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Inside Washington (09/28/2009)

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* WASHINGTON (9/29/09)--The Federal Reserve Board appears to be enhancing systemic risk and consumer protection regulation efforts. However, the Fed’s efforts may not silence critics in Congress, according to financial observers (American Banker Sept. 28). The Fed recently announced it is working on a proposal that would limit executive compensation at financial institutions. It also said it would supervise nonbank subsidiaries of holding companies to ensure compliance with consumer protection rules. The Fed’s efforts send a message that the central bank is looking to fill oversight gaps, said Cornelius Hurley, a former Fed lawyer. The actions also remind policymakers that a financial overhaul is needed while the healthcare debate continues, added Chris Low, FTN Financial chief economist. But the Fed’s actions may not make any difference to several members of the Senate Banking Committee, including Chair Christopher Dodd (D-Conn.), who say that the central bank contributed to the financial crisis. Also, House Financial Services Committee Chair Barney Frank (D-Mass.) released a report last week that indicates the Fed has not used its power to protect consumers from “abusive industry practices” ... * WASHINGTON (9/29/09)--House Financial Services Committee Chairman Barney Frank (D-Mass.) is seeking a compromise that would require the Federal Reserve Board to disclose information about its operation. Rep. Ron Paul (R-Texas) has proposed a bill since 1983 that would let the Government Accountability Office (GAO) audit the Fed. The bill has received 295 co-sponsor signatures (American Banker Sept. 28). The Fed views the bill as a threat to its independence, but Frank indicated that Scott Alvarez, Fed general counsel, said the Fed may accept a watered-down version--which would be added to regulatory reform. The GAO is not the only agency looking to investigate the Fed. Phil Angelides, chair of the Financial Crisis Inquiry commission, said he wants to investigate what role monetary policy had in the financial crisis ... * WASHINGTON (9/29/09)--Borrowing from banks may not be the best way to boost the Federal Deposit Insurance Corp.’s (FDIC) reserves, said FDIC Chairman Sheila Bair. Bair spoke Tuesday at the Clinton Global Initiative in New York (American Banker Sept. 28). The agency can issue debt to banks, and though it’s a possibility, it’s not a preferred option, Bair said. However, James Dimon, CEO of JPMorgan Chase and Co., said Tuesday that the bank would lend money to the FDIC. The FDIC also could receive credit from the Treasury or charge banks another assessment. The Deposit Insurance Fund has dropped to $10 billion from $45 billion this year ... * WASHINGTON (9/29/09)--Recorded phone conversations that took place between public officials and borrowers at Countrywide Financial Corp. has triggered more questions from Congress about a controversial mortgage program, the VIP loan program. Rep. Darrell Issa (R-Calif.) attempted to subpeona records of the loan program, but his request was turned down by committee Chair Edolphus Towns (D-N.Y.). Bank of America, which bought Countrywide in July 2008, confirmed that a recording system existed, but said all of the program’s calls had been eliminated (The Wall Street Journal Sept. 28). Issa wrote the bank asking what happened to the recordings and saying that the records could help provide information about what public officials were told by Countrywide personnel about favorable treatment they had received ... * WASHINGTON (9/29/09)--The Obama administration could commit up to $35 billion to help state and local housing agencies provide mortgages to low- and moderate-income families. The effort, which could be announced this week, aims to lift some pressure on government-operated housing agencies, known as HFAs (The Wall Street Journal Sept. 28). The agencies offer rates 0.5% lower than commercial lenders. The program could be in place for three years and would be funded by Fannie Mae, Freddie Mac and the Treasury. HFAs fund 100,000 mortgages a year. To qualify for an HFA loan, borrowers must fulfill income requirements, have good credit and verifiable income ... * WASHINGTON (9/29/09)--World Bank President Robert Zoellick said the Treasury Department is better suited to manage financial crises than the Federal Reserve Board. He spoke Monday at a Washington university (The Wall Street Journal Sept. 28). Zoellick said it would be hard to give the Fed more authority. The Fed is considered a contender to oversee systemic risk ... * WASHINGTON (9/29/09)--The Minnesota Credit Union Network (MnCUN) visited the National Credit Union Administration (NCUA) headquarters in Alexandria, Va.
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NCUA board member Michael Fryzel welcomed the group, saying that he appreciated their open dialogue with NCUA about key issues. From left are: Ken Blazing, Mayo Employees FCU; Bill Raker, US FCU; Russ Plunkett, Postal CU; Fryzel; Chuck Albrecht, Mid Minnesota FCU; Mark Cummins, CEO of the MnCUN; Dave Boden, Hiway FCU; and Mara Humphrey, MnCUN vice president of governmental affairs. (Photo provided by the Minnesota Credit Union Network) ...

