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Inside Washington (06/02/2009)

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* WASHINGTON (6/3/09)--A long-term debate about what should be done with Fannie Mae and Freddie Mac will likely resurface during a House Financial Services Committee capital markets subcommittee hearing scheduled for today with group members expected to consider whether to privatize or nationalize the enterprises. The government is currently using the enterprises to put liquidity back into the mortgage markets to stem the housing crisis (American Banker June 2). The debate could be partisan, as many Republicans want the two to be included in regulatory overhaul of the financial system. However, Democrats traditionally have opposed privatization and perceive Fannie and Freddie as vital to promoting affordable housing. Rep. Paul Kanjorski (D-Pa.) also said that lawmakers would look at extending the Treasury’s ability to purchase debt from the Fannie, Freddie or securities. The Treasury’s purchasing power will expire at the end of the year. Regardless of the direction lawmakers take, financial industry observers expect they will try not to disrupt the markets ... * WASHINGTON (6/3/09)--Just as the Federal Reserve Board Monday released payback criteria for financial institutions that received Troubled Asset Relief Program (TARP) money, several banks have said they plan to exit TARP soon. JPMorgan Chase and Co., which was not required to raise additional money after undergoing stress tests this spring, plans to raise $5 billion in capital to help repay $25 billion it received from the government last year (American Banker June 2). Banks that repay TARP must show they can issue debt not guaranteed by the Federal Deposit Insurance Corp. and that they can access public equity markets. JPMorgan said it has been able to pay back the funds for a long time without accessing public markets ...

HUD scraps paper begins online reporting for FHA lenders

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WASHINGTON (6/3/09)—The U.S. Department of Housing and Urban Development (HUD) has announced that it will change the way that all renewing Federal Housing Authority (FHA)-approved lenders inform HUD of any relevant business changes; HUD is replacing the paper version of its annual verification reports with an electronic certification process. That process will be completed via the FHA connection website. The new online-only disclosures, which HUD believes will strengthen its controls, may only be completed by “corporate officers and principal owners” with the appropriate authority. HUD has asked that all approved lenders confirm that their institutions are properly presented on the FHA connection site. Any errors in this information, including inaccuracies related to the company’s corporate officers or home and branch offices, should be corrected as soon as possible. For access to the full HUD letter, use the resource link below.

Fed Reg D changes open access to EBAs

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WASHINGTON (6/3/09)—The Federal Reserve Board has amended Regulation D, which addresses reserve and reporting requirements for credit unions, banks and thrifts, by directing federal reserve banks to pay interest on certain balances held by or on behalf of depository institutions and allowing for the establishment of excess balance accounts at reserve banks. Under the rule, required reserve balances that are maintained by depository institutions that are not eligible to earn interest themselves on behalf of an eligible institution (a respondent), will accrue interest--which must then be passed back to the respondent. However, excess balances that are maintained by "ineligible" correspondents on behalf of a respondent will not earn interest. Once effective, the changes to Regulation D will also allow depository institutions, including credit unions, to establish limited-purpose “excess balance accounts." Such accounts will allow depository institutions to earn interest on excess balances held at reserve banks, including those institutions which maintain excess balances via an "ineligible" correspondent. The rule will become effective on July 2, 2009. The Fed has said that it plans to reexamine the continuing need for EBAs once financial markets have stabilized. For more on the final rule, use the resource link below.

CUNA FinCEN should streamline suspicious activity reports

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WASHINGTON (6/3/09)—The Credit Union National Association (CUNA) has asked the Financial Crimes Enforcement Network (FinCEN) to streamline the process by which financial institutions submit their suspicious activity reports. FinCEN and federal banmking authorities are currently planning to reissue an unchanged version of the suspicious activity report for depository institutions (SAR-DI). In a letter sent to FinCEN on Monday, CUNA responded to a call for comments by suggesting that FinCEN change SAR-DI to allow financial institutions to file only newly uncovered information in their periodical reports. Portions of the SAR-DI form that are redundant could simply be cross-referenced with an earlier filing, thus saving the financial institution from having to replicate the entire form for each new filing, CUNA suggested. CUNA also advocated allowing SAR-DI filings to follow a format similar to that of Currency Transaction Reports (CTR). Currently, financial institutions filing a CTR are allowed to attach copies of previously filed information to the new information contained on a separate form. FinCEN should also provide “additional narrative and suspect pages” in its SAR-DI forms, CUNA added. Additionally, CUNA suggested extending the repetitive filing threshold beyond the current 90 day schedule, as such a move would “lessen the burden of these filings on financial institutions.”

CUNA urges quick consideration of Matz nomination

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ALEXANDRIA, Va. (6/3/09)—The Credit Union National Association (CUNA) Tuesday urged the Senate to move quickly on the nomination of Deborah Matz to the National Credit Union Administration (NCUA) board. The NCUA announced Tuesday that President Barack Obama had officially nominated Deborah Matz on June 1. The president had announced his intention to do so, and to designate Matz as chairman, on May 21. CUNA President/CEO Dan Mica thanked the Obama administration for moving quickly to formalize the nomination. Mica said that fast action will ensure continued leadership on the NCUA board with a full complement of three members. “We urge the Senate Banking Committee to reflect the swiftness with which the administration has acted and consider Ms. Matz’s nomination as soon as is possible.” He added that CUNA hoped a speedy turn around by the committee would lead to timely Senate action on Matz’ confirmation to the post. Matz would fill a vacancy that will be created by the exit of NCUA Vice Chairman Rodney Hood, whose termed expired in April. The two remaining board members are current Chairman Michael Fryzel, who took the position in August 2008 and whose term extends in to 2013, and Gigi Hyland, confirmed at the same time as Hood, and whose term ends in 2011. Hood issued a statement after the NCUA announced Matz's formal nomination and said he believes Matz will “serve the agency very well and be a strong chairman representing the best interests of America’s credit unions.” He praised he for keeping open lines of communication and added Matz “has the leadership, knowledge and industry experience necessary for these difficult times that credit unions are facing.”