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CUNA applauds lawmakers Fin. Lit. commitment

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WASHINGTON (4/23/08)—Dan Mica, president/CEO of the Credit Union National Association (CUNA), applauded Reps. Rubén Hinojosa (D-Texas) and Judy Biggert (R-Ill.) for introducing a resolution endorsing the goals of April’s Financial Literacy Month. Mica cited CUNA’s youth celebration this week as one example of the credit union movement’s commitment to providing financial education to young people. "CUNA believes in the importance of financial literacy for all Americans and thanks Reps. Hinojosa and Biggert for their leadership in introducing H. Res. 1079,” Mica said in a statement. “Credit unions have traditionally made financial education a part of their mission, providing financial information and training to all members, and young people in particular. And during Financial Literacy Month, credit unions will demonstrate our commitment to educating youth as we hold National Credit Union Youth Week from April 20-26, 2008,” he added. Through the week’s National Youth Saving Challenge, participating credit unions will work to motivate children, teenagers, and their parents to become more active users of credit union services. This year, 517 credit unions from 49 states and the District of Columbia have registered to participate in the saving challenge. Their combined goal is to have more than 83,000 youths deposit $7.6 million in their accounts during the weeklong celebration. Recent experience suggests that they may do better than they expect. In 2007, for example, credit unions registered the Saving Challenge goal of $7.9 million and by the end of the week had reported youth deposits totaling more than $10.1 million. “Given the uncertainty in today’s financial markets, the subprime lending crisis and other economic factors, financial literacy is more important than ever for all Americans,” Mica concluded. “A knowledge of personal financial management, including savings, investment, and debt, is essential to ensuring that individuals are empowered to make informed decisions about their finances. Financial literacy is vital to the well-being of American families and the overall economic health and prosperity of our nation.” The Hinojosa-Biggert resolution, which carries 41 additional co-sponsors, urges President George W. Bush to officially proclaim endorsement of activities that teach people money management skills.

NCUA opines on third party other issues

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ALEXANDRIA, Va. (4/23/08)—The National Credit Union Administration (NCUA) Tuesday released three legal opinion letters: one addresses third-party relationships, another clarifies that a federal credit union cannot pay for its CUSO’s employees’ benefits, and the last spells out that credit unions meet the definition for “depository institutions.” The letter clarifying earlier information on third-party arrangements specifies that a credit union’s in-house counsel may perform the legal review recommended by the NCUA for a credit union’s third-party arrangements and contracts. The answer is intended to eliminate any confusion that could have been caused by the agency’s December 2007 Letter to Credit Unions, “Evaluating Third Party Relationships,” No. 07-13 (07-CU-13). That guidance included a discussion of due diligence considerations for third-party relationships and, among other recommendations, suggested credit unions have “qualified external legal counsel review prospective third-party arrangements and contracts.” In the new NCUA General Counsel Opinion 08-0218, the agency states, “We have consulted with NCUA’s Office of Examination and Insurance and have confirmed that the reference to external legal counsel was intended to recommend that legal counsel reviewing these relationships should be independent of the third party. “The guidance, by referring to ‘external’ counsel, was not intended to suggest that in-house counsel should not perform the recommended legal review.” Regarding benefits for CUSO employees, NCUA’s Legal Opinion No. 08-0218 said that a federal credit union may obtain and administer benefits to the employees of a CUSO that is wholly-owned or majority-owned by the FCU, but only the CUSO may pay for them. However, the letter notes, a joint arrangement is subject to certain conditions. For instance, it must be “accomplished in a manner that will not affect the legal separateness of the FCU and CUSO, preserving the corporate veil; the CUSO pays in advance for its share of the cost of the benefits attributable to its employees or reimburses the FCU within a reasonable time after the fact; and the CUSO complies with state insurance and other applicable law.” The final legal opinion letter made public by the agency, No. 08-0232, declares that a section of Federal Reserve Act includes in the definition of “depository institution” any insured credit union as defined in section 101 of the Federal Credit Union Act. That, the letter says, includes all federal credit unions and state-chartered credit unions insured by NCUA, or any credit union which is eligible to apply to become an insured credit union under section 201 of the FCU Act. 12 U.S.C. 461(b)(1)(A)(iv), 12 U.S.C. 1752(7), 12 U.S.C. 1781.

