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Obama threatens to veto CFPB funding cuts

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WASHINGTON (7/15/11)--Limiting the Federal Reserve’s funding of the Consumer Financial Protection Bureau (CFPB) to $200 million in 2012, as proposed in H.R. 2434, would "severely undercut" the agency's oversight responsibilities, the Office on Management and Budget said in a recent release. The funding limit for 2012 is $600 million. Under the bill, the CFPB would be subjected to the annual appropriations process beginning in 2013. The Dodd-Frank Act prescribes that the CFPB receive a percentage of the Federal Reserve budget and is not subject to the appropriations process. “Not only would the bill's funding limitation severely curtail hiring and start-up investments that are already underway, but it would also impede supervision, limit the Bureau's consumer response services, prevent the ramping up of citizen financial literacy improvements, and delay the implementation of financial protection programs for older Americans,” the administration release added. The administration statement added that President Barack Obama would likely veto legislative attempts to undermine the Dodd-Frank Act “through funding limits or other restrictions,” The administration also objected to proposed cuts in the Community Development Financial Institutions (CDFI) Fund budget. Community development credit unions are among those that have received grants under the CDFI fund. Further financial restrictions for the Department of the Treasury, the Internal Revenue Service, the Securities and Exchange Commission, and the Financial Research Fund are also proposed in the legislation. H.R. 2434, the Financial Services and General Government Appropriations Act, passed the House Appropriations Committee in late June. For the administration release, use the resource link.

Inside Washington (07/14/2011)

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* WASHINGTON (7/15/11)--Community banks and other for-profit financial institutions will now be permitted to pay interest on commercial checking accounts after the Federal Reserve on Thursday released a final rule that repeals Regulation Q. The Fed in its release noted that the majority of commenters opposed the repeal, saying that it would have “'devastating' effects on smaller and community banks.” The repeal will be effective as of July 21 … * WASHINGTON (7/15/11)--Consumer Financial Protection Bureau (CFPB) architect Elizabeth Warren’s third appearance before a congressional committee was more even tempered than her previous Hill trips, which became contentious. However, Warren did face questions on whether the CFPB would move to ban certain types of mortgages. Warren said that the agency’s work would not focus on eliminating financial instruments, but rather on tightening up the disclosures that are provided to consumers so that those consumers can make more informed decisions. “I want to start with the concept of, ‘Let’s get some real disclosure and see if we can get these markets working,’” she said. She also provided general information on the CFPB’s current and future projects, including creating a combined Truth in Lending Act/Real Estate Settlement Procedures Act disclosure form, defining large non-bank market participants, and large bank supervision. The CFPB will officially launch on July 21…

CUNA seeks comment on NCUA golden parachute rules

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WASHINGTON (7/15/11)--The Credit Union National Association (CUNA) has asked credit unions to comment on whether the list of Section 457 deferred compensation plans that are shielded from the National Credit Union Administration’s (NCUA) new executive compensation prohibitions should be expanded beyond 457(b) and 457(f) deferred compensation plans. The NCUA in May approved a final rule that prohibits golden parachute and indemnification payments. The golden parachute prohibitions would apply if the credit union in question is insolvent, in conservatorship, has a CAMEL 4 or 5 rating or is otherwise in "troubled condition." "Bona fide" deferred compensation plans, general institution-wide severance pay plans, and other assorted employee benefits will not be impacted by the prohibition. The NCUA rules came into effect on June 27, and only new contracts that were entered into after that date will be impacted. Current contracts held by credit union executives will not be affected, unless they are revised. The NCUA allows 457(f) plans to be offered to employees, provided the plans meet the “bona fide” criteria set forth by the agency. The Internal Revenue Service currently allows 457(b) plans to be amended to allow designated Roth IRA contributions and in-plan rollovers to designated Roth accounts. For CUNA’s full comment call, use the resource link.

Net worth equity ratio rule leads July NCUA meeting

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ALEXANDRIA, Va. (7/15/11)--The final version of the National Credit Union Administration's (NCUA) proposed revisions to "net worth" and "equity ratio" definitions will lead the agenda when the agency holds its next open board meeting at 10:00 A.M. ET on July 21. The NCUA in March proposed amending the Federal Credit Union Act's definition of "net worth" for natural-person credit unions under NCUA's Prompt Corrective Action authorities to allow the NCUA's Section 208 Assistance made to troubled credit unions to qualify as regulatory net worth. The NCUA proposal also included a "technical correction" to its regulatory definition of "net worth." This technical correction would generally decrease the amount of a combined credit union's "net worth" in a credit union merger. The agency also proposed equity ratio changes that clarify that the National Credit Union Share Insurance Fund's (NCUSIF) equity ratio must be based solely on the financial statements of the NCUSIF alone, without consolidation with other statements such as those of conserved credit unions. The Credit Union National Association generally supported these changes, but told the NCUA that portions of the agency's proposal addressing so-called "bargain purchase gains" should not be finalized until they can be studied further by accounting professionals. An interim final rule addressing remittance transfers and a proposed rule related to credit union service organizations are also on the agenda. Stabilization fund borrowing, reprogramming the NCUA’s 2011 operating budget, and corporate credit union-related accounting issues will also be discussed during the meeting. The monthly insurance fund report will also be presented. The agency will also discuss combining the roles of deputy executive director and chief operating officer into a single position. Supervisory issues will be covered at a later closed meeting. For the full agenda, use the resource link.