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CUs continue push for MBL support in Senate this week

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WASHINGTON (7/27/10)--The Credit Union National Association (CUNA) and sponsor Mark Udall (D-Colo.) continue to work to drive support for member business legislation ahead of potential action this week. Job-boosting small business legislation was discussed last week, with an amendment that would create a $30 billion lending fund for small banks being added on Thursday. It is not known if the MBL legislation, which would lift the MBL cap imposed on credit unions from the current 12.25% to 27.5% of total assets, will come up for discussion this week, and the potential for discussion on the small business bill is also unknown at this time. While the house will wrap up the first half of 2010 at the end of this week, the Senate will likely remain in session through August 6. Further action on small business legislation could take place at that time. The House schedule for the week includes discussion of supplemental funding bills and possible changes to funding for the department of Housing and Urban Development. A House Financial Services Committee markup on internet gambling legislation will also take place later today.

Corporate stabilization fund gets clean 2009 audit

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ALEXANDRIA, Va. (7/27/10)—The Temporary Corporate Credit Union Stabilization Fund (TCCUSF) received an unqualified or “clean” audit opinion with no deficiencies noted, according to an National Credit Union Administration (NCUA) announcement Monday. Citing a report from KPMG LLP, the independent firm retained to conduct the audit, the NCUA Chairman Debbie Matz said the audit results represent “an important validation of the soundness of this essential NCUA role.” “In these volatile and uncertain times, it is very positive and reassuring for credit unions that the Stabilization Fund, working in concert with other NCUA funds, has received this clean bill of health on its financial reporting and is well-positioned to safeguard the corporate system,” Matz said. Last month, KPGM also gave the National Credit Union Share Insurance Fund (NCUSIF) a "clean" audit report, with auditors also certifying the "financial accuracy" of the NCUA’s operating fund, its community development revolving loan fund, and its central liquidity facility. In its report on the TCCUSF, KPMG wrote, “(I)n our opinion, the financial statements referred to…present fairly, in all material respects, the financial position (of the fund) as of December 31, 2009, and its net costs, changes in net position, and budgetary resources for the period from May 20, 2009 (inception) to December 31, 2009 in conformity with U.S. generally accepted accounting principles.” The TCCUSF was created in May 2009 by the U.S. Congress to accrue corporate credit union system losses, and over time, to assess the credit union system for the recovery of such expenses. The fund has access to $6 billion in U.S. Treasury borrowing authority, which is shared with the NCUSIF. After reviewing the auditors report, Credit Union National Association Chief Economist Bill Hampel said that while the audited financial statements offer no new information, credit unions can find the fund’s unqualified audit reassuring. The projected total cost of the corporate stabilization effort remains approximately $7.5 billion, of which $1 billion is the previous capital injection into US Central, and $6.5 billion is the accounting cost of guaranteeing all credit union non-capital deposits in corporate credit unions, Hampel said. “These accounting costs are NCUA's estimates of the ultimate actual costs of corporate stabilization. After all is said and done, credit unions will have to pay the actual costs that are eventually incurred as a result of troubled assets held by some corporate credit unions. This year's 13.4 basis point assessment raised $1 billion toward the final cost. In the next three to four years, we'll learn more about what the actual costs will be,” Hampel said. He added that it would not be unlikely to see assessments in the neighborhood of 13 basis points for the next couple of years, followed by adjustments, either increases or decreases, in the last few years of the stabilization as actual losses become better known. Use the resource links below for more information.

