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Space Coast sues brokers on investments sold to defunct CU

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NEW YORK (4/28/11)--A lawsuit filed by Space Coast CU Tuesday claims four Wall Street brokerage firms--including Barclays--sold risky collateral debt obligations (CDOs) that they knew would fail to Eastern Financial Florida CU, costing the latter credit union about $150 million and contributing to its collapse. Melbourne, Fla.-based Space Coast CU filed the suit in U.S. District Court for the Southern District of New York in Manhattan against Barclays Capital Inc., Barclays Bank PLC, State Street Global Advisors, State Street Bank and Trust Co., and State Street Corp. The $2.4 billion asset Eastern Financial Florida CU's lost $149.2 million in the CDOs. That precipitated its failure and eventual merger into Space Coast. The $3.17 billion asset Space Coast acquired its assets on June 30, 2009 (News Now May 4, 2010 and May 26, 2010). In the complaint documents filed with the court, Space Coast alleges that the action "concerns a large international bank swindling a Florida credit union by creating and selling an investment that was a mirror opposite of what it purported to be." The CDO, named Markov CDO I, "was built to fail," the complaint document said. Eastern Financial Florida CU, and all other investors in Markov, lost 100% of their investments. The complaint alleges four material misrepresentations, reinforced by marketing efforts, concerning the Markov, that misled the credit union as to:
* Who selected the collateral assets referenced in Markov; * The bases and methods used to select those collateral assets; * The credit quality of the assets; and * The protections Markov's structure was supposed to provide against losses experienced by the collateral assets.
Space Coast alleged that Barclays and the other defendants created or underwrote a CDO nearly opposite of the one represented. It was built to fail because within the CDO was a rigged bet in the form of a credit default swap (insurance policy) that would pay the defendants if the riskiest collateral assets referenced by Markov failed, Space Coast said. "What appeared to be solid AAA-rated assets were actually junk quality securities," said the complaint filed. It noted that $400 million raised through sales of the Markov notes to the credit union and other investors was reserved to pay off Barclays when the referenced collateral inevitably failed. "At bottom, this is a story of a bank that when faced with losses from subprime related investments, resorted to deception." The complaint termed that the facts surrounding the rigged bets built within the CDO "lay to rest any notions of chance and instead evince deliberate--indeed, malevolent--design." The complaint said the CDO in the case was "materially similar" to the "now infamous, built-to-fail Abacus CDO" sold by Goldman Sachs & Co. and which was the target of a probe by the Securities and Exchange Commission. In April 2010, Goldman settled the investigation for $550 million, the court documents said.

CU System briefs (04/27/2011)

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* TAMPA, Fla. (4/28/11)--The suspect in the Monday robbery of Tampa-based Grow Financial CU is in stable condition at a hospital after deputies shot him at his house while he was showing where the loot was kept. The suspect, Thomas Noettl, 30, had been apprehended at a local casino Monday night and taken to his home to recover the money stolen. Deputies said Noettl, whose hands were handcuffed in the front, grabbed a knife and wouldn't let it go. He sustained three gunshot wounds. The incident began when Noettl allegedly entered the credit union at 12:40 p.m. Monday, gave the teller a demand note and indicated he had a weapon. He fled in a Lexus. According to the sheriff's office, part of the money was recovered at the house (TBO.com and Associated Press Newswires April 26)… * ALBUQUERQUE, N.M. (4/28/11)--Estefanita "Fannie" Trujillo, long-time credit union activist, died Sunday at the age of 83, according to the Credit Union Association of New Mexico. She served many years as manager of Northern New Mexico Schools Employees FCU (NNMSEFCU) and as a board member at Guadalupe CU for 15 years. She worked at NNMSEFCU, beginning in 1969, when it was known as Sante Fe Public Schools FCU, until 1988. After her retirement, she continued to serve as a volunteer board member, said Larry Lujan, CEO of NNMSEFCU. In 1993, she was named to the New Mexico Credit Union League Hall of Fame. Trujillo's husband, brother-in-law and daughter-in-law also worked for credit unions. A Mass of Christian burial will be at Our Lady of Guadalupe today at 9:30 a.m., with burial in Santa Fe National Cemetery …

