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Inside Washington (03/18/2009)

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* WASHINGTON (3/19/09)--A push to create a federal regulator to oversee insurance companies is gaining ground after congressional members and financial industry observers criticized American International Group’s (AIG) $165 million bonus package. At a hearing this week, Sen. Richard Shelby (R-Ala.) said AIG’s lack of supervision have brought up questions about state supervision’s adequacy (American Banker March 18). It may make sense to consider regulating insurance companies nationally, he said. Senate Banking Committee Chairman Christopher Dodd (D-Conn.) also said one system of rules, as opposed to a “spotty” system of 50 jurisdictions, may be more effective. Michael McRaith, director of the Illinois Department of Insurance, noted--in response to Shelby’s argument that states cannot handle insurance conglomerates alone--that the issue is whether the regulator is effective ... * WASHINGTON (3/19/09)--The Federal Deposit Insurance Corp. (FDIC) announced Tuesday that it will impose surcharges on guaranteed debt with a maturity of one year or more issued on or after April 1. For guaranteed debt that is issued by June 30, 2009, and matures by June 30, 2012, the surcharge will be 10 basis points annually for an insured depository institution and 20 basis points annually for all others. Surcharges will be added to current fees for guaranteed debt and deposited into the Deposit Insurance Fund instead of being set aside to cover potential Temporary Liquidity Guarantee Program losses. The charges should enable the FDIC to reduce the 20 Basis Point Special Assessment proposed by the board Feb. 27, FDIC Chairman Sheila Bair said ... * WASHINGTON (3/19/09)--Giving the Federal Reserve Board more power to oversee systemic risk may be a hard sell after a hearing Tuesday indicated that lawmakers have concerns about increasing the Fed’s oversight. House Financial Services Committee Chairman Barney Frank (D-Mass.) has said he would begin drafting a bill in May about the topic, but lawmakers expressed their doubts. Rep. Mel Watt (D-N.C.) said giving the Fed more power could conflict with its consumer protection responsibilities and monetary policy (American Banker March 18). Creating a new regulator may be more effective, he said. Rep. Mike Castle (R-Del.) said the Fed should give up some of its powers before taking on systemic risk ...

Former NCUA Chairman Callahan passes away

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WASHINGTON (3/19/09)—Former National Credit Union Administration (NCUA) Chairman Edgar Callahan passed away Wednesday in Sacramento, Calif., following a long illness, the NCUA reported. Marking Callahan’s passing, Credit Union National Association President/CEO Dan Mica called the former agency head a visionary in the credit union movement. Mica said Callahan foresaw an operating environment in which credit unions could serve their members with the least government interference as possible, while safety and soundness was assured. “As NCUA chairman, he proudly kept a sign outside of his office reading ‘we don’t run credit unions,’ and he made that his mantra. Today, we continue to strive toward Ed’s vision of a credit union movement sensibly regulated in its efforts to serve members in a safe and sound manner. CUNA appreciates his efforts as a regulator and his many contributions to the movement as a credit union leader himself,” Mica said. According to agency information, Callahan was nominated to a six-year term on the NCUA Board in the fall of 1981 and he served as chairman from Oct. 22, 1981, to May 3, 1985. Current NCUA Chairman Michael Fryzel called Callahan a “modern day pioneer in the credit union movement.” “He showed his concern and passion for credit unions as a regulator in Illinois, as chairman of NCUA, the founder of Callahan and Associates, CEO of Patelco Credit Union (San Francisco) and as a philosopher, a visionary, and a doer. “There is not a single aspect of day-to-day NCUA or credit union operations that does not bear his mark,” Fryzel said.

FASB issues plan for fair value guidance

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NORWALK, Conn. (3/19/09)--The Financial Accounting Standards Board (FASB) issued two proposed staff positions (FSPs) Tuesday evening intended to provide additional application guidance regarding fair value measurements and impairments of securities. The standards board expedited its consideration of the FSPs after getting some heat for Congress last week. At a hearing conducted by the House Financial Services subcommittee on capital markets, insurance and government-sponsored enterprises, Chairman Paul Kanjorski (D-Pa.) said he wanted FASB to work more quickly toward meaningful changes. Witness Bob Herz, FASB chairman, committed to having final guidance on the use of mark-to-market accounting in illiquid markets out within three weeks. FASB set a 15-day public comment period, ending April 1, for its proposed FSPs. If approved, both sets of guidance would be effective for interim and annual periods ending after March 15. FASB encourage its constituents to review the proposed FSPs and provide comment on whether they agree that the proposed FSPs would improve financial reporting. The board has scheduled an April 2 meeting to evaluate all comment letters and other input received on the FSPs. In summary,
* Proposed FSP FAS 157-e, called Determining Whether a Market Is Not Active and a Transaction Is Not Distressed, provides guidelines for making fair-value measurements more consistent with the principles presented in FASB Statement No. 157, Fair Value Measurements. * Proposed FSP FAS 115-a, FAS 124-a, and EITF 99-20-b, Recognition and Presentation of Other-Than-Temporary Impairments, is intended to provide greater clarity and consistency in accounting for and presenting impairment losses on securities.
Use the resource links below for more guidance details.

