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CU-backed candidate wins California special election

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WASHINGTON (7/14/11)--Los Angeles City Councilwoman Janice Hahn (D), with the backing of the Credit Union National Association's (CUNA) Credit Union Legislative Action Council (CULAC) and the California Credit Union League, on Tuesday won a special election to take former Rep. Jane Harman’s (D) vacant congressional seat. Harman left congress in February to join the private sector. Hahn defeated Republican opponent Craig Huey, with 55% of the total vote. Hahn garnered a total of 41,585 votes, besting Huey’s 34,636. Hahn will represent California’s 36th district, which includes Venice, Torrance, Redondo Beach, and other towns in the coastal portion of the greater Los Angeles area. The district is mainly democratic. California and Nevada Credit Union Leagues Director of Political Affairs Andrea Svoboda told News Now that Hahn, who is a member of Wilmington, Calif.’s ILWU CU, “truly understands the important role credit unions play in California’s communities” and “shares credit unions’ goal of supporting small businesses to bring jobs back into our community. "Hahn has committed to having an open door when it comes to future issues and we look forward to working with her,” Svoboda added. CUNA Vice President of Political Affairs Trey Hawkins said that CULAC “will continue to aggressively support credit union friends in next fall's election.” The presidency, congressional seats, and state and local positions are all at stake in 2012.

Bernanke Low credit access stifling economy

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WASHINGTON (7/14/11)--Limited credit access is one of several “headwinds” that the U.S. economy continues to face as the nation works to recover from the recent economic crisis, Federal Reserve Chairman Ben Bernanke said in Wednesday’s Semiannual Monetary Policy Report to Congress. Slowed consumer spending, low home values, and reduced government spending also continue to hinder recovery, he added. Bernanke spoke before the House Financial Services Committee. He is scheduled to deliver remarks before the Senate Banking Committee today. Bernanke said that recent weak economic performance, which was demonstrated by an uptick in the unemployment rate and lower than expected job growth, could be blamed on “several factors that are likely to be temporary.” These factors include the impact of high energy and food prices on consumer spending and the effects of Japan’s recent earthquake on auto manufacturing. Officials continue to predict that the nation’s gross domestic product could increase by 2.9% in 2011 and 3.7% in 2012. Both of these increases would be better than what has occurred so far in 2012, Bernanke said. The Fed chairman said that his agency may again move to stimulate the economy if economic conditions do not improve. “The possibility remains that the recent weakness may prove more persistent than expected and that deflationary risks might reemerge, implying additional policy support,” he said. The Credit Union National Association advocates an increase in credit union member business lending authority as a way America's credit unions can increase access to capital for small businesses and help them create jobs—with no cost to taxpayers. Lifting the credit union member business lending cap to 27.5% of total assets, as proposed in separate Senate and House bills, could inject an estimated $13 billion in funds into the economy and create more than 140,000 new jobs, CUNA has estimated. For Bernanke’s full report, use the resource link.

CUs banks will cease Savings Bond sales Dec. 31

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WASHINGTON (7/14/11)--After 75 years of regular sales, savings bonds will no longer be sold at credit unions and other financial institutions as of January 1, 2012, the U.S. Treasury has reported. Series EE and I savings bonds will still be made available for purchase via the Treasury’s online purchase platform, TreasuryDirect. Consumers can also use the Treasury’s online platform to convert existing paper bonds into electronic bonds and to purchase savings bonds via a payroll savings plan. The Treasury estimates that the move from paper to electronic bonds will save $70 million in taxpayer funds over five years. Treasury Public Debt Commissioner Van Zeck said that "savings bonds are very much a part of this country's history and culture, and will remain a part of America's future – but in electronic form. "It's time for us to take a 1935 model and make it a 21st century investment tool," Zeck added. Paper savings bonds may still be redeemed at financial institutions. Bonds that have been misplaced or damaged, but have not matured, can be reissued in paper or electronic form, the Treasury added. For the full release, use the resource link.