Cheney to iBankratei CUs concerned that interchange cap works

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WASHINGTON (7/27/10)--President/CEO Bill Cheney continues to publicly highlight credit union concerns over recently enacted statutory provisions to regulate interchange fees and related issues, including in a recent article on bankrate.com. In the article, Cheney questioned whether a legislated interchange carve-out for credit unions with under $10 billion in assets would be truly effective. That carveout, which was avocated by CUNA, credit union leagues and credit unions, would apply to all but three credit unions. While it does appear that that carveout would benefit credit unions, Cheney said that he was unsure that large payment card companies would fully support a two-tier structure with separate sets of fee scales for larger and smaller institutions, respectively. Cheney added that smaller institutions such as credit unions could lose revenue due to the interchange changes, a circumstance that may force credit unions to increase member fees or reduce the amount of services they offer to those members. The bankrate.com story notes that the legislation will allow merchants to continue the practice of setting minimum payment amounts for credit card purchases, but that minimum may not exceed $10. The legislation wil also permit merchants to offer discounts for consumers that use preferred payment methods, the story added. The bankrate.com story also noted U.S. Government Accountability Office research which found that legislation that reduced interchange fees charged to merchants in Australia did not result in lower prices for consumers. The interchange legislation, which passed into law as part of a larger financial regulatory reform package, will allow the Federal Reserve to intervene in the setting of per-transaction swipe fees. CUNA, credit unions, and credit union leagues made thousands of individual contacts with legislators ahead of the regulatory reform vote, urging their legislators to oppose the interchange provisions. CUNA is communicating its own analysis on the interchange legislation to league and credit unions later this week, and will also be revisiting issues that it has already raised to Fed staff as well as flagging additional areas of concern in a letter to the Fed and other policymakers this week. For the full bankrate.com story, use the resource link.

UIGEA relief may see committee vote today

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WASHINGTON (7/27/10)—The House Financial Services Committee later today will discuss H.R. 2267, the Internet Gambling regulation, Consumer Protection, and Enforcement Act, during a markup session. Legislation to address medical debt, shareholder protections, housing, and bonds will also be discussed during the markup session, which will begin at 10 A.M. E.T. H.R. 2267, which would allow the U.S. Treasury to license internet gambling operators, permitting those operators to accept bets from U.S. citizens, was addressed during a public committee hearing last week. During that hearing, Discovery FCU President/CEO Ed Williams, appearing on behalf of the Credit Union National Association, urged legislators to strengthen the safe harbor rules contained in the current legislation, the Unlawful Internet Gambling Enforcement Act (UIGEA). Williams also spoke in support of the more recently proposed legislation, as H.R. 2267 would eliminate some of the compliance-related uncertainty that credit unions currently face under UIGEA. UIGEA regulations currently require credit unions and other financial institutions to establish and implement policies and procedures to identify and block restricted internet gambling transactions, or rely on those procedures established by the payments system. The new legislation, which was proposed by committee head Rep. Barney Frank (D-Mass.), would create new rules for online gambling operators. One way that the legislation, if passed, would aid credit unions is by creating a list of approved gambling operators. This would ease the compliance burden placed on credit unions and other financial institutions and prevent financial institutions from having to do their own investigative work. Williams last week indicated that while the number of transactions that his credit union blocks due to UIGEA rules is "no more than a handful per month," the transaction blocking process does create a number of false positives that "should not have been blocked."

Inside Washington (07/26/2010)

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* WASHINGTON (7/27/10)--The Federal Reserve Board is seeking nominees for its Consumer Advisory Council. The council advises the Fed on its responsibilities under the Consumer Credit Protection Act and other consumer financial services matters. The group meets three times a year in Washington, D.C. Meetings are open to the public. The board plans to appoint up to 10 members for terms that will begin in January. Nominations are due Sept. 10. Alan Cameron, president/CEO of the Idaho Credit Union League, is a representative on the council. His term runs through 2010 ... * WASHINGTON (7/27/10)--Tax cuts for the wealthy, which were approved during former President George Bush’s term, should expire this year, according to Treasury Secretary Timothy Geithner. Geithner told ABC that cuts for individuals who make $250,000 a year or more should expire (The New York Times July 26). The change would affect roughly 3% of Americans, he said. Geithner said he didn’t think the cuts would affect economic growth. Some members of Congress disagree and say they would try to extend the cuts for people of all incomes. Supporters of extending the cuts, approved in 2001 and 2003, argue that raising the taxes on any income group could prohibit economic recovery, the newspaper said ... * WASHINGTON (7/27/10)--The Treasury Friday announced the continued sale of its holdings of Citigroup common stock, slated to end Sept. 30 regardless of whether all the shares are sold. Morgan Stanley, Treasury’s sales agent, will have discretionary authority to sell 1.5 billion shares of Citigroup common stock under certain parameters. Treasury received 7.7 billion shares of the stock last summer as part of the exchange offers conducted by Citigroup to strengthen its capital base. Treasury exchanged the $25 billion in preferred stock it received in connection with Citigroup’s participation in the Capital Purchase Program for common shares at a price of $3.25 per common share. Treasury currently owns about 5.1 billion shares of Citigroup common stock ...