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Inside Washington (09/05/2008)

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* WASHINGTON (9/8/08)--Freedom CU Supervisory Committee Chairman Crystal Barnett was chosen as a delegate to represent Delaware at the Democratic National Convention in Denver Aug. 25-28. Barnett (far right) represents the Philadelphia Federation of Teachers Local #3, which is a part of the American Federation of Teachers. “I was humbled by the experience,” she said. “The final night, when [Barack] Obama spoke, between the quantity of people there and the look of hope on people’s faces--it was amazing.” Freedom CU, Warminster, Pa., has $35 million in assets. (Photo provided by Freedom CU) ... * WASHINGTON (9/8/08)--The Federal Deposit Insurance Corp. (FDIC) can handle bank failures without needing other government sources of liquidity, FDIC Chairman Sheila Bair said Thursday (American Banker Sept. 5). Recent failures such as IndyMac Bank drained the fund’s reserves by 14% last quarter, which means the industry will have higher premiums next year. The agency can use a $30 billion line of credit from the Treasury, but Bair said the higher premiums would be enough to restore reserves. However, the Treasury guarantee helps maintain depositor confidence, she said ... * WASHINGTON (9/8/08)--The Federal Deposit Insurance Corp. (FDIC) released guidance Thursday on best practices from the agency’s forum on mortgage lending for low- and moderate-income households. The forum explored a framework for low-to-moderate income mortgage lending in the future regarding current problems in the mortgage market. It also examined ways to encourage responsible mortgage lending to lower-income households to rejuvenate the secondary market for mortgage loans, the agency said ... * WASHINGTON (9/8/08)--The Federal Housing Finance Agency (FHFA) is looking at a plan that would require the 12 Federal Home Loan Banks to raise capital by keeping more of their earnings (American Banker Sept. 5). Some banks may be forced to keep three times the amount of earnings they do now. However, a proposal on the plan has not been sent to James Lockhart, FHFA’s new director, according to an agency spokesman. In March 2006, the Federal Housing Finance Board, which regulated the Home Loan banks before the FHFA, tried to pass a rule that would have forced the banks to cut their dividends in half. The proposal received criticism from the industry and community banks ...

Bankruptcy law violates lawyers free speech says court

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WASHINGTON (9/8/08)—A provision in the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act that prohibits lawyers from advising clients to take on more debt prior to filing for bankruptcy protection has been struck down by a federal appeals court in St. Louis, Mo. The 8th U.S. Circuit Court of Appeals, ruling 2-1, concluded that attorneys who provide bankruptcy assistance to debtors are debt-relief agencies as defined under the Bankruptcy Code. In addition, the court also concluded that the particular section of the Code that restricts debt-relief agencies from advising potential debtors about incurring additional debt prior to filing bankruptcy is unconstitutional as to attorneys. Calling credit unions’ attention to last week’s ruling, Mike McLain, Credit Union National Association (CUNA) assistant general counsel and senior compliance counsel, said the ruling underscores the need for credit unions to continue working with their members who may be facing financial hardships by continuing to offer debt consolidation loans and working with members to lower payments and interest rates on existing loans rather than file bankruptcy. “There are times when it will be in a member’s interest, for example, when he or she is facing the threat of bankruptcy, to consolidate debt at a lower interest rate and with lower payments, and credit unions can help with that,” McLain said. He said the court ruling will make it likely that more consumers get similar advice from their attorneys. However, in some instances debtor's attorneys may advise their clients to skip certain loan payments or to restructure their debts in a manner that may be harmful to credit unions. To protect themselves, McLain said, credit unions must be aware of the laws and actions they can pursue before a member files bankruptcy as well as their rights and the actions they can pursue under bankruptcy law after a member files bankruptcy. The court ruling applies to the following states: North Dakota, South Dakota, Nebraska, Minnesota, Iowa, Missouri, and Arkansas.

FCUs may offer locked box accounting says NCUA

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ALEXANDRIA, Va.(9/8/08)—A federal credit union may provide “locked box” accounting to services to its members under the National Credit Union Administration’s incidental powers rules, according to a recent legal opinion from the agency. The agency was responding to an inquiry from Bethex FCU. The Bronx, N.Y. –credit union said it was planning to collect monthly rental payments on behalf of a housing cooperative and apply those payments to the cooperative’s accounts. Also under the Bethex proposal, the credit union would pay, from the cooperative’s accounts, certain monthly bills and reconcile the account ledger to the monthly statements. “NCUA defines operational programs as programs that an FCU establishes to deliver products and services to members that enhance member service and promote safe and sound operation. 12 C.F.R. §721.3(j),” wrote NCUA Associate General Counsel Sheila Albin in an Aug. 11 letter recently posted to the agency’s website. “These programs include pre-authorized member transactions and loan collection services…Accordingly, the services you have in mind on behalf of your member are permissible,” the letter concluded.