IUsNews.comI Why you need a CU account

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MADISON, Wis. (4/28/11)--Credit unions are better than commercial banks, primarily because credit unions work for the member/consumer, while banks work for their shareholders, according to a “My Money” columnist for UsNews.com. In a Tuesday column, ‘Why You Need a Credit Union Account,” author Jim Wang said that while credit unions have been around for quite some time, it hasn’t been until the past few years that they have grown in popularity as consumers have become aware of the self-centered excesses of “too big to fail” commercial banks. Wang said that some of the other reasons that credit unions are better than banks are:
* Credit unions generally are smaller, which typically means better service. The fewer members/customers, the less likely each member/customer becomes an account number. When a financial institution gets to a certain size, everything gets reduced into a spreadsheet line item and it loses a bit of the human element. * They have better rates. Consumers can find some of the best certificate of deposit (CD) rates and car loan rates at a credit union. Banks make their money by borrowing cheaply--from deposit accounts such as CDs--and lending it for more--such as on mortgage and car loans. Credit union members--the ones depositing and borrowing money--are the beneficiaries of any profits. * Fees and minimum balances are usually lower. Most credit unions have share-draft accounts with low minimums and low or no fees. Without a profit motive, there’s little incentive to get people to deposit more to increase loan amounts. * Members can try to join the board. The board of directors at a credit union is made up of its members. * National Credit Union Administration insurance is as good as Federal Deposit Insurance Corp. insurance.
To read the column, use the link.

N.M. CU Foundation awards 114K in scholarships

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ALBUQUERQUE, N.M. (4/28/11)--The New Mexico Credit Union Education Foundation awarded $114,000 in scholarships to 114 students for the 2011-2012 school year. Each scholarship recipient was awarded $1,000. Applications from more than 400 students were received. Applicants must be New Mexico residents, full-time students and maintain a minimum grade-point average. The foundation is a scholarship program formed by special legislation through which credit unions use abandoned funds for educational or charitable purposes. Since it was established in 1992, the NMCUEF has presented 1,069 scholarships totaling $612,600 to students attending accredited vocational or technical schools, colleges or universities in New Mexico.

WOCCUS Pete Crear to retire

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MADISON, Wis. (4/28/11)--Pete Crear, president/CEO of the World Council of Credit Unions (WOCCU) since June 2005, has announced that he will retire from that post soon after WOCCU’s World Credit Union Conference in Glasgow, Scotland in July. “When I first began as a junior auditor with the Michigan Credit
Click to view larger image WOCCU President/CEO Pete Crear (shown here addressing an earlier conference) announced his upcoming retirement today, effective August.

Union League in 1965,” Crear noted in his departure statement, “I had no idea that I would one day find myself here” in the top position at WOCCU. “I am honored at the faith the board has shown in me over the years and humbled by the good work that we have been able to do as part of WOCCU’s mission of service.” His retirement is effective in August. WOCCU Chair Barry Jolette, who is also president/CEO of San Mateo CU in Redwood City, Calif., said the WOCCU board will immediately begin a search for its next president/CEO, though, he added, “We’ll never replace Pete…” Credit Union National Association resident/CEO Ill Cheney commended Crear on his time at WOCCU and said, “I have had the opportunity to work with Pete on a variety of projects for WOCCU over the years. I have found his leadership skills, insight, charm and encyclopedic knowledge of the movement to be the perfect mix for his role as president and CEO of the global credit union association. "He developed all of those qualities in a career spent bringing cooperative financial services to those who need them most--locally as a league president, nationally at CUNA, and internationally as WOCCU’s chief executive. It will be a challenge to replace him--and just as much of a challenge to imagine our movement without him.” WOCCU said in its release that during Crear’s tenure the organization has significantly expanded membership, as well as an increased influence in credit union development worldwide. WOCCU also launched development programs in Ethiopia, Haiti, Peru and other countries, as well as seeing its development program in Afghanistan grow significantly. Among many other innovations and accomplishments under Crear, WOCCU convened its first technical congresses to train credit union managers in Africa, Latin America and the South Pacific. WOCCU also launched the European Network of Credit Unions, the International Credit Union Regulators Network and the Global Women’s Leadership Network, a peer-to-peer and educational network that brings together women credit union leaders from both developed and developing countries. During his time at WOCCU, Crear was honored both nationally and internationally for his work to help strengthen the credit union system throughout the world. Prior to joining WOCCU, Crear was with the Credit Union National Association and served in the association’s Madison, Wis., office as executive vice president of external relations and, before that, executive vice president and chief operating officer responsible for daily operations. He also served in top leadership positions at the Indiana, Connecticut and Michigan credit union leagues. A special ceremony and other events honoring Crear’s achievements at WOCCU will be held at the World Credit Union Conference in Glasgow. Use the resource link for more information and to register.

