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Udall announces MBL cap lift legislation at GAC

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WASHINGTON (3/3/11)--Addressing a Credit Union National Association (CUNA) 2011 Governmental Affairs Conference audience, Sen. Mark Udall announced the release of a bipartisan letter stating his
Click to view larger image Sen. Mark Udall (left), who introduced legislation in the Senate during the last session of the U.S. Congress that would have raised the member business lending cap to 27.5% of assets, said that credit unions can push MBL legislation through in 2011. (Shown here with Udall are: Michele Johnson (center), CUNA director of federal legislative affairs, and Ryan Donovan (right), CUNA vice president of legislative affairs. Also at the GAC, Rep. Ed Royce (R-Calif.) said he would re-introduce an MBL bill on the House side soon. (CUNA Photo)
intention to introduce legislation that would increase credit union member business lending (MBL) authority in 2011. The letter, co-signed by Udall (D-Colo.), Sen. Olympia Snowe (R-Maine) and Sen. Charles Schumer (D-N.Y.), describes the Small Business Lending Enhancement Act, which would allow credit unions to increase their small business lending to 27.5% of assets from the current limit of 12.25%. The bills states that to go above 12.25% for MBLs, a credit union must be well capitalized and have a history of MBL experience, be near the lower cap for one year prior to exceeding it, and receive approval by the National Credit Union Administration to lend in excess of the old cap. After a higher limit is approved, if the credit union’s net worth drops below 7%, its must halt further member business lending. At the GAC and in the letter, Udall restated CUNA's position that the MBL limit increase would inject an expected $10 billion into the U.S. economy and create an estimated 100,000 jobs. "We've worked this out," he said. "It makes sense. We ought to put it into law. We came very close last year."

Bachus CUs sold a bill of goods on interchange

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Click to view larger imageSpeaking at CUNA’s GAC, Rep. Spencer Bachus (R-Ala.) said that the proposed interchange rule would directly affect the credit unions’ bottom line. He said it is important to the nation’s economic health that credit unions can survive as Main St. financial institutions. (CUNA Photo)
WASHINGTON (3/3/11)--Rep. Spencer Bachus (R-Ala.) told the Credit Union National Association 2011 Governmental Affairs Conference audience that credit unions were “sold a bill of goods” on the proposed interchange rule, which threatens the existence of small financial institutions. “You were sold a bill of goods in October when you were told as credit unions that the interchange fees didn’t apply to you,” Bachus said. “Well, it’s March, and you know it applies to you. “ Bachus said because the interchange rule would directly affect the bottom line of credit unions and small banks--unlike larger financial institutions that offer a wider array of services--smaller credit unions and banks will be less able extend credit to their members and customers. “We know with interchange fees that if we don’t get it right, credit unions and community banks are not going to be there," he said. “And we know that the big banks will." Bachus assured the audience that several senators have talked directly with Sen. Richard Durbin (D-Ill.) about the potential negative effects of the bill. Durbin drafted the interchange language that was folded into the Dodd-Frank Act. Bachus also opined that the newly formed Consumer Financial Protection Bureau unfairly regulates credit unions in the wake of the financial crisis. “You were told the Consumer Financial Protection Bureau wouldn’t apply to credit unions,” Bachus said. “Credit unions didn’t cause what happened in 2008. I have yet to find anyone in or out of Congress that said credit unions did anything to cause or precipitate the financial crisis. "You played by the rules. You kept the rules. Now you’re told because of sins of others you’re going to have to pay for it, just like too big to fail.” As chairman of the House Financial Services Committee, Bachus promised that credit unions would still be offered protection from interest rate increases following the restructuring of Fannie Mae and Freddie Mac, but added it was essential that in the future, institutions that guarantee loans must be responsible for their losses.

