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Inside Washington (04/28/2010)

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* WASHINGTON (4/29/10)--Allegations that Goldman Sachs Group participated in risky trading activities are bolstering the Volcker Rule, which could now “almost certainly” be enacted as a part of a regulatory reform bill, said American Banker (April 28). The rule, endorsed by the Obama administration and former Federal Reserve Board Chairman Paul Volcker, would ban proprietary trading. The Securities and Exchange Commission filed a suit against Goldman investigating whether it mislead clients about proprietary trading. Lawmakers agreed at a Goldman hearing Tuesday that the current system for trading is flawed. Sen. Susan Collins (R-Maine) said it’s unsettling to read e-mails from Goldman executives that celebrated the collapse of the housing market. The system needs to be reformed, she said. The Goldman investigation provides momentum for the Volcker Rule, added Doug Elliot, Brookings Institution fellow ... * WASHINGTON (4/29/10)--The Treasury Department will offer warrants to purchase equity in PNC Financial Services Group Thursday (Dow Jones April 28). The Treasury announced earlier this month that it intends to sell the warrants, which were received for investments made under the Troubled Asset Relief Program. The proceeds will provide another return to American taxpayers from Treasury’s investment in PNC, the department said ...

CUNA WOCCU detail aid to Haiti CUs

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WASHINGTON (4/29/10)--The Credit Union National Association (CUNA) and the World Council of Credit Unions (WOCCU) detailed for a House subcommittee their involvement in the Haiti Integrated Financing for Value Chains & Enterprises (HIFIVE) program, which “aims to stimulate the Haitian economy, improve the business environment and contribute to the sustainable and lasting development of Haitian enterprises, particularly in rural areas." The groups submitted a statement for the record of a hearing Wednesday on promoting small and micro enterprises in Haiti, conducted by the House Financial Services subcommittee on international monetary policy and trade. The HIFIVE Program supports agricultural development and “the use of technology to improve the efficiency and outreach” of local credit unions and microfinance institutions (MFIs). It provides technical training to micro, small and medium enterprises. HIFIVE also works to "improve the business environment and contribute to the sustainable and lasting development of Haitian enterprises, particularly in rural areas.” WOCCU has worked in Haiti since 2009 and stepped up its efforts following the January earthquake. In the prepared statement that was submitted for the official hearing record, CUNA and WOCCU recommended that legislators “support additional funding to rapidly stabilize and strengthen the microfinance sector” in Haiti by designing a “financial stabilization program that will overcome the financial distress of Haiti’s MFIs and credit unions without making them overly dependent on external aid.” HIFIVE also worked with WOCCU to assess the status of Haitian MFIs and credit unions following the quake. Those assessments found that those institutions were most in need of “increased liquidity and recapitalization.” They were hard hit by the “increased magnitude of individual loan defaults caused by death and loss of jobs/businesses, increased volume of client requests for loans to rebuild homes/businesses over longer periods of time,” and the significant amount of savings that members withdrew to “address immediate short-term household and business needs.” The institutions were also in need of basic construction help to deal with the physical impact of the earthquake, and CUNA and WOCCU in closing said that they would “welcome the opportunity to continue to meet with the committee to explore how to best support microfinance and microenterprise development to promote rebuilding and long-term economic growth” in Haiti. CUNA President/CEO Dan Mica and a number of credit union representatives recently returned from Haiti, where they studied the credit union movement in Haiti and discussed how WOCCU and the global credit union community can best help the country rebuild, using strengths inherent in credit unions' financial cooperative structure. For the full CUNA/WOCCU statement, as presented to the subcommittee on Wednesday, and recent News Now coverage of Mica's Haiti trip, use the resource link.

