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Inside Washington (06/08/2009)

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* WASHINGTON (6/9/09)--Under a new Obama administration proposal, banks that have received two rounds of bailout money from the federal government would be required to submit any significant executive pay changes for approval (The New York Times June 8). The proposal is part of wider regulations on executive pay that the White House could announce this week. General Motors’ financing arm, GMAC; Bank of America; Citigroup; and the American International Group are expected to face the toughest scrutiny. Kenneth R. Feinberg--known for overseeing payouts to those who lost family members to the Sept. 11, 2001, terrorist attacks--will be in charge of monitoring the executive pay. On Thursday, the House Financial Services Committee is scheduled to hold a hearing about how compensation practices have contributed to the nation’s financial trouble. On June 18, Treasury Secretary Timothy Geithner is expected to testify on compensation ... * WASHINGTON (6/9/09)--Sonia Sotomayor, President Barack Obama’s pick for appointment to the U.S. Supreme Court, has significant experience with business and financial issues in court, but it’s not clear whether she would lean toward banking industry interests (American Banker June 5). Sotomayor has had 11 years of experience on the appeals court with business-related cases. If confirmed, she would be the only Second Circuit veteran. Sotomayor’s background includes a 2001 case where she upheld a lower court’s ruling in an antitrust suit involving MasterCard and Visa. Her decision allowed retailers to sue the card companies for bundling interchange fees on credit and debit cards, which the merchants argued monopolized the debit card market. Visa and MasterCard argued that the suit should not have been a class action. After Sotomayor rejected Visa and MasterCard’s arguments, more retailers joined the suit, increasing the two card companies’ payout ... * WASHINGTON (6/9/09)--The White House has announced that Jim Leach, one of the three authors of the 1999 Gramm-Leach-Bliley Act, will be nominated for chairman of the National Endowment for the Humanities (American Banker June 8). Leach, who lost the election for his Iowa congressional seat two years ago, has worked as a professor at Princeton and interim director of the Institute of Politics at Harvard University ...

FinCEN should allow some SARs latitude CUNA

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WASHINGTON (6/9/09)--The Credit Union National Association (CUNA) in a comment letter presented its interpretation of recent Financial Crimes Enforcement Network (FinCEN) guidance on Suspicious Activity Report (SAR) confidentiality rules. In proposed interpretive guidance, FinCEN would allow financial institutions to share SAR information with U.S. affiliates, but would restrict them from sharing that same information with branches located outside of the United States. SARs are intended for use by government and law enforcement officials to combat money laundering and terrorism financing. In the letter, CUNA said that while it supports the FinCEN’s interpretation of sharing guidelines under the proposed SAR confidentiality rules, relaxing those rules to allow U.S.-based financial institutions to share SAR information with their foreign branches would enhance enterprise-wide Bank Secrecy Act compliance and would “assist in the overall goal of detecting and reporting money laundering and terrorist financing within the institution on a global scale.” Credit unions that serve the military, diplomatic groups and other international organizations would benefit from this change, CUNA added. Further, the disclosure risk presented by relaxing these potential rules would be no greater than the risk under prior guidance that allows sharing between U.S. branches of a foreign bank or a U.S. bank or credit union and related head offices or controlling companies that are based outside of the U.S. In a separate letter, CUNA said that it generally supports FinCEN’s broader interpretation of the SAR non-disclosure prohibition, as well as the proposed rule’s clarification regarding permissible SAR or SAR information disclosures by financial institutions. FinCEN’s proposed rule also includes a number of "rules of construction" that seek to address issues that were not clarified by existing SAR non-disclosure prohibitions. However, CUNA does note that FinCEN should provide additional clarity under the "rules of construction" regarding the distinction between SAR information protected under the non-disclosure rules and underlying facts, which are not protected. Finally, CUNA said it generally supports the proposed rule’s compliance provision. However, CUNA believes that the provision’s treatment of issues regarding third party independent audits for BSA compliance should be clarified. For full text of the comment letters, use the resource link below.

Hyland Kanjorski to kick off NCUA CU Symposium

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WASHINGTON (6/9/09)--The National Credit Union Administration will mark the 75th anniversary of the Federal Credit Union Act on Tuesday and Wednesday of this week, with current NCUA Board Member Gigi Hyland set to open the Washington-D.C.-based symposium on Tuesday morning. Longtime credit union proponent Rep. Paul Kanjorski (D-Pa.), who introduced H.R. 2351, the Credit Union Share Insurance Stabilization Act last month, will deliver a keynote address on Tuesday. Operation HOPE Founder, Chairman and CEO John Hope Bryant will also speak at the symposium in a lunchtime address. Academics, regulators and industry insiders will also address the present relevance, ongoing sustainability, and near future of the credit union movement in a series of panel discussions spanning the symposium, which will conclude with closing remarks from Hyland at 11 am on Wednesday.

