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Comprehensive reg reform one step closer with House vote

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WASHINGTON (7/1/10)--The House last night voted 237-182 to pass sweeping reforms of the financial regulatory structure. Following Wednesday’s positive vote the Credit Union National Association (CUNA) said that while it opposes that legislation due to its included interchange fee provisions, the remainder of the bill “strikes a careful balance in protecting consumers while providing meaningful financial reform.” CUNA has repeatedly opposed interchange fee changes that would allow the Federal Reserve to intervene in the setting of those fees. “Nearly everyone recognizes that credit unions did not cause the financial meltdown and that they had no part in it; however, credit unions continue to be collateral damage, even in the proposed solutions, particularly with respect to interchange,” CUNA adds in a letter that was sent to all House members. The financial regulatory reform legislation substantially restructures financial regulations and provides consumers with a new level of protection. One organization that would potentially be tasked with that protection is the proposed Bureau of Consumer Financial Protection. While the BCFP will oversee the operations of many financial entities, the National Credit Union Administration will continue to supervise credit unions with under $10 billion in assets and enforce their compliance with consumer protection law. The Bureau will be funded by the Federal Reserve Board of Governors, and credit unions will not be required to pay more for the new Bureau than they do currently do for such supervision. Another credit union victory noted by the CUNA letter was portions of the legislation that make permanent the $250,000 deposit insurance level under the National Credit Union Share Insurance Fund and provide parallel insurance coverage for credit union business share accounts with bank business transactions accounts. CUNA in the letter also applauded a portion of the legislation that is expected to increase the number of small-dollar loans made by qualifying credit unions and decrease consumer dependence on payday loan providers and loan sharks. The regulatory reform package, which was constructed during a recently completed conference committee, must also pass the Senate before it can become law. It is not known if the Senate will vote on the package before the upcoming Independence Day recess. For the full CUNA letter, use the resource link.

Case for MBL increase undeniable CUNA

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WASHINGTON (7/1/10)--Saying there is "no doubt" that more needs to be done to help small businesses and encourage job creation, Credit Union National Association (CUNA) President/CEO Dan Mica on Wednesday called on senators to support Sen. Mark Udall’s (D-Colo.) S. 4443, an amendment that would lift the member business lending (MBL) cap for credit unions to 27.5% of their total assets. “The Udall amendment is one of the only small business proposals that would lead to substantial job creation without cost to taxpayers, or an increase in the size of government. The concept is simple: permit well managed credit unions that have capacity to lend and that are approaching the current statutory credit union business lending cap to continue to lend to their small business-owning members,” Mica added in a letter sent to all senators. The Senate must vote on whether to attach Udall’s amendment to H.R. 5297, the Small Business Lending Fund Act, which is intended to stimulate small business lending in communities. While H.R. 5297 was not voted on Wednesday before the Senate adjourned, it is thought that it could come up for a vote following the Independence Day district work period. H.R. 5297 also proposes a government-backed $30 billion fund that would enhance the ability of small banks to lend to customers who own small businesses. CUNA and credit unions have touted MBL legislation as a way that credit unions could also help reinvigorate the economy, reiterating that it comes with no cost to taxpayers. Also according to CUNA estimates, lifting the MBL cap even just to 25% of assets would create over 100,000 new jobs and inject over $10 billion in funds into the economy, at no cost to taxpayers. Udall’s legislation is nearly identical to a U.S. Treasury release that proposed increasing the MBL cap for well capitalized, adequately experienced credit unions to 27.5% of assets. That proposal also states that the growth of a given credit union's MBL portfolio may be no more than 30% annually, and that credit unions that wish to be subject to the increased cap must be lending at a ratio near the current cap for the previous four quarters, must have a minimum of five years of underwriting and servicing MBLs, and must demonstrate sufficient experience in managing these types of loans. Mica this week urged credit union leagues to work to ensure that Udall’s amendment gains the support needed to be added to the full bill and, eventually, to become law. A similar bill that was offered by Reps. Paul Kanjorski (D-Pa.) and Ed Royce (R-Calif.) currently has well over 100 House co-sponsors. For the full CUNA letter, use the resource link.

