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Mica to Congress CUs are safest deposit institutions

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WASHINGTON (7/21/08)--Credit Union National Association (CUNA) President/CEO Dan Mica on Friday reassured Congress that America’s credit unions “remain healthy, vibrant, and well capitalized.” Mica told each member of the House and Senate in a letter that the failure of IndyMac--not surprisingly--has led the media and the public to question the safety of their money in depository institutions. “I am proud to report that America’s credit unions remain the safest of all depository institutions,” said the CUNA leader. “Credit unions have weathered every financial storm since the Great Depression without ever costing the American taxpayer a dime in any bailout.” Mica’s letter with an attached CUNA fact sheet also were sent to the lawmakers’ legislative directors in Washington, as was well as their district directors back home. The credit union leader reiterated that deposits in all federally chartered credit unions and virtually all state chartered credit unions are insured by the National Credit Union Share Insurance Fund (NCUSIF). “Credit unions remain the most tightly regulated and well-capitalized of all depository institutions and provide the same level of deposit insurance as their bank and thrift counterparts,” underscored Mica to the lawmakers. Use the link below to access CUNA’s fact sheet: “America’s credit unions: Secure, strong.”

House Financial Services sets second financial markets hearing

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WASHINGTON (7/21/08)--New York Federal Reserve President Timothy Geithner and Securities and Exchange Commission Chairman Christopher Cox will testify Thursday at a second in a series of hearings on policy implications of the transformation of domestic and international financial markets. House Financial Services Chairman Barney Frank (D-Mass.) announced in June that his panel would conduct a number of investigative sessions—starting in July and running into the Fall. The hearings will to examine the ability of the regulatory structure to assess and mitigate systemic risk, especially in light of the collapse of Bear Stearns, in order to avoid a similar or more serious crisis in the future, according to a committee release. Treasury Secretary Henry Paulson and Federal Reserve Board Chairman Ben Bernanke appeared at the first of this series of hearings on July 10. The committee has announced that it plans to invite other federal regulators, academics, economists and market participants to present views at subsequent hearings.

All-borrower data collection may be a Frank 09 priority

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WASHINGTON (7/21/08)—House Financial Services Committee Chairman Barney Frank last week seemed to endorse the idea of a public reporting system on race and gender data for all borrowers, much like Home Mortgage Disclosure Act provisions require for mortgage borrowers. “I would just say with regard to collection of this data, I’ve seen this movie before and it has a happy ending,” he said during Thursday’s hearing on the subject by the Financial Services subcommittee on oversight and investigations, chaired by Rep. Mel Watt (D-N.C.). The “movie” Frank referred to was the long and contentious battle in the 1980s that preceded the enactment of HMDA, a law that many credit with having taken a huge bite out of discriminatory lending practices. An article in the July 18 issue of American Banker, in fact, said the Massachusetts Democrat pledged to make the reporting issue a priority early next year. "I can guarantee this will be very high in this committee's agenda in 2009," the article quoted Frank as saying. Use the resource link below to read more about the subcommittee hearing.

Housing bill could move to Presidents desk this week

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WASHINGTON (7/21/08)—A comprehensive housing rescue plan may be sent to the President’s desk to be signed into law this week, according to Credit Union National Association (CUNA) Senior Legislative Representative John Hildreth. Hildreth said the bill will include a plan offered by U.S. Treasury Department Secretary Hank Paulson to bolster confidence in secondary mortgage industry giants Fannie Mae and Freddie Mac. “Because the Bush administration wants Congress to act quickly to give Treasury emergency powers to lift the cap on Fannie and Freddie's line of credit at Treasury and also to allow Paulson to purchase equity in the two (government-sponsored enterprises) GSEs, the bill takes on added urgency and could soon be passed by the Congress and signed into law,” Hildreth noted. In broad terms, this omnibus housing bill would allow the Federal Housing Administration (FHA) to refinance $300 billion worth of subprime mortgages to assist some of the country's 2.2 million borrowers expected to face the threat of foreclosure on their homes over the next few years. The bill also modernizes the FHA as well as the regulatory structure of the GSEs. CUNA supports the overall bill but has lobbied against certain provisions in the legislation, such as the national registration of bank and credit union loan originators, a new IRS reporting requirement for payment card processors, and a cumbersome GSE product approval process. Key lawmakers continued to work on a compromise last week and emerged from closed-door sessions last week saying they were inching toward a deal on the bill. (American Banker July 18). At that time the House was expected to vote on a final bill by July 23, and the goal was for the Senate to accept it shortly thereafter without making changes.

U.S. appeals court says CU can sue over data breach

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WASHINGTON (7/21/08)—In an important decision for credit unions, a U.S. court of appeals last week threw out a lower court ruling that had denied Pennsylvania State Employees CU (PSECU) and Sovereign Bank standing to sue BJ’s Wholesale Club the $98,000 it spent replacing member credit cards after customer data was stolen from the retailer. The credit union had tried to recover the $98,000 from both the retailer and its merchant bank, Fifth Third Bank, through negotiations. More than 235,000 credit and debit cards total were reissued, and nearly 1,000 accounts were affected by illegal purchases made by thieves. The $3.13 billion Harrisburg, Penn.-based credit union ultimately filed suit against the retailer and bank in U.S. Middle District Court in 2004. In last week’s decision by the United States Court of Appeals, The Hon. William W. Caldwell said the 2006 district court ruling granting summary judgment to Fifth Third Banks is reversed. The judge remanded the cased for further proceedings regarding the breach of contract claim. PSECU President/CEO Greg Smith said the credit union plans now to return to the District Court for a jury trial--which his credit union originally requested. "I think jurors will understand the issues pretty easily," said Smith. "Our counsel may also pursue an expanded complaint--not just the breach of contract issue." Rick Wargo, executive vice president/general counsel for the Pennsylvania CU Association, has said of the case, “PSECU’s litigation is significant in terms of allocating the responsibility for compliance on the appropriate parties, in this case merchants or retailers.” Wargo told News Now Friday, “PSECU is painstakingly doing some pioneering work to make the payment system a better place for all financial institutions.” Also commenting on the appeals court’s ruling, Credit Union National Association CUNA Deputy General Counsel Mary Dunn said, "In making his decision, the judge relied on the 1993 Visa operating rules and other evidence indicating that PSECU was an intended beneficiary of the agreement between Visa and Fifth Third Bank that the bank would ensure BJ's complied with the operating rules, including those involving data security. PSECU presented its argument well and the court agreed."

Inside Washington (07/18/2008)

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* WASHINGTON (7/21/08)--Federal Deposit Insurance Corp. (FDIC) officials are defending the way they handled the IndyMac crisis, though they have acknowledged they were not prepared for it (American Banker July 18). The agency has blamed extensive television coverage of the crisis for scaring consumers into thinking they would not have access to their money. FDIC Chairman Sheila Bair said the agency is monitoring the crisis, and doesn’t forsee a liquidity crisis because of it. Calif. State Rep. Ted Lieu (Calif.) said he thought the FDIC did a satisfactory job handling the crisis, although he said FDIC officials could have done better. James Barth, Auburn University finance professor, said the FDIC has not adequately explained deposit insurance to bank customers. Bert Ely, an Alexandria, Va.-based banking consultant, said the Office of Thrift Supervision (OTS) and the FDIC didn’t understand IndyMac’s problems quickly enough. Sen. Charles Schumer (D-N.Y.), has been blamed for triggering the panic by sending a letter to the OTS about IndyMac’s condition, but Ely said the bank failure could have happened regardless ...