APRs small biz exec pay on congressional agenda

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WASHINGTON (6/9/09)--Legislation that would set a de facto rate cap on consumer loans could take another step toward the Senate floor when the Senate Judiciary Committee discusses S. 257, the Consumer Credit Fairness Act, during a Thursday markup session. The legislation would look to cap the annual percentage rates for loans of all kinds at 19% by amending the current bankruptcy code. The bill, as currently constructed, would allow consumers of "high cost" consumer loans, including credit cards, to transition directly to Chapter 7 "fresh start" bankruptcy proceedings. The legislation would define a "high cost" loan as loan in which the APR, at any time, exceeds the lesser of 15% plus the yield on 30-year U.S. Treasury securities, or 36%. While the bill was set to be debated last week, the Senate Judiciary Committee’s full slate pushed discussion back to this Thursday. Also this week, the Credit Union National Association (CUNA) will take part in a Wednesday House Small Business Committee hearing, "Laying the Groundwork for Economic Recovery: Expanding Small Business Access to Capital," with Roger Heacock, president/CEO of Black Hills FCU in Rapid City, S.D., testifying on CUNA’s behalf. Discussion at the hearing will focus on the role of the Small Business Administration's financing programs, and CUNA believes that the hearing will provide a valuable opportunity to inform Congress on some of the issues facing credit unions involved in small business lending. Testimony from the hearing will be available on CUNA’s legislative affairs website. Elsewhere in Washington, U.S. Treasury Secretary Timothy Geithner and Internal Revenue Service (IRS) Commissioner Douglas Shulman will testify at a Tuesday Senate Appropriations Committee financial services subcommittee hearing on proposed Treasury and IRS budget estimates. The House Financial Services Committee also plans to address executive compensation structure and systemic risk during a Thursday hearing. Though it is not on the schedule for this week, the House Judiciary Committee could begin discussion on interchange fee legislation at any time. Rep. John Conyers, Jr. (D-Mich.) introduced H.R. 2695, the "Credit Card Fair Fee Act of 2009, late last week. The bill would allow merchants to negotiate credit card transaction fees with financial institutions via an antitrust exemption. Conyers, who has chaired the judiciary committee since 2007, could bring the legislation up for debate at any point. However, it is considered likely by some that Congress will not discuss the legislation until the Government Accountability Office (GAO) completes its study of interchange fees, as mandated by the recently enacted H.R. 627, the Credit Cardholders' Bill of Rights. Representatives from CUNA will discuss the interchange issue with the GAO as it develops the study.

Corporate restructure plan may be out this fall

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WASHINGTON (6/9/09)—The National Credit Union Administration (NCUA) is expecting to issue by this fall a proposal addressing changes to the corporate credit union system, according to the agency chairman, Michael Fryzel. Earlier this year, the NCUA received about 450 comments on its advance notice of proposed rulemaking (ANPR) regarding the corporate credit union system and its regulation. The NCUA encouraged credit union comment as the agency began evaluating the corporates' role in the credit union system--including their membership, structure, size and services. Also under consideration is whether to amend Part 704, the corporate credit union regulation, to clarify or revise provisions that include capital, permissible investments, management of credit risk and liquidity, and corporate governance. Fryzel said last week that if the agency issues proposed rules for comment in the fall, it could hopefully approve final rules by early spring, the New Jersey Credit Union League reported. Fryzel spoke to and visited more than 70 credit union leaders in that state, the league said. Some NCUA senior staff have indicated that the process to a final rule may be completed even earlier than the spring. Fryzel said that other issues affecting credit unions, such as supplemental capital, risk-based capital and the member business lending cap, are currently on the back burner of the agency’s priorities until the chairman sees the corporate situation improving, the league reported. Likely before the agency produces a proposal on corporate credit union structure, the leadership of the agency may change. President Barack Obama has nominated former NCUA member Deborah Matz to fill a vacancy that will be created by the departure of Vice Chairman Rodney Hood, with the intention of naming Matz chairman. The Senate Banking Committee has not yet set a date for Matz’s nomination hearing. Use resource link for more information.