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Inside Washington (06/26/2009)

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* WASHINGTON (6/29/09)--The Supreme Court is slated to announce Monday its decision on a banking preemption case, Cuomo v. Clearing House Association LLC. The court will decide if the Comptroller of the Currency has the sole power to enforce laws, even state statutes, over national banks. The decision will be made as President Barack Obama pushes for eliminating preemption to strengthen consumer protection at banks (American Banker June 26). The case is related to a 2005 investigation conducted by former New York Attorney General Eliot Spitzer, who asked Citigroup, Wells Fargo and Co., and JP Morgan Chase and Co. to provide him with data so he could determine if they engaged in discrimination. The banks did not give him the data, so Spitzer threatened to sue them. The agency said they did not have to give up the data because of visitorial powers. Current New York Attorney General Andrew Cuomo, who took on the case after Spitzer, argued that a federal preemption does not prevent a state from prosecuting its laws (News Now April 28) ... * WASHINGTON (6/29/09)--The Office of the Comptroller of the Currency, Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, and Office of Thrift Supervision Friday invited public comment on an interim final rule that provides that mortgage loans modified under the U.S. Department of the Treasury's Making Home Affordable Program (MHAP) will retain the risk weight applicable before modification. On March 4, the Treasury announced guidelines under the MHAP to promote sustainable loan modifications for homeowners at risk of losing their homes to foreclosure. The interim final rule would provide a common interagency capital treatment for mortgage loans modified under MHAP. For example, mortgage loans risk weighted at 50% prior to modification would remain at 50% after modification provided they continue to meet other applicable criteria ... * WASHINGTON (6/29/09)--Uncertainty surrounding Federal Reserve Board Chairman Ben Bernanke’s role in Bank of America’s acquisition of Merrill Lynch and Co. could affect whether the government will give the central bank more power under a financial system revamp plan, according to financial industry observers. Lawmakers have expressed that they do not want to give the Fed more power until Bernanke’s role in the Bank of America deal is clarified (American Banker June 26). A hearing by the House Oversight and Government Reform Committee last week focused on whether giving the Fed more power is a good idea. Republicans on the committee leaked e-mails Wednesday that suggest the Fed left out the Securities and Exchange Commission (SEC) and the Office of the Comptroller of the Currency when it decided how the Merrill deal should be completed. The Fed’s cover-up of information raises questions about how it can work collaboratively with its partners in the federal government, said Rep. Darrell Issa (R-Calif.). Rep. Edolphus Towns, House Oversight and Government Reform Committee chair, said there are too many “sweetheart deals” and regulatory reform must ensure the agencies cooperate. Bernanke has said it wasn’t as important to keep the SEC informed about the Merrill deal because it does not supervise Bank of America. Bernanke’s role in the Bank of America deal is especially important because his term as Fed chief expires in January. It is not known whether President Barack Obama intends to reappoint him ...

House members urge opposition to interchange caps

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WASHINGTON (6/29/09)--Congressmen James Sensenbrenner Jr. (R-Wis.) and Jason Chaffetz (R-Utah) in a Friday letter urged their republican colleagues not to cosponsor legislation that would allow merchants to renegotiate interchange fees with financial institutions. The letter came in response to an earlier communiqué in which Rep. Bill Shuster (R-Penn.) asked his fellow republicans to cosponsor H.R. 2695, "The Credit Card Fair Fee Act," which was introduced by Rep. John Conyers, Jr. (D-Mich.) in early June. This legislation would allow merchants to negotiate credit card transaction fees with financial institutions via an antitrust exemption. The bill is currently awaiting committee-level action. In the letter, the congressmen asked their colleagues to “resist the temptation to mediate every perceived problem or concern with the market, particularly when there are adequate legal remedies already available.” The legislation proposed in the Conyers/Durbin bill would also “hurt consumer, small banks, and credit unions,” the release added. Credit Union National Association (CUNA) President/CEO Dan Mica thanked Reps. Sensenbrenner and Chaffetz for “taking this step and recognizing how important interchange is to card-issuing credit unions.” CUNA recently asked Congress to resist moving on any potential interchange fee legislation until the Government Accountability Office can complete its study of interchange fees, as directed by the recently passed Credit Cardholders Bill of Rights Act of 2009. Members of the Arkansas Credit Union League also discussed the interchange fee issue with their state’s elected representatives during a hike the hill session held earlier this month.

Congress will resume reg reform debate after July 4 break

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WASHINGTON (6/29/09)--Following the Independence Day district work period, Congress is expected to resume its work on financial regulatory restructuring with House Financial Services Committee hearings on the role of the Federal Reserve, derivatives, and general testimony from financiers and leading academics tentatively scheduled for the coming weeks. The committee has not yet published witness lists for these hearings. The committee began discussion of the regulatory reforms this past week, with Troubled Asset Relief Program oversight panel chair Elizabeth Warren saying that the creation of the proposed consumer financial protection agency would undeniably "help fix the broken credit market." During the hearing, Warren spoke in favor of so-called "plain vanilla" financial products and disclosures that could ultimately result in cheaper compliance costs for lenders and fewer oversight responsibilities for regulators. It is widely reported that U.S. Treasury Secretary Timothy Geithner could soon release further details on a proposed consumer protection agency. Congress also held hearings on integrating improvements to financial literacy and education into the larger financial regulatory reform package during the week. House Financial Services chair Rep. Barney Frank (D-Mass.) last week said that the committee would continue to discuss consumer protections following the district work period, adding that related legislation should be marked up in late July. 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.

Fryzel Mica commemorate 75 years of CUs

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ALEXANDRIA, Va. (6/29/09)--National Credit Union Administration Chairman Michael Fryzel commemorated the 75th anniversary of the signing of the Federal Credit Union Act by giving “recognition and thanks to the millions of American consumers who have made the credit union industry a success.” In a statement released Friday, Fryzel said that the “founders of the credit union movement could not have known the heights that these institutions would enable their members to reach.” Those founders would also “draw tremendous satisfaction” from the knowledge that credit unions continue to meet Edward Filene’s mission of demonstrating “the practicality of the brotherhood of man,” he added. Credit Union National Association President / CEO Dan Mica also commented on the anniversary, saying that credit unions continue to follow the path set for them in the aftermath of the Great Depression, as they “are playing a vital role in helping the nation’s consumers recover from this latest economic storm.” “The focus and purpose of credit unions remains the same today as it was 75 years ago -- to improve the financial well-being of their members, now more than 90 million strong,” and CUNA strives to “ensure an operating environment for all credit unions in which they may continue to effectively and completely serve their members,” he added.

SBA Patriot project lends over 300M to US combat vets

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WASHINGTON (6/29/09)--The U.S. Small Business Administration (SBA) on Friday announced that it has backed over $315 million in funds for 3,750 loans to the military community in the two years following the launch of its Patriot Express Pilot Loan Initiative. Since June 2007, credit unions and other lenders have submitted applications for funds under the Patriot Express program, which features a streamlined loan product based on the agency's SBA Express Program, but with enhanced guaranty and interest rate features. The loans may be used for most business purposes and have been approved in all 50 states, the District of Columbia, the U.S. Virgin Islands, Puerto Rico and Guam. They currently range from $5,000 to $375,000 in individual loan amounts, but can be approved for up to $500,000. SBA Administrator Karen Mills said that the program, which provides veterans the “critical access to capital” that “helps them grow their businesses and create good paying jobs in their communities,” is a program that the SBA takes “seriously.”