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Inside Washington (06/22/2009)

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* WASHINGTON (6/23/09)--The biggest flaw in the Obama administration’s plan to revamp the financial regulatory system may be that it doesn’t compel those overseeing the industry to use their power when problems come up, according to financial industry observers (American Banker June 22). Under the plan, federal regulators would have more power over systemically important institutions, but the plan does not say which institutions are considered important or how they should be resolved. Observers also expressed concerns that a consumer protection council to be created under the plan would have broad powers for the first few years after the financial crisis ends, but wouldn’t compel regulators to keep strict standards after the crisis has ended. Giving regulators more power is insufficient, said Sen. Richard Shelby (R-Ala.) A lot of regulators who had power didn’t use it during the crisis, he said. President Barack Obama’s plan may need an item that prevents regulators from forgetting that what goes up during economic prosperity may come down, said Gerard Comizio, partner at Paul, Hastings, Janofsky and Walker. However, Obama’s plan would create a system of checks and balances, so one regulator can be more aggressive if another pulls back, he added ... * WASHINGTON (6/23/09)--Ellen Lazar has been appointed senior adviser for consumer policy to Federal Deposit Insurance Corp. Chairman Sheila Bair. Lazar will advise the chairman on issues relating to the agency’s consumer policy and programs. Lazar was a partner at Venture Philanthropy Partners, a philanthropic organization that invests in nonprofit institutions. She previously served as senior vice president for Housing and Community Initiatives at the Fannie Mae Foundation where she was responsible for grantmaking and management of the foundation’s national, regional and Washington, D.C., offices. She also has served as executive director of the Neighborhood Reinvestment Corp. and director of the Community Development Financial Institutions Fund ...

CUNA thanks president for NCUA independence

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WASHINGTON (6/23/09)--Credit Union National Association (CUNA) President/CEO Dan Mica on Monday thanked President Barack Obama for allowing the National Credit Union Administration (NCUA) to maintain its independence under the administration’s recently proposed plan for financial regulatory reorganization. In a letter to the president, Mica said that CUNA applauded the administration for “avoiding a consolidated regulatory scheme that would supervise for-profit banks and not-for-profit credit unions in a similar manner.” Maintaining the independence of the NCUA is “one of the most significant objectives of the credit union system,” Mica added. While he acknowledged that there are still “many questions to be addressed and a number of details to be determined” regarding the administration’s proposed Consumer Financial Protection Agency, Mica said that CUNA is not simply dismissing the need for the agency. Rather, he said, CUNA is carefully reviewing the provisions for the agency. CUNA is eagerly awaiting congressional review and looks forward to discussing how “the new agency can replace and simplify regulatory requirements that interfere with credit unions' capabilities to serve their members,” Mica said.

Allison confirmed for Treasury Financial Stability post

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WASHINGTON (6/23/09)--Herbert Allison, the former Fannie Mae CEO who was nominated to run the Troubled Asset Relief Program, was confirmed last week by the U.S. Senate. As Assistant Secretary for Financial Stability, Allison is now responsible for developing and coordinating Treasury's policies on legislative and regulatory issues affecting financial stability, including overseeing the Troubled Asset Relief Program (TARP). Allison is also Counselor to Treasury Secretary Timothy Geithner. "Herb Allison has extraordinary experience strengthening American financial institutions and has demonstrated great leadership in recent months at Fannie Mae. We are pleased to have him guiding the administration's financial stability efforts here at Treasury," Geithner said when announcing the confirmation. Most recently prior to this appointment, Allison served as president/CEO of Fannie Mae. He began his career at Merrill Lynch, serving many roles over the years, which led to his ultimate election as president/COO and board member.