House Fin. Services approves trio of bills

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WASHINGTON (4/29/10)--The House Financial Services Committee on Tuesday approved a series of legislative proposals that address insurance for floods, other catastrophes, and mortgages. Under legislation introduced by Rep. Maxine Waters (D-Calif.) and approved by the committee, the National Flood Insurance Program (NFIP) will now be extended for a further five years. The NFIP has been recently reliant on temporary month-to-month extensions and will expire on May 31 without congressional action. The NFIP, which, according to a finance committee statement, provides “reliable, affordable flood insurance coverage for millions of American homes and businesses,” is important to credit unions because the mortgages they write for properties in a floodplain are required to have flood insurance. Waters also drafted H.R. 5072, the FHA Reform Act of 2010, which “will empower FHA to improve its financial position by allowing the agency to adjust its premium structure for new borrowers, while still providing affordable mortgage insurance to the individuals FHA is intended to serve including low-income and minority borrowers and individuals in traditionally underserved areas.” According to a Finance Services Committee press release, H.R. 5072 “also provides FHA with enhanced authority to terminate lenders’ approval to originate or underwrite loans backed by FHA insurance when FHA finds evidence of fraud or noncompliance” and strengthens the FHA’s own internal reporting systems. The committee also approved H.R. 2555, the Homeowners' Defense Act, on a 39 to 26 vote. The legislation, which was introduced by Rep. Ron Klein (D-Fla.) and currently has 74 House co-sponsors, would create a national catastrophe insurance pool that would be made available to disaster-prone states nationwide. All three bills will now move on to the full House for consideration.

CU rep supports interchange at House hearing

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WASHINGTON (4/29/10)--During a Wednesday House Judiciary Committee hearing on potential interchange fee legislation, John Blum of Chartway FCU said if interchange-related revenues drop, credit unions and small financial institutions would “face an impossible decision of raising rates, eliminating rewards programs, or stopping their card programs altogether.” Blum, testifying on behalf of the Electronic Payments Coalition, said credit unions “typically offer debit and credit card products to their customers at or below margin as a loyalty-building and customer-service tool.” Chartway is based in Virginia Beach, Va. Over one dozen committee members took part in the hearing, including Debbie Wasserman-Schultz (D-Fla.), who asked testifying merchant representatives if they could ensure that consumers would realize savings if, as they are proposing, interchange fees paid by merchants were reduced. The witnesses said that they could not guarantee that their prices would decrease if interchange fees were reduced. Overall, many committee members expressed concern over granting merchants an antitrust exemption and the potential harm it would do to consumers and smaller institutions, including credit unions. In a written statement for the hearing record, the Credit Union National Association (CUNA) said that H.R. 2695, the "Credit Card Fair Fee Act of 2009," could force credit unions and other smaller institutions to “re-evaluate their credit and debit card offerings, and possibly exit the market” if those institutions are forced to accept lower interchange fees. This would result in consumers having fewer credit and debit cards from which to choose, forcing them to rely on only a handful of large issuers for credit and debit cards, CUNA added. While supporters of the legislation say that the savings gained by merchants would be passed on to consumers, CUNA said that “granting merchants an anti-trust exemption on interchange fees is more likely to increase credit and debit cards costs that consumers bear.” H.R. 2695, the "Credit Card Fair Fee Act of 2009," which was introduced by committee chair Rep. John Conyers Jr. (D-Mich.), would permit merchants to negotiate interchange fees with financial institutions via an antitrust exemption. Though House action on interchange fees is not expected to be taken any time soon, legislators are reportedly working to add similar legislation to the Senate financial regulatory reform bill. Rep. Bill Delahunt (D-Mass.) called on Conyers to move to a markup of the legislation quickly, but no commitment was made. CUNA has fiercely opposed merchants' proposals that would affect interchange fees. Interchange reflects a merchant's fair share of the costs of the convenient card system and supports everything from re-issuing cards compromised by merchant data breaches to providing a call center to contact if a card is lost or stolen. CUNA testified at a previous interchange hearing, which was held in October 2009 before the Financial Services Committee. For the CUNA statement, use the resource link.