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Washington Archive

Washington

April 14 is comment due date for Fed CARD Act proposal

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WASHINGTON (3/16/10)--The Federal Reserve Board's recently issued proposal that would implement the provisions of the Credit Card Accountability, Responsibility and Disclosure Act of 2009 (CARD Act) that come into effect on Aug. 22 was published in the Federal Register Monday. Although the Fed issued the proposal earlier this month, publication in the Federal Register starts the clock on the 30-day comment period. The most recent proposal, which follows two earlier CARD Act proposals that are already effective, will prevent card issuers from charging inactivity fees, account closure fees, or multiple penalty fees based on a single violation. Otherwise, the proposal outlines three alternatives for calculating penalty fees that are based on costs to the institution, the ability to deter repeated violations, and a list of "safe harbor" fees that will be provided by the Fed at a later time, after it receives comments on what these fees should be. Card issuers will also be required to inform consumers of the reasons behind an increased interest rate and must review any rate increases that have been made since the start of 2009. These rate increases will have to be reviewed every six months and, if applicable, must be reduced. The Fed release will remain open for public comment until April 14. The Credit Union National Association (CUNA) has also published a comment call on the Fed proposal, and will be accepting comments until April 6. To see the full Fed release, as well as a comment call from CUNA, use the resource links below.

In Congress Dodd leads the week with reform bill

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WASHINGTON (3/16/10)-- Senate Banking Committee Chairman Christopher Dodd (D-Conn.) on Monday released long-awaited legislation aimed at reforming the financial regulatory structure in response to the financial crisis of 2008-2009. Dodd's bill incorporates ideas from both Republican and Democratic sides of the aisle, and specifically would allow the Federal Reserve to continue to oversee both large banks and smaller state-chartered banks while also adding authority over some non-bank financial firms to the Fed's list of responsibilities. Dodd’s proposal also allows the National Credit Union Administration to maintain its independence and excludes credit unions with $10 billion or less in assets from the oversight authority of a proposed consumer watchdog. However, Credit Union National Association (CUNA) President/CEO Dan Mica noted that CUNA will advocate for removing all credit unions from the oversight of the new agency. "We believe a strong case can be made that no credit unions need direct supervision by the new agency," Mica said after Dodd's afternoon press conference. While the introduction of Dodd’s financial regulatory reform bill will likely take top billing for credit unions this week in Congress, there will be plenty of other action on Capitol Hill. Credit unions may not be closely following the ongoing healthcare debate, but there is some speculation that the budget reconciliation process that is begun by the passage of any healthcare legislation may also be used to eliminate the Department of Education's Federal Family Education Loans Program in favor of a federal direct lending program. CUNA has opposed the elimination of the FFELP program and will continue to monitor this issue closely throughout the week. One item on the congressional agenda that will not directly affect credit unions, but is still of interest, is jobs legislation, which, after being juggled between the House and Senate, could be returned to the House by the Senate later this week. Two of the many House hearings taking place this week are scheduled for Wednesday, when the House Financial Services Committee will discuss public and assisted housing revitalization initiatives and the link between the Federal Reserve’s bank supervision and monetary policy.

Inside Washington (03/15/2010)

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* WASHINGTON (3/16/10)--The Federal Deposit Insurance Corp. (FDIC) is using an old tactic from the savings and loan crisis to deal with bank failures. On Friday, the agency announced it sold $1.8 billion in bonds upheld by mortgage-backed securities on the balances sheets of seven failed banks. More than 70 investors participating in the deal acquired no assets from the banks, but have FDIC-guaranteed notes the agency can repay from income on underlying assets (American Banker March 15). The agency has not participated in such a bond sale since the early 1990s, and it is the first sale involving debt guaranteed by the FDIC ... * WASHINGTON (3/16/10)--Fannie Mae and Freddie Mac’s chances of becoming permanent fixtures of the government are increasing because the Obama administration hasn’t yet put forth a plan about their futures, financial observers said (American Banker March 15). Treasury Secretary Timothy Geithner said he would provide an outline with more details on their future, and Department of Housing and Urban Development (HUD) Secretary Shaun Donovan said the administration would have a plan “soon.” The administration plans to propose the enterprises’ overhaul during a House Financial Services Committee hearing March 23. Brian Gardner, KBW Inc. analyst, said the longer the industry--Fannie and Freddie--are nationalized, the harder it will be to privatize them. The market and Congress also are not equipped to take the enterprises out of conservatorship. The government placed Fannie and Freddie under its control in September 2008. Howard Glaser, former HUD official, said the government is relying on Fannie and Freddie for “load-bearing support” and the market “can’t live without them” ...

Gillibrand seeks Senate support for MBLs

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WASHINGTON (3/16/10)--Sen. Kirsten Gillibrand (D-N.Y.) encouraged her Senate colleagues to “free up lending” at credit unions “in every corner of America” by including S. 2919 in future job creation bills. “If we’re going to create new jobs and rebuild our economy for the long term, small businesses need more access to credit,” Gillibrand said, adding that S. 2919, which would increase the current member business lending cap of 12.25% to 25%, “would give small businesses more of the capital they need to get off the ground, grow and get thousands of Americans back to work.” The “de minimis” threshold of for MBL loans would also be increased from $50,000 to $250,000 under the bill. Gillibrand in a release last week cited Credit Union National Association estimates which state that lifting the MBL cap for credit unions would create $10 billion in new small business funding, resulting in over 100,000 new jobs, in the first year following enactment, and at no cost to taxpayers. “With the current cap on member business lending, it’s small businesses that are paying the price,” according to William J. Mellin, president/CEO of the Credit Union Association of New York. “They have fewer options and, given the current credit crunch, many small businesses are finding they have no options at all.” Syracuse Fire Department FCU would itself be able to lend an additional $7 million to members with small businesses, lifting its own member business lending cap to $14 million, according to the release. In New York state, lifting the MBL cap would result in the creation of 7000 new jobs, the release added. Senator Gillibrand is working to include this legislation in the upcoming small business jobs package that will be drafted by Congress. New York State has 461 credit unions, 15 of which are in Central New York. According to the Credit Union National Association, this legislation would help create more than 7,000 jobs in New York without government expenditures. Gillibrand is one of 10 co-sponsors for S. 2919, which was introduced by Sen. Mark Udall (D-Colo.) A House version of MBL legislation, which was introduced by Rep. Paul Kanjorski (D-Pa.) late last year, currently has 99 co-sponsors.