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Inside Washington (03/06/2008)

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* WASHINGTON (3/7/08)—House Financial Services Committee Chairman Barney Frank (D-Mass.) is planning to introduce a second economic stimulus package that would attempt to steady the troubled credit and housing markets. One challenge posed by the bill would be whether or not the lending industry is willing to cooperate (American Banker March 6). When questioned if he was planning to ask lenders to take a “haircut” on mortgages in trouble, Frank replied that a lobotomy was in order instead. Under Frank’s proposal, the government could buy mortgages written down by lenders, which appears to contradict any prior notions of a bailout. President George W. Bush has already stated his opposition to a lender bailout … * WASHINGTON (3/7/08)—Federal Deposit Insurance Corp. Chairman Sheila Bair is urging Congress to move forward on legislation that would forbid commercial ownership of industrial loan companies (ILCs). A moratorium on ILCs expired in January, leaving the agency without guidelines on how to tackle pending ILC applications. A bill that would restrict commercial ILC ownership is currently stalled in the Senate … * WASHINGTON (3/7/08)—The Federal Home Loan Bank (FHLB) of Chicago values itself at $800 million, and if the FHLB Dallas accepts that, a merger proposal could be created within a couple of weeks. The merger must be approved by the Federal Housing Finance Board, and FHLB Chicago’s value could change, depending on the markets. A spokesman for Chicago FHLB said terms still need to be finalized … * WASHINGTON (3/7/08)—The Office of Federal Housing Enterprise Oversight (OFHEO) yesterday released the maximum conforming loan limits that will be in effect throughout 2008 as a result of the Economic Stimulus Act of 2008. The maximum for temporary jumbo conforming loan limits, which apply to loans originated in the period between July 1, 2007 and Dec. 31, 2008, are as high as $729,750 for one-unit homes in the U.S. …

Senate Finance chair recognizes CU efforts

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WASHINGTON (3/7/08)--Credit unions know that there’s no place like home, and they also know that without homes there is no community—which is why they work to keep members in their homes, according to Sen. Max Baucus (D-Mont.), another Governmental Affairs Conference (GAC) closing session speaker. Baucus touched on the problems triggered by the subprime loan debacle, highlighting credit unions’ community investment. In addition to creating affordable loans, credit unions help by providing financial education and free income tax assistance, Baucus said. “Credit unions are helping the next generation be wise with money,” he said. The senator encouraged credit unions to take advantage of the opportunities and continue helping. Credit unions have played a large role in Montana and nationwide by making loans that are not predatory, he added. “Credit unions are the foundation of the community,” he said. “They can demonstrate the benefits of cooperative lending.” The GAC was presented in Washington by the Credit Union National Association this week.

Royce CUNA one of most effective organizations

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WASHINGTON (3/7/08)—Just a day after representatives from at least 18 state credit union leagues hiked Capitol Hill to share the credit union message, Rep. Ed Royce (R-Calif.) called the Credit Union National Association (CUNA) one of the “most effective organizations” he’s ever seen on the hill. Royce, who introduced the Credit Union Regulatory Relief Act (CURRA, H.R. 5519) with Rep. Paul Kanjorski (D-Pa.) Monday, was one of three members of Congress who spoke during yesterday’s CUNA Governmental Affairs Conference (GAC) closing session. Royce reminded credit unions of the importance of the Credit Union Regulatory Improvements Act (CURIA), saying he intends to get that bill passed. Royce pledged to his credit union audience that “we’re going to continue efforts until the job is done.” He added, “I want to remind people that we don’t want the government to be an obstacle of economic growth.” The impact of credit unions is great—they pool resources that create liquidity, Royce said, noting that he has seen how credit unions in third-world countries have helped build a stable and safe financial system.

