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House committee okays data breach bill

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WASHINGTON (10/1/09)—The House Energy and Commerce Committee Wednesday passed the Data Accountability and Trust Act (H.R. 2221) by voice vote. The bill would require businesses to notify affected customers when outside parties gain access to sensitive information due to a security breach. The Credit Union National Association (CUNA) has called the bill “well-intentioned,” but has expressed concerns to lawmakers that its does not adequately address the notification issue. In a letter to the committee, CUNA President/CEO Dan Mica said pointed out that the entities that have experienced data breaches in recent years do not typically have the necessary contact information to reach the individuals whose accounts may have been compromised. However, he added, the financial institutions of affected accountholders certainly do. Mica said CUNA backs language to state that breach notification would to be done by the financial institutions of the affected accountholders at the expense of the entity that has lost the data. “Credit unions currently do this at their own expense for members when they are notified of breaches by the merchant or card associations. They have the contact information, but should be compensated for the expense caused by the data breach,” Mica wrote. He added, “Further, we would encourage you to include language that permits the financial institutions to disclose the source of the breach or loss to affected accountholders. “Without being able to disclose the source, credit unions are exposed to reputation risk—the loss of confidence in the credit union by the members—in addition to actual monetary costs.”

CUNA CFPA legislation could create redundant rules for CUs

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WASHINGTON (10/1/09)--The Credit Union National Association (CUNA) in a Wednesday letter noted that while legislation that would create the proposed Consumer Financial Protection Agency (CFPA) takes "several steps in the right direction," credit unions remain concerned that the duplicative and redundant regulations that could potentially face credit unions have not been addressed. The letter, which was sent to members of the House Committee on Financial Services and submitted and was added to the record of a hearing held on Wednesday, sought assurance that the additional credit union concerns over the examination and enforcement authorities that could be conveyed to the CFPA. However, CUNA stated, the CFPA should be given “back-up examination powers” over regulated depository institutions, and the CFPA examiners could also be used to examine financial institutions “on a random, backup basis.” Some of the additional protections sought by CUNA include clarification that the Chairman of the National Credit Union Administration will be given a seat on the CFPA Oversight Board and directing the CFPA Director to take into account disclosure requirements under other laws in order to enhance consumer compliance and reduce regulatory burden. The discussion draft, which was the subject of a Wednesday Financial Services Committee hearing, also seeks to ensure that the CFPA does not create additional fees or assessments for financial institutions. Protections for depositor data and the treatment of state consumer protection law would be given “serious consideration” as the Committee continues its debate and mark-up of the legislation. For the full CUNA letter, use the resource link.

Non-profits need health care incentives CUNA

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WASHINGTON (10/1/09)--While it supports health care assistance for small employers, the Credit Union National Association (CUNA) said Wednesday that the same standards should also apply to non-profit employers, including federal- and state-chartered credit unions, that seek the same benefits for their employees. CUNA made its remarks in a letter to Senate Finance Committee members Max Baucus (D-Mont.) and Charles Grassley (R-Iowa) which addressed a modified version of the America’s Healthy Future Act of 2009 which provides tax credits to help small employers cover the cost of purchasing health insurance for their employees. As written, an amendment to the bill that was offered by Sens. Kerry, Snowe, Schumer, Lincoln and Cantwell would extend these same benefits to non-profits, but only to those that are organized under Section 501(c)(3) of Internal Revenue Service Code. While positive, this would still exclude 27 types of non-profits that are organized under Section 501(c) of the IRS code. In closing, CUNA President/CEO Dan Mica asked for “employer parity and basic fairness” to “prevail” by allowing the bill’s incentives to apply to “all small employers.”

