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Maine CU League leader noted on House Floor

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WASHINGTON (5/17/11)—Maine Credit Union League President/CEO John Murphy was honored yesterday with a statement entered into the Congressional Record by Rep. Mike Michaud (R-Maine) noting Murphy’s induction into the Credit Union House Hall of Leaders. Michaud noted that Murphy has served as league president for nearly two decades and has “worked diligently on behalf of credit unions for even longer.” In his many opportunities to work with Murphy, Michaud said, he has found that the people and economy of Maine have benefitted from Murphy’s dedication and thought advocacy. Michaud said that the Credit Union National Association’s induction of Murphy to the Hall of Leaders reflects his “unique level of commitment to ensuring that these vital community institutions are able to continue serving the individuals and small businesses that make up their customer base.” “It has been an honor to work with John in the past, and I have no doubt that this recognition in the Hall of Leaders will inspire him to continue his advocacy on behalf of credit unions and the people they serve. I know that the 64 credit unions in Maine, as well as their 613,000 members, greatly appreciate John as a resource and as their representative fighting for the issues that matter to them,” Michaud said on the House floor. Murphy was among 10 credit union leaders who have made a significant impact on the credit union movement at the local, state or national level who were inducted into the Credit Union House 2011 Hall of Leaders in March. Also named were: Harold Allen, Nebraska; D.S. "Scotty" Broome, Mississippi; Raymond Brunner, Pennsylvania; James Bryan, Texas; William Eckhardt, Alaska; John Fiore, Illinois; Gene Hensley (posthumously), Tennessee; Robert Walls, Delaware; and Jim Williams, Texas. Use the resource link to read more about the Hall of Leaders inductees.

Inside Washington (05/16/2011)

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* WASHINGTON (5/17/11)--In a letter to lawmakers outlining how it has interpreted its authority under the Dodd-Frank Act, the Office of Comptroller of Currency (OCC) maintained that its 2004 preemption rule is still valid for national banks. Some Democrats and state regulatory officials argued the 2004 rule was overturned by Dodd-Frank. State rights advocates maintain the OCC misinterpreted Congress’ intentions in Dodd-Frank (American Banker May 16). Dodd-Frank appeared to overturn the OCC’s preemption rule, which said that national banks do not have to comply with any state laws that “obstruct, impair or condition” the business of banking. This is known as the Barnett standard, a reference to a landmark 1996 Supreme Court decision related to preemption. Dodd-Frank appeared to overturn additional language used by the OCC in its 2004 preemption rule. While the agency said the new language was an attempt to "distill" the Barnett standard, many state officials said it was an attempt to preempt additional laws. In the letter sent to Sen. Tom Carper (D-Del.) and other lawmakers, the OCC admitted the new language should be removed from the 2004 regulation, but the agency said it does not substantively change its position. Carper said the provisions do not create a new preemption standard, but clarify that the preemption tests laid out by the Supreme Court in the Barnett case still apply .. * WASHINGTON (5/17/11)--House Republican lawmakers on Friday introduced seven more bills designed to break up the government-sponsored enterprises. That makes 15 bills total that seek to dismantle Fannie Mae and Freddie Mac. The bills cover everything from the GSEs’ legal expenses to a cap on their liabilities and subjecting them to the Freedom of Information Act (American Banker May 16). Rep. Don Manzullo (R-Ill.) said the incremental approach is good public policy, integrating opinions, suggestions, and criticisms from a variety of sources within the financial system. Of the new bills, one measure introduced by Manzullo would prevent the Treasury Department from decreasing the 10% dividend that Fannie and Freddie are required to pay taxpayers to ensure the two companies continue to repay on their public debt. Two other bills would cap Fannie's and Freddie's liabilities to limit the cost to taxpayers bailing out the GSEs and shield taxpayers from the growing legal expenses of the two companies. Another bill would require that if the Freddie and Fannie are put into receivership, they would be wound down, and no new entity with taxpayer backing would be established …