Congress back CUNA heat on CUBTRRA interchange

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WASHINGTON (9/8/08)—Congress returns to session this week after a month-long recess that spanned the Democratic National Convention (DNC) and the Republican National Convention (RNC), and both houses of Congress have set Sept. 26 as their targeted adjournment date for the year. “The rest of the House and Senate calendar year is short, but promises to be intense,” assessed John Magill, senior vice president of legislative affairs for the Credit Union National Association (CUNA). Magill said CUNA will keep the heat on its two year-end priority issues: passage of the Credit Union Bank and Thrift Regulatory Relief Act CUBTRRA); and dissuading lawmakers from allowing government interference in interchange fees. Both issues were key topics for credit unions at the DNC in Denver, Colo. and RNC in St. Paul, Minn. In discussions with lawmakers at the convention, CUNA continued to promote opposition to a bill that would give merchants an antitrust exemption to negotiate interchange fees. CUNA also encouraged support for credit union regulatory relief at every opportunity. CUNA will continue those efforts as lawmakers return to Washington and will also work during the final few weeks left in the legislative session to push for passage of CUBTRRA. “We haven’t given up hope for final passage this year,” says CUNA Vice President of Legislative Affairs Ryan Donovan, who put the chances for passage in 2008 at about thirty percent.

Cost of political absence too high says CEO

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ST. PAUL, Minn. (9/5/08)--The cost is too high for credit unions not to be involved in the local, state and national political scenes, according to credit union CEOs who attended the Republican National Convention in the Twin Cities this week. “We’ve seen all too clearly 10 years ago how being not involved can costs credit unions dearly,” said Harry Carter, president/CEO of Topline FCU in Maple Grove, Minn., in referring to the landmark legislative effort to pass H.R. 1151, the Credit Union Membership Access Act. Carter, who also is board chairman of the Minnesota Credit Union Network, urged credit unions to never let history repeat itself. “Ten years ago, we got caught flat-footed, but we’ve learned,” he said, pointing out that credit unions have strengthened both CUNA and their league’s political muscle. “If you’re going to master the strength of your industry, you must always be heard by those who make the laws.” Jeff Schwalen, president/CEO of Hiway FCU in St. Paul agreed with Carter. “You must be involved in the process or accept what people put on you,” said Schwalen, who chairs the Minnesota Credit Union Network’s Political Involvement Committee. While delegates to each party convention are bombarded with messages, the two CEOs said credit unions’ non-partisan nature is an advantage. They said the Homes for Our Troops project at both conventions was a perfect way to send a message. “The project was a way to demonstrate how credit unions give back to their communities and leave lasting commitments,” said Schwalen. Wounded Iraqi war veteran Sgt. Marcus Kuboy, who received the Minnesota Homes for Our Troops house, joined Hiway FCU after embarking on the project with credit unions. Both CEOs say they enjoy representing credit unions in the political process. “I think it’s valuable, fun and rewarding,” said Carter. “I’ve met so many interesting people.”

As conventions conclude CUs keep momentum

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ST. PAUL, Minn. (9/5/08)--Representatives from the Credit Union National Association (CUNA), the state leagues and credit unions yesterday polished off their final day of advancing the credit union movement during the back-to-back Democratic and Republican National Conventions.
Click for slide show As the confetti and balloons fall, the camera zooms in on Sen. John McCain and Gov. Sarah Palin, the GOP ticket for the president and vice president of the United States. (Photo provided by CUNA) (Photo provided by CUNA)
During the conventions, the three-tiered system reinforced credit unions’ non-partisan, consumer-oriented position in American politics. That effort was illustrated by CUNA and the leagues’ signature project at both party events: Building a home for a wounded veteran with Homes for Our Troops. Beyond the flurry of meetings, receptions and other events during both party conventions, CUNA teamed up with the National Journal to produce a series of Daily Briefings with national pundits and politicos. The two organizations also hosted nightly VIP viewing receptions, where those not attending the convention facilities could mix and mingle while watching speeches via television. CUNA and credit unions have been involved in these national events since 1988, according to CUNA Senior Vice President of Political Affairs Richard Gose. "Being a part of the party conventions demonstrates CUNA's resolve to put itself in front of the key people who will be making policy affecting credit unions in the coming year," said Gose. "It's just as important to be part of the campaigns as it is to be lobbying in Washington."