Inside Washington (06/30/2010)

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* WASHINGTON (7/1/10)—Former American International Group (AIG) executive Joseph Cassano on Wednesday told members of the Financial Crisis Inquiry Commission that his organization‘s credit derivative-related losses would have been less substantial if the U.S. government hadn’t unwound those derivatives as a condition of the 2008 bailout of AIG, The Wall Street Journal reported. While many related AIG's financial troubles can be linked to its derivatives portfolio, a 2009 report found that the majority of AIG's shortfall was concentrated in lines of insurance in which claims develop slowly, such as professional liability and worker's compensation. Cassano, who headed AIG's Financial Products division between 2002 and 2008, told the commission that many of AIG’s mortgage collateralized debt obligations were not entirely tainted by weak underwriting standards, and that AIG’s debt pools would not have realized extensive losses due to the recent market turbulence and accounting losses… * ALEXANDRIA, Va. (7/1/10)--The National Credit Union Administration on Wednesday announced that it has archived, in full, an online town hall meeting which took place on June 28. The NCUA addressed its upcoming regulatory plans, and some recent developments, during the online town hall … * WASHINGTON (7/1/10)--The Federal Reserve Monday announced the results of an auction of $2 billion in 28-day term deposits through the Term Deposit Facility. The Fed received nearly $11.14 billion in competitive bids and more than $121 million in non-competitive bids. The awarded deposits will settle today and mature on July 29. The Fed is set to conduct a third and final auction July 12, which will offer 84-day term deposits (News Now June 2) ...

NCUA gives strong support to financial reform bill

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ALEXANDRIA, Va. (7/1/10)—The National Credit Union Administration (NCUA) has come out in “strong support” of the financial regulatory reform bill that was hammered out last week by a House-Senate conference committee and now awaits a final vote in both chambers of the U.S. Congress. The legislative package, aimed primarily at Wall Street and meant to establish barriers to a repeat of the country’s recent crisis prompted by a meltdown of housing and mortgage markets, also includes reforms of interest to credit unions. Those reforms include the creation of a consumer financial protection bureau, making permanent an increase in federal deposit insurance to $250,000 per account, and extending on an equal basis for credit unions and banks unlimited federal insurance for non-interest bearing accounts. In a letter to House Financial Services Committee Chairman Barney Frank (D-Mass.) and Senate Banking Committee Chairman Christopher Dodd (D-Conn.) Tuesday, NCUA Chairman Debbie Matz cited the above provisions as reason for her agency’s support of the reg reform package. Frank and Dodd were leadership of the conference committee. Matz’s letter did not address a hot-button topic that has been in the forefront of many credit unions’ concerns in recent weeks, that of a provision that would require government controls of a portion of the fees merchants pay to use the electronic payments system, known as interchange fees. Credit Union National Association (CUNA) President/CEO Dan Mica expressed surprise that the NCUA’s letter did not take note of debit interchange. “The bill’s interchange provision has generated more outpouring of concern from credit unions than any issue we have seen in many years. In the short time since NCUA released its letter I have been deluged with calls and comments from credit unions expressing their frustration that NCUA would 'throw them under the bus' by endorsing the legislation without at least acknowledging the concerns raised about the interchange language," Mica said. The Credit Union National Association (CUNA), which along with the state leagues and credit unions launched a herculean effort to block the provision, ultimately has opposed the overall reform bill because of its inclusion of the interchange language. The reg reform package was expected to be voted by the House Wednesday and is awaiting a final vote by the Senate. CUNA’s strong opposition to the interchange language has been fueled, in large part, because of concerns that the amendment would hurt consumers by driving up their debit card fees, with no compensatory advantages to those consumers. CUNA has also said that the interchange rule change forces the Federal Reserve into a role of a price-fixing body, when interchange fees should be driven by market forces. CUNA’s opposition campaign generated hundreds of visits by credit union advocates to federal lawmakers, as well as over 600,000 email and phone contacts seeking withdrawal of the amendment. If signed into law, CUNA will spearhead efforts to address credit union concerns during the regulation and implementation process.