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Franks consumer protection plan has CRA difference

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WASHINGTON (7/9/09)— House Financial Services Committee Chairman Barney Frank (D-Mass.) introduced a bill Wednesday that would enact President Obama’s plan to strengthen consumer protections as a part of a broader financial regulatory restructuring. In a release, Frank said his bill (H.R. 3126) would establish a Consumer Financial Protection Agency (CFPA. The new agency is intended to be a powerful independent agency with a range of rulemaking, information-gathering, supervisory, and enforcement tools to better protect consumers who purchase financial products from banks and non-bank financial institutions. Frank’s bill departs from the Obama plan in two significant ways. The administration had proposed to place Community Reinvestment Act (CRA) enforcement under the purview of the new agency. Frank’s bill preserves the current federal banking regulators’ role of enforcers. Also, Frank noted, the administration’s proposal “presupposes” the creation of the National Bank Supervisory (NBS), a new prudential regulator that would merge the Office of the Comptroller of the Currency (OCC) and the Office of Thrift Supervision (OTS). “While this is consistent with the administration’s goals for regulatory restructuring, these considerations will be done at later date,” the release declared. Accordingly, the introduced bill makes references to the OCC and OTS, instead of the NBS. The Credit Union National Association's (CUNA's) Governmental Affairs Committee and and Executive Committee are reviewing CUNA's policy in light of the new bill. CUNA will be among those briefing Democratic members of the House Financial Services Committee next Tuesday on financial industry views concerning the proposed agency and legislative language. The bill’s co-sponsors include: Reps. Maxine Waters (D-Calif.), Carolyn Maloney (D-N.Y.), Luis Gutierrez (D-Ill), Mel Watt (D-N.C.), Gary Ackerman (D-N.Y.), Brad Sherman (D-Calif.), Michael Capuano (D-Mass.), Brad Miller (D-N.C.), Al Green (D-Texas), Keith Ellison (D-Minn.), Jackie Speier (D-Calif.), and Alan Grayson (D-Fla.). Frank‘s financial service panel also announced a hearing entitled “Banking Industry Perspectives on Reform Proposals” for July 15; witnesses are to be announced at a later date.

No interchange fees in Senate appropriations bill

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WASHINGTON (7/09/09)—A Senate appropriations subcommittee, as expected, voted on the Financial Services Appropriations Act for fiscal year 2010 and no amendment was offered to impose restrictions on interchange fees--the bill was approved with no interchange language. Credit Union National Association (CUNA) Senior Vice President of Legislative Affairs John Magill said CUNA will remain watchful as the bill goes forward to see if it becomes a vehicle for interchange language. The subcommittee website noted the following provisions of its bill:
* The bill provides $166.8 million for the U.S. Treasury Department's Community Development Financial Institutions (CDFI) Fund, an increase of $59.6 million, or 56%, over the last year’s enacted level. CDFI grants support financial services to underserved communities, including lending and investment in affordable housing, small business, and community development; and * For the Small Business Administration, the bill provides $860.9 million, an increase of $81.6 million over the FY10 budget request. The increase supports $25 million for the Microloan program and $114.4 million for Small Business Development Centers.
The bill is scheduled to be marked up by the full committee today. A similar appropriations bill was approved by a House committee Tuesday night. That bill would allow the National Credit Union Administration’s Central Liquidity Facility to maintain its maximum amount of $40 billion through the 2010 fiscal year. It also would increase funding for CDFI fund and the SBA’s business loan account.

FinCEN reports double-digit increase in fraud-related SARs

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WASHINGTON (7/9/09)--The Financial Crimes Enforcement Network (FinCEN) on Tuesday reported that Suspicious Activity Reports (SARs) related to fraud increased across the board during 2008, with depository institutions filing 12.85% more SARs than they had in 2007. Fraud violations account for 7 of the 20 types of violations tracked by FinCEN, and represented nearly half of all violations reported during 2008, the FinCEN release said. In comments accompanying a FinCEN release, director James H. Freis, Jr. said that “while increases in reporting of suspected fraudulent activity could mean that there is an increase in fraud, it also reflects an increase in awareness within financial institutions detecting such activity.” FinCEN reported double-digit increases in fraud-related filings, including fraud related to checks, mortgages, consumer loans, wire transfers, credit cards, debit cards, and commercial loans. However, the total amount of SARs filed only showed a slight increase of 3%, lower than the 16% increase recorded during 2007. To view the full FinCEN release, use the resource link.

NCUA FOIA reports detail early response to corp. CU crises

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ALEXANDRIA, Va. (7/9/09)--The National Credit Union Administration (NCUA) has posted online a redacted report which details the proceedings of closed sessions of several NCUA board meetings that took place between October 2008 and March 2009. The redacted report was released in response to requests by the Credit Union National Association (CUNA) and others under the Freedom of Information Act (FOIA). The report, which centers on corporate credit union assets and other related information, includes four NCUA Board closed meeting transcripts, two copies of the Board Action Memorandum authorizing the Temporary Corporate Credit Union Share Guarantee Program and related measures, and other once-private information regarding the NCUA's valuation of the mortgage-backed securities portfolios held by U.S. Central FCU and Western Corporate FCU’s (WesCorp). The redacted documents detail NCUA staff ’s presentations to the NCUA Board on how to deal with possible corporate credit union losses and liquidity concerns, and include information on the estimated costs that implementing a corporate credit union share guarantee would impose on federally-insured credit unions. The documents also outline the NCUA’s discussions on how best to determine the fair value of the corporate share guarantee. The NCUA Board closed meeting transcripts also provide some insight into the Pacific Investment Management Company LLC (PIMCO) credit analysis of the corporates' mortgage-backed securities, as well as details about WesCorp's and U.S. Central's mortgage-backed securities. A previously unreleased Board Action Memorandum (BAM) also provides the NCUA’s early estimates of the billions in unrealized losses related to U.S. Central and WesCorp. The BAM also discusses the other than temporary impairment charges assessed on U.S. Central, WesCorp, and some other corporate credit unions. The NCUA responded to an earlier CUNA FOIA request by releasing 56 highly-redacted pages related to the 4,500 page PIMCO report to CUNA early last month. The NCUA later posted those documents on its website. Use the resource links below to access a CUNA summary of the recently released items as well as the NCUA board meeting report.

