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MBL leader Udall backs MBL bill in iThe Hilli blog post

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WASHINGTON (3/21/11)--Sen. Mark Udall (D-Colo.) last week reaffirmed his commitment to “finally taking the common sense step of allowing credit unions to increase the amount of money they can lend to small businesses” and touted his proposed member business lending (MBL) cap lift legislation in a blog post on The Hill’s Congress Blog. Udall’s legislation, the Small Business Lending Enhancement Act of 2011 (S. 509), currently has 17 sponsors. The bill would increase the MBL cap to 27.5% of a credit union's assets, up from the current 12.25%. The Credit Union National Association (CUNA) has estimated that the MBL cap lift could provide up to $13 billion to small businesses in the first year alone and create over 140,000 new jobs, at no cost to taxpayers. Udall in his blog post said that credit unions “know small businesses in their communities that need loans to expand and hire, and the credit unions have money to lend them.” He also noted that “nearly 350 credit unions, accounting for approximately 60% of all business loans subject to the 12.25% cap, are facing their cap and will have to dramatically slow their business lending.” The MBL cap lift is “a smart, no-cost way of increasing lending without drastically changing the composition of the small business lending market,” Udall added. The senator’s blog post mirrored comments he made on the Senate floor on Thursday. Sen. Olympia Snowe (R-Maine), a co-sponsor of S. 509, also backed the MBL legislation in her own Thursday comments. Snowe said that the MBL cap lift is “a critical way” of creating more jobs in America, and noted that the legislation would create 1,000 new jobs in her home state alone.

CUNA asks CFPB head to join interchange fight

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WASHINGTON (3/21/11)--Credit Union National Association (CUNA) President/CEO Bill Cheney last week asked Consumer Financial Protection Bureau (CFPB) architect Elizabeth Warren to join those who are requesting a delay in implementation of the Federal Reserve’s interchange fee changes. Cheney said that CUNA would “deeply appreciate” Warren’s input on the Fed’s interchange proposal, and would be glad to meet with her to discuss interchange further. CUNA met with Warren on the interchange issue during the recently completed 2011 Governmental Affairs Conference. CUNA representatives and Warren have also discussed the regulatory burden faced by credit unions and other issues during additional meetings. In this most recent communication, Cheney recommended that Warren consider adding a formal regulatory burden monitoring function to the CFPB’s pending Office of Community Banks and Credit Unions. The CUNA leader said that such a move would be “extremely well-received by credit unions.” Warren last week told members of the House Financial Services Committee that the CFPB would work with credit unions and other small institutions as it pursues various rulemaking priorities, and added that the agency would protect credit unions and community banks as it develops and revamps regulations. On the topic of interchange, regulators, legislators, consumer groups and members of the press have all come out in recent weeks to call for a delay in interchange regulation implementation. The Fed’s proposal, which is scheduled to go into effect on July 21, could cap the interchange fees paid to debit card issuers at as low as seven-to-12 cents per transaction. Active bills in both the House and Senate would push back implementation to allow further time for study of the interchange regulation’s impact on credit unions, small issuers, consumers and merchants.

TARP funding for large banks disadvantages CUs

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WASHINGTON (3/21/11)--The lasting legacy of the Troubled Asset Relief Program (TARP) could ultimately be the worsening of the problems posed by “too big to fail” financial institutions, as that program has helped many big banks grow even larger, TARP Special Inspector General Neil Barofsky said late last week. Testifying before the Senate Banking Committee on Thursday, Barofsky noted that TARP has put small issuers, such as credit unions, at a disadvantage by granting larger institutions greater access to cheap credit and capital. “Cheaper credit,” in this case, “is effectively a government-granted subsidy, which translates into greater profits, and which allows the largest institutions to become even larger” while “materially disadvantaging” smaller financial institutions, he added. The safety net provided by TARP has caused credit ratings agencies to continue to give higher credit ratings to large institutions, and has given executives of larger firms greater motivation to take greater risk, Barofsky said. “The prospect of a government bailout also reduces market discipline, giving creditors, investors and counterparties less incentive to monitor vigilantly those institutions that they perceive will not be allowed to fail,” he added. Barofsky said that while one of the central elements of the recently enacted Dodd-Frank financial reform package was to end "too big to fail," there is not sufficient evidence that the issue has been solved. In fact, Barofsky noted that the funding advantage that larger banks hold over their smaller competitors has increased since Dodd-Frank was signed into law. For more of Barofsky’s testimony, use the resource link.

