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Washington

Consumer protection agency could fix credit woes says Warren

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WASHINGTON (6/25/09)--In remarks delivered during a Wednesday House Financial Services Committee hearing, Elizabeth Warren, current chair of Congress’s Troubled Asset Relief Program oversight panel, said that the creation of the proposed consumer financial protection agency would undeniably “help fix the broken credit market.” The consumer protection agency would not be meant to rescue consumers that have willfully overextended their credit or have purchased a home that they cannot afford. Rather, Warren said, “this is about people who get trapped by credit agreements themselves.” Warren said that many consumers do not understand the terms of many of their consumer loans and other finance-related products, including credit scores. Credit unions and small banks may offer financial products that are better for consumers than those offered by larger banks, but smaller financial institutions with smaller advertising budgets often lose out when consumers lack the proper tools to compare those products, Warren said. Though some of the gathered representatives and panelists said that the proposed consumer financial protection agency would lead to duplicative and unneeded regulations, Warren said that getting so-called “plain vanilla” financial products and disclosures that “automatically passed regulatory muster” would result in cheaper compliance costs for lenders and fewer oversight responsibilities for regulators. According to Warren, creating this new separate regulator will help smaller financial institutions that did not cause the problem “but are now being forced to pay for it” by lowering the “direct cost of compliance” through streamlined financial regulations that protect consumers while lessening the burden on all financial institutions. The agency could also level the playing field between large and small financial institutions by helping create the “appropriate financial market” where many of the “cleaner” and “better” products offered to consumers win out over more complicated, riskier financial products, she added. House Financial Services chair Rep. Barney Frank (D-Mass.) said that the committee would continue to discuss the creation of the new consumer protection agency once it has returned from the Independence Day district work period. The committee should begin marking up related legislation in July, Frank added. While Frank said that the final regulatory reform legislation would take the form of one all-encompassing bill, each piece of that legislation will be discussed and marked up separately by his committee.

NCUA What corporate reform could look like

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ALEXANDRIA, Va. (6/25/09)--The National Credit Union Administration (NCUA) will begin developing new rules for corporate credit unions this summer with a projected completion date of spring of 2010, moderator and Office of Corporate Credit Union official Scott Hunt said during the NCUA’s webinar on its corporate credit union stabilization plan. During the webinar, Hunt said that the NCUA will lay out a potential framework for corporate credit unions, and those corporate credit unions will then decide which services they would prefer to offer within that framework. Member credit unions could then decide which corporate credit union they wish to support. The NCUA board should issue its proposed rules for corporates this fall, according to Hunt. Hunt said that he does not expect the NCUA to dictate the structure that corporate credit unions must take on. However, he added, the new NCUA rules could lead to some corporate credit union consolidations. Hunt noted that the "slow run" on corporate credit union shares has abated, as deposit patterns now look to be following seasonal norms. Cash assets have also increased, and the corporates are reestablishing external lines of liquidity. Western Corporate FCU (WesCorp), which reported $7.6 billion in losses for its 2008 fiscal year, has a capital deficit of $3.5 billion and had its independent audit completed on May 19th. The NCUA also reported that U.S. Central now has $960 million in capital and that a comprehensive audit of U.S. Central’s financial situation should be completed by July 10th. Addressing the liquidity of the corporates, Hunt said that both US Central FCU and WesCorp were in “stable but tenuous” condition. External lenders are also starting to lend to the corporates again, as that the NCUA’s recent actions have effectively stabilized the corporate credit union system. However, Hunt said, natural person credit unions still need to continue to invest in the corporate credit union system, as the NCUA could be forced to sell some or all of U.S. Central's and WesCorp’s mortgage-backed securities portfolios if those institutions do not have adequate funds available to hold those securities to maturity. The Credit Union National Association will soon provide an audio archive of the NCUA webinar.

Space Coast merger with Eastern Financial Fla. okayed

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ALEXANDRIA, Va. (6/25/09)--The National Credit Union Administration (NCUA) on Wednesday announced that Melbourne, Fla.-based Space Coast CU will merge Miramar, Fla.’s Eastern Financial Florida CU into its operations. The NCUA has monitored the operation of Eastern Financial following it’s entry into conservatorship in April of this year. The NCUA had always intended to sell Eastern Financial or merge it’s operations with another credit union, and Space Coast, which currently holds $1.7 billion in assets from over 160,000 members, will now serve Eastern Financial’s 200,000 members. Space Coast announced the merger in April, but the NCUA did not confirm or deny any planned merger at that time. The merger is the second in a week, as $42 million-in-assets Community Trust CU merged with $333.4 million-in-assets Self-Help FCU of Durham, N.C. earlier this week.

