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Paulson says CUs included in federal rescue proposal

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WASHINGTON (9/25/08)--U.S. Treasury Secretary Henry Paulson, Jr. in testimony before the House Financial Services Committee yesterday said credit unions would be included in any federal plan to rescue the financial services sector. Paulson appeared in the hearing entitled, “Turmoil in U.S. Credit Markets: Recent Actions regarding Government Sponsored Entities, Investment Banks and other Financial Institutions.” He outlined the urgency of Treasury's plan to issue up to $700 billion of Treasury securities to buy troubled mortgage assets from U.S. financial firms. “Under our proposal, we would use market mechanisms available to small banks, credit unions, and thrifts, across the country--not just big banks,” said Paulson. “These mechanisms will help set values of complex, illiquid mortgage and mortgage-related securities to unclog our credit and capital markets, and make it easier for private investors to purchase these securities and for financial institutions to raise more capital.” Paulson said the Treasury for months internally analyzed the proposed program--which he said the administration had hoped would never be necessary. The secretary urged lawmakers to quickly adopt the plan, and provided a peek at his follow-up agenda to reform the U.S. financial regulatory structure. “When we get through this difficult period, which we will, our next task must be to address the problems in our financial system through a reform program that fixes our outdated financial regulatory structure, and provides strong measures to address other flaws and excesses,” said Paulson. “I have already put forward my recommendations on this subject. Many of you also have strong views, and we must have that critical debate, but we must get through this period first.” Use the resource link below to access the complete text of Paulson’s testimony.

Inside Washington (09/24/2008)

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* WASHINGTON (9/25/08)--Senators expressed their concern over the Treasury Department’s proposed plan to buy back illiquid assets from banks (American Banker). Sen. Richard Shelby (R-Ala.) said that the plan is expensive and there is no guarantee that it would work. Michael S. Barr, professor at the University of Michigan and former special assistant to Treasury Secretary Robert Rubin, said the plan is shifting troubled assets from institutions to taxpayers. According to Treasury Secretary Henry Paulson, not passing a bill would harm the credit markets. Jobs would be lost and homes would be foreclosed on, he said. Sen. Jack Reed (D-R.I.) noted the government should show the public that the proposal is not a “one-way salvation” that costs taxpayers. He referred to American International Group’s loan from the Federal Reserve, which has a 79.9% stake in the insurer ... * WASHINGTON (9/25/08)--Securities and Exchange Commission (SEC) Chairman Christopher Cox said he would like to see certain credit derivative products regulated to improve disclosure and prevent fraud--which contributed to the housing crisis (American Banker Sept. 24). Cox asked Treasury Secretary Henry Paulson if the SEC should be granted authority to regulate the products as part of the Treasury’s bailout plan, but Paulson said the issue can’t be dealt with at this time. The credit default market is too large to interrupt with a regulation, he said ... * WASHINGTON (9/25/08)--The Federal Bureau of Investigation (FBI) has opened up preliminary investigations of possible fraud involving Fannie Mae, Freddie Mac, Lehman Brothers and American International Group (The New York Times Sept. 24). The four companies would logically come under investigation because of their recent collapses, said a government official. On Tuesday, FBI officials said the agency is investigating a total of 26 corporate fraud cases, compared with 24 a week ago ... * WASHINGTON (9/25/08)--The U.S. Small Business Administration (SBA) has named Peter Schalestock as the agency’s general counsel. He now serves as chief legal adviser to SBA Acting Administrator Sandy Baruah and the agency’s senior staff on the development and implementation of SBA policies and programs. Schalestock joined SBA as deputy general counsel in March and has been acting general counsel for the last three months ...

IPoliticoi CUs look good in midst of mortgage mess

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WASHINGTON (9/25/08)—As the dust settles from the current economic maelstrom and mortgage meltdown, credit unions may find they have successfully distinguished themselves on Capitol Hill as the strong and secure financial institutions that did not engage in the bad lending practices that are at the heart of the nation’s financial crisis, according to Politico (Sept. 24). And that distinction, the article surmised, could give a boost to some credit union priorities in the long run. Once the bailout is passed, the economy will remain weak, Credit Union National Association (CUNA) Vice President of Legislative Affairs Ryan Donovan pointed out in the column. “Congress is going to need to look for ways to help Main Street recover,” Donovan said, and noted that allowing credit unions to lend to small businesses — when other institutions are cutting back — would be one good option. Increased member business lending and several other proposed credit union regulatory reforms have been fiercely fought for years by the banking industry. But, Donovan noted, “Credit unions were created in the aftermath of the Depression to help the economy recover, so it makes perfect sense that, coming out of this situation, Congress and American consumers should look to credit unions to help them.” Wall Street Politico is a weekly column looking at issues that drive business. To read the complete column, which also focuses on hedge funds and investment banks, use the resource link below.

President Bush asked to note NCUSIF

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WASHINGTON (9/25/08)—President George W. Bush was asked by the Credit Union National Association (CUNA) Wednesday to instruct those within his administration to included federal credit union share insurance in messages meant to reassure Americans about the safety of their federally insured deposits. “In recent days through a variety of the media, Secretary of the Treasury (Henry) Paulson, Federal Reserve Board Chairman (Ben) Bernanke and you have been quoted as saying that consumers should consider their deposits safe in Federal Deposit Insurance Corporation, FDIC, insured accounts,” CUNA President/CEO Dan Mica wrote in his Sept. 24 letter. “I would respectfully draw your attention to the fact that credit union members’ funds in federally insured credit unions are just as safe as those that are insured by the FDIC,” Mica wrote. Credit union members’ funds at the nation’s 7,972 federally insured credit unions are guaranteed under the National Credit Union Share Insurance Fund (NCUSIF) to the same levels and safety as the FDIC insured accounts. NCUSIF, like the FDIC, is backed by the full faith and credit of the United States. The CUNA missive also highlighted that credit unions are gaining increasing recognition for the fact that they have not contributed to this crisis, having remained faithful to sound loan underwriting and avoiding subprime lending.