Cheney briefs CFA on CUco-op difference

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WASHINGTON (3/21/11)--Credit Union National Association (CUNA) President Bill Cheney last Friday discussed the value of credit
Click to view larger image Credit Union National Association President/CEO Bill Cheney discusses the value of credit unions to consumers with Consumer Federation of America's (CFA) consumer advocates, in Washington for CFA's Consumer Assembly. (Photo provided by CUNA)
unions to consumers as part of an orientation on co-ops that the Consumer Federation of America (CFA) arranged for a group of its key state and local advocates in Washington to attend CFA’s Consumer Assembly. Cheney emphasized that having a cooperative financial services option in the marketplace “means consumers have an institution that gives them a voice, that provides great value, and that offers stellar service.” And they have a long history of doing so, he added. Cheney held up a copy of the very first issue of what is now Consumer Reports magazine, which is celebrating its 75th anniversary this year, and pointed out the inaugural issue had an article written by credit union pioneer Dora Maxwell on the benefits of credit unions to consumers. Cheney explained how credit unions as co-ops answer to their members, not outside stockholders. He cited CUNA research showing consumers saved $6.5 billion last year using credit unions rather than banks due to credit unions' better rates and lower fees, a figure that likely would be even higher if the interest-rate environment for savings was not so low. “And credit unions’ presence in the marketplace creates competitive pressure that helps bank customers, too,” he said. That savings amounts to about $3.5 billion a year, for a total savings to consumers of $10 billion a year. He also thanked CFA for its consistent support of credit unions' tax status. Noting that tax reform is an emerging issue in Congress, Cheney said credit unions “have a very good story to tell about the exemption they receive.” He also explained that revoking the exemption would effectively turn credit unions into banks, depriving consumers of a cooperative choice for their financial services. “If you tax credit unions, you eliminate credit unions--it’s game over,” he said. Also presenting at the session, organized by CFA Executive Director Stephen Brobeck, were National Cooperative Business Association CEO Paul Hazen and American Public Power Association chief lobbyist Joe Nipper.

Online gambling legalization bill introduced

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WASHINGTON (3/21/11)--Legislation that would allow the U.S. Treasury to license internet gambling operators and would permit approved operators to accept bets from U.S. citizens was again offered in the House late last week. The Internet Gambling Regulation, Consumer Protection, and Enforcement Act was introduced by Rep. John Campbell (R-Calif.), with Rep. Barney Frank (D-Mass.) serving as its main co-sponsor. Reps. Ed Perlmutter (D-Colo.) and Peter King (R-N.Y.) have also co-sponsored the bill. Frank introduced identical legislation last year, and that bill gained House Financial Services Committee approval in July. It did not come up for further vote in the full House, however. The new gaming legislation would ease the compliance burdens imposed by the Unlawful Internet Gaming Enforcement Act (UIGEA) by supplying a list of approved Internet gambling providers that financial institutions could use to help determine what transactions to validate. UIGEA, as currently constructed, requires credit unions and other financial institutions to establish and implement policies and procedures to identify and block restricted internet gambling transactions, or rely on those procedures established by the payments system. While many transactions that are made with illegal gambling operators are blocked, the UIGEA regulations do result in a large number of false positives, creating issues for both credit union members and credit unions.