NCUA Town Hall includes alt capital corporate CUs

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WASHINGTON (10/1/09)—National Credit Union Administration (NCUA) Chairman Deborah Matz Wednesday stated that the agency is conducting a "post mortem" on what contributed to the problems in the corporate credit unions, including NCUA's role. The chairman made her remarks before an NCUA Town Hall meeting here, one
Click to view larger image CUNA's Dan Mica, left, and Mary Dunn, right, pose with NCUA Chairman Deborah Matz, who gave attendees substantial insight into the NCUA's future rulemaking and examination agenda. (CUNA Photo)
of three such meetings organized under the new chairman. Matz said the priority now, though is to "get through the crisis" period. She also stated that the agency is adding more personnel and providing additional training to staff. "We are getting to where we should have been and need to be to effectively examine credit unions," she said. She added the agency is going back to a 12-month examination cycles because the 18 month cycle has not served the system well. The town hall meeting was attended by 180 other credit union representatives, among them Credit Union National Association President/CEO Dan Mica and other CUNA officials. Matz acknowledged that 2010 and perhaps 2011 could still be difficult years for natural person credit unions, and said that the NCUA's examiners are currently scrutinizing credit unions' call reports. Many of the issues found by the examiners relate to loan participations and a general failure to conduct proper due diligence. NCUA board member Michael Fryzel, Office of Corporate Credit Union Director Scott Hunt, General Counsel Bob Fenner, and NCUA Deputy Executive Director Larry Fazio were also in attendance, and the NCUA officials discussed the financial condition of the corporate credit unions and NCUA's ongoing implementation of its efforts to address problems within the corporate system. While the NCUA has not yet released its comprehensive plan for corporate credit union governance, the NCUA representatives previewed some elements of the proposal. Key elements will include proposed new capital standards that call for a 4% leverage ratio, which will include retained earnings and paid-in capital from members. The proposal will also address over concentration of risks in mortgage-related securities and other asset-backed securities, and will also propose limits on the weighted life of assets, perhaps two years. The proposal will also recommend yearly disclosures of the total compensation packages of all senior staff members, and will prohibit so-called "golden parachutes." The proposal is expected to be issued for comment in November. During questions from the audience, CUNA Board Member Tom Dorety, of Suncoast Schools FCU in Tampa, Fla., raised the issue of the need for alternative capital for a number of credit unions. Matz said that she was open to a reasonable proposal that would allow cedi unions to have additional sources of capital. Board member Gig Hyland noted that a that a comprehensive white paper on allowing credit unions to raise alternative capital could be presented to the NCUA board before its previously expected deadline of December of 2009. Hyland is heading an NCUA resource group that is developing an alternative capital proposal to send to COngress. The NCUA will hold its final Town Hall meeting in San Diego, Calif. on Oct. 5.

SBA extends GO Loan program

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WASHINGTON (10/1/09)--The Small Business Administration (SBA) this week announced that it is extending its Gulf Opportunity Pilot Loan Program (GO Loans) for a further year, extending them until September 30, 2010. The SBA began its GO Loan program in November of 2005 to provide financing on an emergency basis to small businesses in areas affected by Hurricanes Katrina and Rita. According to an SBA release, the GO Loan program, which provides 85 percent guarantees for eligible lenders, resulted in 301 loans for a total of $25.2 million in funds during 2008. The SBA also reported that the demand for GO loans “increased significantly” during 2009. The maximum loan amount is currently $150,000. The full notice detailing the extension of the GO loan program can be found in the most recent edition of the Federal Register.

2008 mortgage trend info available

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WASHINGTON (10/1/09)—Data on mortgage lending transactions by credit unions, banks and thrifts throughout the United States in 2008 is now available through the Federal Financial Institutions Examination Council (FFIEC). The number of reporting institutions fell to 8,388, about 3% less than the 8,610 covered by the Home Mortgage Disclosure Act (HMDA) the year before. The drop was attributed primarily to a relatively large decline in the number of independent mortgage companies. The FFIEC is comprised of the National Credit Union Administration, Federal Reserve Board, Federal Deposit Insurance Corp., Office of the Comptroller of the Currency and Office of Thrift Supervision. The Credit Union National Association (CUNA) is currently analyzing the just-released mortgage lending data, particularly credit union information, and will report any significant trends. In general terms, an FFIEC release noted that the 2008 HMDA data reflect ongoing difficulties in the housing and mortgage markets, with decreases in the both the number of reporting institutions and the number of loans written. The total number of originated loans of all types reported fell about 3.3 million, or 31%, from 2007. However, the story does not stop there. While the number of reported first-lien conventional loans fell sharply from 2007 to 2008, first-lien loans backed by Federal Housing Authority (FHA) insurance increased dramatically, the FFIEC noted. In fact, FHA loans rose 169% in 2008 and the FHA’s share of such loans expanded to 19.5% in 2008, up from 5.5% the year prior. First-lien loans backed by Veterans Administration (VA) guarantees also increased markedly. The number of VA-guaranteed loans in 2008 increased by 48 percent over the number in 2007. The VA market share increased from 1.5%in 2007 to 2.9% in 2008. The incidence of higher-priced lending declined in 2008, but racial disparity remained. The FFIEC reported that among all HMDA-reported loans, about 12% were higher-priced, down significantly from the historic high point of about 29% in 2006 and 18%t in 2007. However, the 2008 HMDA data, similar to the data from earlier years, indicate that black and Hispanic white borrowers were more likely, and Asian borrowers less likely, to obtain higher-priced loans than were non-Hispanic white borrowers. Mike Schenk, CUNA vice president of economics and statistics, noted it will take time to cull the enormous HMDA database. However, he said CUNA expects the numbers to show that credit unions, compared to other lenders, continue to be more likely to approve mortgage loan applications, and that their relatively high approval rates will continue to stand out across the income spectrum and in all key ethnic groupings. Schenk said the FFEIC numbers also historically have shown credit unions to be much less likely to saddle consumers with high-cost loans and that credit unions remain true to their mission: compared to other lenders, credit unions reported a larger share of the total mortgage lending to low/moderate income consumers. "My expectation is that, at a minimum, the new numbers will show a continuation of these impressive credit union results,” Schenk said Thursday. He anticipated the FFEIC data will reflect that credit unions have remained active, responsible lenders during the ongoing housing downturn, which has caused many other lenders to significantly tighten underwriting standards and substantially curtail or completely abandon the mortgage market. "Credit unions were not contributors to the subprime mess, and have remained active, responsible lenders - the FFIEC data should reflect this fact," the CUNA economist said.