Lawmakers urge halt to Internet Gambling rulemaking

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WASHINGTON (4/23/08)—Some congressional heavy hitters urged the Federal Reserve Board and U.S. Treasury Department to set aside their endless and toilsome efforts to implement the Unlawful Internet Gambling Enforcement Act (UIGEA). House Financial Services Committee Chairman Barney Frank (D-Mass), and three other of the panel’s members, sent an April 21 letter to Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke regarding what they termed “the unworkable regulations” of UIGEA. Treasury and the Fed are charged by the law to issue rules to implement its provisions. The letter noted an April 2 House Financial Services subcommittee hearing on the internet gambling law, at which representatives from both the implementing agencies, as well as financial services industry, testified. Through that hearing “the Federal Reserve, the Treasury and the industry made clear that regulations from the UIGEA are vague, confusing, burdensome, and generally unworkable,” the letter said. The hearing resulted in the introduction of a bill, H.R. 5767, which would prohibit the implementation of UIGEA regulations. The bill is sponsored by Frank and Rep. Ron Paul (R-Texas), who is also a House Financial Services Committee member. “The regulations, like the underlying legislation, fail to define the term ‘unlawful internet gambling,’ leaving it to each financial institution to reconcile conflicting state and federal laws, court decisions and inconsistent Department of Justice interpretations, when determining whether to process a transaction. “Furthermore, some of the information needed to make this determination would likely be unavailable to banks, because customers or financial institutions in foreign jurisdictions will likely be unwilling or unable to provide it,” the letter noted. It went on to say that given the implementation difficulties, other national priorities that demand the agency’s attention, such as the mortgage crisis, and the pending legislation that would prohibit implementation of the law, “(W)e believe it would be imprudent for you to devote additional agency resources to this Sisyphean task.” Sisyphus is the sinner in Greek mythology condemned to the endless toil of rolling a boulder uphill then watching it roll back down again--for eternity. The letter was signed by Frank, Rep. Luis Gutierrez (D-Ill.), who heads the House subcommittee on domestic and international monetary policy, Paul, who is ranking member of that subcommittee, and Rep. Peter King (R-N.Y.), who is former chairman of the House Homeland Security Committee. The Credit Union National Association (CUNA) was among the witnesses at the UIGEA hearing. CUNA board member Harriet May, CEO of GECU, El Paso, Texas,, testified on the compliance burden for credit unions that would be associated with UIGEA. She urged the subcommittee to halt current efforts to implement the law.

Inside Washington (04/22/2008)

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* WASHINGTON (4/23/08)--The ranking Republican member of the House Financial Services Committee, Rep. Spencer Bachus of Alabama, has introduced what he referred to as Republican legislation to address the recent instability in the housing market. It is co-sponsored by two other GOP members of that committee, Reps. Shelley Moore Capito of West Virginia and Judy Biggert of Illinois, and a list of other Republican House members. The goal of the bill, according to its sponsors, is to complement current public and private efforts to help struggling homeowners who face foreclosures on their homes. It intends to protect homebuyers from predatory lending practices and prevent future problems, and safeguard the interests of taxpayers from losses in federally insured programs … * WASHINGTON (4/23/08)--The President's Advisory Council on Financial Literacy will convene its second meeting on Monday, May 5. The teleconference meeting will be open to the public. Those interested in listening to the meeting should call 202-622-5770 or e-mail to obtain the conference call number. The public is also invited to submit written statements with the advisory council. The same email address may be used to submit electronic statements. Paper statements in triplicate may be sent to President's Advisory Council on Financial Literacy, Office of Financial Education, Room 1332, Department of the Treasury, 1500 Pennsylvania Avenue, N.W., Washington, D.C. 20220… * WASHINGTON (4/23/08)--The Federal Reserve Board could release two proposals next week designed to curb abusive credit card practices. The proposals will likely be open for 60 days’ comment (American Banker April 22). The Fed also could propose a change to Regulation Z to align it with the new credit card practices proposal. The Fed plans to focus on universal default and double-cycle billing, said Sandra Braunstein, director of consumer and community affairs, in testimony last week ... * WASHINGTON (4/23/08)--The Senate Banking Committee is scheduled to vote on two financial services bills May 6 (American Banker April 22). One bill, by Chairman Christopher Dodd (D-Conn.), will focus on helping borrowers who can’t pay their bills with financing through a less expensive loan backed by the Federal Housing Administration. The other bill involves government sponsored enterprise reform. A discussion draft on the bill is not yet available ... * WASHINGTON (4/23/08)--The Office of Federal Housing Enterprise Oversight (OFHEO) issued guidance regarding fair value yesterday. The guidance outlines standards for OFHEO examiners to apply when overseeing and evaluating the use of the fair value option already adopted by Fannie Mae and Freddie Mac. It sets forth OFHEO’s expectations for practices that will: promote sound risk management and controls, support the integrity of regulatory capital measure and foster transparent and consistent financial reports by the government-sponsored enterprises ... * WASHINGTON (4/23/08)--Sen. Christopher Dodd (D-Conn.) said in a release Monday he plans to introduce a bill that would ensure students and parents can qualify for Federal PLUS loans even if they have had trouble making their mortgage payments. The loans are available to help students and parents pay college tuition. Borrowers can qualify for the loans regardless of financial need, but are ineligible if they have been delinquent on a mortgage payment for 90 days or have gone through a foreclosure within the last five years. The bill would prevent borrowers from being disqualified from the loan based on their mortgage situation. Dodd is being joined by Sens. Edward Kennedy (D-Mass.), Hillary Clinton (D-N.Y.), Sherrod Brown (D-Ohio), Bernard Sanders (I-Vt.) and Patty Murray (D-Wash). ...