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Inside Washington (09/14/2009)

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* WASHINGTON (9/15/09)--The Federal Deposit Insurance Corp. (FDIC) is encouraging its loss-share partner institutions to consider temporarily reducing mortgage payments for its borrowers who are underemployed or unemployed. Unemployment or underemployment is the primary cause for default on a home mortgage, according to FDIC. The agency is urging its partners to consider the borrower for a temporary forbearance plan, reducing the loan payment level for at least six months. The monthly payment should be established based on an affordable payment--given the borrower’s circumstances--and it should allow for reasonable living expenses after payment of mortgage-related expenses, FDIC said ... * WASHINGTON (9/15/09)--Rumors that the Federal Deposit Insurance Corp. (FDIC) is broke may be unfounded. The agency appeared on paper to have only $10 billion left at the second quarter to deal with bank failures, but the FDIC has more than $42 billion on hand--$4 billion less than it had nine months earlier (American Banker Sept. 14). Financial observers say the news media and analysts had incorrectly assumed that bank failures had risked emptying the fund. The media enjoys looking at fund balances, when a look at the “whole picture” is needed, said Paul Miller, managing director at Friedman, Billings, Ramsey & Co. Art Murton, FDIC division of insurance and research director, said the agency has been emphasizing that people need to look at federal reserves and contingent loss reserves ... * WASHINGTON (9/15/09)--In recent reports, the Office of the Inspector General of the Federal Deposit Insurance Corp. (FDIC) faulted the FDIC in three bank failures: Corn Belt Bank and Trust Company, Pittsfield, Ill.; FirstBank Financial Services, McDonough, Ga.; and Sherman County Bank, Loup City, Neb. Sherman County Bank failed because of its decisions to increase and fund loan commitments without considering borrowers’ ability to repay and underlying collateral. FirstBank failed due to its management’s pursuit of rapid growth in the commercial real estate lending in Atlanta. Corn Belt failed because its management did not implement sound risk management practices in loan underwriting and credit administration during a period of key growth. The FDIC could have taken more action in the Sherman County Bank and FirstBank cases, the report said. The FDIC should have required Corn Belt to hold more capital or submit a capital contingency plan ... * WASHINGTON (9/15/09)--President Barack Obama Monday discussed his administration’s work to keep the economy from collapsing. The economy is “beginning to return to normalcy,” but “normalcy cannot lead to complacency,” he said. Obama also noted his plan for financial reform. First, the administration would give the Federal Reserve Board the ability to oversee systemic risk. Second, a consumer agency would be created. Third, the government would have the power to resolve institutions slated “too big to fail.” Financial observers have said it’s too tough to pass financial reform this year, but Obama said he would continue to work on reform. Obama also rebutted some arguments against financial reform (American Banker Sept. 14). He said that criticisms that the consumer protection agency would hinder innovation are unfounded. Financial institutions could do better by not hiding the real costs, he said. Many credit cards and mortgages had attracted consumers with their low rates--which then increased to levels they could not afford ...

Matz Corporate CUs should consult auditors on impairments

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ALEXANDRIA, Va. (9/15/09)--National Credit Union Administration (NCUA) Chairman Deborah Matz on Monday advised corporate credit unions to “consult with their auditors to determine the potential impairment” of any assets related to U.S. Central Federal Credit Union following the recent release of that corporate credit union’s audit. According to Matz, the capital depletion figures reported by U.S. Central through June 30, 2009 “have not changed.” U.S. Central in its audit released last week reported an other-than-temporary-impairment charge of $4.9 billion and recorded $1.2 billion in expected credit losses related to investments as of Dec. 31, 2008. According to Matz, these losses do not affect “the depletion of capital” as the NCUA “determined that all depletion would be based on credit losses, not mark-to-market losses, consistent with the new accounting guidance” that was issued by the Financial Accounting Standards Board in April of this year. See related story in News Now's Sept. 14 edition, "U.S. Central 2008 financial statement released."

Go Direct Safety month ripe for direct deposit promo

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WASHINGTON (9/15/09)--The U.S. Treasury Department's "Go Direct" campaign is again telling partnered credit unions to educate their members on the safety benefits of using direct deposit for Social Security payments. The Go Direct promotional campaign is taking place during October, which is National Crime Prevention Month. The campaign, which is entering its fifth year, promotes the use of electronic delivery for government benefits checks. Using electronic delivery reduces the risk of identity theft and helps reduce stolen checks and forgeries, according to the release. The release also highlights free educational tools that credit unions can use to help their members, including PowerPoint slides and talking points and other communications materials. Over 485,000 Social Security and supplemental security income (SSI) checks were reported lost or stolen and $64 million in checks issued by the Treasury were fraudulently endorsed during 2008, according to the release. The Credit Union National Association is a national partner of the Go Direct campaign, and supports the goals of the program. Use the resource links below for more Go Direct information.

Congress CFPA off front burner CRA up for debate

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WASHINGTON (9/15/09)--WASHINGTON (9/15/09)--President Barack Obama in a speech delivered Monday called for "strong rules of the road to guard against the kind of systemic risks" that precipitated the ongoing financial crisis. Meanwhile, while members of the House and Senate continue to debate how best to reach the goal of enhanced financial oversight, there is little in the way of official debate on those matters scheduled for this week. However, the House Financial Services Committee on Wednesday will hold a hearing on proposals the committee says would enhance the Community Reinvestment Act. Although a full witness list was not released at press time, representatives of the Credit Union National Association (CUNA) have been told that representatives from the American Bankers Association, the National Community Reinvestment Coalition, and the Massachusetts Commissioner of Banks could testify before the Committee. Representative Eddie Bernice Johnson (D-Texas), who sponsored H.R. 1479, the Community Reinvestment Modernization Act, may also testify during the hearing. The status of the proposed Consumer Financial Protection Agency is another item that is likely to be on the mind of legislators, but CUNA believes that that legislation may not be considered until early next month. CUNA representatives have said with certainty that the legislation will not be marked up this week, but additional hearings on the CFPA may be held later on this month. Also, H.R. 3221, the Student Aid and Fiscal Responsibility Act of 2009, which would terminate the Federal Family Education Loan Program (FFELP), is currently being discussed in the House. CUNA has lobbied against the bill.

SBA Homeland Security unite on H1N1 guidance

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WASHINGTON (9/15/09)—The U.S. Small Business Administration (SBA) and U.S. Department of Homeland Security jointly announced the availability of a preparedness guide to assist small businesses to plan for the possibility of an H1N1 flu outbreak this fall. When unveiling the guide to reporters, SBA Administrator Karen Mills underscored the importance of flu preparedness for small businesses. “Small business owners should take the time to create a plan, talk with their employees and make sure they are prepared for flu season,” said Mills. “For countless small businesses, having even one or two employees out for a few days has the potential to negatively impact operations and their bottom line. A thoughtful plan will help keep employees and their families healthy, as well as protect small businesses and local economies.” The preparedness guide offers small business employers tools and information to help plan for varying levels of severity of an H1N1 outbreak— which may lead to increased absenteeism, and, if the outbreak becomes more severe, may include restricted service capabilities and supply chain disruptions.