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House panel to discuss corporate stabilization

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WASHINGTON (5/13/09)—A House Financial Services subcommittee will discuss the National Credit Union Administration’s (NCUA) corporate credit union stabilization plan in a May 20 hearing. The Credit Union National Association (CUNA) will be among those testifying before the House Financial Services subcommittee on domestic and international monetary policy, trade and technology. The witness panel is also expected to include representatives from the National Association of Federal Credit Unions and the National Association of State Credit Union Supervisors. Representatives from the NCUA will testify separately, prior to the CUNA panel. The hearing follows Senate deliberation on S. 896, the Helping Families Save Their Homes Act, which passed by an 86 vote margin late last week. (See related May 7 story: CU stabilization, insurance fund mods clear Senate.) That bill included language that would increase the National Credit Union Share Insurance Fund’s (NCUSIF) borrowing authority to $6 billion and allow credit unions to spread the cost of NCUSIF replenishment over a longer time period. Currently, NCUA does not feel that it has the authority to spread out NCUSIF related costs to federally insured credit unions. Credit unions are paying into the NCUSIF in the form of assessments that are collected as one lump sum. CUNA President/CEO Dan Mica has called upon Congress to extend the time period for paying these assessments, as such a move would allow credit unions to increase their consumer lending activities. A corporate credit union stabilization plan that was presented by NCUA in February calls for a $1 billion infusion and an initial estimate of $3.70 billion to guarantee current corporate credit union deposits. Under this plan, NCUA estimated that it would require $5.9 billion in total funds to restore the NCUSIF to its normal operating equity ratio level of 1.3%.

Inside Washington (05/12/2009)

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* WASHINGTON (5/13/09)--A deal between Sen. Richard Shelby (R-Ala.) and Senate Banking Committee Chair Christopher Dodd (D-Conn.) could push a bill forward that would crack down on abusive credit card practices. The bill passed the House April 30 and is expected to be taken up in the Senate this week. The senators’ deal incorporates tougher changes than those President Barack Obama sought. The changes include requiring credit card companies to get cardholders’ permission before charging cardholders over-the-limit fees (American Banker May 12). The deal allows card companies to increase interest rates if the consumer is 60 days late on payments, but they would have to re-evaluate if the cardholder’s credit improved. The legislation’s effective date would be 90 days after enactment, although the industry has argued that it would not be ready to implement before July 2010. Shelby said he compromised on the bill because card reform is “overdue.” He included a provision requiring the Federal Reserve Board to report to Congress every two years on the cost and availability of credit ... * WASHINGTON (5/13/09)--The Federal Reserve Board’s estimates of needed capital buffers are “appropriately conservative,” said Ben Bernanke, Fed president, during a speech at a Federal Reserve Bank of Atlanta conference. Bernanke was referring to stress tests that were given to 19 of the nation’s largest banks. Results of the tests were released last week and indicated that several banks may need to raise more capital. Bernanke cautioned that the tests did not address some risks that institutions will have to cover in their own internal tests--such as operational, liquidity and reputational risks. “The stress used in the assessment program should be part of a broader palette of internal stress tests conducted by firms,” he said ... * WASHINGTON (5/13/09)--The Office of Management and Budget (OMB) and the Federal Deposit Insurance Corp. (FDIC) have conflicting estimates regarding bank failure-related expenses (American Banker May 12). The OMB said the expenses would cost $91 billion through 2010, while the FDIC projected net losses of $65 billion through 2013. The Obama administration likely weighs systemic risk more heavily than the FDIC, said George Pennachi, finance professor at the University of Illinois at Urbana-Champaign and former OMB consultant. However, the OMB also projected revenue into the FDIC that could offset some costs. The FDIC is expected to earn $21 billion through assessments this year and $24 billion next year. It also could raise $27 billion from regular premiums and a 20-basis point special assessment to cover losses to the Deposit Insurance Fund ...