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CUNA seeks comment on indemnification changes

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WASHINGTON (8/17/10)--The Credit Union National Association (CUNA) has asked credit unions to comment on whether a proposed prohibition on indemnification payments would discourage institution-affiliated parties (IAPs) from working with credit unions. The NCUA’s indemnification proposal would prohibit federally insured credit unions from making indemnification payments to an institution-affiliated party (IAP) for legal and other professional expenses in administrative and civil proceedings by NCUA or a state regulatory agency where the IAP is assessed a civil money penalty, removed from office or made subject to a cease and desist order. Credit unions may also comment on whether or not the NCUA should prescribe an indemnification prohibition on IAPs regardless of the financial condition of the credit union that they are involved with. CUNA’s comment call has also asked if the aforementioned indemnification payment prohibitions, as well as prohibitions on so-called “golden parachute” compensation arrangements, should apply to both natural person and corporate credit unions. The NCUA proposed prohibiting so-called “golden parachute” compensation packages to the departing executives of troubled federally insured credit unions. These prohibitions would not apply to qualified pension plans, "bona fide" deferred compensation, and some other types of employee benefits and severance agreements, and would not apply to current employment contracts, only to those that are agreed to or renewed after the rules take effect. Comments are due to CUNA by Aug. 27. Comments to NCUA should be submitted by Sept. 7. For the comment call, use the resource link.

NCUA Kappa Alpha Psi seek hearing delay

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WASHINGTON (8/18/10)—Kappa Alpha Psi FCU will now have until Aug. 23 to respond to the National Credit Union Administration’s most recent court statement after the credit union and the National Credit Union Administration (NCUA) agreed to extend the deadline on Tuesday. The NCUA will be given until Aug. 30 to respond to any claims that the credit union may make at that time, and the two sides also agreed that any additional hearings related to the case will take place between Sept. 15 and 30. The two sides were set to take part in a full hearing to be held later today in the U.S. District Court for the District of Columbia. However, the credit union failed to respond to an NCUA brief by the previously scheduled Aug. 16 deadline. The credit union filed a legal challenge to the NCUA’s liquidation order earlier this month, alleging in the challenge that the NCUA’s forced liquidation of the credit union was unjust. Specifically, the credit union alleged that the “significant drop” in its net worth ratio was created by assessments charged by the NCUA. The NCUA countered, saying that its liquidation order was well founded and was directly related to the credit union’s inability to generate profits, build its net worth, and adequately grant, service, and collect loans. The NCUA on Friday formally liquidated the troubled credit union by distributing all shares held in the credit union to its former members. The NCUA on Tuesday said that it “has a statutory obligation to pay members their shares and give them access to their funds as soon as possible.” Any member funds that were still held in the credit union as of Friday were mailed to the former members on that day, the NCUA said. A total of just over $700,000 in member funds were paid to the credit union’s 1,472 members. However, the NCUA said that it could not locate the holders of 150 accounts which typically held the minimum $25 account balance, and nothing more. The NCUA said that it is continuing the search for the holders of these accounts.

Inside Washington (08/17/2010)

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* WASHINGTON (8/18/10)--Donna Gambrell, director of the Treasury’s Community Development Financial Institutions (CDFI) Fund, will announce the recipients of the 2010 Technical Assistance and Financial Assistance Awards on Thursday. The announcement will take place at Lower East Side People's FCU, New York City, a federation member, and the largest community development credit union in New York City. The round is expected to be the largest ever, with $247 million allocated to the CDFI Fund through the 2009 Omnibus Bill ... * WASHINGTON (8/18/10)--Banks eased loan standards in the second quarter, according to a Federal Reserve Board Survey. The July 2010 Senior Loan Officer Opinion Survey on Banking Lending Practices indicated that some domestic banks eased standards and terms on commercial and industrial loans of all sizes. Large domestic banks reported easing standards on almost all of the different categories of loans to households. Other banks showed smaller net fractions easing policies or a net tightening of policies. Regarding residential real estate lending, few large banks reported easing standards on prime mortgage loans, while a modest net fraction reporting tightening standards. Banks reported an increased willingness to make consumer installment loans for the third consecutive quarter and small net fractions of banks reported easing standards on credit card or consumer loans. A small net fraction of respondents reported tighter terms and conditions on credit card loans ... * WASHINGTON (8/18/10)--Sen. Carl Levin (D-Mich.) Monday told the American Bar Association that law firms should implement anti-money laundering guidance, which directs lawyers to tighten their protocols by identifying the beneficial owners of trusts and shell companies to improve how firms identify risky clients (American Banker Aug. 17). It also defines the procedures needed to evaluate the source of client funds deposited into an attorney-client or law office bank account, suggesting firms designate an anti-money laundering compliance officer. Levin called on legal groups in February to crack down on misconduct. He has praised the guidance, but said it is just a first step ...

Treasury outlines administrations critical housing issues

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WASHINGTON (8/18/10)--At a housing conference Tuesday, U.S. Treasury Secretary Timothy Geithner outlined what the administration has identified as significant issues that have to be addressed in restructuring the government-sponsored housing enterprises and the housing finance industry. He added that there must be a new system that eliminates the conflict between Freddie Mac’s and Fannie Mae’s public policy role and the need to enhance shareholder returns. “Based on the panel discussions after Geithner’s remarks, it appears that the issues of most concern are the role of the government and the need for transparency in the mortgage securitization market,” said Jeff Bloch Tuesday. Bloch is senior assistant general counsel for the Credit Union National Association. “As for the role of government, the panels’ thoughts ranged anywhere from limited guarantees for only certain types of mortgages and securities to having the entire housing finance industry under the control of one large government agency. There was also agreement that more transparency and disclosure was needed in the mortgage securitization market and that although this was addressed in the Dodd-Frank Act, the success of these provisions will depend on the implementing regulations,” Bloch added. Additional issues made during the conference:
* The role of the government in promoting stability in the market in good times and bad. Specifically, the role and extent of the federal guarantee and whether it's to be explicit, or implicit as it was before the collapse of the industry, and the extent that the private market absorbs losses. For example, one idea here is to set up an insurance fund, similar to deposit insurance, in which premiums from the private sector go to a fund that pays losses and the losses beyond that are paid by the government; * The extent to which there should be financial support for affordable housing and the extent that this should encourage rental housing instead of home ownership; * The makeup of the mortgage securitization market and the need for transparency. The Dodd-Frank Act addresses a number of these issues; and * The time that would be necessary to transition to a new system.
National Urban League President/CEO Marc Morial, American Enterprise Institute Fellow Alex Pollock, Bank of America Home Loan President Barbara Desoer, and other academics and industry insiders were among the panelists.