CU reg relief issues get full hearing in House

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Click for slide show (CLICK TO VIEW PHOTO ESSAY) “By law--not regulation, as for other insured depositories--credit unions must maintain a 7% net worth or leverage ratio in order to be considered ‘well capitalized,’” Dorety told the committee. “In comparison, the current leverage ratio for banks to be well capitalized is only 5%. This capital requirement for credit unions is inefficient in that it unnecessarily retards member service and growth, and it does not appropriately account for risk of a credit union’s assets.” The CUNA chairman said Congress should consider the removal of all of the prompt corrective action (PCA) stipulations from the statute and “leave it to regulatory determination, similar to the system under which the banking industry operates.” (Photo provided by CUNA)
WASHINGTON (3/7/08)—It could be argued that the star of Thursday’s congressional hearing on credit union regulatory relief was the important role credit unions are playing to help communities through the “subprime mortgage meltdown,” even though they were not part of the problem. That role was highlighted by a number of the members of the House Financial Services Committee—including Chairman Barney Frank (D-Mass.)—during that panel’s hearing entitled "The Need for Credit Union Regulatory Relief and Improvement." Frank, in his remarks opening the hearing, said he hoped his colleagues would follow their debate about the regulatory relief issues with some definite action for credit unions. He thanked Rep. Paul Kanjorski (D-Pa.), who heads the panel’s subcommittee on capital markets, for his role in spearheading credit union regulatory relief efforts. Kanjorski, along with Rep. Ed Royce (R-Calif.), is author of the Credit Union Regulatory Improvements Act (CURIA, H.R. 1537), which has 145 backers in the House, and the very recently introduced Credit Union Regulatory Relief Act (CURRA, H.R. 5519). Kanjorski chaired the remainder of the hearing at the chairman’s request. National Credit Union Administration (NCUA) Chairman JoAnn Johnson was the first of four credit union movement witnesses to testify. She keyed primarily into two major issues; reforming prompt corrective action (PCA) rules and allowing all credit union charter types to offer services to underserved areas. Johnson said the legislation being discussed by the committee would allow Congress to grant greater flexibility to credit unions serving consumers and to strengthen the NCUA’s ability to maximize the safe and sound operation of federally chartered credit unions. Honing in on PCA reform as her top priority as a regulator and a “necessary tool,” Johnson said a risk-based capital system, more aligned with that of the banking and thrift industries, would improve the current credit union “regulatory regime” and “put more money in the members’ hands.” CURIA proposes such a system. She added that it would: promote more active management of risk by credit unions in relation to capital levels; enable credit unions to better relate their capital to risk assessment; and strengthen NCUA oversight by adding tools to identify each credit union’s risk profile based on their activities. Tom Dorety, CEO of Suncoast Schools FCU, Tampa, Fla., testified on behalf of the Credit Union National Association (CUNA) as its new chairman. He told the House committee members he finds it truly ironic that as the economy experiences a credit crunch in many sectors and credit unions stand “ready, willing and able to help alleviate the problem and promote economic growth,” credit union efforts to do so are inhibited by “outmoded laws that protect the narrow self interest of bankers.” He urged Congress to support legislation that would improve a current 12.25%-of-assets cap on member business lending (MBL) by raising it to 20% of assets. “There is no economic rationale for this cap,” Dorety said, noting credit unions have been providing such loans safely for more than 100 years. Also, CUNA urged lawmakers to exempt from the cap MBLs made in underserved areas. The CUNA witness also backed the NCUA’s plan for a risk-based capital system and the statutory clarification that all federal credit unions may apply to NCUA to add underserved areas to their fields of membership. “We are forced to ask Congress for this provision because the American Bankers Association (ABA) sued NCUA in 2005 for authorizing single-sponsor and community-chartered credit unions to add underserved areas to their field of membership.” In a juxtaposition of banker actions that Rep. Brad Sherman (D-Calif.) said defined the term “chutzpah,” Dorety reminded the committee that in November 2005 the ABA complained before the House Ways and Means Committee that credit unions do not do enough to serve people of modest means. Then, within days, it took credit unions to court to prevent them from doing so. Also testifying as part of the credit union panel at the hearing were the National Association of State CU Supervisors, the National Association of Federal Credit Unions and two banking industry representatives. On a separate bankers’ panel, the ABA and Independent Community Bankers of America were represented. In a related story, earlier this week Sen. Mary Landrieu (D-La.) told the more than 4,500 attendees of CUNA’s Governmental Affairs Conference here that she soon will introduce a Senate version of the CURIA bill. Sen. Joe Lieberman (I-Conn.), also addressing the GAC, vowed to be an original co-sponsor of the measure.

Lieberman CUs represent classic American ideal

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WASHINGTON (3/7/08)—Sen. Joe Lieberman (I-Conn.) reiterated his pledge to credit
Click to view larger image U.S. Sen. Joe Lieberman (I-Conn.), left, and CUNA President/CEO Dan Mica backstage before Lieberman addressed Thursday's GAC closing general session. (Photo provided by Robert Knudsen)
unions that he would fight any attempt to take away the tax-exempt status of credit unions and said credit unions’ cooperative model represents a classic American ideal of “people getting together.” Addressing the closing session of the Credit Union National Association’s Governmental Affairs Conference, Lieberman said that America is a “remarkably diverse” country and that credit unions represent the “length, the depth and the breadth of our country.” “Unity, confidence, optimism—working for the common purpose—is what you represent.” Lieberman said he recognized the importance of the Credit Union Regulatory Improvements Act to credit unions and pledged to be an original co-sponsor of a bill that Sen. Mary Landrieu (D-La.) plans to introduce in the Senate.