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Inside Washington (05/04/2009)

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* WASHINGTON (5/5/09)--Stress-test results for 19 of the nation’s largest banks have been pushed back until Thursday, federal regulators said (CNNMoney.com). The results are expected to come in Thursday afternoon. The delay was triggered by a disagreement among some banks over the results of the tests. Last Friday, regulators began notifying participating institutions of the results, according to Austan Goolsbee, an economic adviser for President Barack Obama. Goolsbee emphasized that the tests were not pass/fail. Instead, the tests were designed to determine each institution’s health and need for additional capital ... * WASHINGTON (5/5/09)--The failure of Silverton Bank of Atlanta could lead to more scrutiny of the Office of the Comptroller of the Currency and its decision to allow the institution to convert to a national bank (American Banker May 4). The OCC said Friday that the institution had a business plan that the agency thought was workable and that the bank was supervised. Silverton failed on Friday, leaving behind 1,000 customers and 400 stockholders. Its operations had been folded into a bridge bank by the Federal Deposit Insurance Corp. ... * WASHINGTON (5/5/09)--Federal Deposit Insurance Corp. (FDIC) Chairman Sheila Bair said Monday that Michael Bradfield will be the agency’s new general counsel. As general counsel, Bradfield will oversee the legal division, which is responsible for legal work on regulatory issues, FDIC transactions, litigation, corporate and commercial claims. Bradfield formerly served as general counsel for the Federal Reserve Board ...

House members promise action on bill with NCUA stabilization plan

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WASHINGTON (5/5/09)--House financial leaders, including Rep. Barney Frank (D-Mass.), have promised to act quickly on H.R. 1106, Helping Families Save Their Homes Act, once the bill returns to the House. The Senate was expected to vote on its version of the bill, S. 896, late last week, but Senate Banking Committee Chairman Christopher Dodd (D-Conn.) on Friday elected to push the vote back. The Senate is expected to vote on the bill starting today. In a recent letter to Dodd, Rep. Frank, along with cosigners Paul Kanjorski (D-Pa.) and Luis Gutierrez (D.-Ill.), supported Dodd’s efforts to include the temporary corporate credit union stabilization fund as part of H.R. 1106. The stabilization legislation, introduced by the National Credit Union Administration (NCUA), would enable credit unions to spread the cost of National Credit Union Share Insurance Fund (NCUSIF) replenishment over a longer period of time. According to the letter, credit unions would pay a 99 basis point charge for every $100 in deposits if the current law is not changed. This one-time charge could cause an estimated two-thirds of credit unions to report negative earnings for 2009 and could harm 225 federally-insured credit unions that would fall below the necessary level of capitalization. Rep. Kanjorski plans to introduce NCUA’s stabilization plan to the House “in the very near future.” Rep. Gutierrez, who currently chairs the House Financial subcommittee on financial institutions and consumer credit, also plans to have his subcommittee review the proposal before the end of the month. Gutierrez will also discuss potential changes to NCUA’s regulation of corporate credit unions, the letter added.

Instead of CRA make banks more like CUs federation says

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WASHINGTON (5/5/09)—The head of the National Federation of Community Development Credit Unions reiterated the group’s long-held position that Community Reinvestment Act (CRA) requirements are unnecessary for credit unions, in response to a recent blog posting. The federation was established in 1974 to represent credit unions with a specialized mission of serving low- and moderate-income people and communities. Executive Director Clifford Rosenthal highlighted in his comments that credit unions last year, despite the unprecedented crisis that rocked the financial system, “actually increased their mortgage lending and auto lending, while banks (freeze) out millions of Americans.” An earlier blog posting had alleged that a fear of CRA was a primary factor in credit unions not taking federal funds, like the Troubled Asset Relief Program (TARP) funds being poured into banks. Rosenthal noted that credit unions were split over the issue of federal funds, but he emphasized that CRA was “very much a subordinate concern.” More key to the debate, he said, were credit union concerns about increased federal taxes, as well as the pride the credit union movement takes in never having taken taxpayer funds in the past. He noted that the federation was on the side of credit unions who worked to be included as eligible for federal funds. Rosenthal also pointed out the credit union movement was itself bearing the cost of the National Credit Union Administration’s (NCUA’s) corporate credit union stabilization efforts. Even with legislation currently being considered to allow the cost to credit unions to be spread out over time, the “burden” is borne by credit unions. Responding to the blog post's question of how the federation can support CRA in general but not for credit unions, Rosenthal stated, "If the goal is to achieve a kind of parity or symmetry between banks and credit unions, I would suggest a far better solution would be to make banks more like credit unions." Such parity, he explained, would entail a system where all banks were not-for-profit, transparent, locally controlled, directly accountable to those they serve, steered by democratically elected boards, limited in the compensation of senior management, focused on providing small, unsecured credit on affordable terms, and lending 70% or more of their assets back to their customers. "These are the basic characteristics of credit unions in the United States," he added.

Card bill brings usury ceiling interchange concerns CUNA

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WASHINGTON (5/5/09)—When the Senate completes consideration of S. 896, the Helping Families Save Their Homes Act, that body is expected to proceed to consideration of S. 414, the Credit Card Accountability, Responsibility and Disclosure Act (CARD Act), according to the Credit Union National Association (CUNA). Ryan Donovan, CUNA vice president of legislative affairs, noted Monday that CUNA will be closely monitoring the credit card bill’s progress for a number of reasons. First, he said, is CUNA’s concern that there is a balance to the bill that avoids unintended consequences that ultimately would be adverse to consumers, including making credit more expensive and less available for consumers. CUNA generally supported a version of the bill approved in April by the House Financial Services Committee because it closely mirrored new regulations credit unions will have to follow beginning July 2010. Donovan said CUNA could have concerns with any legislation that goes further than the new rules. “Additionally, we are concerned that amendments related to the regulation of interchange fees and imposing a national usury ceiling may be offered as the bill is being considered,” Donovan said. “We strongly oppose all amendments related to the regulation of interchange fees; and we also oppose the usury ceiling legislation that could be offered as an amendment,” Donovan said.

Fryzel encourages dialogue with NCUA CUs on corporates

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ALEXANDRIA, Va. (5/5/09)--National Credit Union Administration (NCUA) Chairman Michael Fryzel encouraged credit unions to continue dialogue with NCUA on reforms to the corporate system. Credit unions can take the challenges presented by market turmoil and turn them into an opportunity to “revamp, refine and improve the forms and functions of corporate credit unions,” Fryzel said in a speech to 150 credit union officials during the Illinois Credit Union System’s Governmental Affairs and Legislative Day in Springfield, Ill. NCUA’s Corporate Stabilization Plan is pending Congressional approval. The plan is an “immediate priority,” according to Fryzel. The goal is to create an improved corporate credit union system that can meet the needs of credit unions and their members, he said. Noting that he has repeatedly expressed his intention to preserve the safety and soundness of credit unions, Fryzel said: “NCUA’s recent actions have instilled confidence in a corporate network that has experienced considerable stress. Credit unions should be reassured by this and should know that, working cooperatively; credit unions can not only deal with problems, but also emerge a stronger and more valuable asset to America’s consumers.”