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Inside Washington (06/10/2010)

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* WASHINGTON (6/11/10)--The Latino community “needs credit unions that understand and serve their unique needs,” said National Credit Union Administration (NCUA) board member Gigi Hyland at the National Federal of Community Development Credit Unions’ Latino Credit Union Conference in Pittsburgh. She encouraged credit unions to continue their commitment to innovative outreach. “Part of your continuing challenge is to earn and maintain the trust” of the Latino communities served by Latino-focused credit unions, she said. Hyland also discussed NCUA initiatives to recognize the unique role that Latino, other community and low-income credit unions can play. Specifically, she addressed the recent NCUA supervisory letter on low-income credit unions and community development credit unions, NCUA’s proposal on small dollar loans, its Community Development Capital Initiative and member business lending. “Many of your efforts have focused on financial education and serving community members with the products they need,” she said. From NCUA’s perspective, “I’ve been firmly committed to trying to improve the dialogue between examiners, low-income credit unions and community development credit unions” ... * WASHINGTON (6/11/10)--A provision by Sen. Susan Collins (R-Maine) in the Senate version of the reform bill could have banks flooding capital markets or pursuing preferred-to-common stock conversions, said American Banker (June 10). Collins’ amendment would no longer allow bank securities held by the Treasury through the Troubled Asset Relief Program to count toward a banking company’s Tier 1 capital. D. Barry Hester, a lawyer for Bryan Cave, said the provision would mean a number of banks would be considered undercapitalized. Michael Iannaccone, president of MDI Investments Inc., said 350 banking companies could be forced to raise more capital. Sheila Bair, chairman of the Federal Deposit Insurance Corp., supports the amendment. The amendment is critical to ensure that financial institutions hold enough capital to absorb losses during financial stress, Bair has said in a letter to Collins ... * WASHINGTON (6/11/10)--A report is expected to be released today by the Treasury Department indicating how many banks in the Troubled Asset Relief Program (TARP) have missed six dividend payments to the government (American Banker June 10). Banks in TARP must pay a 5% quarterly dividend to the government until the funds are repaid. About 74 banks have deferred at least one payment, while a dozen banks have missed four payments, according to a March Treasury report. Today’s report will show how many missed the latest payment on May 17 ... * WASHINGTON (6/11/10)--The House was expected to pass a bill Thursday to recapitalize the Federal Housing Administration (FHA) by allowing it to raise borrowers’ annual premiums. The agency has backed an increasing number of loans during the financial crisis--about 30% of all new mortgages in 2009 and 20% of refinancings. But the losses have drained its capital reserves. The Mutual Mortgage Insurance Fund has a capital ratio of 0.53%, below the minimum 2%. The bill, introduced by Rep. Maxine Waters (D-Calif.), would allow FHA to raise its premium to 1.55% from the current cap of 0.55%. FHA said it would not immediately raise the premium--rather, it would charge an annual rate of 0.90% for borrowers who make downpayments of 5% or less, and 0.85% for borrowers with bigger downpayments ... * WASHINGTON (6/11/10)--Senate Banking Committee Chairman Christopher Dodd (D-Conn.) has endorsed a plan that would force banks to divest their derivatives operations. The plan is championed by Sen. Blanche Lincoln (R-Ark.), who has been fighting an uphill battle to keep her provision in the regulatory reform bill (American Banker June 10). Dodd said Lincoln’s primary win this week increased the chances of the provision being included in the reform bill. Some financial observers said the derivatives issue could be addressed through changing language that would implement the Volcker Rule to ban proprietary trading. Dodd did not say if he favored the approach ...

NCUA liquidates Orange County Employees CU

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ALEXANDRIA, Va. (6/11/10)--The National Credit Union Administration (NCUA) on Thursday began the process of liquidating the $1.7 million asset Orange County Employees CU. In a release, the NCUA said that the Orange, Texas-based credit union, which served 1,000 members, was shuttered by the Texas Credit Union Department, due to its deteriorating financial condition. The assets and members of Orange County have been taken on by Orange, Texas’ Sabine FCU, which currently holds $150 million in assets from 150,000 members. Sabine’s membership is spread throughout Orange County, as well as neighboring Hardin and Jefferson Counties. Orange County is the ninth credit union to be liquidated in 2010.

CUs interchange efforts noted in iWash. Posti

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WASHINGTON (6/11/10)--As the Credit Union National Association’s (CUNA) recent Hike the Hill was wrapping up, The Washington Post noted the influence that credit union activists are having on the legislative process, reporting that “again and again, big banks have been outpaced by small-town interests, proving that even when it comes to overhauling financial regulation, politics really is local.” Hundreds of credit union activists from across the country descended on Washington this week to warn their legislators of the dire impact that changes to interchange legislation would have on their credit unions, their members, and the many nonprofit organizations that count on credit unions for their financial services. Around 400,000 credit union backers have also reached out to their respective legislators, urging them via phone and email to oppose changes to interchange legislation. The Post story noted these efforts, as well as the work of credit union backers that were “swarming Capitol Hill” to oppose interchange legislation. CUNA President/CEO Dan Mica said that the Post coverage “shows the tremendous effort by credit unions to take on this issue – even though, relatively speaking, credit unions are a small player in the entire process.” “The fact is,” Mica added, that the efforts of credit unions, credit union leagues, and credit union members “are being noticed – as they should be.” “The entire Washington community now can see for themselves what a determined credit union movement is all about,” he added. The Post story also quoted Rep. Barney Frank (D-Mass.), who currently serves as House Financial Services Committee Chairman and is one of several House members that will serve as conferees during the ongoing debate on financial regulatory reforms, which began with opening statements by both House and Senate members on Thursday. "The major influence has been legitimate grassroots networks” such as credit unions, Frank said. Credit unions and auto dealers "are the kinds of operations that have members in every district. People who get sponsored by big institutions have had very little impact," Frank told the Post.

