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Frank intros new CFPA provisions

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WASHINGTON (9/24/09)--Rep. Barney Frank (D-Mass.) this week promised to propose revised legislation that would eliminate language that would require financial institutions to offer so-called “plain vanilla” financial products and prevent the proposed Consumer Financial Protection Agency from approving or changing the business plans of a financial institution under the agency’s oversight. H.R. 3216, the Consumer Financial Protection Agency (CFPA) Act, which would seek to protect consumers of financial products through the creation of a powerful independent agency with extensive rulemaking, oversight, and enforcement tools, was introduced by the Obama administration earlier this year. While Frank’s legislative changes, which have been circulated via a discussion draft, would still allow the CFPA to require financial institutions to provide improved disclosures to their consumers. However, non-financial businesses, including merchants, retailers, and other non-finance-related businesses would not come under the authority of the CFPA. Depository institutions would have the option of “simultaneous federal safety and soundness and consumer compliance examinations” to help minimize regulatory burdens born by financial institutions, and financial institutions that “receive contradictory or supervisory determinations” from the CFPA or other supervisors would be given an outlet to directly challenge any assessed deficiencies that are spotted by regulators. The CFPA would also be prevented from mandating a so-called “reasonableness standard” that would force financial institutions to assess whether or not a given consumer could understand the full terms of the financial products or services they are taking part in. Additionally, Frank’s proposal would fund the CFPA via the Federal Reserve, which would pay for the CFPA “at a level that reflects amounts the banking agencies currently pay for consumer compliance.” Non-banks would also be subject to assessments meant to fund the CFPA. However, financial institutions would not pay for the examination or supervision of non-financial entities. Frank earlier this year introduced a bill that would enact the Obama CFPA plan, with some changes, including postponing consideration of the merger of the Office of the Comptroller of the Currency (OCC) and the Office of Thrift Supervision (OTS) into a prudential regulator, the National Bank Supervisory (NBS), as proposed in the Obama Administration’s original legislation, until a later date. The House Financial Services Committee, which Frank chairs, could soon mark up CFPA legislation, and Frank recently stated that other comprehensive financial regulatory reform legislation could be completed as soon as October, with a view toward signing it into law by the end of this year.

CU exec tells of strength outreach in Hill forum on capital access

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WASHINGTON (9/24/09)--Municipal Credit Union board member Shirley Jenkins was one of several attendees at a congressional Access to Capital forum organized by Rep. Yvette Clark (D-N.Y.) on Wednesday in Washington. During the forum, which was organized to explore the impact of the
Click to view larger image Municipal CU board member Shirley Jenkins, participating in a congressional Access to Capital forum organized by Rep. Yvette Clark (D-N.Y.), tells attendees of the positive impact of her credit union’s outreach efforts. (CUNA Photo)
credit crunch on minority-owned businesses, Jenkins detailed the strength of her credit union when compared to banks. Jenkins also commented on the assistance that her credit union provides to members that are looking to start their own businesses and told attendees of the positive impact that is created by Municipal CU’s community outreach endeavors, which teach financial responsibility to their members and local youth. The Credit Union National Association has also worked to increase financial literacy among both the young and old through its Personal Finance Initiative. Other forum participants included Federal Deposit Insurance Corporation Director of Diversity and Economic Opportunity Michael Collins, Operation HOPE’s Lance Triggs, and City First Bank of DC CEO Dorothy Bridges.