Blunt warns of consequences of big government

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WASHINGTON (3/3/11)--Sen. Roy Blunt (R-Mo.) told a Credit Union National Association 2011 Governmental Affairs audience that more governmental regulation creates uncertainty and “unintended consequences” for the financial services industry. “With these new bureaus that are being created,” Blunt said, “you can be guaranteed that the unintended consequences will not be what people thought. And the unintended consequences of government are the most certain consequences.” Coming out of the financial crisis, Blunt said, the U.S. economy requires more certainty. He cautioned against a “rush to regulate.” One of the unintended consequences he referred to was higher fees that could result from the Federal Reserve's proposed debit interchange rule that is opposed by credit unions. “Higher fees are going to force more people into the unbanked community, and nobody benefits from that,” Blunt said. He repeatedly called for less governmental intervention in American business and the everyday lives of American consumers. “We are at critical moment of deciding what kind of country we are going to live in,” Blunt said. "Are we going to live in a country where the government is bigger than the people? Or the people are bigger than the government?" He said issues such as the interchange proposal are examples of overregulation in the wake of the financial crisis, when the big banks deemed too big to fail were bailed out by the government. “We can’t have the federal government saying it’s okay for big banks to lose money, but it’s not okay to earn money,” Blunt said.

Boehner says new rules punish CUs

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WASHINGTON (3/3/11)--House speaker John Boehner (R-Ohio) warned a Credit Union National Association (CUNA) 2011 Governmental Affairs Conference audience that the new rules and regulations created by
Click to view larger image House Speaker John Boehner (R-Ohio) said at CUNA’s GAC that American consumer access to credit provided by credit unions is essential to economic growth and job creation. Boehner is concerned that bigger government leaves less money for Americans to invest in their families and communities. (CUNA Photo)
Click to view larger image Speaker of the House John Boehner (right) meets with CUNA President/CEO Bill Cheney (left) before the Ohio Republican hits center stage to address CUNA’s 2011 Governmental Affairs Conference, which ran from Feb. 27-March 2. Boehner told his credit union audience that spending cuts and job creation are Republicans' top priorities in the next year. (CUNA Photo)
the Dodd-Frank Act will punish those who are the least responsible for the financial meltdown of 2008. “All this will do is punish everyone who had nothing to do with the Wall Street crash two-and-a-half years ago,” Boehner said. “It puts in place rules and regulation limiting your ability to provide credit to your members.” Access to credit is essential to grow the economy and create new jobs, Boehner said. He cited job creation and reining in spending as two critical economic issues. “The real battle” on those issues begins with the federal budget, Boehner said, and he didn’t mince words when commenting on President Barack Obama’s efforts in meeting the challenge presented by the budget. Boehner noted that with a $1.6 trillion budget deficit, the U.S. has to borrow 40 cents for every dollar it spends. “I think all of us in America owe it to ourselves to get our arms around this,” he said. Boehner’s answer to meeting the demands of cutting the deficit are less government and more “common sense.” “The bigger government gets, the smaller the people get,” Boehner said. “The more government takes from people, the less they have to invest in their families, their communities and themselves.”

Wasserman Schultz CUs can halt interchange train

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WASHINGTON (3/3/11)--The “runaway interchange train” may have recently left the station, “but the time has come to stop it in its tracks,” Rep. Debbie Wasserman Schultz (D-Fla.) told attendees at the Wednesday session of the Credit Union National Association’s (CUNA) 2011 Governmental Affairs Conference.
Click to view larger image After “smoking out” merchants’ true interchange intentions, Rep. Debbie Wasserman Schultz (D-Fla.) said that she has turned her eyes toward halting the progress of the Federal Reserve’s interchange fee proposal. (CUNA Photo)
“There is too much at stake. We must get this right,” she said. She called on credit unions to help her fight for further consideration of interchange fee changes, and added that she would work with any legislator who wants to help fix interchange issue facing credit unions and other small issuers. Wasserman-Schultz, who was one of 105 House members who tried to keep language on interchange fees out of the final comprehensive financial regulatory legislative package, added that the Federal Reserve’s interchange fee proposal is “deeply wrong, deeply flawed, and needs to be fixed.” She echoed CUNA’s call to stop, study and start over on interchange legislation. While the interchange fee legislation was ultimately passed, credit union advocacy helped Wasserman Schultz and other House colleagues modify the interchange provision to make it less harmful to credit unions, small issuers, and government benefit programs. The legislator also directly questioned merchants' claims that the savings realized from lower interchange fees would be passed on to consumers. “I smoked out the merchants' true intentions, and exposed their true intentions, and they have no intention of passing those savings along to consumers,” Wasserman Schultz said. Noting the "key role" that credit unions have played in helping the American economy get back up and running, Wasserman Schultz also praised credit unions for filling the lending gap left open by many banks. She added that credit unions must be able to provide the credit that small businesses need to start up, to hire new workers, and to expand their existing operations. “Main Street, not Wall Street, continues to lead our economic comeback,” and credit unions must be able to provide these key resources to their members, she added.

