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Inside Washington (06/17/2011)

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* WASHINGTON (6/20/11)--Federal Reserve Chairman Ben Bernanke will appear before the House Financial Services Committee at 10 a.m. (ET) July 13 to deliver the semiannual Monetary Policy Report to the Congress. The Federal Reserve reports to the committee twice a year on the conduct of monetary policy and the state of the economy. The Federal Reserve is primarily responsible for formulating the nation’s monetary policy to maintain economic and price stability and maximum employment … * WASHINGTON (6/20/11)--Sen. Olympia Snowe (R-Maine) called for the Small Business Administration (SBA) to correct processing errors that resulted in millions of dollars in overpayments on loan guarantees in 2007. About 27% of 2007 loan guarantee payments were incorrect, resulting in a total of $234 million in overpayments, according to an inspector general’s report (American Banker June 17). Snowe called on the SBA to develop a standardized process to correct the errors “without delay” during a Senate Small Business Committee hearing on waste and fraud in SBA programs. The SBA is conducting a joint review with the inspector general to determine the exact number of overpayments in 2007, according to SBA administrator Karen Mills. But delays could prevent overpayments from being determined in fiscal year 2010, said SBA Inspector General Peggy Gustafson. Snowe and Sen. Chuck Grassley (R-Iowa) sent a letter Wednesday to the Department of Justice asking why 17 cases of fraud and abuse determined by the SBA inspector general have not been prosecuted … * WASHINGTON (6/20/11)--Fears that Dodd-Frank Act requirements and strict international capital and liquidity rules are driving financial institutions overseas resurfaced during a House Financial Services Committee hearing Thursday. Rep. Shelley Moore Capito (R-W.Va.) expressed concern that the costs related to Dodd-Frank compliance could lead to job losses and damage U.S. standing as a global financial center (American Banker June 17). While there is consensus that capital and liquidity standards were largely inadequate prior to the financial crisis, the impact of raising capital standards under Basel III remains to be seen, said Rep. Jeb Hensarling (R-Texas). Lael Brainard, undersecretary of the Treasury for international affairs, said the U.S. is still moving from a position of strength and the rest of world would follow the higher standards …

Tenn. individual banned from CU work

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ALEXANDRIA, Va. (6/20/11)--A former employee of Fort Campbell FCU, Clarksville, Tenn., has been banned by the National Credit Union Administration (NCUA) from an future participation in the affairs of any federally insured financial institutions. The NCUA Friday announced a prohibition order against Aimee Rattiff, who, the NCUA noted, was convicted of theft of property. Rattiff was sentenced to probation, ordered to perform 150 hours of public service work and to pay $4,200 in restitution. Violation of a prohibition order is a felony offense punishable by imprisonment and a fine of up to $1 million. Back in 2008, a Fort Campbell car loan program designed to finance cars for soldiers and their families was defrauded by 11 individuals who pleaded guilty to fraudulently obtaining almost $84,000 in car loans. The fraud reportedly involved fake identifications and Social Security numbers, false statements on loan applications, and reporting incorrect amounts of down payments to the auto dealership.

CUNA launches CompBlog today

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WASHINGTON (6/20/11)--“CompBlog,” the Credit Union National Association new compliance issues blog, is being launched today as part of a continuing effort to keep apace with the challenges that face credit unions every day. “Credit union compliance challenges continue to arise at a record pace, and we wanted to move to a format that addresses questions at the same rate of speed,” said Valerie Moss, CUNA’s director of compliance information. CUNA’s CompBlog combines the information that credit unions haverelied on for years in CUNA’s Compliance Challenge with content previously found in its popular “What’s New in Compliance”--and serves it up in a timely delivery format. CUNA published its last monthly Compliance Challenge newsletter last month. “With CompBlog, users have all they need on one site to monitor the latest regulatory developments,” said Moss. “The goal is to make this new site a user-friendly destination that credit union compliance professionals find helpful in their daily quest to stay in compliance with the ever-increasing list federal rules and regulations.” CompBlog readers can send comments and questions to CUNA’s compliance department staff (via cucomply@cuna.com), and keep the conversation going with their peers on COBWEB, CUNA’s popular compliance listserv. “We look forward to comments and suggestions from readers on what we can do to best serve their needs,” said Moss. “Working in close partnership with the leagues, CUNA’s mission remains to provide member credit unions with timely and helpful regulatory compliance information.” Visit CUNA’s CompBlog at www.cuna.org, and click on “Regulations & Compliance.”