Fryzel NCUA committed to corporate system improvements

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ALEXANDRIA, Va. (6/23/09)--In statements released today on the National Credit Union Administration’s Web site, NCUA Chairman Michael Fryzel said that new rules governing corporate credit unions should “not only reflect the lessons learned from the current situation, but also enable NCUA, and the industry, to avoid future problems.” Speaking before the Florida CU League’s yearly convention late last week, Fryzel added that he is committed to ensuring that future corporate reforms would be “more effective at understanding and mitigating risk, while at the same time recognizing that corporates can play a useful and important role in facilitating credit union service to members.” “This rulemaking process will entail hard work, honest dialogue and difficult decisions,” Fryzel said. However, he is “confident” that the rulemaking process would result in a “better corporate network.” The NCUA recently addressed other issues in the corporate credit union system by approving the corporate credit union stabilization plan at its monthly board meeting, which was held last Thursday. During the meeting, the NCUA board agreed to immediately borrow $1 billion of the total $6 billion offered by the U.S. Treasury to shore up the corporate credit union system. The $1 billion in borrowed funds would be used to "secure the re-assignment" of the National Credit Union Share Insurance Fund's (NCUSIF) capital note at U.S. Central Federal Credit Union. This would result in a $1 billion increase to the NCUSIF's equity, the NCUA said. (See related story: New corp stabilization plan implemented by NCUA June 19.)

Frank advocates expanded powers for CUs

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BOSTON, Mass.(6/23/09)--Credit unions should be given expanded powers, House Financial Services Committee Chairman Barney Frank told Massachusetts Credit Union League members on Monday. Speaking before a meeting held in conjunction with the Credit Union National Association’s America's Credit Union Conference, Frank said that credit unions have not been singled out for negative treatment under financial regulatory reform because they “were zero part of the current financial upheaval." According to Frank, the “good news” for credit unions is that "there is no news," as Congress is currently busy taking care of the problems created by other financial institutions. While Congress is expected to be occupied with financial regulatory reform through the end of this year, Frank said that he plans to begin a review of credit union powers early next year. Frank also commended CUNA President/CEO Dan Mica and MA/NH/RI League President Dan Egan for their leadership on behalf of the credit union movement, adding that both Mica and Egan are working to pursue credit union interests with Frank.

Reg restructuring debate to begin this week

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WASHINGTON (6/23/09)--Congress will begin its final week before the Independence Day district work period by holding a House Financial Services Committee hearing on “Regulatory Restructuring: Enhancing Consumer Financial Products Regulation.” The House will follow up that hearing, which is scheduled for Wednesday, with plenty more hearings on the Obama administration’s plan for financial regulatory restructuring throughout the summer, as House Financial Services Committee chair Rep. Barney Frank (D-Mass.) announced a tentative schedule for discussion of the reform plans late last week. First on the committee’s agenda, following the July 4 district work period, is a July 9 domestic monetary policy subcommittee hearing on the Federal Reserve's role. The committee will also hold a hearing on derivatives on July 10 and will hear general testimony from financial industry experts and academics on July 13. "The debate over this issue is going to consume the House Financial Services Committee this summer," said Ryan Donovan, vice president for legislative affairs at the Credit Union National Association. While the House of Representatives is not expected to consider financial restructuring legislation until September at the earliest, the Financial Services Committee is expected to begin its markup of legislation in late July, according to the schedule. Frank is also expected to reschedule House testimony by U.S. Treasury Secretary Timothy Geithner, which was delayed last week due to conflicts with the voting schedule. In other discussions scheduled for this week, the full House Financial Services Committee will again convene to discuss options for maintaining federal and state-assisted affordable housing. The House Financial Services subcommittee on financial institutions and consumer credit will also hold a hearing on improving financial literacy on Thursday. The House Appropriations Committee subcommittee on financial services has planned a mark-up session for Thursday as well.

Fed seeks new CAC nominees

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WASHINGTON (6/23/09)--The Federal Reserve Board on Monday announced that it is seeking nominations to fill its Consumer Advisory Council (CAC), which will represent the “interests of consumers, communities, and the financial services industry.” The Fed’s Consumer Advocacy Council, which advises the Federal Reserve Board on the exercise of its responsibilities under myriad consumer financial protections, is composed of 30 members, with each member serving three-year terms. Terms for 10 of the CAC’s 30 members will expire on December 31 of this year. According to the release, potential nominees must have “familiarity with consumer financial services, community development and reinvestment, and consumer protection regulations.” Nominations must be submitted by August 28. To read the Fed request for nominations, use the resource link.