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Washington Archive

Washington

CUNA: Sen. Begich Letter Shows CU Tax Status Commitment

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WASHINGTON (7/30/13)--Credit Union National Association President/CEO Bill Cheney on Monday thanked Sen. Mark Begich (D-Alaska) for his support of the credit union tax exemption, noting that the senator's comments "clearly show his commitment to supporting credit unions and their service to Alaska consumers and small businesses going forward."

Begich in a letter to the chairman and ranking member of the Senate Finance Committee said the tax exempt status of credit unions should be retained in any tax reform effort. The letter from Begich is dated July 26--the deadline the Finance Committee leaders gave to their Senate colleagues to submit recommendations for what to include on a "blank sheet" as tax preferences under a new tax code.

"Alaska is far removed from traditional financial centers, and credit unions play an outsized role in our economy," the senator said in a letter to Sens. Max Baucus (D-Mont.) and Orrin Hatch (R-Utah), the chairman and ranking member of the Finance Committee, respectively.

"Sen. Begich wanted complete transparency for his thoughts about tax reform, and used a letter for making his views known," Cheney said.

Begich in his letter said retaining the credit union tax exemption would "ensure continued access to affordable credit for consumers, homebuyers and small businesses alike, all of which contribute substantially to economic growth."

In making his recommendations, Begich noted that his list of recommendations was not exhaustive. "Instead, I want to focus my response to the committee on a handful of provisions I consider absolutely critical for Alaska," he wrote.

Begich also offered recommendations with regard to Alaska natives, energy, housing and a number of miscellaneous items--which included the statements about credit unions.

Cheney To Obama: Include MBLs In Econ Aid Packages

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WASHINGTON (7/30/13)--Credit Union National Association President/CEO Bill Cheney has encouraged President Barack Obama to "include authority for credit unions to provide more credit to small businesses, which will create at least 140,000 jobs in the first year in communities across the country without the expenditure of a single tax dollar" in any legislative jobs package his administration develops.

Cheney made his remarks in a Friday letter to Obama, and that letter is one of many items addressed in this week's CUNA Regulatory Advocacy Report. The administration is again focusing on the economy, and the CUNA CEO in his letter noted that many of the administration's economic goals can be accomplished through America's credit unions, "which community-by-community nationwide stand ready to help" middle-income families and others."

Separate House (H.R. 688) and Senate (S. 968) member business lending (MBL) bills were also introduced earlier this year. Both bills would increase the MBL cap from 12.25% of assets to 27.5%. CUNA has estimated that lifting the MBL cap would create 140,000 jobs and inject $13 billion in new funds into the economy, at no cost to taxpayers. Both bills enjoy bipartisan support. H.R. 688 has 109 co-sponsors, and S. 968 is co-sponsored by 16 senators.

These bills, Cheney stressed, "would permit credit unions with experience in business lending to continue to lend to their small business members." The CUNA letter also called attention to the fact that the U.S. Treasury, under former Secretary Tim Geithner, worked with the National Credit Union Administration to develop MBL legislation.

"This [legislation] would create jobs in small businesses that form the core of the American middle class through increased access to credit," CUNA pointed out.

The Regulatory Advocacy Report also features details on:
  • NCUA open board meeting results;
  • The NCUA's 2013 regulatory review;
  • Consumer Financial Protection Bureau actions regarding mortgage loan originator compensation practices; and
  • CUNA discussions with the Federal Reserve regarding payments research and coordination.
For CUNA's letter to President Obama and this week's Regulatory Advocacy Report, use the resource links.

Hampel Lays Out 'Rebate' Impact Of Excessive Corporate CU Assessments

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WASHINGTON (7/30/13)--With the growing likelihood that corporate stabilization losses are largely paid for, the Credit Union National Association has called for the end of any further corporate stabilization assessments.

According to CUNA Chief Economist Bill Hampel, assessments in excess of what is needed to cover losses would likely be rebated back to credit unions. That is both good and bad news.

"While rebates in and of themselves are good, to the extent rebates occur, it means prior assessments were higher than they needed to be. Rebates add to net income, but their existence means assessments previously subtracted from net income," Hampel said. "Understating Return on Assets for the next few years, and overstating it later would create incorrect signals about credit union performance," he added.

CUNA has consistently questioned why the National Credit Union Administration covered all the corporate losses in a five-year period. The agency had originally planned a 13-year lifespan for the Temporary Corporate Credit Union Stabilization Fund (TCCUSF), and following that plan would have minimized the high up-front cost to credit unions, Hampel said.

NCUA last week announced a 2013 TCCUSF assessment of eight basis points (bp), which will amount to about $700 million. With this assessment, credit unions will have paid $4.8 billion in TCCUSF assessments since the fund was established. The projected net remaining assessments over the life of the TCCUSF, based on last December's valuation of the legacy assets, now range from $0.9 billion to $3.2 billion. However, as the performance of the legacy assets continues to improve, the range of remaining assessment estimates is likely to fall further.

"The improving performance of corporate legacy assets and positive housing and economic trends could mean the end of corporate assessments," said Hampel.

The NCUA board will consider the 2014 assessment range in November, and CUNA will continue to encourage NCUA to refrain from charging a TCCUSF assessment next year, and instead monitor how the economy in general and housing markets progress.

The other key factor in winding down the corporate stabilization fund is how fast the NCUA pays back the $4.7 billion line of credit it took out from the U.S. Treasury. After this year's payment is made, outstanding borrowing to the Treasury will total no more than $4.075 billion, NCUA staff said at last week's NCUA Board meeting. Paying down the credit line builds a cushion for emergency liquidity needs the agency or share insurance fund might encounter.

