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CUNA works to add CUs to Dodd insurance bill

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WASHINGTON (3/9/09)--Including credit union provisions in legislation introduced by the chairman of the Senate Banking Committee to increase the borrowing authority for the Federal Deposit Insurance Corp. (FDIC) is being advocated by the Credit Union National Association (CUNA). “When the news broke Thursday, our staff immediately contacted the office of Chairman Chris Dodd to ask if the legislation would contain similar language for NCUA,” said CUNA Presiden/CEO Dan Mica. “We pointed out specifically that the House is poised to pass such language.” On Thursday, Dodd (D-Conn.) introduced a bill (S.541) to increase the FDIC borrowing authority from $30 billion to $100 billion, with additional authority to increase the borrowing authority to as much as $500 billion with the concurrence of Treasury and the Federal Reserve Board. The additional authority to $500 billion would only be available until the end of 2010. Mica said that, after discussions between CUNA and NCUA, the agency sent a formal communication to Dodd requesting additional borrowing authority for itself along the lines of that proposed for FDIC. “We will continue to discuss this legislation with Chairman Dodd’s staff in the hopes of having the bill amended to include credit unions during Senate consideration,” Mica said. “We are also reaching out to our allies in the House to ensure that, in the event that this legislation were to pass the Senate without including credit union provisions, those portions would be included during House consideration.”

NCUA Big response to March SIP offering

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ALEXANDRIA, Va. (3/9/09)—More than $7.7 billion has been issued to corporate credit unions in the first two subscriptions of the National Credit Union Administration’s Credit Union System Investment Program (CU SIP), the agency announced Friday. The corporates use the funds to pay down external borrowings, freeing collateral for future contingency liquidity needs. The NCUA said in a release that credit unions showed strong early support for CU SIP, and their continued support for corporate credit unions is significant. The March offering, in fact, was moderately oversubscribed, the agency said. The National Credit Union Administration is pleased to report that the Credit Union System Investment Program (CU SIP) has been extremely successful in the initial corporate stabilization phase due to the high level of support from natural person credit unions. Over $7.7 billion was issued to corporate credit unions in the first two subscriptions. The corporates have used the funds to pay down external borrowings, freeing collateral for future contingency liquidity needs. Credit unions’ strong early support for CU SIP, and their continued support for corporate credit unions is significant. The March offering was moderately oversubscribed. Due to the size of the initial two offerings, the NCUA Central Liquidity Facility limited awards for the third subscription to the amount requested by the issuing corporate credit union, the agency noted. Each natural person credit union submitting a subscription order and meeting the CU SIP criteria will be awarded some amount; however, at a reduced level from its initial request. The SIP program remains open and available for subsequent offerings, if there is a need in coming months.

Inside Washington (03/06/2009)

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* WASHINGTON (3/9/09)--The Credit Union Association of New York presented Rep. Nydia Velazquez (D-N.Y.) with a Legislator of the Year award during a visit to her Washington, D.C., office Feb. 25. The award recognizes a distinguished legislator who has shown outstanding commitment to issues important to New York credit unions. “Velazquez regularly expresses her support for credit unions,” said association President/CEO William Mellin. “As chair of the small business committee, she regularly called upon credit unions to provide a voice in how to best serve the nation’s small businesses.” (Photo provided by the Credit Union Association of New York) ... * WASHINGTON (3/9/09)--The Senate expressed willingness to compromise on legislation that the House approved Thursday that would allow bankruptcy judges to modify terms of troubled mortgages, otherwise known as cramdown (American Banker March 6). Senate Majority Whip Richard Durbin (D-Ill.) said he was open to compromise on the legislation. Brian Gardner, analyst with Keefe, Bruyette and Woods, said he predicted a Senate compromise also. The bill the House approved Thursday was slightly modified to encourage borrowers to seek loan modifications before declaring bankruptcy and also included language to require a borrower to wait 30 days between receiving help from a mortgage servicer and going bankrupt ... * WASHINGTON (3/9/09)--Senators doubted the Federal Reserve Board would be able to act as a systemic risk regulator, they said during a House Financial Services Committee meeting Thursday, given the central bank’s handling of the recent American International Group (AIG) bailout (American Banker March 6). During the meeting, lawmakers quizzed Fed Vice Chairman Donald Kohn about the bailout, saying they wondered if the central bank had made a mistake. Regulators need to better explain why they rescued AIG, Sen.Christopher Dodd (D-Conn.) said. Kohn said the only power the Fed had at the time to help AIG was to lend them money, instead of extending a line of credit to the insurance company ...

