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Inside Washington (09/17/2008)

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* WASHINGTON (9/18/08)—Senate Banking Committee Chairman Christopher Dodd (D-Conn.) has asked Senate Majority Leader Harry Reid (D-Nev.) to keep the Senate in “pro forma” session for the rest of the year so that body can respond if market conditions demand it (American Banker Sept. 17). Dodd said at a press conference that he wants the ability to reconvene his committee as events unfold. He also wants to be able to call before his committee members of the administration and “others” to examine what options should be pursued as market conditions develop. Dodd’s request was reported in an article that questioned whether the rapidly evolving financial crisis may result in structural solutions rather than just crisis management by the Bush administration…. * WASHINGTON (9/18/08)--The Treasury Department is launching a multi-media campaign to teach 18-24 year-olds already in debt or about to get into unmanageable debt about their spending habits. The campaign will feature public service announcements with the tagline, “Don’t let your credit put you in a bad place.” Television spots, radio spots, web banners and a new website will also be used. Some radio spots and a version of the website will be in Spanish ... * WASHINGTON (9/18/08)--To revive a slow mergers and acquisitions market, regulators are proposing to allow acquirers to count goodwill toward Tier 1 capital requirements (American Banker Sept. 17). The Federal Deposit Insurance Corp., Office of Thrift Supervision, Office of the Comptroller of the Currency and the Federal Reserve Board have sent out a proposal on the change with a 30-day comment period. If the change is approved, it could trigger dealmakers and help acquirers by “lowering the barrier,” according to Carol Larson, senior client partner at Deloitte and Touche. Under current Financial Accounting Standards Board rules, acquirers have to accept writedowns if a seller’s assets are less than the purchase price. In 2001, the banking industry expressed its concerns that goodwill in Tier 1 capital is not included. It has continually pushed for a change ... * WASHINGTON (9/18/08)--The Treasury Department announced Wednesday a temporary Supplementary Financial Program at the Federal Reserve’s request. The program will consist of Treasury bills, separate from the current borrowing program, and will provide cash for Federal Reserve initiatives. It will be governed by existing Treasury auction rules ... * WASHINGTON (9/18/08)--Congress is looking into creating an agency that would buy bad debt from troubled companies (The New York Times Sept. 17). On Tuesday, House Financial Services Committee Chairman Barney Frank (D-Mass.) said it would make more sense for a new agency, rather than the central bank, to tackle the debt. Senate Majority Leader Harry Reid (D-Nev.) and House speaker Nancy Pelosi (D-Calif.) supported the idea. Steny Hoyer (D-Md.), House majority leader, said there isn’t enough time for Congress to consider new proposals in two weeks. Senate Banking Committee Chairman Christopher Dodd (D-Conn.) said he wondered if the Fed and Treasury were already functioning to handle the bad debt and whether a new agency was needed. However, Dodd noted that he wasn’t opposed to the idea ...

Inflation-adjusted available funds bill passed

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WASHINGTON (9/18/08)—A bill to increase the dollar amount of funds subject to next-day availability passed the House Financial Services Committee Tuesday by voice vote. The bill would allow accountholders next-day access to the first $175 deposited by check on any single business day, up from the current $100 cap. It also proposes to raise to $700—up from $400—the amount of cash from a deposit that may be withdrawn by 5 p.m. on the day it is available. The bill is formally known as The Expedited Funds Availability Dollar Limits Adjustment Act of 2008 (H.R. 6871). It was introduced by Rep. Carolyn Maloney (D-N.Y.), chairman of the House Financial Services subcommittee on financial institutions, and was co-sponsored by Rep. Barney Frank (D-Mass.), who heads the parent financial services panel. The bill is intended to account for inflation over the 21 years since the enactment of the original law. It also contains a provision to provide for future adjustments on a regular basis—at least every five years. The Credit Union National Association (CUNA) worked closely with the bill's designers, Ryan Donovan, CUNA vice president of legislative affairs, noted. He cautioned, however, that the legislation is unlikely to see additional action this session of Congress, since the House and Senate are expected to adjourn Sept. 26 for the year, with a possible lame duck session in November or December.