S. Carolina league elects two to board new officers

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COLUMBIA, S.C. (4/28/11)--South Carolina credit unions elected one new director and re-elected another to the South Carolina Credit Union League (SCCUL) board of directors. Election results were announced at an April 16 business session of the SCCUL & Affiliates 2011 Annual Meeting in Myrtle Beach, S.C. New to the 2011-2012 SCCUL board is Anne Shivers, president/CEO of Carolina Collegiate FCU, Columbia. Re-elected is Rick Hammond, president/CEO of S.C. State CU, Columbia. Both will serve three-year terms. Continuing their multi-year terms in 2011-2012 are:
* Faye Crocker, CEO, Greater Abbeville (S.C.) FCU; * Robert Harris, CEO, Health Facilities FCU, Florence; * W. Ray Partain, board member, Anderson (S.C.) FCU; * Ed Templeton, president/CEO, SRP FCU, North Augusta; and * Linda Weatherford, director of marketing and business development, SPC CU, Hartsville.
Following the business session, the board named its officers:
* Weatherford, chairman; * Templeton, vice chairman; * Partain, treasurer; and * Crocker, secretary.
As immediate past chairman, Scott Wood, president/CEO of SC FCU, North Charleston, remains as an ex officio member of the board, as is SCCUL President/CEO Steve Fowler.

Filene seeks participants for two leadership studies

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MADISON, Wis. (4/28/11)--The Filene Research Institute is undertaking two studies to help credit unions understand and plan for leadership challenges. “Predicting Organizational Performance: The Role of the CEO, the Senior Management Team, and Work Engagement” will be conducted by Prof. Murray Barrick of Texas A&M University. The study seeks to identify personality traits and leadership styles of effective credit union CEOs and senior management teams. The findings will help credit unions identify and tap the potential of CEOs and staff to improve performance and service to members. “Key Attributes of Highly Successful Middle Managers” will be led by Michael Neill, president of Michael Neill & Associates. The study aims to identify key traits of successful operational managers to help credit unions understand, hire and promote those most likely to improve their performance. Filene seeks individuals from natural-person credit unions of all sizes to participate for free in the studies. The data participants contribute will remain private. Filene’s public report will present anonymous aggregate findings. To learn more or to sign up for the studies, use the links.

Study questions impact of homebuyer ed programs

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WASHINGTON (4/28/11)--Although there is no conclusive evidence, potential homeowners who take part in pre-purchase education and counseling programs may be more apt to pay their mortgages on time, according to a Mortgage Bankers Association (MBA) study released Tuesday. Those who participate in default counseling are more likely to have their loans modified, the study also indicated. The study, “Homeownership Education and Counseling: Do We Know What Works?” was conducted by Michael J. Collins and Collin O’Rourke of the PolicyLab Consulting Group--sponsored by MBA’s Research Institute for Housing America. It examines effectiveness of the leading types of pre-purchase and post-purchase counseling education. The consulting group concluded it did not know what effectively works. Key findings include:
* The study reviewed 18 evaluation studies and found that sample selection biases plague most of the studies. * Some pre-purchase programs reduced mortgage default by as much as 34%, but many studies found no such effects. * At least one study suggests programs may result in accelerated pre-payment of mortgages. * More than 2.1 million clients received one-on-one housing counseling from Housing and Urban Development (HUD)-approved agencies in fiscal year 2010, according to HUD reports. But the services delivered varied. About 245,000 received pre-purchase counseling; 205,000 received help with home repair or a reverse mortgage; 278,000 received help for rental housing; 37,000 received homelessness counseling; and 1.4 million received foreclosure prevention counseling. * Among clients attending pre-purchase education, about 17% reported purchasing a home and another 26% anticipated buying within three months. HUD data suggest counseling agencies were involved in more than 301,000 loan modifications in fiscal year 2010.
The study also makes recommendations for future studies on the effectiveness of the programs. To view the full report, use the link.