Kanjorski mark-to-market hearing this week

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WASHINGTON (3/9/09)—Rep. Paul Kanjorski (D-Pa.) plans a subcommittee hearing this week on mark-to-market accounting rules that have required financial institutions to report impairments of illiquid assets. Kanjorski, chairman of the House Financial Services subcommittee on capital markets, insurance, and government-sponsored enterprises, said his subpanel will examine the accounting rules that some contend have exacerbated the current troubles in the financial industry and in the broader economy. The mark-to-market standard requires companies to value assets held at current market values. Kanjorski, in a release, said that for assets that are frozen and have a diminished current market value but may recover value in the future, the standard has proven problematic. Companies are then forced to write-down billions in assets, which can lead to further write-downs elsewhere. “Illiquid markets have resulted in great difficulty in valuing sizable assets. Some have therefore complained about fair value accounting and sought to eliminate it. While companies need stability, investors still need accurate information. We therefore cannot allow for fantasy accounting that wishes away bad assets by merely concealing them,” Kanjorski said. His subcommittee will look at balancing companies’ needs for stability with investors’ needs for accurate information. The hearing is March 12. Witnesses had not been announced as of Friday afternoon. The Credit Union National Association (CUNA) will submit a statement for the record. Also, CUNA recently advanced a new idea to address problems created by accounting rules on fair value, mark-to-market and the reporting of assets that are "Other Than Temporarily Impaired." In a letter to President Barack Obama, CUNA urged the formation of a Presidential Task Force.

Upcoming bill to address CUNAs FTC concerns

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WASHINGTON (3/9/09)--The Credit Union National Association’s (CUNA) concerns about the expansion of the Federal Trade Commission’s (FTC) mortgage-lending rulemaking authority--contained in H.R. 1105, the Fiscal Year 2009 Omnibus Appropriations Act, which the Senate is expected to vote on today--will be addressed in upcoming legislation. "The Senate cannot fix the language in [H.R. 1105] because the House will not accept any amendments to the bill, so they are going to have to do it in a future bill,” said Ryan Donovan, CUNA vice president of legislative affairs. “Everyone seems to agree that the language in the omnibus is too broad and it will be fixed in the near future.” On Thursday, Senate Banking Committee Chairman Christopher Dodd (D-Conn.) noted that he would ask senators to work with him to add an amendment to future legislation to clarify the FTC’s powers. CUNA supported an amendment by Sen. Mike Crapo (R-Idaho) to H.R. 1105 that would have addressed the FTC’s powers. The amendment was withdrawn Thursday because the intent of H.R. 1105 is not to expand the FTC’s powers to affect credit unions or other financial institutions. Rather, the bill intends to give state attorneys the power to bring civil actions against mortgage industry participants not supervised by federal banking agencies or are not federal credit unions, according to Sen. Byron Dorgan (D-N.D.), the bill’s author (Congressional Record Exchange March 5). CUNA supported Crapo’s amendment because it would have removed the proposed increased FTC authority and increased state attorneys’ general authority to enforce Truth-in-Lending violations. Currently those violations primarily are addressed by federal agency enforcement actions and in private lawsuits. Crapo noted Thursday that if the initial FTC proposed rule goes beyond scope, “it is my understanding that there is agreement that the Senate would immediately take up legislation and stop that from occurring. “It would be a terrible mistake to add another patchwork of conflicting authorities and interpretations of federal laws for insured depository institutions as it relates to home loans and other types of consumer finance transactions,” he said.

Corporate restructuring plan unveiled soon by CUNA

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WASHINGTON (3/9/09)--The Credit Union National Association (CUNA) Corporate CU Task Force plans to complete development of its statement on the future of corporate credit unions by mid-March. At its meeting last week, the task force focused on the role of the corporates and discussed the need for changes in the corporate credit union system in the areas of permissible services, capital, and corporate governance, among other issues. The discussion will form the basis of CUNA's comment letter to the National Credit Union Administration (NCUA) on its Advance Notice of Proposed Rulemaking on the corporate credit unions. Comments are due to NCUA April 6. The CUNA task force also received an update on CUNA's work to pursue alternatives to the funding of NCUA's Corporate Stabilization Program that will lessen credit unions' insurance costs associated with the program. During its discussions, the task force stressed that any such alternatives cannot eliminate the need for credit unions to incur some insurance costs to fund the Corporate Stabilization Program. However, it was resolved that CUNA should continue its efforts to encourage NCUA to develop alternatives as soon as possible that will mitigate credit unions' costs.