CUNA backs NCUSIF reserve level review

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ALEXANDRIA, Va. (6/20/11)—The Credit Union National Association (CUNA) has commended National Credit Union Administration (NCUA) board member Gigi Hyland’s suggestion that the agency consider lowering the reserve levels of its National Credit Union Share Insurance Fund. CUNA suggested that any money that is no longer needed for NCUSIF reserve purposes should be transferred to the agency’s Temporary Corporate Credit Union Stabilization Fund. Doing so would reduce corporate assessments that are charged to credit unions, CUNA added. Hyland raised the issue during Friday’s NCUA June open board meeting. The NCUSIF reserves currently stand at $1.2 billion. The NCUA’s Office of Examination and Insurance is currently analyzing the NCUSIF’s reserve levels, and that will complete that analysis by the end of June. The monthly insurance fund report, which was released during Friday’s meeting, noted that the TCCUSF brought in $7.5 million in earned revenues and $447,850 in operating expenses during May, resulting in a surplus of more than $7 million. CAMEL Code credit unions accounted for 22% of total insured shares during May, and the NCUA reported that there were 377 CAMEL 4 and 5 credit unions and 1,791 CAMEL 3 credit unions. CAMEL 4 and 5 credit unions held $36 billion in shares and CAMEL 3 credit unions held $130 billion in shares during that month. For more on the NCUA board meeting, use the resource link.

NCUA may alter CU derivative investment rules

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ALEXANDRIA, Va. (6/20/11)--The National Credit Union Administration (NCUA) is considering broadening rules that allow certain credit unions to hedge interest rates by investing in some forms of derivatives, and is accepting public comment on this action. The agency currently allows only institutions that were approved under its own investment pilot program that was established in 1999 to take part in derivatives transactions. These transactions typically involve interest rate swaps and caps to hedge interest rate risk on fixed-rate investments such as mortgages. Using interest rate swaps and caps in this manner can effectively convert a fixed-rate loan into a variable-rate loan for the duration of the swap or cap contract. The NCUA is accepting comment on whether it should consider allowing credit unions to be approved to use derivatives -- such as interest-rate swaps -- on a case-by-case basis, allowing credit unions to invest via third parties, or invest independently in derivatives. The agency is also considering canceling its existing credit union derivatives investment program altogether. Comments on how best to regulate any credit union derivative activity will also be accepted. Under the NCUA’s pilot investment program, credit unions that invest in derivatives must have a minimum net worth ratio of 7% and to have positive earnings for the past 12 months. Eligible credit unions must also review each transaction before it is made, and affirm that the transaction is being made to address interest rate risk only. Periodic reviews of the status of the investment, and the credit unions own financials, are also required. A credit union must also ensure that its own accounting policies and procedures are suitable for derivative transactions before it may proceed. The agency also requires specific internal controls. The NCUA will accept comment on its advanced notice of proposed rulemaking for 60 days after it is published in the Federal Register. The recently issued “golden parachute” prohibition was also addressed during the meeting, with the NCUA issuing a technical change that specifies that 457(b) tax free deferred compensation plans, but not other types of 457 plans, are among employee payment options that are protected from regulator scrutiny. The agency noted, however that other types of 457 plans, such as 457(f) plans, can often fall within a different exemption depending on the applicable facts and circumstances. The prohibition, which prevents credit unions from offering high value payments to departing executives of troubled credit unions, does not apply to qualified pension plans, "bona fide" deferred compensation, and some other types of employee benefits and severance agreements. The NCUA also made final rules that will permit federal credit unions to use "statistically valid" random samples of member income data to prove their low-income status to the agency. The low-income and golden parachute releases will remain out for public comment for 30 days. For more on the NCUA meeting, use the resource links.