* WASHINGTON (4/13/10)--The Federal Reserve Board Monday announced that William B. English will become the agency's director of the Division of Monetary Affairs, effective July 23. English has served as deputy director of the division since February 2008. He is to succeed Brian F. Madigan, who has been appointed senior adviser to the Fed board, effective upon English's promotion. Madigan plans to retire later this year after more than 30 years of service with the board, including three years as head of this division. As director, English will advise the Fed chairman and other board members, as well as the Federal Open Market Committee, on the conduct of monetary policy, including open market operations and the discount window ... * WASHINGTON (4/13/10)--Chairman Carl Levin (D-Mich.) of the Senate Permanent Subcommittee on Investigations announced hearings this week on the causes of the country’s financial crisis. On Tuesday, the Senate panel will zero in on mortgage lending as it was executed by the failed Washington Mutual. The committee will then broaden its sights and scrutinize the actions of bank regulators. Levin said he wants to use the hearing process to compile a record of the causes of the meltdown, and hoped that information would be used to inform the current legislative debate involving financial regulatory reform (American Banker April 12) … * WASHINGTON (4/13/10)--Some critics of federal lawmakers’ ongoing efforts to reform financial regulations charge those efforts are dodging some very central issues. They say the current Senate bill, about 1300 pages awaiting a vote, ignores too many factors that contributed to the country’s financial crisis, such as inefficient and outdated regulations, an out-of-whack housing finance market, as well as faulty underwriting standards that allowed waves of borrowers to sign up for mortgages they ultimately could not afford. While others argue the bill is complete with many provisions that would have a positive effect on the financial marketplace by providing greater and broader oversight and transparency, and providing better tools to handle the resolution of systemically significant firms, even some of those admit some holes. For instance, while it was the housing and mortgage markets that brought about the economic collapse, the housing finance system is largely ignored in the bill (American Banker April 12) … * WASHINGTON (4/13/10)--The old model for government-sponsored enterprises (GSE) took a beating last week at a hearing conducted by the Financial Crisis Inquiry Commission (American Banker April 12). The hearing featured Fannie Mae’s former executives and regulators and painted a picture of a company embracing unnecessary risks while chasing profits and striving to preserve market share. To add to the negative picture, it seems all this was being done while the GSE was vigorously lobbying lawmakers not to bolster what is now seen by many as a weak and ineffective regulator …
WASHINGTON (4/13/10)—April 15 is the comment deadline for the National Credit Union Administration’s (NCUA) proposed changes to field-of-membership (FOM) rules, and the Credit Union National Association (CUNA) encourages federal credit unions to submit remarks. CUNA supports the objective of the FOM proposal, which is to revise the current FOM process in such a way that it limits--or perhaps completely cuts off--future banker challenges to NCUA's FOM policies and processes. “There is no higher priority in dealing with FOM applications than for the agency to build a solid record that demonstrates its decisions are made on a rational, not arbitrary, basis,” said CUNA Deputy General Counsel Mary Dunn Monday. However, she added, CUNA has identified a number of concerns regarding the agency’s plan and will raise a range of issues and recommendations in its comment letter to improve the proposal before it becomes a final rule. Those concerns, generally, fall under the headings of:
* Well-defined local communities: Placing greater reliance on quantifiable data as opposed to subjective information and review would help limit litigation; * Single political jurisdictional areas: Retaining current treatment of single jurisdictions so that any county, city or smaller political jurisdiction, regardless of size, is considered by NCUA to be a well-defined local community for purposes of chartering new community credit unions or adding areas to an existing charter; * Multiple political jurisdictional areas: To avoid unnecessary exclusions, the NCUA should only require credit unions to meet any two of the agency’s proposed four criteria; * Rural districts: The criteria NCUA has chosen to define a “rural community” are too limiting and do not sufficiently take into account areas where the population is spread out over large areas; * Underserved areas: In CUNA’s view, underserved areas should not have to qualify as well-defined local communities, as that approach is not required by the Federal Credit Union Act; * Marketing plans: CUNA rejects a provision that would require NCUA’s review of marketing plans and business plans after an area has been approved. That review, CUNA maintains, should only occur for purposes of safety and soundness; and * Emergency merger definitions: CUNA is concerned that the new provisions would give the NCUA additional latitude to require a credit union that is at or near 4% net worth to be merged, regardless of whether the credit union wants to remain a separate entity.
Use the resource links below for additional information.