CUNA to Senate Ease smothering effect of some CU regulations

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WASHINGTON (7/9/09)--Credit Union National Association (CUNA) Small CU Committee member and Allied CU President/CEO Frank Michael during a Wednesday Senate subcommittee hearing urged legislators to ease the “smothering effect” of increased regulatory scrutiny that is causing an increasing number of small rural credit unions to merge with their larger counterparts.
Click to view larger imageCUNA Small CU Committee member and Allied Credit Union President/CEO Frank Michael urged legislators to ease a regulatory burden that is pushing an increasing number of small rural credit unions to merge with their larger counterparts. He said Congress should find opportunities to provide exemptions from the most costly and time-consuming burdens to cooperatives and other small institutions as lawmakers move forward on financial regulatory reforms. (CUNA Photo)
Speaking before a Senate subcommittee on financial institutions hearing on the effects of the economic crisis on rural community banks and credit unions, Michael asked the assembled legislators to “look for opportunities to provide exemptions from the most costly and time-consuming initiatives to cooperatives and other small institutions” as they move forward with their work on financial regulatory reforms. Addressing the Obama administration’s recently released plans to create a Consumer Financial Protection Agency (CFPA), Michael said that while he agrees that consumers should be protected, adding an additional level of regulatory oversight would, in the case of his credit union, lead to a costly and burdensome regime of dual examinations. The administration has proposed consolidating the consumer protection roles currently held by the Federal Reserve, National Credit Union Administration and other federal financial regulatory agencies into the CFPA. National Credit Union Association (NCUA) Chair Michael E. Fryzel in late June said that the NCUA will propose the creation of a Consumer Protection Office in its 2010 Agency Budget. According to Fryzel, the new office would “consolidate existing consumer protection functions already administered by NCUA and would create a liaison relationship with relevant external parties, such as the Consumer Financial Protection Agency (CFPA), if that proposed entity becomes a reality." However, the Wall Street Journal on Wednesday reported that U.S. Treasury Assistant Secretary Michael Barr confirmed that the NCUA would lose its consumer protection powers under the administration’s proposed CFPA legislation. In House testimony, Barr said that credit unions would not be exempted from the new consumer protection regulations. Rather, all financial institutions would receive the same treatment under the CFPA, regardless of their composition or charter. Another pressing issue raised during the hearing was the impact that the current cap on member business lending (MBL) is having on both credit unions in general and, more specifically, on smaller rural credit unions. Michael said that while CUNA supports “strong regulatory oversight of how credit unions make member business loans, there is no safety and soundness rationale” for current laws that restrict the amount that credit unions may lend to their member businesses to 12.25% of the credit union’s total assets. Michael advocated that Congress grant the NCUA the authority to lift the current MBL cap above 20% of a given credit union’s assets “if safety and soundness considerations are met.” Such a move would “safely and soundly” result in $10 billion in new small business loans within one year, Michael added.

Inside Washington (07/08/2009)

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* WASHINGTON (7/9/09)—Twenty Senate Democrats, with Senate Banking Committee Chairman Christopher Dodd (D-Conn.) and committee member Sen. Jack Reed (D-R.I.) at the lead, are pushing the Obama administration to take action to reduce home mortgage foreclosures. In a letter to the U.S. Treasury Secretary, the lawmakers—concerned by recent reports that borrowers wait up to two months for a response to a loan modification inquiry--said the government should use its authority to ensure servicers participating in the administration's Making Home Affordable foreclosure prevention program move more quickly. Among questions posed to Treasury Secretary Timothy Geithner, the senators asked if more legislation was needed (American Banker July 8) ... * WASHINGTON (7/9/09)—The Federal Deposit Insurance Corp. (FDIC) took heat recently from its inspector general (IG) for sometimes slow and inefficient oversight actions regarding Franklin Bank of Houston prior to that institutions November failure. The IG said the agency was on target with recommendations, starting in 2003, that Franklin monitor its loan concentrations, reduce liquidity risk and beef up its auditing activities. However, the IG criticized the FDIC for not always ensure that management of the CAMEL 2-ranked bank responded adequately to agency recommendations. The IG cited risky lending in the demise of the state thrift that had $4.9 billion in assets. (American Banker July 8) ... * WASHINGTON (7/9/09)—At least in part due to criticism of its failure to uncover Bernard Madoff’s $65 billion ponzi scheme, the Securities and Exchange Commission (SEC) is launching the biggest overhaul of its enforcement division in 30 years. The changes will result in more front-line investigators, fewer layers in the management level, and, probably, five specialist teams. The specialists will focus on such things as expanding, complex or opaque areas of the market, according to a July 8 article in American Banker ...