Compliance What an accelerated CARD ACT date would mean

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WASHINGTON (10/1/09)—Credit unions, faced with the specter of a bill that would accelerate the effective date of the Credit Card Accountability, Responsibility and Disclosure (CARD) Act, have been seeking guidance on what should be done now to prepare for the possibility, said Kathy Thompson, Credit Union National Association senior vice president for compliance. Credit unions are worried, Thompson said Wednesday, about how they could possibly comply with the CARD Act if Congress were to pass legislation introduced last week to change the effective date to Dec. 1 of this year, rather than the Feb. 22, 2010 deadline in the law enacted last May. “We’ve received calls from credit unions asking what they should be doing right now if the effective date were accelerated by almost three months,” reports Thompson. “It’s something we have taken a close look at and CUNA has concluded that it would be virtually impossible for card issuers to comply with all the changes required by the new law in a matter of 60 days. “Data processing changes are still being developed and need to be tested, and implementing Regulation Z changes were just proposed two days ago. The Regulation E amendments required by the CARD Act to impose restrictions on gift cards haven’t even been proposed. Many steps need to be taken before being able to comply with the new law in any orderly fashion.” Key members of the U.S. Congress have expressed concerns about large banks rushing to make changes in the terms and conditions of their credit cards prior to the February date. Last week, Rep. Carolyn Maloney (D-N.Y.) introduced H.R. 3639, the “Expedited CARD Reform for Consumers Act of 2009,” a vehicle to move up the effective date. “I was surprised to see a quote from a supporter of a December 1 effective date saying that such a change would only affect large financial institutions because ‘small financial institutions don’t issue credit cards.’ “Half of the nation’s credit unions issue credit cards. Accelerating the effective date could raise even greater compliance concerns for credit unions because they don’t run their own credit card operations and therefore can’t simply pour more resources into their programs to comply on short notice. They rely upon third-party vendors to provide necessary support, and these vendors are working diligently to comply by the early 2010 effective date,” noted Thompson. She advised credit unions to focus on the 800-page proposed credit card regulation and explanatory materials released by the Federal Reserve Board this week, rather than trying to anticipate potential compliance problems if the effective date were moved to December. “Right now, we urge the 4,000 credit unions with credit card programs to provide CUNA with input on the practical problems you see with the Fed’s credit card proposal,” Thompson urged. Once the Fed formally issues its proposal, there is only a 30-day turn around for comments, so October is the time to focus on what additional guidance is needed from the Fed. Also credit unions should be considering what changes may be needed in their credit card programs to address issues raised in the credit card law, such as fixed versus variable rate cards, credit for members under 21 years of age, and over-the-limit transactions, to be ready for the CARD law's implementation, noted Thompson. Thompson reminded credit unions that not only the controversial 21-day mailing requirements but also the 45-day change-in-terms notice requirements have already gone into effect. “And one other provision in the new credit card law – although it doesn’t actually go into effect until next summer – requires credit unions to start tracking any interest rate increases they make in members’ credit card accounts since January 1, 2009 due to market conditions or a member’s risk profile,” warned Thompson. Starting August 22, 2010, the credit union will have to review these accounts at least every six months to assess whether a reduction in the interest rate is warranted.” Thompson emphasized that if a bill to accelerate the effective date begins to gain traction in Congress, CUNA and the leagues will meet with lawmakers and their staff to explain the regulatory burden and potential liability to credit unions. Even if Congress doesn’t take action to move up the effective date of the credit card law, it will be closely watching what is happening. The Fed is required to deliver to Congress next May a study on creditors’ practices in raising interest rates or reducing credit limits since 2007, and to report every other year on the impact of the new credit card law has on consumers.