Community charter FOM manual on NCUA slate

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WASHINGTON (6/11/10)--The National Credit Union Administration (NCUA), at its upcoming board meeting at 10 a.m. ET next Thursday, will discuss the final version of recently proposed changes to its chartering and field of membership (FOM) policies. The FOM changes, which were proposed late last year, would set objective and quantifiable criteria to determine the existence of a well-defined local community for areas that encompass multiple group areas. A new, objective definition for rural districts was also proposed at that time. The Credit Union National Association (CUNA) in comments submitted to the NCUA earlier this year opposed the proposal, recommending that the NCUA provide more leeway for applications involving multiple political jurisdictions and rural districts. CUNA also strongly opposed FOM changes that would prevent credit unions from demonstrating a community is present through the use of narrative information. Other topics of discussion will include the delegation of chartering authority and a proposed rule addressing the NCUA’s requirements for insurance, interest rate risk policies and programs. The NCUA also will discuss the accounting standards, the payment of insured shares, and assessments related to its Temporary Corporate Credit Union Stabilization Fund will have its monthly report on the status of its National Credit Union Share Insurance Fund during the meeting. During the closed portion of the meeting, the NCUA will discuss supervisory activities. For the full NCUA release, use the resource link.

NEW 85 in House sign on Dont include interchange in reg reform

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WASHINGTON (6/11/10)—In a effort coordinated by Reps. Debbie Wasserman Schultz (D-Fla.) and Kenny Marchant (R-Texas), a bi-partisan list of 85 U.S. House members have signed on in support of an effort to urge financial regulatory reform conference committee members not to include language on interchange fees in the final legislative package. Credit Union National Association (CUNA) President/CEO Dan Mica immediately commended the effort: “This letter will be crucial in building momentum among lawmakers to remove interchange from the bill. Credit unions are gravely concerned about the consequences of the interchange language, particularly its impact on their members who will face higher fees if it becomes law. “We will continue to press our concerns on Congress about the interchange language, as we did this week with 1,000 credit union activists on the Hill, and continuing contacts with Congress by credit unions nationwide – now at more than 450,000 since May 24." At issue is a late-added provision found in the Senate version of the reg reform bill that would ask the government to control interchange fees. The House version contains no interchange language. The House letter to conferees says, “This language will devastate credit unions and community banks, while providing no discernable benefits for consumers.” It underscores other concerns regarding the interchange language, and in part cites numerous articles in the national press that have “highlighted the potential unintended consequences of the interchange amendment, particularly its negative impact on consumers.” An additional concern of those 85 who signed the letter is the lack of transparency regarding the process by which the language was added to the Senate bill. “(W)e also have strong reservations about the lack of congressional review, debate or study about these provisions. The debit rate-setting provision has never been vetted by any committee in either chamber. “Furthermore, the recently completed (Government Accountability Office) report was almost exclusively dedicated to the impact of related interchange legislation on the credit card market, not the debit card market. Yet that study still concluded that ‘the costs of [credit] card acceptance might shift from merchants to card holders if interchange fees were limited.’” “We believe the GAO’s conclusion raises similar concerns about the impact of these changes on consumers of debit cards,” the coalition of lawmakers wrote. Credit union advocates in town this week for CUNA’s national grassroots campaign, launched to oppose the interchange amendment, supported the Wasserman-Schultz-Marchant effort and urged their lawmakers to sign on in support of the letter.

House Senate begin final financial reg reform debate

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WASHINGTON (6/11/10)—The bicameral debate over the final version of financial regulatory reform legislation began in earnest with opening statements on Thursday, with the discussion, which was divided along party lines, focusing mainly on the perceived causes of the financial crisis. A series of day-long sessions are scheduled to follow on June 15, 16 and 17. Negotiations will continue between June 18 and 26, with final votes tentatively set to occur between June 28 and July 2. The discussions will be aired live on C-SPAN. House leaders Nancy Pelosi (D-Calif.) and John Boehner (R-Ohio) earlier this week named their respective Democratic and Republican conferees for the inter-chamber financial regulatory reform debate. House Financial Services Committee Chairman Barney Frank (D-Mass.) joins ranking committee member Spencer Bachus (R-Ala.) and Reps. Paul Kanjorski (D-Pa.), Joe Barton (R-Texas), Maxine Waters (D-Calif.), Sam Graves (R-Mo.), Carolyn Maloney (D-N.Y.), Darrell Issa (R-Calif.), Luis Gutierrez (D-Ill.) and Frank Lucas (R-Okla.). Reps. Mel Watt (D-N.C.), Lamar Smith (R-Texas), Gregory Meeks (D-N.Y.), Ed Royce (R-Calif.), Dennis Moore (D-Kan.), Judy Biggert (R-Ill.), Mary Jo Kilroy (D-Ohio), Shelley Moore Capito (R-W.Va.), Gary Peters (D-Mich.), Jeb Hensarling (R-Texas) and Scott Garrett (R-N.J.) are also taking part in the conference committee. Select other House members from the judiciary, energy, agriculture, government reform, and small business committees will also address portions of the bill that fall under their respective committee jurisdictions. The Senate named its own list of conferees, which includes Sen. Banking Committee leaders Chris Dodd (D-Conn.) and Richard Shelby (R-Ala.), among others, last week. It is thought that the interchange amendment could be addressed by the conference committee early next week. Hundreds of credit union representatives from across the country came to Washington this week to discuss credit union concerns over interchange with their legislators. Additionally, around 400,000 credit union backers from across the country have contacted their legislators via phone calls and email to urge them to remove the Senate interchange amendment from the final version of the bill. To contact your legislators, use the resource link.