Inside Washington (03/18/2011)

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* WASHINGTON (3/21/11)--The Treasury Department will place its own nominees on the boards of banks that fail to meet terms of their government bailouts, a senior official said Thursday (American Banker March 18). Treasury is in the process of identifying individuals who can have the most positive effect on bank boards, said Timothy Massad, acting assistant secretary for financial stability. The board nominations are expected to be announced soon, Massad said. Most of the $204.9 billion disbursed under the Troubled Asset Relief Program’s Capital Purchase Program have been paid back, but some banks have missed dividend or interest payments. As of the end of February, 189 banks had failed to make at least one scheduled dividend or interest payment. Thirty-two have yet to make at least six payments, the agency said. After an institution fails to make six payments, the Treasury has the right to elect two members to the bank's board of directors … * WASHINGTON (3/21/11)--The Federal Reserve last week clarified portions of its Regulation Z, altering the rule to prevent card issuers from requesting a consumer's household income on credit applications. The amended rule will instead require issuers to request a consumer’s individual income or salary, the Fed said. The amendment will also prohibit issuers from revoking initial offers of interest-free credit during a specified amount of time “unless the account becomes more than 60 days delinquent.” The Fed currently imposes similar rules on so-called “teaser” credit card rates. It has also moved to include application and other first-time fees under a rule that limits the total amount of fees charged on a credit account to 25% of the account’s credit limit... * WASHINGTON (3/21/11)--Community bankers are divided on a provision of the Dodd-Frank Act that would allow for the payment of interest on commercial checking accounts. Some believe the repeal of Reg Q could cut into margins and cause commercial clients to seek the highest bidder (American Banker March 18). Though the repeal of Reg Q is one paragraph in 2,300 pages of legislation it affects the foundation of many institutions’ commercial banking strategies, according to Cliff McCauley, a senior executive vice president at the Cullen/Frost Bankers Inc. unit Frost Bank and a former chairman of the Independent Bankers Association of Texas. The Independent Community Bankers of America (ICBA) is surveying its members on the repeal. Preliminary results show a split of opinion among ICBA members as to whether they believe they will be impacted by the repeal. Bankers more anxious about the change said those less concerned not may not be considering the long-term impact. Frank Sorrentino III, chairman/CEO of the $602 million-asset North Jersey Community Bank, Englewood Cliffs, N.J, said the repeal may not have an immediate effect in the current low-rate environment. But rates will eventually rise, he said, affecting each bank’s commercial viability … * WASHINGTON (3/21/11)—House Financial Services Committee Chairman Spencer Bachus (R-Ala.) announced the planned schedule for the rest of March and April. The schedule is tentative and will depend on witness availability and other factors that may require changes. Hearing witnesses will be announced at later dates. All times are Eastern. March 30: Oversight and Investigations Subcommittee hearing on cost of Dodd-Frank implementation, 2 p.m.; March 31: Capital Markets Subcommittee hearing on legislative proposals on GSEs, 10 a.m.; April 1: Insurance and Housing Subcommittee hearing on NFIP at 10 a.m.; April 5: Capital Markets Subcommittee markup of government-sponsored enterprise bills at 10 a.m.; April 6: Financial Institutions Subcommittee hearing on the small business lending fund at 10 a.m., and Insurance and Housing Subcommittee markup of the National Flood Insuranch Program bill at 2 p.m.; April 7: Domestic Monetary Policy Subcommittee hearing on the U.S. Mint Bullion Program at 10 a.m.; April 13: International Monetary Policy Subcommittee hearing on Ex-Im Bank at 10 a.m., and Insurance and Housing Subcommittee hearing on Federal Housing Administration and Ginnie Mae legislative proposal at 2 p.m.; April 14: Oversight and Investigations Subcommittee hearing on the Stanford Financial Ponzi scheme at 10 a.m., and Capital Markets Subcommittee hearing on risk retention at 2 p.m. …