Inside Washington (09/30/2009)

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* WASHINGTON (10/1/09)--Senate Banking Committee Chairman Christopher Dodd (D-Conn.) is drafting a bill for a single financial regulator, despite opposition from community bankers and the House. Dodd’s bill would consolidate all regulation for financial institutuins into one, except credit unions (American Banker Sept. 30). “I want to make it clear that this does not relate to credit unions. Before I get calls from around the country, I wanted to make that point. Credit unions: You are O.K.,” Dodd said during a hearing Tuesday. Dodd’s proposal goes further than the Obama administration’s plan to consolidate regulation. Obama would merge the Office of the Comptroller of the Currency and the Office of Thrift Supervision. Dodd’s plan would strip authority from the Federal Reserve Board and Federal Deposit Insurance Corp. Though community bankers have voiced opposition to Dodd’s plan because they fear it would hurt the dual banking system, several said they support it. A consolidated regulator is critical to improving the financial system, according to Sen. Mark Warner (D-Va.). A single banking regulator could eliminate “arbitrage” and preserve the dual banking system without harming community banks, he said. Having too many regulators leads to unnecessary regulatory burden, added Eugene Ludwig, former comptroller. Several Government Accountability Office (GAO) reports also make the case for a single regulator. Regulatory consolidation could decrease fragmentation in the system and improve regulatory independence, said Richard Hillman, managing director of financial markets and community investment for the GAO ... * WASHINGTON (10/1/09)--The insolvency of the Deposit Insurance Fund (DIF) will likely span years--until 2012, according to Federal Deposit Insurance Corp. (FDIC) Chairman Sheila Bair. DIF--the FDIC’s reserve--was significantly depleted this year because of 95 bank failures. But a DIF negative balance doesn’t mean the agency will “run out of money,” Bair told reporters Tuesday (American Banker Sept. 30). The FDIC is planning to raise $45 billion by requiring banks to pre-pay their premium assessments until 2012. Under that plan, the DIF will reach its minimum balance in 2017. The DIF has always been expected to have at least $1.15 (1.15%) reserved for each $100 of insured deposits, but the ratio has been pushed much lower. For instance, on June 30, the reserve ratio was 0.22% ...

Inside Washington (09/29/2009)

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* WASHINGTON (9/30/09)--Illinois credit union officials attended Thursday’s National Credit Union Administration (NCUA) board meeting in Alexandria, Va., and later met their elected officials. The delegates were in the Washington, D.C., area for the Credit Union National Association’s Hike the Hill event.
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The group also met with NCUA board member Michael Fryzel, who said he was happy to talk with the delegation about issues regarding corporates and member business loans. From left are: Barrie Hendrickson, Cornerstone CU; Carl Sorgatz, Hawthorne CU; Cheri Taylor, Sangamon Schools CU; Ann Duble, NuMark CU; Gail Clore, Cornerstone CU; Fryzel; Geri Burek; South Division CU; John Bratsakis, Baxter CU; Karen Woods, Decatur Earthmover CU; and Don Edwards, Illinois Credit Union League. (Photo provided by the Illinois Credit Union League) ... * WASHINGTON (9/30/09)--The Federal Deposit Insurance Corp. (FDIC) has adopted a notice of proposed rulemaking that would require insured financial institutions to prepay their estimated quarterly risk-based assessments for the fourth quarter of 2009 and for all of 2010, 2011 and 2012. The assessments will help to replenish the Deposit Insurance Fund, which has dipped to lower levels recently because of several bank failures. So far, 95 have failed this year (Bloomberg Sept. 29). The prepaid assessments are expected to bring in about $45 billion. The board also voted to adopt a three-basis point increase in assessment rates effective Jan. 1, 2011, and extend the restoration period to eight years from seven years. “As of June 30, FDIC-insured institutions held more than $1.3 trillion in liquid balances, or 22% more than they did a year ago,” FDIC said in a statement. “Prepaying assessments will put the industry's liquid balances to good use in conserving capital and helping to maintain the capacity of banks to lend while they rebuild the fund” ... * WASHINGTON (9/30/09)--Ed DeMarco, new head of the Federal Housing Finance Agency (FHFA), said he supports standardized reporting for the Federal Home Loan Banks. The 12 banks have resisted such a move but DeMarco said the goal should be to enhance the “consistency and robustness” of their disclosures to the capital markets. A FHFA proposal that would expand the number of independent directors on the board of the Office of Finance--which issues debt for the banks--is due for comment next week. The proposal also would allow the directors to sit on an audit committee that could establish more standard accounting policies (American Banker Sept. 29). The prospect of the committee has caused some to think the individual bank boards wouldn’t have much say in developing accounting standards. However, DeMarco said that would not be the case ...