CUNA to Congress Allow CUs to survive thrive under new regs

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WASHINGTON (9/24/09)--Reiterating that credit unions did not contribute to the financial crisis, Credit Union National Association (CUNA) Chief Economist Bill Hampel called on the assembled legislators to "ensure that the credit union model is not eroded as a result of the misappropriation of bank regulations to credit union operations."
CUNA Chief Economist Bill Hampel urges a House panel that consumer protection regulation should be “consolidated and streamlined” so it does not add to the regulatory burden of "those that have been regulated and performed well, such as credit unions.” (CUNA Photo)
Speaking during a House Committee on Small Business hearing on “The Impact of Financial Regulatory Restructuring on Small Businesses,” committee chair Rep. Nydia Velázquez (D-N.Y.) said that some of the proposed financial regulatory changes could substantially alter the business models of both community banks and credit unions. Hampel in prepared remarks addressed one such potential change that has been laid out by legislators, saying that the creation of a separate consumer protection examiner outside of the National Credit Union Administration (NCUA) would “distract credit unions from their mission and divert resources away from serving their members.” While CUNA generally supports the concept of consumer protection, Hampel in his remarks called for consumer protection regulation to be “consolidated and streamlined” so as not to add to “the regulatory burden of those that have been regulated and performed well, such as credit unions.”
Speaking during the tommittee hearing, Rep. Nydia Velázquez (D-N.Y.) said that the needs of small businesses must be considered as Congress crafts its regulatory response to the conditions that created the financial crisis. (CUNA Photo)
The NCUA is reportedly developing its own division of consumer protection which will come into effect whether or not Congress elects to create its own Consumer Financial Protection Agency, as has been proposed. Hampel also encouraged the legislators to retain the NCUA as the sole regulator and enforcer for credit unions, saying that maintaining that regulatory independence "extends beyond both philosophical and structural issues." While credit unions themselves cannot solve all of the current economic problems, they can be part of the solution, and Hampel urged the assembled legislators to enact legislation that would “restore credit unions’ ability to serve the lending needs of their business-owning members” by “eliminating or expanding the limit on credit union member business lending.” Such a move would allow credit unions to ease the credit crunch for some members while generating the portfolios needed “to support compliance with NCUA’s regulatory requirements,” he added. CUNA, according to Hampel, would also work with regulators to “facilitate underwriting practices and standards” to ensure that safety and soundness concerns remain at the forefront of member business lending activities.

NCUA bans 12 from financial institution work

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ALEXANDRIA, Va.(9/24/09)—Twelve former credit union employees have been banned by the National Credit Union Administration (NCUA) from participating in the business of any federally insured financial institution. The NCUA released the following information about the prohibition orders and their subjects;
* Chinithia Bills, a former employee of St. Charles Borromeo Church FCU, New York, N.Y., was convicted of bank fraud and sentenced to 37 months in prison, 4 years of supervised probation, and ordered to pay $135,218.96 in restitution.; * Trena C. Bledsoe, a former employee of Appalachian Community FCU, Kingsport, Tenn., was convicted of embezzlement and making a false oath and account in relation to a bankruptcy case. She was sentenced to 30 months in prison, five years supervised probation, and ordered to pay $105,900 in restitution; * Ollis Grayson, Jr., a former employee of Dallas Educators CU, Selma, Ala., was convicted of fraud in connection with his employment at Dallas Educators CU and sentenced to six months in prison, five years of supervised release, and ordered to pay $75,743 in restitution; * Quartus Omar Henderson, former teller at Security CU, Flint, Mich., was convicted of credit union embezzlement; * Aurelia D. Jennings, a former employee of Piedmont Hospital FCU, Atlanta, was convicted of theft affiliated with the credit union and sentenced to 15 years in prison, with one year served in confinement, a total 14 years probation, and ordered to pay $136,165 in restitution; * Joanna Lynn McGee, a former employee of TEXDOT-WF CU redit Union, Wichita Falls, Texas, was convicted of embezzlement, aiding and abetting and sentenced to 71 months in prison, 5 years supervised probation, and ordered to pay $2,063,891 in restitution; * Scott-Alexander L. McKenzie, a former loan officer of Rochdale Co-Op FCU, Jamaica, N.Y., without admitting or denying fault, signed an order prohibiting him from participating in the affairs of any federally insured financial depository institution; * Jessica Lynn Morgan, a former employee of American 1 FCU, Jackson, Mich., was convicted of theft and sentenced to 365 days in prison, 60 months of supervised release, and ordered to pay $100,570 in restitution; *Nora Phelps, a former employee of South Jersey FCU, Deptford, N.J. , was convicted of bank fraud and sentenced to serve 33 months in prison, five years of supervised probation, and ordered to pay $342,827 in restitution; * Lee Woong Song, a former manager of Korean American FCU, Oakland, Calif., has signed an agreement and is prohibited from participating in the affairs of any federally insured depository institution; * Elsie P. Taylor, a former manager of City of Wilson FCU, Wilson, N.C., was convicted of embezzlement and obtaining property by false pretenses and was sentenced to a suspended sentence of a minimum six months, maximum eight months in prison, placed on supervised probation for 24 months, ordered to complete 100 hours of community service and ordered to pay $795 in fines, court costs and community service fees; and * Patricia Ann Taylor, a former office manager of Nashville Post Offices FCU, Nashville, Tenn., was convicted of money laundering and bank fraud and ordered to serve 13 months in prison, three years of supervised release, and ordered to pay $269,580 in restitution.
Violation of a prohibition order is a felony offense punishable by imprisonment and a fine of up to $1 million. Use the resource link below to see these and other NCUA enforcement orders.