Tester urges CU on to fight interchange

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WASHINGTON (3/3/11)--Sen. Jon Tester (D-Mont.) said the credit union community must urge Congress to reopen the subject of interchange fees. “I think you should suggest Congress needs to stop and study,” he told Credit Union National Association members attending the 2011 Governmental Affairs Conference Wednesday. “The stakes are too high for credit unions and community banks.” Tester, a member of the Senate Banking Committee, said he opposed the interchange fee legislation when it was approved by the Senate. “I opposed [the legislation] because I know how much damage will result for credit union members,“ he told the session. The senator said that if credit unions and other opponents do not defeat the interchange fees, it will lead to further industry consolidation.

House Majority Whip Were at a crossroads

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WASHINGTON (3/3/11)--Rep. Kevin McCarthy (R-Calif.) said the nation needs to unite for an all-out assault on the federal deficit. “We are at a crossroads,” he added, during a speech before credit unions at the Credit Union National Association's 2011 Governmental Affairs Conference. The crisis today is far different than the one posed by World War II, when all political parties pitched in to help win that conflict, he said. “Today we are divided,” he said. “When one party says one thing, the other says something else.” McCarthy, who is the House Republican Whip, said Congress needs to unite and reform the tax code. The current dependence on foreign entities such as China to finance debt is a hazardous course, he added. “Why should we put ourselves in that position?” he questioned. McCarthy said future elections will be crucial because the American public is eagerly searching for someone to tackle the current crisis.

High government spending a concern Moore Capito

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WASHINGTON (3/3/11)--Rep. Shelley Moore Capito (R-W.Va.) believes concern about runaway government spending is starting to seep into average American households. She said it is due in part to the economic recession, which has made more citizens budget conscious. “The good thing about American families is they know what we are up against in Washington,” she told a morning general session of the Credit Union National Association’s (CUNA) 2011 Governmental Affairs Conference. “They know from their own experiences,” said Capito, who is a member of the House Financial Services Committee. “We are creating debt as far as the eye can see,” she added. Capito said CUNA can make a meaningful contribution in the area of fiscal responsibility because of its role as “one of the most forceful and effective lobbies on Capitol Hill.” During the speech, she also was critical of the proposed new Consumer Financial Protection Bureau, questioning whether it might stifle the financial sector. “It would mean that we will have nine different agencies overseeing banks, and various types of financial institutions,” she said.

Crapo CFPB rules likely to get lawmakers review

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WASHINGTON (3/3/11)--Sen. Mike Crapo (R-Idaho) said he expects Congress to conduct public hearings on future regulations by the Consumer Financial Protection Bureau (CFPB). Crapo told a session at the Credit Union National Association’s (CUNA) Governmental Affairs Conference Wednesday the proposed new agency “doesn’t do what it claims.” The CFPB was created by the Dodd-Frank Wall Street Reform Act, which became law last year. The bill has been subject to hearings in the last few weeks. For instance, CUNA President/CEO Bill Cheney testified before a House subcommittee, also Wednesday, on the impact of the act on credit unions (See related story: "Cheney warns reg burden is growing ‘crisis.’") Crapo, the ranking Republican on the Senate Banking subcommittee on financial institutions, also said that the CFPB would “burden financial institutions with new rules, without preventing the kind of too-big-to-fail financial conglomerates that was a big factor in the recession.” The Idaho senator also said he hopes Congress will take another look at the controversial interchange fee provisions that were added to the Dodd-Frank Act at the last minute. The interchange provisions are currently scheduled to go into effect in July. He said efforts to write an effective exemption, as required by the law, for small card issuers like credit unions, have failed. He told the GAC session that credit unions should use their political influence to urge the Senate to take a second look at the interchange proposal.

