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Inside Washington (06/12/2008)

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* WASHINGTON (6/13/08)--Loan modifications have been overstated, said Comptroller of the Currency John Dugan in a speech in New York this week. The loan modification data hasn’t undergone consistency and completeness checks, which raises questions about the data’s precision, he said (American Banker June 12). Dugan is the first regulator to question the loan reporting efforts, which are managed by the Hope Now alliance. The group said more than one million borrowers’ loans were modified between October 2007 and March 2008. The Office of the Comptroller of the Currency (OCC) said Wednesday only 167,000 had been helped during the same time period. The OCC’s data come from reports conducted by nine banks, which hold 25% of outstanding subprime mortgages and 40% of outstanding mortgages. Hope Now represents 90% of the subprime industry. Hope Now’s executive director, Faith Schwartz, has defended her organization’s data ... * WASHINGTON (6/13/08)--Rep. Patrick McHenry (R-N.C.) has introduced the Credit Rating Agency Transparency and Disclosure Act. “The housing market exposed dangerous weaknesses in the credit rating industry, demonstrating a clear need for reform,” he said in a statement. Specifically, the bill would: ensure that issuers and originators are providing credit rating agencies with adequate information on the assets underlying a structured security; require credit rating agencies to institute procedures for gathering data from issuers and originators concerning the procedures employed to attest to the data’s veracity and the fraud detection capabilities surrounding the process; and require credit rating agencies to disclose in a central database the historical default rates of all classes of financial products they have rated ... * WASHINGTON (6/13/08)--Sen. Joseph Lieberman (I-Conn.) is looking to propose legislation to ban institutional investors from commodity markets (The New York Times June 12). The senator is on the Senate Homeland Security and Governmental Affairs Committee, which is planning a hearing June 24 to discuss whether the price of fuel and crops is being affected by financial speculation. Sen. Jack Reed (D-R.I.) and Carl Levin (D-Mich.) also have requested a task force to see if deceptive practices are fueling energy prices--a request that was approved by the Bush administration ...

MBLs focus of NCUA board meeting

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ALEXANDRIA, Va. (6/13/08)—The National Credit Union Administration (NCUA) announced its board meeting agenda for Thursday, June 19, and its one item is an Advanced Notice of Proposed Rulemaking regarding member business loans, Part 723 of the federal regulator’s rules and regulations. The agency is expected to ask for comment on whether the NCUA should revise such things as loan-to-value rules and waiver requirements. As usual, the meeting will be held at the agency headquarters here at 10 a.m. A closed board meeting will follow.

House panel to look at financial market reg restructuring

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WASHINGTON (6/13/08)--House Financial Services Committee Chairman Barney Frank (D-Mass.) announced Thursday that the committee will conduct a series of hearings to study policy implications of financial market regulatory restructuring. Starting in July, the committee intends to examine the regulatory implications of the rescue of Bear Stearns through the intervention by the Federal Reserve. Throughout the fall, subsequent hearings are being planned to examine, in light of the collapse of Bear Stearns, the ability of the regulatory structure to assess and mitigate systemic risk in order to avoid a similar or more serious crisis in the future, according to a committee release. “As the extraordinary measures utilized to respond to the Bear Sterns crisis demonstrated, we have failed to develop a regulatory system with the reach and capacity to protect the system against the large risks embedded in our increasingly interconnected markets. These hearings are designed to focus on identifying how much reach and what new capacities are needed to avoid – or respond to – the next crisis,” said Frank. Ryan Donovan, vice president of legislative affairs for the Credit Union National Association, said Thursday, "We don't expect any legislative action on this issue in the near term, but will be following all of these hearings closely.” He added, “I think that part of the reason Chairman Frank is going hold these hearings this summer is precisely because there is not enough time to do anything as significant as regulatory restructuring before the end of the year. There is a lot of time for these issues to be studied." The House panel intends to invite the following witnesses: U.S. Treasury Department Secretary Henry Paulson, Federal Reserve Chairman Ben S. Bernanke, New York Federal Reserve President Timothy Geithner, Securities and Exchange Commission Chairman Christopher Cox, other federal regulators, academics, economists. Frank said his committee will also invite witnesses who are “market participants who can address the current state of America’s and other jurisdictions financial regulatory system and can testify on how best to measure and limit risk without stifling innovations and improve market liquidity and breadth.”

State regulators oppose blueprints exec order

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WASHINGTON (6/13/08)—State financial regulators told President George W. Bush this week that an Executive Order proposed in the U.S. Treasury’s Blueprint for a Modernized Financial Regulatory Structure would diminish the interagency regulatory cooperation provided through the Federal Financial Institutions Examination Council (FFIEC). The result of the Executive Order, which would expand the scope and authority of the President’s Group on Financial Markets, would be to circumvent congressional intent that established FFIEC as the primary forum for interagency coordination, the regulators said in a joint letter to the President. The letter was signed by the he National Association of State Credit Union Supervisors, the American Council of State Savings Supervisors, and the Conference of State Bank Supervisors. The three organizations have representatives on FFIEC’s State Liaison Committee. “The Congress has organized the FFIEC as the proper mechanism for financial policy coordination and interagency regulatory cooperation. The FFIEC is best positioned to draw upon federal and state expertise to enhance financial market integrity as it pertains to depository institutions,” NASCUS Chairman George Reynolds and his bank and thrift counterparts wrote. The letter added, “An expanded and broader role for the President’s Working Group will make the FFIEC irrelevant, as policy development shifts to the purview of the Treasury Department. While greater coordination is needed to enhance market stability, we believe the solution lies in enhancing the strengths of our existing model of federalism, as created by the Constitution of the United States, and preserved by Congress in the centuries that have followed.” The Credit Union National Association (CUNA) has lobbied against the Treasury blueprint since it was released March 31. CUNA charges that the Treasury plan would essentially eliminate credit unions if its long-term recommendations were put into place and is completely counter to the Bush administration’s long-standing support of the credit union movement. In April, the chairman of the House Financial Services Committee and a high-ranking Republican member of that panel each sent credit unions their assurances that the U.S. Congress values the unique role of financial services cooperatives. Chairman Barney Frank (D-Mass.), in a letter to CUNA, wrote that the Congress appreciates the role credit unions play in the country's financial services system. Frank acknowledged CUNA's concerns regarding the devastating affect the Treasury proposal could have on credit unions and said that any proposal to do away with credit unions is a proposal that will go nowhere. Rep. Ron Paul of Texas, who is the ranking member on the House Financial Services subcommittee on domestic and international monetary policy, trade, and technology, wrote similar assurances to the Texas CU League.