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Inside Washington (08/17/2011)

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* WASHINGTON (8/18/11)--The U.S. Chamber of Commerce in a comment letter issued Monday has challenged the Consumer Financial Protection Bureau (CFPB) authority to oversee large nonbanks. The chamber cited a “notice and request for comment” the CFPB issued in June. The CFPB notice requested feedback on how the bureau should determine which large nonbanks should be subject to supervision. Because the bureau does not have a permanent director, it lacks the authority to provide such oversight, the chamber said in its comment letter. “The secretary and the bureau should therefore cease all development of the ‘larger participants’ rule until a director has been confirmed,” the letter stated.

MasterCard tells CUs of interchange structure plans

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WASHINGTON (8/18/11)--MasterCard plans to implement a two-tiered debit interchange fee structure, and currently plans to keep its existing market-based rate structure in place for credit unions and other financial institutions with under $10 billion in assets, MasterCard Global Head of Public Policy Shawn Miles said during a Wednesday conference call. Miles added, however, the rates are subject to change based on market forces and will be finalized in a few weeks and announced prior to Oct. 1. The call was presented by MasterCard and the Credit Union National Association (CUNA) and featured input from CUNA Chief Economist Bill Hampel and CUNA Deputy General Counsel Mary Dunn. The Fed's final debit interchange rule caps debit interchange fees for issuers with assets of $10 billion or more at 21 cents, and allows an additional five basis points of the value of the transaction to cover fraud losses. An extra penny may be charged by financial institutions that are in compliance with Fed-established fraud prevention standards. Credit unions and other institutions with under $10 billion in assets are exempt from the rule. MasterCard plans to establish its own online debit interchange registration system for its member institutions to denote if they are above or below the $10 billion-asset threshold. The card processor is planning to include in the registry the ability for institutions above $10 billion in assets to certify that they qualify to receive the extra penny for complying with fraud prevention standards. CUNA and MasterCard will both monitor merchants for any signs that they are steering consumers away from using debit cards issued by institutions that are not subject to the cap. CUNA is developing a mechanism for credit unions to report illegal merchant steering behavior. The MasterCard representative also thanked credit unions and CUNA for their efforts to delay and change the debit interchange fee cap legislation, and said that the final rule was significantly improved due to this work. Miles added that MasterCard looks forward to working with CUNA on any future threats to interchange fees. However, CUNA has noted that members of Congress are reticent to take up the interchange debate any time soon, given the controversy that surrounded the issue.

Treasury clears air on housing finance reform

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WASHINGTON (8/18/11)—U.S. Treasury Deputy Secretary Neal Wolin this week said that the Obama Administration is still considering a range of options for mortgage market reform, adding that the administration “believes that the private sector – subject to strong oversight and consumer protection – should be the dominant provider of mortgage credit.” Wolin in a treasury.gov blog post responded to a recent Washington Post story that claimed the Obama administration is working on a proposal that would maintain a large government role in the mortgage market by subsidizing federal loans for most home buyers. The administration’s approach, the Post reported, could possibly preserve Fannie Mae and Freddie Mac, “although under different names and with significant new constraints.” The deputy secretary reminded both the paper and citizens that the Obama administration has proposed a trio of potential outcomes for Fannie Mae and Freddie Mac, including almost completely privatizing the housing finance system, limiting the government's intervention in the mortgage market to times of financial distress, and using a system of reinsurance to backstop private mortgage guarantors to a targeted range of mortgages. Wolin said that the administration is still considering all three of these options. “In each of the three options we outlined in our report to Congress, the government's footprint in the housing finance market will shrink substantially,” Wolin said, adding that “any government support for housing finance will be targeted and limited. “This will help ensure that taxpayers are protected and the private sector bears the burden for losses,” he said. For the blog post and the Washington Post story, use the resource links.

Cheney MBL cap lift has greater benefits than loan fund

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WASHINGTON (8/18/11)—Following the U.S. Treasury’s decision to provide $418 million in Small Business Lending Fund (SBLF) cash to community banks, Credit Union National Association (CUNA) President/CEO Bill Cheney noted that lifting the business lending cap is “a more effective way of helping the economy grow and creating jobs." The SBLF is the $30 billion fund authorized by the Small Business Jobs and Credit Act that provides low-cost capital to small and mid-sized banks as incentives to increase lending. The Treasury noted that the latest round of SBLF awards brings the total amount of funds given to community banks through the SBLF program to more than $1 billion. The Treasury added that additional SBLF funding announcements will be made in the near future. Lifting the MBL cap, which currently stands at 12.25% of total assets, to 27.5% of assets would inject more than $13 billion in new funds into the economy, creating up to 140,000 new jobs in the first year of the cap lift. “Unlike the taxpayer-funded SBLF, this wouldn’t cost taxpayers anything,” Cheney said. The case for MBLs was given a boost on Tuesday when Jeff Disterhoft, president/CEO of University of Iowa Community CU, Iowa City, Iowa, shared the potential benefits of an MBL cap lift with President Barack Obama during the White House Rural Economic Forum at Northeast Iowa Community College in Peosta, Iowa. (News Now, 8/17) Disterhoft told News Now the president appeared attentive to his concerns, adding that Obama said he would "go back to Washington and look further” into the issue. Disterhoft’s MBL exchange with President Obama also received coverage in The Wall Street Journal’s FINS Finance web site and the Iowa City Press Citizen. (See related story: WSJ Web page covers CU’s MBL pitch to Obama.) For the Treasury release, use the resource link.