Lawmakers query CUNA on Dodd-Frank impact

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WASHINGTON (3/3/11)--After testifying on the impact of the Dodd-
"We are concerned that this is a train wreck for consumers," CUNA President/CEO Bill Cheney said when questioned by federal lawmakers on the impact statutory changes to interchange fees would have. "But we can stop it before it happens," the CUNA leader added. (CUNA Photo)
Frank law on credit unions, Credit Union National Association (CUNA) President/CEO Bill Cheney responded to lawmakers’ questions on interchange provisions, at one point saying, “We’re concerned this is a train wreck for consumers, but we can stop it before it happens.” Cheney had just finished testifying at the House Financial Services subcommittee on financial institutions and consumer credit hearing. Responding to a question from Rep. David Scott (D-Ga.), Cheney went on to say that without regulatory enforcement of an intended small-issuer exemption that would cover all but three credit unions, consumers’ costs for debit card services could be driven up. And that, the CUNA leader said, “drives people out of the banking system and impacts most those who can least afford it.” Cheney also fielded questions from Rep. Carolyn Maloney (D-N.Y.), who underscored that the crisis, intended to be addressed by Dodd-Frank, was not caused by small institutions. “If anything you were a rock on which to lean, and continue to be,” she said. Does this help bring in payday lenders and other players in the “shadow” banking system under the same regulation, she asked. Cheney responded: “Credit unions already are the most highly regulated financial institutions. We’re not in favor of additional regulation for other financial institutions. But I do think parts of the financial services system not currently regulated could benefit from additional oversight.” Maloney went on to ask how the credit union burden could be further reduced. “We can’t simplify just by creating new regulation. We have to peel back outdated and duplicative regulation,” Cheney answered. Rep. Jim Renacci (R-Ohio) asked a question about credit union costs for sustaining capital. “Every dollar credit unions have to spend on compliance is a dollar that has to come out of the bottom line and their retained earnings.” For credit unions, Cheney noted, that $1.5 billion cost is the difference between continued economic recovery and continued losses.

Cheney warns reg burden is growing crisis

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WASHINGTON (3/3/11)--Credit unions, owned by their members, already have strong incentives to treat consumers well, but they face a crushing “crisis of creeping complexity” under a steady accumulation of regulatory requirements, Credit Union National Association (CUNA) President/CEO Bill Cheney testified before a House subcommittee
Click to view larger image CUNA President/CEO Bill Cheney (left) is greeted by Rep. Shelley Moore Capito (R-W.Va.) before she opens her House subcommittee hearing on the impact of the Dodd-Frank bill on small financial institutions and small business, at which Cheney testified on behalf of credit unions. Moore Capito addressed CUNA's Governmental Affairs Conference earlier in the day. (CUNA Photo)
Wednesday. In opening statements to the hearing, subcommittee member after member voiced concerns about one of those burdens--the interchange fee regulations contained in the Dodd-Frank Act. The afternoon hearing conducted by the House subcommittee on financial institutions and consumer credit was titled, “The Effect of Dodd-Frank on Small Financial Institutions and Small Businesses.” Cheney noted for the panel of federal lawmakers that as credit unions are not-for-profit financial cooperatives, members are the ones who receive the benefit of ownership, through reduced fees, lower interest costs, and higher rates on savings. “Every dollar that a credit union spends complying with an unnecessary or overly burdensome regulation is a dollar that is not used to benefit the credit union’s membership,” Cheney stated. He warned that the increasing regulatory requirements pursuant to Dodd-Frank and other government initiatives--called by some the “creeping crisis of complexity”--is a major driver behind current credit union consolidations, making it impossible for smaller credit unions to exist. He added that credit unions are concerned that the increasing regulatory burdens also stifle innovation. The CUNA leader also highlighted two key areas of the Dodd-Frank law, which he termed “very significant” to credit unions First, he exhorted Congress to create a legislative remedy that will ensure a meaningful carve-out from interchange fee restrictions for small debit card issuers, such as all but three credit unions, as intended in the original bill. There has been a growing cry from regulators and legislators alike that the Federal Reserve Board’s proposed implementation of the statutory exemption is likely to be impotent to protect small issuers. The second area of credit union concern addressed by Cheney: provisons of Dodd-Frank intended to reduce regulatory burden by requiring the Consumer Financial Protection Bureau (CFPB) reduce "unwarranted" burdend and assess the impact of proposed rules on credit unions and community banks with less than $10 billion in assets. Cheney said that it is feared that the result of the CFPB’s comprehensive review process will be an increased, not decreased, regulatory burden. On another key credit union topic, Cheney urged lawmakers to increase the statutory credit union member business lending cap to create an influx of $10 billion in new credit for small business in the first year, more than 100,000 new jobs--all at no cost to taxpayers. Also, see related story in this issue of News Now, “Lawmakers query CUNA on interchange impact.”