In the past, the Central Liquidity Facility (CLF) provided access to large amounts of emergency liquidity to the NCUA, but in its present form, the CLF no longer serves that purpose.

NEW: Rep. Kildee Joins Ranks Of CU Tax Status Supporters

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WASHINGTON (UPDATED: 7/30/13, 11 A.M. ET)--Rep. Dan Kildee (D-Mich.) has spoken out in support of the credit union tax exemption, noting the critical role credit unions play in Michigan's economy in a statement to the Michigan Credit Union League.

"Credit unions offer unique benefits and services to their members," Kildee said, "from the everyday worker who opens a savings account with a favorable interest rate, a family with a low-interest home mortgage loan to buy their first home, or an entrepreneur with access to a small business loan, credit unions have historically been structured in a way that directly benefits their members in my district and across the nation."

The House Financial Services Committee member said he has heard from many constituents who, like him and his family, "are members of credit unions and strongly support the services they provide to our local community and economy."

MCUL & Affiliates CEO David Adams today thanked Kildee for his strong statement of support for credit unions. "His statement gives a strong and credible endorsement for the credit union tax exemption being good public policy. We're hopeful that other members of the Michigan delegation will also affirm their support in a similar way," Adams said.

Kildee's support also reaffirms the importance of grassroots outreach, Adams added. Kildee's tax status statement follows Sen. Mark Begich's (D-Alaska) announcement that he too supports the credit union tax exemption.

Begich in a July 26 letter to the chairman and ranking member of the Senate Finance Committee said the tax exempt status of credit unions should be retained in any tax reform effort. (See News Now story: CUNA: Sen. Begich Letter Shows CU Tax Status Commitment.)

NASCUS: Derivatives Proposal Ignores State Expertise

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WASHINGTON (7/30/13)--The National Credit Union Administration's derivatives proposal "would limit the authority of state regulators to supervise derivatives activities in their states," the National Association of State Credit Union Supervisors wrote in a recent comment letter. NASCUS said it cannot support the proposed derivatives regulation in its current form.

The NCUA derivatives proposal, released at the May open board meeting, would allow well-run federal credit unions to use simple derivatives to hedge against interest rate risks. The NCUA plan would allow only well-managed credit unions with $250 million or more in assets, and which have appropriate expertise, to apply for an agency derivatives investment program. Swaps and caps will be the only approved investments. Fees will be charged to cover costs related to application processing and supervision of the program.

Around 75 to 150 credit unions would apply for derivatives authority within the first two years of the program, the NCUA has estimated.

Federally insured state-chartered credit unions (FISCUs), however, are granted no new authority in the proposal, NASCUS noted in the letter. "Rather, the proposal limits the ability of states to allow FISCUs to engage in derivatives transactions, in some cases pre-empting long-standing state authorities," NASCUS added.

Overall, NASCUS said, the NCUA's proposal fails to recognize state expertise and experience. "Many state credit union regulatory agencies have experience supervising derivatives activities at the state level in state credit unions, and substantially more experience supervising the activity in state banks. That state experience, coupled with the historic independence of states to determine appropriate investments for state-chartered credit unions, should mean that NCUA has a compelling case for such sweeping pre-emption. There is no such case," NASCUS said.

The NCUA's derivatives rule "should address only federal credit unions," NASCUS added.

The Credit Union National Association has also filed a comment letter on the proposal. CUNA in that letter said it strongly opposes the imposition of application and/or supervision fees paid to the agency in order for credit unions to apply for or maintain derivatives programs or for any other financial activity that is directly authorized by statute or incidental to such authority.

CUNA also said it does not support an asset eligibility threshold for derivatives participation, and is concerned that the investment limitations set forth in the proposal are too restrictive. The CUNA comment letter urged the agency to provide for waivers and/or permit additional derivatives authority that would permit more flexibility for qualified credit unions. (See July 25 News Now story: CUNA Seeks Key Changes In NCUA Derivatives Proposal.)

For more on the CUNA and NASCUS letters, use the resource links.

Metsger Nomination Could Be Approved Before August Recess

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WASHINGTON (7/30/13)--There is no looming crisis as the U.S. Congress enters its final week before the August recess, and with a relatively simple agenda ahead, routine matters, including the potential approval of Richard Metsger's nomination to serve on the National Credit Union Administration board, could be taken care of this week.

Senate leaders announced last week that they intend to consider nominations for the Federal Bureau of Investigation and the National Labor Relations Board. The Credit Union National Association has also learned that the Metsger nomination and the nomination of Rep. Mel Watt (D-N.C.) to be head of the Federal Housing Finance Administration could also be considered before the end of the week.

Metsger's nomination could be considered under unanimous consent before the end of the week's session; the Watt nomination would likely be subject to a vote. "Nothing is set in stone on this; we continue to monitor this situation closely," CUNA Senior Vice President of Legislative Affairs Ryan Donovan said Monday.

The Senate is expected to consider the Transportation, Housing and Urban Development and Related Agencies Appropriations bill (S. 1243), and the House could hold votes on student lending, transportation and housing appropriations, energy, health care and regulatory relief measures this week. The regulatory relief bill, known as the Regulations from the Executive in Need of Scrutiny--or "REINS" Act (H.R. 367), would require the U.S. Congress to approve all federal agency rules that would have an economic impact of more than $100 million.

Items on a light committee schedule include:
  • Today's Senate Banking Committee hearing entitled "Mitigating Systemic Risk in Financial Markets through Wall Street Reforms;"
  • A Wednesday Joint Economic Committee hearing on how tax reform can boost economic growth; and
  • A Wednesday Senate Finance Committee hearing on energy tax reforms.