NCUA advises CUs on mortgage mods financial trends

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ALEXANDRIA, Va. (9/30/09)--In Letter to Credit Unions 09-CU-19, National Credit Union Administration (NCUA) Chairman Deborah Matz advised credit unions on how best to handle the “unprecedented levels” of mortgage defaults. Matz encouraged credit unions that originate real estate loans to work with their borrowers to modify their loans, if needed. Potential loan modifications suggested by the NCUA supervisory letter include reducing interest rates, extending the maturity date of the loan and/or offering principal forbearance or forgiveness. Credit unions may also waive late fees or reduce or capitalize past due amounts, taxes, accrued interest, insurance, or fees, the agency recommended. According to NCUA, the objectives of loan modification programs are to help financially distressed members stay in their homes and to minimize default and foreclosure costs for credit unions . The NCUA encourages its examiners to “evaluate the effectiveness” of a credit union’s mortgage modification program and “ensure that the program is not masking delinquency or delaying the timely recognition of loan losses." In a separate Letter to Credit Unions (09-CU-18), NCUA notes that the real estate market continues to affect the credit quality of loans . However, the enclosed report on credit union trends found that the majority of loan growth over the first six months of this year came from the real estate sector. The report also found that while the credit union industry "remains sound," the impact of the financial crisis "continues to have a negative impact on credit union trends." Matz noted the crucial role of proper risk and asset-liability management for credit unions given the difficulties of this environment and she advised credit unions that originate real estate loans to "remain vigilant and enforce sound underwriting practices." For the full NCUA letters, use the resource link.

Dodds assurance No single regulator for CUs

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WASHINGTON (9/30/09)—In a financial regulatory reform hearing conducted by the Senate Banking Committee Tuesday, Chairman Christopher Dodd (D-Conn.) made it resoundingly clear that any plan to combine financial institution regulation under a single regulator does not apply to credit unions. The hearing was titled “"Strengthening and Streamlining Prudential Banking Supervision." During the public session, banking panel member Sen. Jeff Merkely (D-Ore.) noted that community banks and credit union are concerned about being rolled into a single regulator. The Credit Union National Association has stated the credit union case that a separate federal regulator is an imperative for credit unions because their structure and, in some ways, operations are so distinct from banks and thrifts. Responding to Merkeley, Dodd said: “I want to make it clear that this does not relate to credit unions. Before I get calls from around the country, I wanted to make that point. Credit unions: you are ok.” Sen. Bob Corker (R-Tenn.) said of the exchange, “You have just given evidence to where the real political clout is.” CUNA Vice President of Legislative Affairs Ryan Donovan said after the hearing, “Now the administration, House Financial Services Committee Chairman Barney Frank (D-Mass) and Chairman Dodd appear aligned on keeping NCUA out of a national banking regulator.”