Hyland Collaboration is road to the future

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WASHINGTON (3/3/11)--National Credit Union Administration (NCUA) board member Gigi Hyland Wednesday said if economic recovery is to be fully achieved by credit unions, they need to “look for more avenues of growth through collaborative business models.”
Click to view larger imageNCUA board member Gigi Hyland discusses the road to the credit union future, which she says prominently features collaborative efforts among credit unions. (CUNA Photo)
“The credit union movement is still about the people,” she said during her address to the Credit Union National Association’s Governmental Affairs Conference here. “Your power is in mutuality, cooperation, and collaboration,” she said, underscoring that she believes the “bright future” of the credit union movement “resides in collaboration.” Hyland also noted that she believes that the NCUA should not take a regulatory stance that pushes credit unions to be “completely risk averse.” "We need to focus on making sure that you are managing that risk" properly, but not stifling service to members, she said. "(The NCUA) can't waiver from its regulatory responsibilities" of protecting safety and soundness, Hyland said, "but we have to make sure the pendulum does not swing too far" to one side or the other of the risk equation. Hyland, an NCUA member since November 2005, said that going forward “there must be capital reform” for credit unions, both in the form of prompt corrective action (PCA) changes and in pursuing authority for supplemental sources of capital. She said PCA rules should move away from the current approach that can be categorized as a “one-size-fits-all” rule. Hyland also backed the idea of an NCUA review of the definition of a small credit union, set at $1 million in assets in 1997 and updated to $10 million in 2003. She noted that in 2003, the $10 million cutoff represented 54% of credit unions. Hyland suggested that $50 million might be a more realistic threshold now. “The world had changed a lot” since 2003, Hyland remarked, and she suggested it is now time for the agency to study if a new definition of small credit union is in order as a means to increase regulatory flexibility for more institutions. Noting that it is her idea and not necessarily representative of her agency, Hyland said she also favors an idea fostered by Sen. Mark Warner (D-Va.), which promotes a regulatory “Pay Go” plan. Under the plan, a regulatory agency would have to eliminate one regulation for every regulation added to reduce the burden of cumbersome and duplicative rules. Hyland reminded her credit union audience of her agency’s long-term efforts to reduce regulatory burden by reviewing one-third of its regulations each year to eliminate redundant or outdated rules.

Inside Washington (03/02/2011)

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* WASHINGTON (3/3/11)--Although U.S. Treasury Secretary Tim Geithner did not endorse a specific approach that would take the country into the future of its housing finance system, he did offer clues to the future of the government-sponsored housing enterprises (GSE) when he testified Tuesday before the House Financial Services Committee (American Banker March 2). The Obama administration has outlined three options for reforming the GSEs. One option would significantly cut back government support, leaving just the Federal Housing authority and a few other programs to help low-income borrowers with housing needs. A second, similar plan would create a government guarantee that could play a larger role in tough times but be scaled back during an economic boom. The last option would allow a group of private mortgage companies to provide guarantees for mortgage-backed securities. They would have to meet some tough underwriting standards, and only then would the federal government supply reinsurance to the securities holders, for which it would charge a premium to offset taxpayer losses. And holders of the securities would get paid only if shareholders were wiped out ... * NEW YORK (3/3/11)--Formerly the top economic researcher at the Federal Reserve Bank of San Francisco, John Williams has been named to serve as its president/CEO (Dow Jones March 2). Williams' appointment was effective immediately when announced Tuesday; he replaces Janet Yellin, who resigned last October ...