Mica in iAmerican Bankeri MBLs are CU tradition

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WASHINGTON (3/19/09)—Credit Union National Association (CUNA) President/CEO Dan Mica Wednesday took on a myth he said is being spread by some bankers: that member business lending (MBL) is separate from credit unions’ traditional mission. In a letter to the editor of American Banker, Mica noted that a New Jersey banker recently wrote in that space that the federal tax exemption for credit unions should be revoked in exchange for passage of a bill lifting the cap on credit unions' MBLs. Barry Zadworny had argued that for credit unions, there should not be a "free lunch." “Aside from the fact that talk of a ‘free lunch’ rings extremely hollow from an industry whose institutions big and small have required unprecedented amounts of government assistance, Mr. Zadworny's point is premised on the false notion that credit unions stray from their traditional mission when engaging in member business lending,” Mica wrote. He noted that credit unions' traditional mission included member business lending without portfolio restrictions for almost 100 years, until 1998. "Credit unions are staying true to their mission. Lifting the arbitrary cap that now exists on member business lending, as Sen. (Charles) Schumer (D-N.Y.) proposes, will help credit unions further that mission,” Mica said. He was referring to Schumer’s announced plans to introduce legislation to lift the MBL cap because “banks are not lending to small businesses and credit unions will." He added that the senator’s point is buttressed by the Federal Reserve Board's Senior Loan Officer Survey, which shows a majority of banks have cut back on small-business lending (75% in the October '08 survey). Also, a recent white paper by the Competitive Enterprise Institute further concludes that expanding credit union small-business lending would yield much-needed economic stimulus. The CUNA letter also noted that the credit union federal tax exemption is premised on credit unions' structure as not-for-profit, member-owned financial cooperatives. That structure, Mica pointed out, does not change with the decision to offer member business loans.

CUNA delivers CU perspective to Hill today

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WASHINGTON (3/19/09)—The Credit Union National Association (CUNA) is scheduled to testify twice today, detailing credit union positions on deposit insurance issues and also on changes to credit card and overdraft protection plan programs. This afternoon, Terry West, chairman of CUNA's Corporate Credit Union Task Force, is scheduled to testify at the Senate Banking subcommittee on financial institutions' hearing entitled, "Current Issues in Deposit Insurance." West is CEO of Vystar CU, Jacksonville, Fla. Also a scheduled witness at this hearing, National Credit Union Administration (NCUA) Executive Director David Marquis will present his agency’s remarks. Earlier in the day, the full Banking Committee will launch a series of hearings on “Modernizing Bank Supervision and Regulation.” NCUA Chairman Michael Fryzel is scheduled to testify along with federal and state bank and thrift regulators. At the second in this series of hearings, scheduled for March 24, CUNA will testify. Meanwhile, also this afternoon, CUNA's views on bills to address unfair and abusive practices as relating to overdraft protection plans and credit card terms will be presented by Doug Fecher, president/CEO of Wright-Patt CU, Fairborn, Ohio. Fecher is scheduled to appear before the House Financial Services subcommittee on financial institutions and consumer credit, which is conducting a legislative hearing on H.R. 627, the Credit Cardholders' Bill of Rights Act, and H.R. 1456, the Consumer Overdraft Protection Fair Practices. NCUA Associate General Counsel Sheila Albin is also a scheduled witness. Copies of CUNA's written testimony will be posted on the CUNA Legislative Affairs Website when available. Use the resource link below for CUNA website.

CDFI plans billions in grants tax credits

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WASHINGTON (3/19/09)--Credit unions will benefit from a plan released Wednesday by the Treasury’s Community Development Financial Institutions (CDFI) Fund, which will award $100 million in grants and $3 billion in additional tax credit authority to support community-based financial institutions. The awards, available through the American Recovery and Reinvestment Act, will support underserved communities. The CDFI Fund plans to disburse awards within 120 days. The CDFI Fund will re-open its 2009 CDFI Program and Native American CDFI Assistance (NACA) Program award rounds to enable additional applicants to apply, and will offer current applicants the opportunity to request larger awards. The Recovery Act authorizes the CDFI Fund to allocate $3 billion of tax credit authority to qualified Community Development Entities (CDEs) under the New Markets Tax Credit (NMTC) Program: $1.5 billion to CDEs that applied for allocation authority under the 2008 NMTC allocation round; and $1.5 billion to CDEs that apply for allocation authority under the 2009 NMTC allocation round. The $3 billion in allocation authority is in addition to the $3.5 billion already allocated for the NMTC this year. The CDFI Fund estimates that the $6.5 billion in NMTC allocation authority will help to develop or rehabilitate 33 million square feet of real estate in low-income communities, supporting thousands of construction jobs.