NCUSIF signage FOIA requests on todays NCUA agenda

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WASHINGTON (9/25/08)—The National Credit Union Administration (NCUA) is scheduled to consider at its open board meeting today one final rule addressing requirements for use of the official insurance sign in advertising and another other intended to streamline the agency's system for complying with freedom of information and privacy laws. It will be the first open session since Michael Fryzel became chairman of the agency in late July. Historically, the NCUA suspends open board meetings for the month of August. The Freedom of Information Act and Privacy Act proposal slated for final consideration combines both housekeeping and substantive changes. It incorporates recent amendments to the Freedom of Information Act, adds definitions, and revises and clarifies provisions implementing the Privacy Act. The other item up for a vote--the NCUA proposed revisions to requirements for use of the official insurance sign and official advertising statement--would permit insured credit unions to use the basic form of the official advertising statement, a shortened form, or the official sign in advertisements. The rule, if adopted, is expected to give credit unions added flexibility in advertisements. The final item on the agenda is a proposal to address Part 742 of NCUA's Rules and Regulations, involving its Regulatory Flexibility Program. Use the resource link below to access the NCUA website.

Mica promotes CU soundness message

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WASHINGTON (9/24/08)—Credit Union National Association (CUNA) President/CEO Dan Mica Wednesday posted a video reminder that not only are consumers’ federally insured share deposits in credit unions safe, credit unions are “probably the safest depository institutions in the country right now.” The Mica video contested misinformation being circulated in the news media about deposit safety and dispelled any notion that credit unions are second to any other depository institution as a safe haven for consumers’ insured funds. The message is featured on the homepage of the CUNA website, as well as the consumer website, creditunion.coop. “Credit unions, virtually all credit unions, are insured by the National Credit Union Administration, a federal agency with similar insurance to all the banks all over the country,” Mica assured listeners. Moreover, Mica noted, “Credit unions have history of not having the kind of problems banks and other institutions have. “During the Depression, we didn’t need a bailout. The last 100 years, we didn’t need a bailout. Our capital is strong. Our credit unions are strong. And they are insured.” The American credit union movement celebrates its 75th anniversary this year. Mica concluded the video clip: “Take a look at a credit union. I think they are probably the safest depository institution to put your money in.” (See related story: NCUA call center launched for insurance queries) In related events, CUNA has been working amid fast-breaking developments to assure credit unions are assured equal access to a proposed Treasury Department economic rescue package, if approved. Now that equality appears assured, CUNA is closely monitoring associated accounting and bankruptcy issues that could develop under the rescue plan.

NCUA call center launched for insurance queries

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ALEXANDRIA, Va. (9/25/08)--The National Credit Union Administration (NCUA) has opened a call center staffed by insurance experts available to answer questions about share insurance coverage provided by agency’s National Credit Union Share Insurance Fund, backed by the full faith and credit of the U.S. government. “With the well-publicized turmoil in the financial markets, consumers need assurance that the federally insured funds in their credit unions are safe up to the insured limits,” said NCUA Chairman Michael Fryzel in an announcement of the hotline. The agency concurrently posted an electronic tool kit, which is designed to enhance overall consumer understanding of how credit union deposits are insured. Fryzel urged credit union volunteers and professionals to make sure they are well-versed in the details of the protections offered to credit unions members through the NCUSIF. He encouraged those i8ndividuals to use the resources the NCUA is providing through the call center and toolkit. As of Sept. 23, the NCUA Insurance Call Center began operating from 8 a.m. to 6:30 p.m. (EDT) Monday through Friday. The toll-free number is 1-800-755-1030, extension 1. The NCUA electronic tool kit is available online through the NCUA website and provides information on share insurance coverage, including:
* An ‘insurance estimator,’ which facilitate the calculation of an estimate of share insurance coverage; * Your Insured Funds, a brochure that details insurance coverage and illustrates sample cases; * How Your Accounts Are Federally Insured, a brochure that provides basic insurance information; * “Special Bulletin,” which explains increased retirement account coverage in addition to basic insurance protection; and * Letter to Credit Union 08-CU-18, Educating Members on Share Insurance Coverage.
Also, the NCUA is offering a free Webinar on Oct. 7 from 1-2:30 p.m. (ET) to review federal share insurance regulations. Registration opened Sept. 19 for the event. The Credit Union National Association (CUNA) and the leagues also are working on behalf of credit unions to reassure their members about the safety of their deposits in the credit unions system and about the soundness of that system despite today's upheavals. CUNA President/CEO Dan Mica Wednesday posted a video on the CUNA website that dispels misinformation that is circulating that federally insured banks are the only safe places for consumer funds right now. He says that statement tells only part of the story and emphasizes that almost all credit unions are also federally insured and probably “the safest depository institutions in the country right now.” (See related story, Mica promotes CU soundness) Other CUNA efforts include a recent issue of Credit Union NewsWatch, in which CUNA encapsulated many of its newly designed resources to help credit unions and their staffs address the public's questions and concerns about the safety of their money in trying economic times. The issue featured a two-page "Primer on Share Insurance Coverage for Individual Credit Union Members," as well as a two-page spread on operational questions affecting share insurance coverage, geared toward credit union compliance staff. Also included in the special edition:
* CUNA, Leagues Help CUs Spread Good News of Safety, Soundness; * NCUSIF Strong at Mid-Year, Says NCUA; and * CUNA, Leagues Get Word Out About CU Soundness.