Inside Washington (06/24/2009)

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* WASHINGTON (6/25/09)--The federal bank and thrift regulatory agencies Wednesday proposed a change to their rules that implement the Community Reinvestment Act (CRA), a revision that would require the agencies to consider low-cost education loans provided to low-income borrowers when assessing a financial institution’s record of meeting community credit needs. The proposal was issued jointly by the Comptroller of the Currency, Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, and Office of Thrift Supervision. It incorporates provisions of the recently enacted Higher Education Opportunity Act, which revised the CRA. The agencies will accept comment for 30 days after the proposal is published in the Federal Register… * WASHINGTON (6/25/09)--President Barack Obama commended Federal Reserve Board Chairman Ben Bernanke for doing a “fine job” responding to the nation’s economic crisis (Dow Jones June 24.) Obama said Tuesday that the Fed is well-suited for oversight of systemic financial risks. However, the president declined to comment on whether he would reappoint Bernanke as chairman. Financial industry observers have speculated on Bernanke’s future at the Fed due to its handling of the financial crisis ... * WASHINGTON (6/25/09)--A plan by the Obama administration to revamp the nation’s financial regulatory system is being questioned by financial industry observers based on whether the plan would resolve the problem of financial institutions being slated as “too big to fail” (American Banker June 24). Observers say that tougher standards for companies perceived as “too large to fail” should be implemented now as opposed to after the reform bill is enacted. Regulators need to be held accountable, and if the wording is “too vague it’s very hard to hold them accountable,” said Dean Baker, co-director of the Center for Economic and Policy Research. Under President Barack Obama’s plan, financial regulators would decide which institutions are Tier 1 financial holding companies and would also set capital, leverage and liquidity requirements ...

Effective dates set on new NCUA rules

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WASHINGTON (6/25/09)—The effective dates of two recently adopted National Credit Union Administration (NCUA) rules have been published in the June 24 Federal Register: one addresses operating fees, the other second lien modifications. Effective Jan. 1, 2010, the NCUA has amended its rule on the assessment of operating fees by permitting federal credit unions to subtract investments made under the Credit Union System Investment Program (CU SIP) and the Credit Union Homeowners Affordability Relief Program (CU HARP) from their total assets. The Credit Union National Association had argued that the change would remove a disincentive to credit union participations in the CU SIP or CU HARP programs. The programs are designed to add liquidity to the corporate credit unions system. CU HARP makes advances for a maximum term of one year, renewable for one year. CU SIP is designed to complement CU HARP by enabling the NCUA’s Central Liquidity Facility to lend to credit unions to invest in NCUSIF guaranteed notes, the proceeds of which will be used to retire external system debt. Another rule adopted at the last NCUA open board meeting, one amending lending rules to create a limited exception to the 20-year maturity limit on second mortgage loans, became effective upon publication on June 24. Written comment will be accepted through Aug. 24. The rule change is intended to enable federal credit unions participating in the U.S. Department of the Treasury's Making Home Affordable Program to modify a second mortgage loan, beyond 20 years, to match the term of a modified first mortgage loan. Use the resource link below to access the NCUA rules.

Mica on Bloomberg Consumers seek CU safety

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WASHINGTON (6/25/09)—Credit unions for 100 years have served as a “flight to safety” for consumers in tough times, Credit Union National Association President/CEO Dan Mica told Bloomberg News. In an interview that reflected remarks he has made at CUNA’s
Click for video CUNA President/CEO Dan Mica was interviewed about the 100th anniversary of the first credit union on Bloomberg TV. Click for member-only video. (Photo provided by CUNA)
America’s Credit Union Conference in Boston this week, Mica told a national television audience that credit unions are currently experiencing a “flood of growth” from those who are seeking safe and sound financial products. Credit unions are marking their hundredth anniversary of service in the United States this year. During the Bloomberg interview, Mica underscored the difference between member-owned credit unions and banks that owe allegiance to their stockholders in the form of profits from customers. He also reiterated that deposits in federally insured credit unions are covered up to $250,000, and that credit unions are strictly regulated by the federal government. Mica also took the opportunity to highlight the strength, safety and soundness of the credit union system and to explain the difference between natural-person credit unions and their corporate counterparts. When questioned, Mica explained that two large corporate credit unions recently had difficulties due to tough and changing economic conditions, but noted the problems have been dealt with within the credit union system, under the oversight of both the U.S. Congress and federal regulators. Use the resource link below to view Mica interview posted on Youtube.