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Presidents pen turns corporate stabilization bill into law

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WASHINGTON (5/21/09)—In a ceremony held at the White House on May 20, President Barack Obama signed S. 896, the Helping Families Save Their Homes Act, into law.
CU League of Connecticut President/CEO Tony Emerson (pictured left, at White House) attended the bill-signing ceremony for S. 896 as a guest of cosponsor Sen. Christopher Dodd (D-Conn.) CUNA President/CEO Dan Mica said that Emerson's invitation by Dodd is a "perfect illustration of the vital role state leagues have in advocacy for the CU movement." (Photo courtesy of Sen. Dodd's office)
Of interest to credit unions are portions of the bill that will create a corporate credit union stabilization program to help credit unions weather the ongoing financial crisis and extend the $250,000 share and deposit insurance coverage ceiling through 2013. Credit Union League of Connecticut President/CEO Tony Emerson attended the signing ceremony as a guest of S. 896 cosponsor Sen. Christopher Dodd (D-Conn.) The House and Senate approved the bill on May 19. Under S. 896, the National Credit Union Administration's (NCUA) borrowing authority will be extended to $6 billion, with a possible further extension to $30 billion under exigent circumstances. Credit unions may also spread the cost of National Credit Union Share Insurance Fund (NCUSIF) replenishment over a longer period of time, with a total of eight years to deal with the cost of a premium assessment that has resulted from losses at wholesale corporate credit unions. Any impairment related to the NCUSIF replenishment may be booked over a seven-year period. Representatives from CUNA, the NCUA, and other industry groups also discussed the corporate credit union stabilization plan in a hearing before the House Financial Services subcommittee on financial institutions and consumer credit. President Obama will have more on his desk by Memorial Day, as the House today voted 361 to 64 to approve H.R. 627, the Credit Cardholders' Bill of Rights. Once enacted, the bill will rein in many abusive or deceptive credit card practices.

Inside Washington (05/20/2009)

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* WASHINGTON (5/21/09)--The Federal Reserve Board could respond the week of June 8 to bankers’ requests to repay Troubled Asset Relief Program funds (American Banker May 20). Regulators intend to make announcements each month on requests from the nation’s 19 biggest banks on repayments. Because of discussions on the approval procedures, it may be about three weeks before Morgan Stanley, Goldman Sachs Group Inc. and JPMorgan Chase and Co. receive answers to their applications to refund $45 billion of government funds ... * WASHINGTON (5/21/09)--Legacy assets will be included in the Term Asset-Backed Securities Loan Facility (TALF), the Federal Reserve Board said Tuesday. It also said it expanded the number of rating companies that can rate assets for TALF (American Banker May 20). The inclusion of older securities was determined after investors were disappointed with a May 1 announcement that TALF only would include new commercial mortgage-backed securities. Investors will have until late July to apply for loans to buy commercial mortgage-backed securities ... * WASHINGTON (5/21/09)--The nation’s largest banks have bolstered their balance sheets by $56 billion since financial stress tests were unveiled several weeks ago, said Treasury Secretary Timothy Geithner. He testified before the Senate Banking Committee this week in Washington. About $48 billion of the funds comes from the 10 banks that needed to boost their capital levels, he said (The New York Times May 21). Geithner also said there are indications that the financial system is starting to “heal.” The lending markets are stabilizing and interest rates that businesses pay to raise money from bond buyers have fallen. Geithner also updated the committee on the $700 billion government bailout fund. Less than $100 billion fund remains. The government anticipates receiving $25 billion in repayments, he said ... * WASHINGTON (5/21/09)--Securities and Exchange Commission (SEC) Chairman Mary Schapiro does not support a plan proposed by President Barack Obama to create a new financial watchdog. The watchdog would reduce SEC’s powers and damage investors’ government protection, she said (The Associated Press May 20). The Obama administration is expected to release details about its plan in the next few weeks as it attempts to reform the nation’s financial regulatory system. Some industry groups have already said they oppose the plan. Earlier this year, Sens. Richard Durbin (D-Ill.), Edward Kennedy (D-Mass.) and Charles Schumer (D-N.Y.) introduced a bill that would create a commission to oversee consumer products. Elizabeth Warren, who oversees the Congressional Oversight Panel, also supports a commission approach. Creating a commission could involve the combining of several federal agencies and their powers ... * WASHINGTON (5/21/09)--The Federal Housing Finance Agency (FHFA) was awarded with a Certificate of Excellence in Accountability Reporting (CEAR) for its 2008 Performance and Accountability Report. The report combined information from the former Office of Federal Housing Enterprise Oversight (OFHEO), the former Federal Housing Finance Board (FHFB) and the FHFA. The agency was one of 17 to receive the award from the Association of Government Accountants (AGA). The FHFA, which supplanted OFHEO and the FHFB, was created July 30 under the Housing and Economic Recovery Act of 2008 ...