Fryzel vows decisive regulation

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ALEXANDRIA, Va. (9/18/08)—In what the National Credit Union Administration (NCUA) labeled a “major address” by its chairman, Michael Fryzel vowed a decisive, assertive regulatory approach to preserve confidence in the credit union system. “Where I see a balance sheet problem, I will move decisively to resolve it. Where I see adverse trends, I will take steps to correct them. And where activities carry unacceptably high levels of risk and expose consumers to potential loss, I will intervene decisively,” Fryzel said. He announced a comprehensive stress test of the National Credit Union Share Insurance Fund, aimed at determining the Fund’s strength to withstand stresses that could develop as a result of credit and mortgage dislocations. Fryzel said his experience as a former state regulator of credit unions has formed his philosophy that regulations should create a climate for credit unions "to function as strong, dynamic, consumer-oriented financial service providers." He stated that "like every other financial institution in these turbulent times, corporate [credit unions] have faltered" and ”must regroup and regenerate themselves to withstand the balance of this economic downturn." The chairman added that the NCUA is committed to maintaining the integrity of the corporate network and is actively monitoring the corporates. It will take ”all necessary measures" to "restructure, reenergize and maintain the corporate system as a viable entity,” he said. "I expect every [credit union] trade organization, every credit union volunteer and professional to render their full support to our efforts to keep the corporate system vibrant and member driven. As a result of the volatility in the markets, I have been required to take aggressive measures that will institute an ounce of prevention as we move through the remainder of the year," Fryzel said. He noted Congress’ interest in credit unions now and said that he is keeping lawmakers well informed about the corporates. Fryzel also said his agency is currently expanding Vice Chairman Rodney Hood's risk mitigation efforts, and is organizing a high level industry summit with the trade associations on the ramifications of "continued volatility in the credit and mortgage markets and to identify measures to mitigate the impact." He made his remarks at the National Association of Federal Credit Unions Congressional Caucus in Washington, D.C. Credit Union National Association (CUNA) Deputy General Counsel Mary Dunn said Wednesday that CUNA will be working closely with the agency to help address these issues.

Tiny Interfaith FCU closed

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ALEXANDRIA, Va. (9/18/08)—Interfaith FCU of East Orange, N.J., had approximately $388,000 in assets and 370 when it was closed by the National Credit Union Administration (NCUA) recently. It is the tenth federal credit union to be closed by the agency this year. Announcing the liquidation Wednesday, the NCUA said its Asset Management and Assistance Center will issue checks within a week to individuals holding verified share accounts. The agency reiterated that the members’ deposits are insured to at least $100,000 on regular accounts and $250,000 on certain retirement accounts through the NCUA National Credit Union Share Insurance Fund. The federal regulator liquidated Interfaith FCU and discontinued its operations after determining the credit union is insolvent and has no prospects of restoring viable operations. The credit union was chartered in 1982 to serve New Hope Baptist Church.

All but two Ike-struck CUS contacted reports NCUA

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ALEXANDRIA, Va. (9/18/08)—As of close of business Tuesday night, the National Credit Union Administration (NCUA) reports that there are only two credit unions—both federally insured and state-chartered—that state and federal credit union authorities have not made contact with yet. Additionally, the NCUA reports there are an additional 32 federally insured credit unions that are not operational at this time. The agency says that its calculations based on member numbers shows that 89% of affected members have access to at least some credit unions services. “This is a major accomplishment given that Texas media is reporting that over 2.1 million residential customers are still without power,” noted John McKechnie III, NCUA director of public and congressional affairs. He added that many credit unions are operating from alternate work sites, shared branch centers, or on generators. In an announcement issued yesterday, McKechnie said the NCUA noted "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.