In Congress House Senate spotlight reg reform

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WASHINGTON (9/29/09)--While it does not appear that there will be any votes that are of interest to credit unions during the upcoming week, there will be some hearings of note. The Credit Union National Association will submit a statement to the House Financial Services Committee as that committee on Wednesday will hold its hearing on "Perspectives on the Consumer Financial Protection Agency." Also, on Thursday, the House Financial Services Committee will conduct a hearing entitled, "Federal Reserve Perspectives on Financial Regulatory Reform Proposals," with Federal Reserve Chairman Ben Bernanke scheduled to testify. On the Senate side, the Banking Committee on Tuesday will discuss the "Strengthening and Streamlining Prudential Banking Supervision." The Senate subcommittee on international trade and finance will review international cooperation in financial regulatory modernization on Wednesday, and some aspects of financial regulation will again be discussed by the Senate Small Business Committee on Thursday during a hearing entitled "Reauthorizing the Small Business Administration Finance Programs and the Impact of the Small Business Provisions of the Recovery Act."

Nevadas Clearstar Financial CU closed

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ALEXANDRIA, Va. (9/29/09)--The assets, loans and shares of Reno, Nev.-based Clearstar Financial CU have been purchased by United FCU after the Nevada Division of Financial Institutions closed Clearstar Financial on Friday. The $144 million in assets and 16,000 members served by Clearstar will now be assumed by $941 million in assets and 78,000 member United Federal, which serves employee and association groups through 15 branch offices in Michigan, North Carolina, Arkansas, Nevada and Ohio. Clearstar was closed due to its “declining financial condition,” the National Credit Union Administration said.

CU Hikes blanket Capitol Hill

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WASHINGTON (9/29/09)--The Credit Union National Association (CUNA) on Wednesday will complete what has been a banner month for its Hike the Hill campaign with representatives from the League of Southeastern Credit Unions traveling to Washington to discuss credit union issues with their representatives and regulators. Twelve state-based groups took part in Hike the Hill last week, helping close out what has been a memorable September for the program. A total of 25 state credit union groups are participating in Hike the Hill throughout September and October, and League of Southeastern Credit Unions President/CEO Patrick La Pine told News Now that “it has never been more important” for credit unions to show their “political grassroots strength.” “Issues that could impact credit union operations for years to come are being debated and voted on this fall in Washington, D.C.,” and credit unions must not be “spectators on the sidelines” if they “want to affect a positive outcome,” La Pine added. Member business lending cap reforms, alternative capital, and the ongoing congressional conversation over general financial regulatory reform are topics for the credit union representatives. Reps. Paul Kanjorski (D-Pa.) and Ed Royce (R-Calif.) in late July introduced legislation that would increase the current statutory MBL cap of 12.25% to 25%, and while a vote on the legislation is not close on the horizon, it remains active in the House. The House and Senate also continue to work on their plans for financial regulatory reform, and sources have recently indicated that financial reform rules could be completed by the end of next month, with a view toward signing them into law by the end of the year.

Rep. Frank credits CUs role iWashington Posti

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WASHINGTON (9/29/09)--Calling credit unions “responsible and thoughtful citizens,” House Financial Services Committee Chairman Barney Frank (D-Mass.) in Sunday’s Washington Post said that those financial institutions played no part in the abuses that created the need for the current financial regulatory debate that continues in Congress. “If we only had community banks and credit unions, we wouldn't be in this problem,” Frank added, noting that these financial institutions have strength in numbers “because they're in everybody's district." Frank and fellow Rep. Carolyn Maloney (D-N.Y.) recently announced legislation what would move up the date that Credit Card Accountability, Responsibility and Disclosure (CARD) Act provisions go into effect to December from the previous effective date of February, and Frank has said that the House could pass this legislation in the coming weeks. Frank and his House and Senate colleagues also continue their work on financial regulatory reform, which Frank has said could be completed by the end of October.