2010 NCUSIF audit clean Operating Funds has deficiencies

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ALEXANDRIA, Va. (5/1711)--The National Credit Union Administration (NCUA) announced Monday that its 2010 audited financial reports for its four permanent funds, including the National Credit Union Share Insurance Fund (NCUSIF), received unqualified or “clean” audit opinions. Noting the NCUSIF’s unqualified opinion for its financial condition specifically, NCUA Board Chairman Debbie Matz said, “The fact that independent, outside auditors issued an unqualified opinion with no reportable conditions is a testament to NCUA’s diligent oversight and protection of the share insurance fund for credit unions nationwide.” In addition to the NCUSIF, auditors also certified the financial accuracy of three other NCUA funds: the Operating Fund, the Community Development Revolving Loan Fund, and the Central Liquidity Facility. KPMG LLP completed the audits of all four funds. Expected this summer, the NCUA announcement said, KPMG also will provide its opinion of the financial statements for the Temporary Corporate Credit Union Stabilization Fund. Matz said the agency made the independent reviews of the permanent funds immediately available to the public to "facilitate transparency in our operations." Also in the report, the auditor found a “significant deficiency” regarding the NCUA Operating Fund. The auditor’s concerns are classified as “deficiency,” “significant deficiency” or “material deficiency.” A significant deficiency is a concern that is less severe than a material weakness but “important enough to merit attention by those charged with governance.” Among other things, the auditor found:
* The Operating Fund needs improvement in reporting certain activities. For example, the report cited the inability of management to readily provide documentation related to property, plant and equipment. * Also, for the first three quarters of last year, journal entries were not reviewed and approved by anyone other than the preparer.
As part of the auditor’s report, the NCUA included a response in which it said it would take steps to provide timely documentation and to ensure manual entries are accurate and entered with appropriate safeguards. The Credit Union National Association’s Accounting Task Force will be reviewing the financial statements, as well as the agency’s response, to ensure NCUA addresses all deficiencies satisfactorily without the use of excessive resources. The financial reports can be viewed by using the resource link below.

This week in Congress

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WASHINGTON (5/17/11)—The congressional calendar has taken an unusual turn this week with the Senate in session while the House is on recess. Senate floor time will be used to consider various nominations as well as legislation eliminating tax subsidies for oil and gas companies. There is not much on the calendar this week of specific interest to credit unions, but, more generally, it is possible that the Senate will begin the budget process—though budget votes are not expected this early. Another major bill expected to be considered before the Senate recesses for a Memorial Day District Work Break on May 27 is the reauthorization of the USA Patriot Act. The House returns next Monday and will be in session until June 3. With the House out of session, committee meetings with relevance to credit unions are relatively sparse, noted Ryan Donovan Monday. Donovan is vice president of legislative affairs for the Credit Union National Association (CUNA). The Senate Banking Committee will hold hearings during the week on the Export-Import Bank, the state of the securitization market, and public transportation. On Thursday, the Senate Small Business Committee will hold a hearing on the implementation of the Small Business Jobs Act of 2010. Also on Thursday, the Senate Commerce Committee will hold a hearing on consumer privacy and protection in the mobile marketplace. CUNA, the leagues and credit unions continue to work closely with Senate lawmakers to identify an appropriate time and appropriate vehicle for a vote on Sen. Jon Tester’s interchange amendment. That amendment would delay the Federal Reserve Board’s implementation of a Dodd-Frank Wall Street Reform Act provision that limits the fee debit card issuers can charge merchants for the use of the card system. CUNA’s grassroots action alert has generated approximately 320,000 communications to federal lawmakers urging a delay to “stop, study, and start over” on the interchange provision.

CUNA backs court delay of interchange fee cap

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WASHINGTON (5/17/11)--The Credit Union National Association (CUNA), and its partners in the Electronic Payments Coalition, late last week filed a court document in support of TCF National Bank’s (TCF) lawsuit to block the Federal Reserve Board's implementation of proposed debit card interchange fee cap regulations. The CUNA amicus curiae--or “friend of the court”--brief was submitted in support of TCF’s recent appeal of a ruling by U.S. District Court for the District of South Dakota Judge Lawrence Piersol. Piersol declined to dismiss TCF's suit against the Fed--but also declined to issue an injunction based on the statute. The CUNA brief asks for a reversal of the judge's denial of a preliminary injunction. The TCF suit, filed last October, states that the government cannot write laws that would arbitrarily prevent a given business from recovering its costs sufficiently to avoid losses on its various business operations. TCF charges the interchange cap is just such a law. TCF also alleges that portions of the Dodd-Frank Wall Street Reform Act that would require the Federal Reserve to set restrictions on debit card interchange fees are unconstitutional, and argues that the Fed's implementation plan restricts a financial institution's ability to recover costs associated with providing the debit card service. CUNA’s amicus brief argues, in part, that credit unions and banks--under their legislative and regulatory mandates--serve “established, important public interests.” CUNA notes in its filing that the public interests at issue in this case is the “enablement and innovation of the electronic payments system,” an interest that the federal government both “supports and expects financial institutions to support.” The Fed’s proposed debit card interchange fee cap of seven cents to 12 cents, down from a current average charge of 44 cents, would not only eliminate any return on debit-card products and services, it would also cap the fees at an amount far below any card issuers per transaction cost. This reduction would not only sever the card industry’s ability to foster innovations, it would likely, as CUNA has noted often, force an introduction of new fees to all consumers who are debit card users. CUNA’s partners in filing the brief are the Clearing House Association LLC, American Bankers Association, Consumer Bankers Association, The Financial Services Roundtable, Independent Community Bankers of America, Midsize Bank Coalition of America, and the National Association of Federal Credit Unions. TCF filed its brief on May 2. The Fed’s next brief is due Thursday and TCF will have the option to file an additional reply brief by May 23.