Savings challenge ends Sat. results due May 17

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MADISON, Wis. (4/28/11)--The National Youth Saving Challenge officially ends this Saturday. Credit unions are reminded to post their savings challenge results by noon May 17 CT to be eligible for 10 prize drawings of $100 each randomly awarded by the Credit Union National Association (CUNA). The National Youth Saving Challenge takes place every year during April. It is held in conjunction with National Credit Union Youth Week, sponsored by CUNA. Credit unions are asked to report the number of youth who made deposits, the number of new account opened, and the total dollars deposited by youth during the challenges. The starting and ending dates of the challenge is also requested. Credit Union Youth Week 2012 will be April 22-28.

Georgia storm closes five branches of Coosa Valley CU

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ROME, Ga. (4/28/11)--Storm damage in Rome, Ga., closed all five of Coosa Valley CU's locations Wednesday for the rest of the day. The main office in Rome remained without power late Wednesday morning, credit union branch manager Rick Baxter told the Cedartown Standard (cedartownstd.com April 27). newspaper. That meant the $152 million asset credit union's server was down, and none of the locations could access member information. The power outage closed two locations in Rome, and one each in Cedartown, Armuchee and Cartersville. The locations were expected to be open today for normal business.

Texas league announces 10 rebate

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DALLAS (4/28/11)--The Texas Credit Union League (TCUL) will provide its member credit unions with a 10% dues rebate for 2011--a total of $550,000--the league announced at the close of its annual business meeting Tuesday in Austin., Texas.
Click to view larger image Credit Union Resources Inc. Chairman Paul Trylko presents a dividend check in the amount of $550,000 to Texas Credit Union League Chair Pamela Stephens at the league annual business meeting. On Tuesday, the league announced it would return the amount to its members as a 10% dues rebate. (Photo provided by Texas Credit Union League)
“It’s the right thing to do,” said league President/CEO Dick Ensweiler of this decision. Credit Union Resources Inc, a TCUL subsidiary, notified the board of directors in March of its intention to present the dividend to the league. At its March meeting, the board decided to return the money to its member credit unions. Annual meeting attendees offered applause when league Chair Pamela Stephens announced how the league would use the $550,000 check received from Credit Union Resources. "The credit union movement, not unlike any other industry, has dealt with its fair share of challenges,” Stephens said. “Returning dividends to our dues-paying members is our way of showing how much we appreciate their loyalty and commitment to this organization during the good times and the not-so-good times.”

Discovery breakouts debut at CUNAs ACUC

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MADISON, Wis. (4/28/11)--The Credit Union National Association (CUNA) and CUNA Mutual Group are collaborating to bring CUNA Mutual's Discovery breakout sessions for the first time to the 2011 America's Credit Union Conference & Expo (ACUC), June 19-22 in San Antonio, Texas. The 17 face-to-face sessions will address key industry topics credit unions have deemed important to running their businesses. They will feature some of the industry's top thought leaders and best practices at one of the credit union marketplace's most innovative and progressive conferences, the two groups said. "Collaboration is more important today than ever before in the credit union market," said Jeff Post, CUNA Mutual president/CEO. "Through this partnership, CUNA and CUNA Mutual are collectively demonstrating their commitment to serving and supporting the credit union movement. Discovery's diversified learning experience will help ACUC attendees solve problems, maximize opportunities and address current market challenges." The Discovery sessions will provide a forum to deliver thought leadership on trends and challenges facing credit unions. That information is provided through free webinars, a free virtual daylong conference and now through face-to-face sessions at CUNA's ACUC. "ACUC is consistently lauded for its innovative, forward-thinking agenda and unmatched speaker line-up," said Bill Cheney, CUNA president/CEO. "This year's event promises to be a one-of-a-kind experience." For more information on the Discovery sessions at ACUC and to register, use the link.