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Inside Washington (06/29/2009)

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* WASHINGTON (6/30/09)--President Barack Obama’s proposal for financial regulatory reform would expand the Federal Reserve Board’s umbrella supervisory powers by removing restrictions that prevent the Fed from examining, requiring reports from or enforcing higher capital limits at big banks (American Banker June 29). The Obama administration argues that the restrictions prevented the Fed from using its supervisory powers. Financial industry observers disagree, saying the Fed did not use the powers it had. The Fed fought for supervisory powers in the 1990s and was allowed to examine financial holding company and bank subsidiaries. But the Fed had to rely on information from the institution’s regulator, observers said. Gil Schwartz, former Fed lawyer, said he doesn’t remember the Fed saying it couldn’t obtain the information. He doesn’t sympathize with those who say the Fed could have done more if it had more information. Obama pointed to the Gramm-Leach-Bliley Act as a cause of the financial crisis, but Schwartz said under Gramm-Leach-Bliley, the Fed could have forced a holding company to sell a subsidiary because of safety and soundness concerns ... * WASHINGTON (6/30/09)--The Treasury has released more information for banks that want to return Troubled Asset Relief Program (TARP) funds in regards to repaying warrants. A bank wishing to repay a warrant must submit an offer of fair market value within 15 days of repayment. The Treasury would have 10 days to accept the offer (American Banker June 29). If the offer is rejected, Treasury and the bank would select independent appraisers to value the warrants. If the appraisers do not agree on a price, a third appraiser may be hired to establish fair market value. If a bank chooses not to repurchase the warrant, the Treasury could dispose of the warrant however it wants to over time ...

Treasury program awards 17.M to CDCUs

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WASHINGTON (6/30/09)--Treasury Secretary Tim Geithner on Monday joined Rep. Jose Serrano (D-N.Y.) and Community Development Financial Institutions (CDFI) Fund Director Donna Gambrell to announce the disbursement of $90 million in CDFI program recovery act awards to 59 CDFIs that work in underserved communities. Over $17 million of the $90 million in award money was granted to nine credit unions. They are:
  • Alternatives FCU, Ithaca, N.Y.;
  • ASI FCU, Harahan, La.;
  • Brooklyn Cooperative FCU, Brooklyn, N.Y.;
  • Communicating Arts CU, Detroit, Mich.;
  • First Legacy Community CU, Charlotte, N.C.;
  • Latino Community CU, Durham, N.C.;
  • Mendo Lake CU, Ukiah, Calif.
  • Opportunities CU, Burlington, Vt.; and
  • Santa Cruz Community CU, Santa Cruz, Calif.
In comments accompanying the press release, Geithner said the $90 million in funding provided by the recovery act awards “will help generate capital for small businesses, mortgage loans for homebuyers, and funding for affordable housing projects and other facilities in communities across the country.” The CDFI Fund awards were announced at New York-based Point Community Development Corp., an organization that works to promote the arts and local business in portions of the South Bronx area of New York City. Point Community currently receives financial support from a local CDFI, according to the Treasury release. Washington State’s Express CU, Seattle, and The Union CU, Spokane, as well as Waipahu, Hawaii-based Kunia FCU each received around $100,000 in funds when the CDFI Fund awarded technical assistance grants in April of this year. The CDFI Fund is expected to announce a further $50 million in 2009 annual appropriations by the end of September.

Supreme Court ruling could impact FCUs says Mica

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WASHINGTON (6/30/09)--Credit Union National Association President/CEO Dan Mica said Monday that the Supreme Court’s opinion in Cuomo v. Clearing House Association LLC could “leave the door open wider for state attorneys general to bring consumer protection lawsuits against federally chartered institutions, including credit unions.” However, Mica added, these types of lawsuits by state attorneys general are seldom brought against credit unions due to their “good record on consumer protection issues.” The Supreme Court decision, which was handed down on Monday, was written by Justice Antonin Scalia and signed by justices John Paul Stevens, David Souter, Ruth Bader Ginsberg, and Stephen G. Breyer. The decision ruled that federal banking regulations do not preempt the rights of state attorneys general to enforce otherwise non-preempted state consumer protection laws using the court system. According to Mica, this Supreme Court opinion, which holds that the National Bank Act does not preempt the ability of state authorities to sue national banks, “has more to do with who may sue federal institutions than with what subjects are preempted by federal law.” The portions of the National Bank Act that were referenced in the opinion are broader than similar portions of the Federal Credit Union Act, and the National Credit Union Administration’s determinations on preemption should stand up if they are challenged in court, Mica said. The case relates to a 2005 investigation conducted by former New York Governor and 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 discriminatory lending practices. A group of large national banks attempted to block Spitzer’s probe by claiming that the existing federal regulatory structure prevented state authorities from taking their own independent actions. The Office of the Comptroller of the Currency argued that its examination "visitorial powers" preempted Spitzer's ability to enforce the state fair lending laws in question as they pertain to national banks. The Supreme Court upheld a lower court's ruling that the National Bank Act's "visitorial powers" clause preempted Spitzer's ability to use administrative subpoena powers to obtain national bank lending information, but ruled that state attorneys general may bring lawsuits to enforce consumer protection laws that are not otherwise preempted. Spitzer threatened to sue the banks after they refused to give him the data.

NASCUS Keep CU reg independence

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WASHINGTON (6/30/09)--The National Association of State Credit Union Supervisors (NASCUS) has asked Congress and the Obama administration to ensure that the dual charter credit union system, which “provides diversity, competition and innovation in the credit union regulatory structure,” is maintained under the pending restructured financial regulatory regime. While NASCUS President/CEO Mary Martha Fortney praised the Obama administration for recognizing the value of dual chartering, the importance of state-level consumer protection and the need for a separate credit union regulator, NASCUS in a press release offered a series of core principles that it said should be followed during the coming regulatory debate. The first of these principles is the recognition and affirmation of the “distinct roles” of “a state chartering authority and a share deposit insurer.” Cooperation between state and federal regulators and share deposit insurance systems should also be affirmed, NASCUS said. Legislators should also ensure that states and state credit union regulators maintain their supervisory and regulatory authority over state-chartered credit unions, and consumer protection statutes and regulations should be allowed to be created, implemented, and enforced “without the threat of federal preemption,” the release added. NASCUS also asked decision makers to “support total capital reform for credit unions” and “allow credit unions to access supplemental capital.”