Inside Washington (09/23/2009)

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* WASHINGTON (9/24/09)--House Financial Services Committee Chairman Barney Frank (D-Mass.) and Senate Banking Committee Chairman Christopher Dodd (D-Conn.) said they are moving forward with legislation to reform the financial system. Reports that financial reform has stalled are wrong, Frank said. So far, there is agreement among lawmakers on some of the reform’s basic components: creating a consumer financial protection agency, enhancing resolution authority, consolidating banking supervision and increasing financial institutions’ capital requirements (American Banker Sept. 23). However, Dodd and Frank disagree on whether to consolidate all regulators into one. Frank said he does not in favor the idea, adding that two regulators would not make much difference if an institution failed. He would prefer a “hybrid” approach to managing systemic risk, whereas President Barack Obama has proposed giving the Federal Reserve Board oversight powers, Frank said. He is drafting a bill to create a consumer protection agency. The bill could be released in a couple days ... * WASHINGTON (9/24/09)--The inspector general of the Federal Deposit Insurance Corp. (FDIC) has released a report regarding the agency’s monitoring of IndyMac Bank, which collapsed in July 2008. The report said that until late 2007, FDIC officials consistently concluded that despite IndyMac’s high-risk profile, the bank posed an ordinary--or slightly more ordinary--level of risk to the insurance fund based on its CAMEL rating. When FDIC increased its monitoring of the bank, resumed its on-site presence and assessed a higher insurance premium, IndyMac’s financial condition was irreparable due to declining real estate values, credit quality problems and the collapse of the secondary market. FDIC, citing favorable composite ratings, did not request that the Office of Thrift Supervision take or pursue its own enforcement action against IndyMac, the report said ... * WASHINGTON (9/24/09)--The Federal Deposit Insurance Corp. (FDIC) plans to meet Tuesday to discuss a plan that would boost the reserves of the Deposit Insurance Fund. At the end of last quarter, the fund held $10 billion (American Banker Sept. 23). FDIC Chairman Sheila Bair said the agency is looking at several options to boost the fund, instead of giving banks another premium assessment. Many banking trade groups have urged the FDIC not to issue another special assessment ... * WASHINGTON (9/24/09)--U.S. officials say they’re confident that an agreement will be reached at the Group of 20 (G-20) Summit in Pittsburgh on strategies to prevent the problems that triggered the financial crisis (The New York Times Sept. 23). Treasury Secretary Timothy Geithner has been pushing a framework of principles that require financial institutions to build their capital reserves to prevent investment losses and cash shortages. U.S. officials also said they were hopeful they’d reach an agreement with European leaders on executive compensation regulation. French officials have favored putting caps on bonuses for executives--which British and American regulators think is too harsh. Geithner said the goal of the G-20 meeting is to get the countries to agree on what is in their best long-term interest. The goal of the meeting is to make people look forward and at the imbalances and risks “building up,” he said. Some financial observers, such as Simon Johnson, senior fellow at the Peterson Institute for International Economics, said the meeting would not carry much weight. The G-20 leaders haven’t even set timelines for ending their own countries’ emergency economic stimulus measures, Johnson told the Times ...