ALEXANDRIA, Va. (4/13/10)—A white paper released Monday by the National Credit Union Administration (NCUA) concludes that “affording credit unions the ability to raise supplemental capital that counts towards prompt corrective action (PCA) 'net worth' requirements is an appropriate policy consideration.” The report, prepared by an internal working group at NCUA, explores the NCUA’s existing authority to permit federally insured credit unions to offer supplemental capital. It also attempts to identify key public policy considerations for any expansion of NCUA’s authority to permit additional sources of capital. Credit Union National Association (CUNA) General Counsel Eric Richard said Monday of the white paper, “While the report details a number of limitations that may not be necessary, we plan to study the report in detail and want to continue working with the agency to pursue supplementary capital for credit unions." Within the NCUA report, the working group also offered these additional conclusions:
* PCA regulatory reform including a stronger and more meaningful risk-based capital system, as advanced by the NCUA Board in 2005 and 2007, should continue to be pursued as a priority. The reforms combined with supplemental capital could afford credit unions the opportunity to more effectively manage capital levels; and * Any statutory change that affords credit unions the ability to count supplemental capital towards PCA “net worth” must be accompanied by robust regulatory authority to assure reasonable safeguards and risk parameters are put in place.
The NCUA board must vote to adopt the working group's white paper for it to become agency policy. No board action on the report is scheduled at this time, according to an agency spokesman. When NCUA board member Gigi Hyland announced the release of the agency report Monday, she noted 2008 discussions with state credit union supervisors. “They made a number of compelling arguments that it is time to seriously consider whether credit unions must be given access to some form of supplemental capital to continue providing members the services they need,” she said. Hyland also noted NCUA Chairman Debbie Matz’s letter late last year to House Financial Services Committee Chairman Barney Frank (D-Mass.) outlining “two narrow legislative remedies that would help reverse the disincentive to accept new share deposits.” Hyland said that that letter is “a key starting point for any discussion about supplemental capital,” and added she hoped the new white paper sparks progress to action on “this important issue.” CUNA strongly supports credit union alternative capital authority and has steadily worked to get the Obama administration on board with the idea of alternative sources of capital for credit unions. In part, CUNA has reinforced to key contacts within the U.S. Treasury Department the importance of credit union alternative capital authority. "CUNA is acutely aware that some credit unions need to issue supplemental capital products in order to maintain their net worth ratio requirements," CUNA's Richard has said. "We have long maintained that secondary capital and PCA reform are required for credit unions for the long term. However, that future is here for some.” Use the resource links below to access the NCUA report and CUNA's summary of the white paper.
WASHINGTON (4/13/10)—The U.S. Senate reconvened yesterday and the House does so today, launching what some predict will be the busiest seven congressional weeks of the year in a session that ends with a Memorial Day break. During this past recess, discussions regarding the Financial Regulatory Restructuring bill continued between Senate Banking Committee Chairman Christopher Dodd's (D-Conn.) staff and the staff of the committee’s ranking Republican member, Richard Shelby of Alabama. “Our understanding is that no agreements have been made, though both sides have repeatedly committed to continue talking,” said Ryan Donovan Monday. Donovan is vice president of legislative affairs for the Credit Union National Association (CUNA). CUNA worked with committee staff during the recess to continue discussions about outstanding credit unions concerns with the legislation, including the examination and enforcement language and the remittance provisions. Donovan said April 26 is the earliest the Senate could vote on a financial reform bill; he noted, however, the process could drag on many weeks after that date. On the House side of the U.S. Capitol, where a reform bill--H.R. 4173, the Wall Street Reform and Consumer Protection Act--was passed in December, there are a number of hearings this week of interest to credit unions--although one of key interest involving the Unlawful Internet Gambling Enforcement Act (UIGEA) was cancelled Monday afternoon. Although late last year federal lawmakers pushed the compliance date for the Unlawful Internet Gambling Enforcement Act (UIGEA) back to June 1 from Dec. 1, 2009, things remain unsettled around that law. The Federal Reserve Board and U.S. Treasury Department are tasked with implementing UIGEA, under which credit unions and other financial institutions must establish policies and procedures to identify and block restricted Internet gambling transactions, or rely on procedures established by the payments system. Some, including House Financial Services Committee Chairman Barney Frank (D-Mass.) have called the agencies’ proposed implementation plans “deeply flawed.” On Friday, Frank’s committee was scheduled to conduct hearings on H.R.2266, the Reasonable Prudence in Regulation Act, and H.R.2267, the Internet Gambling Regulation, Consumer Protection, and Enforcement Act-Governmental Perspectives. The former would establish a one-year moratorium for UIGEA provisions, the latter would re-instate the legality of Internet gambling. The hearings are expected to be rescheduled. On Thursday, House Financial Services, as announced last week, will conduct a hearing entitled, "Perspectives and Proposals on the Community Reinvestment Act." Also on Thursday, the Senate Small Business Committee will hold a hearing entitled, "Assessing Access: Obstacles and Opportunities for Minority Small Business Owners in Today's Capital Markets." Use resource link to see additional House Financial Services Committee hearings.