CUNA urges Congress to address CU capital

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WASHINGTON (5/21/09)—Just hours before a bill with corporate credit union stabilization provisions was signed into law, representatives from the Credit Union National Association (CUNA) and the National Credit Union Administration (NCUA) joined other industry groups to testify Wednesday on a broad slate of natural person and corporate credit union issues. At the hearing conducted by the House Financial Services
Click to view larger image Bill Lavage, president/CEO of Service 1st FCU, Danville, Pa., testified on CUNA’s behalf that "the capital of some credit unions is being wiped out on the basis of estimates.” CUNA Chief Economist Bill Hampel is seated behind Lavage.(CUNA photo)
“ subcommittee on financial institutions and consumer credit, Bill Lavage, president/CEO of Service 1st FCU, Danville, Pa., testified on CUNA’s behalf that "the capital of some credit unions is being wiped out on the basis of estimates.” The NCUA’s current corporate credit union stabilization plan calls for a $1 billion infusion and estimates that a further $3.7 billion would be needed to guarantee current corporate credit union deposits. Under this plan, the NCUA estimates that it would require $5.9 billion in total funds to restore the National Credit Union Share Insurance Fund to its normal operating equity ratio level of 1.3%. “We need a mechanism [so that] if the estimates are wrong, the capital can be returned [to credit unions]," Lavage urged the subcommittee. The hearing, which centered on the NCUA’s corporate credit union stabilization plan, was also attended by representatives from the National Association of State Credit Union Supervisors and the National Association of Federal Credit Unions. Although the original goal of the hearing was to discuss H.R. 2351, the Credit Union Share Insurance Stabilization Act, many of the details addressed by that bill were included in S. 896, the Helping Families Save Their Homes Act, which President Barack Obama signed into law yesterday. (See related story: President's pen turns corporate stabilization bill into law) Therefore, the focus of the hearings “shifted to ensuring the efficient implementation” of the corporate stabilization plans, Rep. Paul Kanjorski (D-Pa.) explained in his opening statement. Regarding the NCUA estimated shortfall, the agency based its $5.9 billion share insurance deficit on estimates by the Pacific Investment Management Company, LLC that predicted that corporate credit unions would lose as much as $16 billion on some securities investments. However, more recent estimates have predicted a lower total, which could change the total needed to replenish the share insurance fund. Lavage asked the NCUA to provide greater detail regarding the underlying assumptions used to arrive at these numbers. As it reacts in the aftermath of the current economic downturn, NCUA Chairman Michael Fryzel testified that pending NCUA regulations could limit the types of investments that corporate credit unions are allowed to take part in to help avoid potentially dangerous economic situations in the future. The NCUA could also investigate the investments of corporate credit unions to ensure that their investment profiles are substantially diversified, he added. Rep. Brad Sherman (D-Calif.) during the hearing stated that he’d support allowing credit unions to issue alternative capital, a move that would free up credit unions to grant more loans to their members. Credit unions could also be permitted to issue subordinated debt at zero risk or cost to the government, Sherman added.

Financial crimes enforcement bill awaits signing

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WASHINGTON (5/21/09)—The Fraud Enforcement and Recovery Act of 2009 cleared both the House and Senate this week and has been sent to the White House to await the president’s signature. The measure, known as FERA, amends the federal criminal code and expands its definition of “financial institution” to include “a mortgage lending business or any person or entity that makes, in whole or in part, a federally related mortgage loan.” If signed into law, the act will:
* Extend the prohibition against making false statements in a mortgage application to employees and agents of a mortgage lending business; * Apply a prohibition against defrauding the federal government to fraudulent activities involving the Troubled Assets Relief Program (TARP) or a federal economic stimulus, recovery, or rescue plan; * Expand securities fraud provisions to cover fraud involving options and futures in commodities; and * Expand the concept of monetary proceeds, for purposes of enforcing prohibitions against money laundering, to include gross receipts.
The legislation also would create an independent commission charged with studying the causes of the country’s current financial crisis. Use the resource link below to read more of the bill’s provisions.

Next Treasury Fin Lit meeting is May 27

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WASHINGTON (5/21/09)-- The U.S. Treasury Department announced this week that the next open meeting of its Financial Literacy and Education Commission (FLEC) will be held May 27. FLEC is a 20-agency commission lead by the U.S. Treasury Secretary. It was created by Congress in 2003 to create a national strategy for financial education and the National Credit Union Administration (NCUA) is represented among its members. An agenda for the meeting next week has not yet been made public, but Treasury did supply details in its Federal Registerdocument published Wednesday of how to register to attend the meeting. It is to be held in the Cash Room at the Treasury Building. Use the resource link below to access the Federal Register announcement.