feb. 10, the highest average mortgage rate recorded since April 2010. Fifteen-year fixed rate mortgages held steady at 4.15%. Five-year and one-year adjustable rate mortgages (ARM) remained essentially even, with five-year ARMs increasing to 3.73%, .01% up from the previous weeks average, and one-year ARMs averaging 3.21%, down .02% from the previous week’s average. Five-year ARMs averaged 4.05% this time last year, while one-year ARMs averaged 4.22%. Freddie Mac Vice President/Chief Economist Frank Nothaft said that positive employment numbers helped mortgage rates hold steady. The sub-5% average mortgage rates that have continued for all but one week this year have also contributed to “record home affordability,” Nothaft added. For the full survey, use the resource link.