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Washington Archive

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Inside Washington (09/16/2008)

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* WASHINGTON (9/17/08)--The Merrill Lynch-Bank of America deal may have increased risks faced by the Federal Deposit Insurance Corp. (FDIC), according to industry observers. Over the weekend, the Federal Reserve Board waived long-standing limits, which are aimed to prevent commercial banks from bailing out their affiliates (American Banker Sept. 16). Observers say the waiver may have paved the way for Merrill Lynch to agree to sell itself to Bank of America. Lawmakers worry the FDIC will run out of funds to pay for bank failures because barriers designed to prevent commercial banks from bailing out their affiliates are being relaxed. FDIC Chairman Sheila Bair said the agency is monitoring risks posed by the investment bank sector; and has taken steps to mitigate impact from the Lehman Brothers bankruptcy filing. On Thursday, regulators will testify before the Senate Banking Committee on the IndyMac Bank failure ... * WASHINGTON (9/17/08)--The Federal Reserve Banks Monday announced “significant progress” converting customers to the FedLine Direct access solution ahead of sunset date Dec. 31 for legacy computer-interface technology. The conversion does not involve changes to message or file formats. The solution leverages a financial institution’s investment in Internet protocol-based technology. “As with all Federal Reserve access solutions, security and reliability are top priorities,” said Tony Fressola, assistant vice president of the Fed’s wholesale product office ... * WASHINGTON (9/17/08)--John A. Koskinen and Philip A. Laskawy will serve as the non-executive chairmen of Fannie Mae and Freddie Mac, respectively, the Federal Housing Finance Agency announced Tuesday. Koskinen worked at Palmieri Co., serving as president/CEO from 1979 to 1993. He also has served in several senior positions with the federal government, including deputy director for management in the Office of Management and Budget. Laskawy served as chairman/CEO of Ernst and Young from 1994 to September 2001. In 2006-2007, he served as chairman of the International Accounting Standards Committee Foundation ...

Pennsylvania FOM case closed

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WASHINGTON (9/17/08)—U.S. District Court Judge Yvette Kane has entered the remedy to the Pennsylvania field of membership case submitted by the National Credit Union Administration (NCUA) and the bankers and has ordered the clerk to close the case. Under the remedy, effective immediately, the community charters granted by the NCUA to Members 1st FCU in 2003, New Cumberland FCU in 2004, and AmeriChoice FCU in 2005 are vacated. Each credit union is prohibited from accepting any new members pursuant to their former community charters unless those members are eligible under the restored charters. However, current members who would not be eligible for membership under the restored charter may remain as members as “grandfathered members.” John McKechnie III, NCUA director of public and congressional affairs, said Tuesday that the court orders' provision allowing the credit unions to continue to serve all members of record is "a particularly positrive apect." The judge’s order also states that the affected credit union “may add as a member any person or persons within the immediate family or household of a Grandfathered Member is the Grandfathered Member was eligible for membership under the terms of the restored charter on or after April 23, 2003.”

FASB plan covers some CU loan participations

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WASHINGTON (9/17/08)—Credit unions that sell a participating interest in loans could feel a direct impact of a new plan by the Financial Accounting Standards Board (FASB), but those on the purchase side will see little change, said the head of the Credit Union National Association’s (CUNA’s) Accounting Task Force Tuesday. Task force chairman Scott Waite was addressing FASB’s recently proposed amendments that would remove the concept of a qualifying special purpose entity (QSPE) from FAS 140, Accounting for Transfers and Service of Financial Assets and Extinguishments of Liabilities. The accounting body’s intent, in part, is to address concerns about isolating the loan participations and other financial assets from the reach of the originating institutions and its creditors in liquidation. "This provides more clarity as to the accounting treatment required when ‘control’ is maintained over the assets," Waite said. CUNA and its accounting group are reviewing the proposed FASB statements and will file comments with FASB. However, Waite’s group’s early review suggested that sellers of participation must be sure to structure a transaction so that it qualifies as a true “sale” of the assets before removing it from their financial statements. “The Accounting Task Force will be sure to review the exposure draft, provide comments back to the FASB Board, and keep the credit union industry informed,” Waite said Tuesday. He is SVP-CFO of Patelco CU, San Francisco and an advisor to FASB. FASB has been developing its proposal since 2000 and CUNA has argued that there are already sufficient safeguards in place to address the accounting group's concerns about isolating the loan participation asset from the reach of the originating credit union and its creditors in liquidation. Therefore, CUNA has maintained, there is no need for the proposed changes to FAS 140. Use the resource link below to read CUNA comments in its 2004 letter to FASB.

CUNA urges blocked list in UIGEA rules

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WASHINGTON (9/17/08)—The House Financial Services Committee late Tuesday passed an amended version of the Payment System Protection Act (H.R. 6870), a bill that would place a moratorium on the implementation of the Unlawful Internet Gambling Enforcement Act (UIGEA) as currently proposed by the Department of Treasury and the Federal Reserve Board. The approved bill includes an important mandate that the Department of Treasury compile and maintain a list of unlawful internet gambling sites, similar to the Office of Foreign Assets Control (OFAC) list. Prior to the committee’s consideration of the bill, the Credit Union National Association (CUNA) wrote to its chairman, Rep. Barney Frank (D-Mass.) voicing strong support H.R. 6870. CUNA President/CEO Dan Mica wrote that without intervention by Congress in the implementation of the UGEIA, credit unions and other financial institutions would be forced to comply with a regulation that does not even define the type of transactions that would be required to be blocked. An earlier version of Frank’s bill was defeated this summer by a tie vote. When the new bill was introduced, it was stripped its provision ordering the Treasury to maintain the list of unlawful gambling sites. CUNA urged that provision be adopted. “We feel very strongly that such a list is absolutely essential for credit unions and other financial institution to be able to comply with the extraordinary burdens of UIGEA.” Mica told Frank in the CUNA letter. He added, “Without such a list, there is no way for financial institutions to know which entities are unlawful Internet gambling providers.” CUNA Vice President of Legislative Affairs Ryan Donovan said that while CUNA is “delighted with the positive outcome of the House committee vote,” final votes in the House and Senate are unlikely this year due to the dwindling congressional calendar.

Ike cancels Hoods Texas town hall speech

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WASHINGTON (9/17/08)—The Texas Credit Union League (TCUL) said Tuesday that it has been forced by Hurricane Ike to cancel its Sept. 18 town hall-style meeting, which was to feature a presentation by National Credit Union Administration Vice Chairman Rodney Hood. “Given that a large number of registrants from the area affected by Hurricane Ike are understandably unable to attend the one-day program, and with much efforts being placed on disaster recovery, TCUL and other involved parties felt it most appropriate to cancel the meeting,” the league announcement said. The conference had been scheduled fo the Doubletree Hotel in Dallas.

103 CUs in Ike territory are operational--NCUA

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WASHINGTON (9/17/08)--Of the 179 credit unions affected by Hurricane Ike in Texas and Louisiana, 103 are operational, according to the National Credit Union Administration (NCUA). NCUA, jointly with the Louisiana and Texas state regulators, contacted 158 of the 179 affected credit unions as of the close of business Monday. "We anticipate several more will either open today or Wednesday, as power is restored to the Houston metro area," said John McKechnie III, NCUA director of public and congressional affairs. "Galveston-area credit unions continue to evidence the most damage and difficulty in restoring operations," he said. He added NCUA notes "a very high level of disaster preparedness among credit unions in the Texas and Louisiana coastal areas, with good implementation of contingent record-keeping and off-site operational ability plans." Hurricane Ike struck the Texas and southwestern Louisiana coastline on Saturday.