Management oversight flaws cited in Beehive failure

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ALEXANDRIA, Va. (7/14/11)--Weak management and inaccurate financial reporting on behalf of the credit union helped cause the collapse of Salt Lake City, Utah’s Beehive CU, the National Credit Union Administration’s (NCUA) Office of the Inspector General (OIG) has reported. The $145 million in assets, 18,000 member credit union was acquired by Security Service FCU in December of 2010. The OIG report said that the credit union failed “because management did not effectively manage the risks, policies, operations, and financial position of the credit union, nor did they demonstrate an understanding of the risks inherent in their strategic decisions. In addition, both the Board and management lacked sufficient and responsive action to address repeat findings raised by external auditors and examiners related to concentrations, Allowance for Loan and Lease Losses (ALLL) methodology, and asset quality.” The report also pinned the failure on questionable business decisions, including the decision to go forward with a planned$3 million branch expansion and risky lending programs. The credit union also spent on new computer and telecommunications systems as the financial status of the credit union, and the nation as a whole, grew weaker. The credit union’s board did not address its poor financial condition, and management did nothing to address declining loan originations and increasing loan delinquencies, the OIG added. Lax supervision by the NCUA and state regulators also contributed to the collapse. The OIG found that the regulators did not make a single supervisory contact between March of 2006 and November of 2008. This lapse “prevented examiners from detecting the deficiencies and curtailing the risky lending practices that eventually led to Beehive’s insolvency,” the OIG report said. The OIG said that recent NCUA actions to schedule inspections of credit unions with over $250 million in assets on a yearly basis "should help prevent the type of supervision gap that occurred with Beehive from occurring in the future." Beehive pursued a thrift charter conversion during that time period, but in 2009 said it abandoned its conversion plans, saying it "sensed" that the country's economic turmoil would make federal regulators reluctant to approve a new bank charter. For the full report, use the resource link.

Freeing Capital for Small Biz Fox interviews CUNA

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WASHINGTON (7/14/11)— In an appearance on Fox Business Channel Tuesday, Credit Union National Association (CUNA) President/CEO Bill Cheney noted for a national audience that credit unions “are ready to do more” to help the economy; they just need Congress to act by increasing the member business lending cap to make more capital available to the nation's small businesses. Fox Business anchor Charles Payne noted that opposing an MBL cap

lift while small businesses are “drowning” is “beyond the pale” and asked who would oppose such a plan. Cheney said that bankers are the only group against it. Cheney touted the benefits of an MBL cap lift during his interview, noting that lifting the current 12.25% of assets cap to 27.5% could inject over $13 billion in funds into the economy, creating over 140,000 new jobs. "We know we need jobs to stimulate the economy, and we have no cost stimulus that can go out and help small businesses," Cheney said. The nearly 300 credit unions that are near the 12.25% of assets cap account for 51% of the total small business lending done by credit unions, Cheney noted. The CUNA CEO added that credit unions have increased their small business lending by 38% since December of 2007, while bank small business lending has declined by 5% since then. Legislation that would lift the cap is active in both the House and Senate. Cheney also discussed the credit union difference, which gives consumers “a better deal” than for-profit banks. He noted CUNA's new website, aSmarterchoice.org, helps consumers find credit unions to join.

Inside Washington (07/13/2011)

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* WASHINGTON (7/14/11)--The Financial Stability Oversight Council (FSOC), created by the Dodd-Frank Act to limit risk to the financial system, has accomplished little in its first year of existence, according to some observers (American Banker July 13). The council’s primary responsibilities are determining which nonbank financial companies are large and interconnected enough to receive heightened supervision and overseeing the Office of Financial Research, which monitors financial markets for potential systemic threats. The FSOC also assists in implementing the Volcker Rule, a Dodd-Frank provision named for former Fed Chairman Paul Volcker that limits banks’ risky investments. The council has held five meetings--another meeting is scheduled for Monday--and made early progress to curb banks’ proprietary trading and classify certain firms as “systemically important.” But overall, the 10-member FSOC has done little to make it more relevant than informal policy groups that predate it, industry observers say. The council, which includes heads of other top regulators such as the Federal Reserve Board and Federal Deposit Insurance Corp., may be a lower priority for its members that run other agencies, observers said. Douglas Landy, a partner in Allen & Overy LLP, said that although the FSOC miscalculated in not taking formal action earlier, it is working without a blueprint and may need time to gel … * WASHINGTON (7/14/11)--The Consumer Financial Protection Bureau (CFPB) Wednesday outlined the agency’s approach to monitoring big banks for consumer abuses. Starting July 21, the CFPB will oversee the 111 depository institutions that have total assets more than $10 billion--80% of the banking industry’s assets. “The new consumer agency is here to make sure that markets work for American families, and our bank supervision program is a big part of that,” said Elizabeth Warren, special advisor to the Secretary of the Treasury on the CFPB. “Starting on July 21, we will be a cop on the beat--examining banks and protecting consumers.” The CFPB will conduct periodic examinations for most banks, the agency said. For the largest and most complex institutions, the agency said it will implement year-round supervision programs. The examination process will begin remotely in most instances. CFPB examiners will start on-site reviews at the supervised institutions to continue their work, the agency said. The CPFB will provide additional information via letter to the 111 institutions, and will conduct informational roundtables starting in early August. The agency will post the initial phase of its examination manual on its website. The manual is the field guide for examiners supervising banks and other consumer financial services companies …