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Stabilization plans must address CU concerns--CUNA

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WASHINGTON (5/18/09)—Credit Union National Association President/CEO Dan Mica on May 15 urged the National Credit Union Administration (NCUA) to “act favorably and expeditiously” to address concerns that credit unions nationwide have raised about NCUA’s efforts to stabilize the corporate credit union system. Citing recent discussions with credit union league presidents, the Association of Corporate Credit Unions, and representatives from various state and federal credit unions, CUNA has asked NCUA to provide credit unions with more detailed information on the assumptions used to determine estimated losses related to mortgage- and asset-backed securities. Additionally, CUNA recommended that the NCUA waive any penalties that may be assessed on credit unions whose payments into the National Credit Union Share Insurance Fund cause their net worth ratios to fall. CUNA also called on the NCUA to support the use of the Central Liquidity Facility to provide greater liquidity to corporate credit unions. Existing plans to “extinguish” all capital accounts in WesCorp FCU and all paid-in capital and 63 percent of member capital shares at U.S. Central Corporate FCU could prevent account holders from benefiting from any potential recovery of these credit unions’ mortgage- and asset-backed securities. In the letter, CUNA also suggested that NCUA grant a share of any recovery that is gained from these mortgage- and asset-backed securities to capital holders.

Inside Washington (05/15/2009)

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* WASHINGTON (5/18/09)--Questions have arisen from financial industry critics about whether the Federal Reserve System should be revamped. Among the suggestions: downsizing the role of the 12 Fed regional banks to make them work with other field offices, or changing the Fed’s corporate governance framework (American Banker May 15). The Fed has always had an “odd” role, according to Douglas Landy, a Allen & Overy partner and former New York Fed lawyer. The Fed is owned by its members, but it also has supervision powers, he said. Two weeks ago, House Financial Services Committee Chairman Barney Frank (D-Mass.) said he wanted to examine conflict-of-interest issues at the Fed banks but it would need to wait until after the financial crisis has passed ... * WASHINGTON (5/18/09)--The Securities and Exchange Commission (SEC) has proposed amendments to increase protections for investors who entrust their money to investment advisers. The measures are intended to ensure that advisers who have “custody” of clients’ funds and securities are properly handling those assets. In recent enforcement actions, firms and principals have been charged with misusing clients’ money and covering it up by distributing false account statements. Investment advisers generally don’t have physical custody of funds or securities--instead, assets are maintained with a broker-dealer or a bank, called a “qualified custodian.” The amendments, if adopted, would promote independent custody and allow independent public accountants to act as third-party monitors, the SEC said ... * WASHINGTON (5/18/09)--Sen. Charles Schumer (D-N.Y.) and the office of Sen. Kirsten Gillibrand (D-N.Y.) met with New York State credit union representatives during meetings coordinated by the Credit Union Association of New York. The groups discussed the National Credit Union Administration’s (NCUA) Corporate Stabilization Program, and other credit union issues. Accompanying the group was Association President/CEO William Mellin, Senior Vice President and General Counsel Michael Lanotte and Vice President of Governmental Affairs Amy Cramer. In addition to meeting with Schumer (pictured) and staff from Gillibrand’s office, the group met with these representatives from New York’s congressional delegation: Gary Ackerman (D-Metropolitan), Michael Arcuri, (D-Utica-Rome), Timothy Bishop (D-Long Island), Yvette Clarke (D-Metropolitan), Eliot Engel (D-Metropolitan/Westchester-Rockland), Brian Higgins (D-Buffalo/Jamestown), Steve Israel (D-Long Island), Peter King (R-Long Island), Christopher Lee (R-Buffalo/Niagara/Rochester), Nita Lowey (D-Catskill-Hudson), Daniel Maffei (D-Central New York), Carolyn Maloney (D-Metropolitan), Gregory Meeks (D-Metropolitan), Paul Tonko (D-Capital), and Nydia Velazquez (D-Metropolitan). They also met with NCUA Chairman Michael Fryzel and his staff. (Photo provided by CUNA) ...

NCUA guidance on PIC MCA out this week

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ALEXANDRIA, Va. (5/18/09)—The National Credit Union Administration said it will explain the implications of exhausted and depleted paid-in-capital (PIC) and membership capital accounts (MCA) in guidance that will be released later this week. NCUA on May 13 addressed revisions to the Temporary Corporate Credit Union Share Guarantee Program in a letter that was issued to corporate credit unions. The NCUA Board could also soon make changes to the Temporary Corporate Credit Union Liquidity Guarantee Program. These changes would aim to enhance liquidity by providing longer term funding options for all corporate credit unions, NCUA said. In its weekly media release on the corporates, NCUA also updated the financial status of U.S. Central Federal Credit Union and Western Corporate Federal Credit Union. WesCorp’s year-end audited financial statements are due out soon, and its financial statements for the quarter ended March 31, 2009, were posted on May 1, 2009. U.S. Central released its most recent financial statements on May 13, 2009, and is in the process of finalizing its audit procedures. Its year-end financial statements should be released by mid June. The best estimate of U.S. Central Federal Credit Union’s credit losses remains at $2.3 billion. However, U.S. Central’s other than temporary impairment charges drop to $1.8 billion when its cash flows from these losses are discounted under Generally Accepted Accounting Principles. This accounting difference means that U.S. Central’s MCAs are depleted by 23 percent, not the 63 percent total that was reported on April 30. Both WesCorp and U.S. Central will publicly discuss their situations this week.

Rouge Employees CU is liquidated

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ALEXANDRIA, Va. (5/18/09)—Rouge Employees Credit Union, a 6200-member, Dearborn, Mich.-based credit union holding $23 million in assets, was liquidated on May 15, the National Credit Union Administration reported. Rouge Employee’s members will be served by the larger Chief Financial FCU, of Pontiac, Mich., effective May 18. Members will have uninterrupted access to their assets. Chief Financial holds nearly $83 million in assets and currently serves 13,480 total members from local employee groups, associations, and underserved portions of the greater Detroit area.

Compliance Challenge CUs and paper statements

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WASHINGTON (5/18/09)--In this month’s Compliance Challenge, a credit union asks if it can eliminate mailing paper statements to reduce costs. But does this affect statements for open-end loans such as credit card accounts and home equity lines of credit (HELOCs)? The credit union only has to provide a periodic statement for a credit card, HELOC, or other open-end account if a finance charge is imposed during the billing cycle or if a credit or debit balance exists of more than $1, according to the Credit Union National Association. If there is no activity, no balance, no finance charge, or no credit or debit balance exceeding $1, then no periodic statement would be required for that particular account, according to Regulation Z, Section 226.5 (b)(2). However, since many credit unions provide a periodic statement that includes share account activity and Reg. E transactions in addition to loan balances, they will provide a periodic statement anyway even if a particular loan balance meets the above criteria and no statement would be required for that particular open-end loan. Otherwise, the statement could indicate a zero balance for the loan or not include the loan information at all. A periodic statement need not be sent for an account if it is considered as uncollectible by the credit union, or if delinquency collection proceedings have been instituted, or if furnishing the statement would violate federal law. For more information, use the links.