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CUNA acknowledges Prestons exec skills

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WASHINGTON (4/22/08)—The Credit Union National Association (CUNA) said Monday that President George W. Bush’s choice of Steven Preston to be the new leader at the U.S. Department of Housing and Urban Development could bring some key problem solving skills to the agency. Preston, who for two years has been at the head of the U.S. Small Business Administration (SBA), might be able to put those talents to use to help HUD through a troubled time, according to CUNA. The White House last week announced its decision to place Preston in the spot being vacated by Alphonso Jackson. Jackson, whose resignation as HUD secretary was effective Friday, is under criminal investigation because of allegations that he favored friends with contracts at public housing authorities controlled by HUD. CUNA Deputy General Counsel Mary Dunn acknowledged that Preston's background does not include housing issues but commended his fairness and concern for effectiveness while he has been at the SBA. “From all reports, HUD is in need of management skills and we are hopeful he will combine his concern for efficiency with compassion for those who, in this time of mortgage crisis, need housing assistance and related services,” Dunn added.

NCUA says CUs give important small biz help

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ALEXANDRIA, Va. (4/22/08)—Monday began National Small Business Week and National Credit Union Administration (NCUA) Chairman JoAnn Johnson kicked it off by encouraging credit unions to provide prudent member business lending products. “I encourage credit unions to continue providing prudent and responsible member business lending products that help member-owners establish viable businesses, create jobs and sustain local communities,” Johnson said in a statement. The Small Business Administration dedicated April 21-25 to the nation’s small businesses. Johnson noted, “Small businesses play a crucial role in sustaining our nation’s economic vitality. In fact, they have generated 60% to 80% of net new jobs annually over the last decade and they employ about half of all private sector employees.” She added that the NCUA strives to promote a credit union environment that fosters the “entrepreneurial spirit for credit union members while maintaining a safe and sound credit union system.” “One example of this commitment is found in NCUA facilitation of webinar programs with the SBA. These sessions provide information regarding business lending services and programs administered by the SBA, including SBA 7a Guaranteed Loans, which help qualified small businesses obtain financing,” Johnson pointed out. “In addition, credit unions themselves have demonstrated a strong commitment to the small business community. Through diverse approaches such as promotion of Individual Development Accounts targeted at small businesses, business development seminars and micro-enterprise lending, credit unions are aiding the creation of community asset building and enhancing the investment environment,” she concluded. Every year since 1963, the President of the United States has declared an official week to recognize the role of America’s small business community in the nation’s economy. For more information, use the resource link below.

Tucoemas FCU must pay punitive damages

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WASHINGTON (4/22/08)—Tucoemas FCU, of Visalia, Calif., must pay punitive damages equaling more than $1.5 million to a former executive who claimed she was pushed out of her job after being diagnosed with cancer and undergoing its incumbent treatments. The U.S. Supreme Court this week decline to hear an appeal of a lower court’s damages award, thereby exhausting the credit union’s options to challenge the award granted to Kim McGee, a former Tucoemas vice president. Tucoemas FCU had argued that under federal case law, a federal credit union is defined as a”federal instrumentality” and is therefore exempt from paying punitive damages in civil cases. The California's 5th District Court of Appeal had ruled that the”federal instrumentality designation” only covers a federal credit union in tax and bankruptcy matters and is not relevant to other areas of law. The Supreme Court's decision to not hear the case means that the California Court of Appeal's decision stands. It has been reported that the punitive damages will be paid in addition to about $1.8 million in compensatory damages, including lawyers' fees and lost wages. McGee's appeal-related expenses alone were about $600,000.

Inside Washington (04/21/2008)

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* WASHINGTON (4/22/08)--Regulators are stepping up their scrutiny of loans, so much that the old term “performing nonperforming loans” has begun to creep up again. Performing nonperforming loans, or loans whose payments are made on time but could be troublesome in the future, are being flagged by banking regulators (American Banker April 21). Due to troubled market conditions, regulators--especially the Federal Deposit Insurance Corp. (FDIC)--are encouraging banks to be more proactive in accounting for their loans. Boston Private Financial Holdings Inc., which reported fourth-quarter losses, was required by the FDIC to build up reserves by $16 million. Lenders are not expected to be “lulled to sleep” just because they have interest reserves, noted Steve Fritts, FDIC associate director for risk management policy ... * WASHINGTON (4/22/08)--Several states continue to work on foreclosure prevention legislation--heightening financial institutions’ uncertainties regarding which laws they are required to follow. Generally, foreclosure and real estate laws are not pre-empted, unless the law affects a financial institution’s ability to receive payment on a debt (American Banker April 21). Maryland passed a foreclosure prevention measure requiring a five-month moratorium. It is unclear if Maryland’s law could be pre-empted by federal laws. Other states, such as New Jersey and Connecticut, are working on similar but tougher pending bills. Passage of state foreclosure laws will continue until federal legislation is passed, according to Gil Schwartz, a former Federal Reserve Board attorney. The Office of the Comptroller of the Currency and the Office of Thrift Supervision did not comment on the matter, but said in 2004 that they would preempt foreclosure laws if their provisions are hidden ... * WASHINGTON (4/22/08)--The Federal Bureau of Investigation (FBI) expects to see more mortgage fraud cases in the months to come, said Robert Mueller, FBI director in a speech Thursday. The FBI is investigating more than 1,300 individual fraud matters, and has identified 19 corporate fraud matters related to the subprime lending crisis. “We are targeting accounting fraud, insider trading and deceptive sales practices,” Mueller said. “These investigations may lead to other instances of fraud, from investment banks and private equity firms to hedge funds” ...

iAmerican Bankeri notes banker doublethink

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WASHINGTON (4/22/08)—The ability of the leader of the American Bankers Association to hold two contradictory beliefs simultaneously—at least where credit unions are concerned—was questioned in the April 21 issue of American Banker. Confused yet? asked a subhead in the publication’s “Washington People” section. The short article pondered whether ABA President Ed Yingling has been “flipping through the pages of George Orwell's '1984,' which defined ‘doublethink’ as the power to hold two contradictory beliefs simultaneously.” The article noted that after the Treasury Department outlined its blueprint for financial regulatory reform, Yingling issued a statement that said, "We are no more ready to abandon the thrift charter than we are to abandon the American family dream of living in a house that you own." That release was closely followed, the article said, by an ABA letter of praise for the Treasury plan, which suggested merging the credit union and bank charters, by saying the two types of institutions are very similar and should be treated as such. “The letter raised eyebrows among some observers, since, generally speaking, the bank and thrift charters are considerably more alike than the bank and credit union ones. “For example, credit unions are cooperatively owned not-for-profits, as opposed to banks, which are for-profit institutions owned by shareholders. In contrast, both bank and thrifts are for-profit organizations,” American Banker noted. The article said the ABA “rejected the claim that the ideas are contradictory.”