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Inside Washington (07/10/2008)

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* WASHINGTON (7/11/08)--Panelists from a recent Securities and Exchange Commission roundtable signaled their support for the Financial Accounting Standards Board fair-value accounting model (American Banker July 10). The first panel comprised representatives from large financial companies, while the second focused on smaller ones. John B. Wojcik, chief financial officer, Bank of the West, who sat on the second panel, spoke favorably of the model but said the market values don’t reflect the cash flow values on some debt flow instruments. The Credit Union National Association has stated that the model could be costly and confusing for credit unions. The World Council of Credit Unions has said that the standard could be detrimental in credit union mergers ... * WASHINGTON (7/11/08)--Federal Reserve Board Chairman Ben Bernanke presented the Semiannual Monetary Report before the Senate Banking Committee Tuesday and will undergo questioning before the House Financial Services Committee Wednesday on the state of the economy (American Banker July 10) ...

Next monetary policy hearings not likely to be routine

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WASHINGTON (7/11/08)—Federal Reserve Board Chairman Ben Bernanke is slated to present his semi-annual economic forecast before Congress twice next week. Bernanke will appear before the Senate Banking Committee on Tuesday and the House Financial Services Committee on Wednesday. Although the public airing of the chairman’s assessment of monetary policy are routine and required under the Humphrey-Hawkins Act, the hearings next week may prove to be unusual. Lawmakers in both the House and Senate may decide to probe the Fed chief on a number of hot issues. For instance, the Fed’s rules on fair lending practices under the Home Ownership and Equity Protection Act are expected to come out Monday. Also, Bernanke may be quizzed further on comments made this week before Congress that the Fed should be given stronger supervisory authority over investment banks to help protect the broader economy from problems like ones that caused an emergency rescue of investment bank Bear Stearns.

Paulson announces Treasury staff shifts

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WASHINGTON (7/11/08)—Following an announcement by Wachovia Corp. late Wednesday that U.S. Treasury Undersecretary Robert K. Steel will become its chief executive and president, Treasury Secretary Henry M. Paulson, Jr. announced staff changes in his agency’s office of domestic finance. The Treasury announcement noted:
* Assistant Secretary for Financial Markets Anthony W. Ryan will take on a broader role managing Treasury's domestic finance and financial markets agenda; * Assistant Secretary for Financial Institutions David Nason will continue to spearhead regulatory reform efforts and oversee financial institutions policy, including issues surrounding the government-sponsored enterprises; * Steven Shafran, with 22 years of experience in finance before coming to Treasury, will take on a broader role in his current capacity as senior adviser to the Secretary; * Assistant Secretary Kenneth Carfine will continue to oversee the government's fiscal operations, including managing federal financing needs and the government's cash flow; and * Deputy Assistant Secretary for Financial Institutions Policy Jeremiah Norton will take on additional financial institutions responsibilities.
Paulson said, “I have great confidence in the abilities of the domestic finance team at Treasury to adjust to this change and not miss a beat." He also noted that Steel has been his friend and colleague for more than 30 years and had served “the President and the public with ingenuity and dedication during extraordinary times in our financial markets.”

Mica in iPoliticoi Bankers should learn from CUBTRRA

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WASHINGTON (7/11/08)—A current seeming détente between credit union and bank lobbying forces—declared to improve chances for regulatory relief for all financial institutions this year—is likely to be short lived. However, Credit Union National Association (CUNA) President/CEO Dan Mica told Politico that the bankers have much to learn from it. In a July 10 article, Mica noted that banks have been trying for years to get certain regulatory relief provisions passed by the U.S. Congress. But, he noted, they “couldn’t get it done this time without working with credit unions on the broader legislation.” Politico is a prominent publication widely read on Capitol Hill and by Washington's political establishment. The article referred to the Credit Union, Bank and Thrift Regulatory Relief Act (CUBTRRA) and said the “modest yet carefully crafted package of regulatory tweaks” has the rival credit union and banking lobbies “working toward the common goal of Senate floor consideration before the legislative calendar runs down.” The House has passed the bill and under normal circumstances the Senate Banking Committee would hold a hearing, and then conduct a vote, before passing the package along for consideration on the Senate floor. “The bill’s passage (in the House) demonstrated the recognition that credit unions needed to be treated fairly and with parity,” said Mica, who hopes it will be followed by “serious and active consideration” of credit unions’ capital reserve and business lending needs. “The bankers have started to realize that it’s not just a one-shot playing field for them,” he said. “We’re going to have to work together or nothing is going to happen.” The article went on to say that both credit union representatives and bankers think the bill’s industry-wide support, along with the strongly favorable vote in the House—will put CUBTRRA on the short track directly to a Senate floor vote. “If ever there was an opportunity to try to fast-track something, this is it,” Mica said in the piece entitled, “Credit unions, banks join forces for now.” “We’re going to do our best. The enemy for us is time,” Mica noted, referring to the abbreviated Senate calendar. The Senate announced this week that it will adjourn for the year on Sept. 26 because of the upcoming federal elections. Use the resource link below to read more.

CUNA urges House panel to focus on CU risk system

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WASHINGTON (7/11/08)--As the House Financial Services Committee proceeded with hearings on the implications of current financial markets policies, the Credit Union National Association (CUNA) urged the committee’s leadership to also consider whether a risk-based capital system is appropriate for credit unions. In a letter to the committee’s chairman, Rep. Barney Frank (D-Mass.), and its ranking member, Rep. Spencer Bachus (R-Ala.), CUNA President/CEO Dan Mica noted that the committee would be focusing on a risk-based capital system for investment banks during its hearings. Mica pointed out that credit unions are seeking a risk-based system for themselves, and recommended that now is an appropriate time to include credit unions in the mix of consideration. “The National Credit Union Administration (NCUA) has developed a risk-based capital system for credit unions,” Mica wrote. “Legislative language supported by NCUA is incorporated in Title I of H.R. 1537. The NCUA’s proposal would lower the leverage requirement for credit unions while at the same time imposing a new, risk-based capital requirement to augment the leverage ratio.” H.R. 1537 is the Credit Union Regulatory Improvements Act (CURIA), with 150 backers in the House including its authors Reps. Paul Kanjorski (D-Pa.) and Ed Royce (R-Calif.). It is known as S. 2957 in the Senate, where it was introduced by Sen. Joseph Lieberman (I-Ct.) and has three additional co-sponsors. “Unlike other depository institutions, credit unions lack access to capital markets. Without such access, in times of rapid savings growth (such as when members are concerned about the economy or financial markets) the ratio of net worth to assets can fall substantially even for healthy, well-managed credit unions.” Mica wrote. The CUNA leader added, “What should really matter is how those new assets are deployed, rather than just their sheer volume.” The CUNA letters hit the lawmaker’s desks just as the financial services panel opened what it has said will be a series of hearings on domestic and international financial markets. The committee has said it is investigating the adequacy of current oversight and regulatory tools, and the extent to which existing structures are adequate to respond to future problems. Federal Reserve Board Chairman Ben Bernanke and U.S. Treasury Secretary Henry Paulson testified Thursday. Use the resource link below to read the complete CUNA letter to lawmakers.