Fed limits CARD Act minimum payment warnings to credit cards

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WASHINGTON (9/30/09)--Proposed amendments to Regulation Z released by the Federal Reserve today would limit the required minimum payment warning disclosures outlined in the Credit Card Accountability, Responsibility and Disclosure (CARD) Act to credit card accounts. "The Credit Union National Association (CUNA) has urged the Fed to limit these minimum payment warning disclosures to credit cards for weeks," said Deputy General Counsel Mary Dunn. These disclosures must be provided on periodic statements and must describe the affect that making only minimum payments has on the amount of interest that is paid and the time it takes to repay the balance. CUNA Senior Assistant General Counsel Jeff Bloch added that CUNA is “pleased that the Fed is using its authority under the Truth in Lending Act to limit these provisions in this manner.” The proposed rule, which would implement the portions of the CARD Act which come into effect on February 22, 2010, is the second stage of CARD Act implementation. Many of these provisions will be similar to Regulation Z rules that addressed open-end lending, which were issued earlier this year. Under the Fed proposal, credit card issuers would be prevented from increasing a borrower’s interest rate during the first year that an account is open. Consumers that are under 21 years of age will generally require a co-signor to open a credit account under the proposed rules, and the increased fees that can sometimes be associated with so-called “subprime” credit cards will also be limited. The proposal will also require that payments which exceed the minimum payment must now be allocated to balances with the highest interest rate first. While most provisions are currently scheduled to come into effect in February or August of next year, Reps. Barney Frank (D-Mass.) and Carolyn Maloney (D-N.Y.) recently introduced legislation that would accelerate the effective date for some portions of the CARD Act to December of this year. CUNA expects that the Fed’s newly-proposed rules, as well as interim final rules that address portions of the CARD Act that came into effect in late August, will be finalized by the end of 2009. Comments on the 900 page proposal are due within 30 days, and CUNA will issue a comment call soon on the new proposal. CUNA will also file a comment letter, working with its Consumer Protection Subcommittee and the CUNA Lending Council.

As first step toward alternative capital CUNA backs members only

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WASHINGTON (9/29/09)—The Credit Union National Association (CUNA)has reached out to the National Association of Federal Credit Union (NAFCU) in an effort to work together to obtain alternative capital for credit unions. Following the adoption of a resolution by the CUNA board at its most recent meeting in Estes Park, CO, the CUNA board and President/CEO Dan Mica have directed CUNA staff to work with NAFCU on this key issue. CUNA has reviewed draft legislative language from NAFCU and determined it is a good first step toward gaining additional sources of capital for credit unions. However, CUNA has suggested modifications to make the member-only alternative capital legislation as broad as possible, while being consistent with the principle of mutuality. In a memo to NAFCU, CUNA suggested that the legislative proposals be modified to include a number of additional sources for credit unions, including:
* Government assistance, including TARP funds; * Credit union assistance to other credit unions; * Credit union sponsors and select employee groups (SEGs) should be able to provide capital as members of a credit union, including those who have set out to make credit union access available to their employees as an employee benefit; and * There should be exceptions to capital rules for extenuating circumstances – such as in exigent circumstances to help prevent credit unions from going into costly conservatorship or liquidation.
"The modifications CUNA is recommending to the suggested legislative proposals are aimed at helping as many credit unions as possible. We look forward to working with NAFCU on securing alternative capital,” CUNA General Counsel Eric Richard said Monday. CUNA underscored in its communication to NAFCU that, in the long term, credit unions must be allowed to determine for themselves, based on their needs and membership, whether that capital should come strictly from membership or other sources. Drafting a legislative plan is just a first step in the pursuit of alternative sources of capital. The trades groups, once in agreement, will seek National Credit Union Administration backing of the plan. If that is secured, the groups will go on to pursue the U.S. Treasury Department’s support and then seek a sponsor on Capitol Hill.

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.

NCUA names Hunt as corporate CU director

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ALEXANDRIA, Va. (9/28/09)--The National Credit Union Administration (NCUA) on Friday named Scott Hunt as its Director of the Office of Corporate Credit Unions. In comments accompanying the announcement, NCUA Chairman Debbie Matz said that Hunt’s “talent, knowledge and dedication” to the issues currently faced by corporate credit unions “is well-known and has produced real results.” Hunt’s “background and skill set” also “make him uniquely qualified for this crucial position,” she added. Hunt most recently served as acting special assistant and, before that, as acting director of the corporate office. Hunt, who joined the NCUA in 1989, has also served in several other roles, including as an examiner and as associate regional director and senior investment officer in the NCUA’s Office of Capital Markets.

CDFI funding announced Matz urges participation

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WASHINGTON (9/28/09)--The U.S. Department of the Treasury this week announced that it will make a total of $113 million in funding available through its Community Development Financial Institutions Fund (CDFI Fund) during the upcoming year. The Treasury's CDFI Fund helps locally based financial institutions offer small business, consumer and home loans in communities and populations that lack access to affordable credit. The fiscal 2010 CDFI funding round is the 15th since the program’s inception, and was announced 15 years to the day that the CDFI Fund was created by the signing of H.R. 3474, the Riegle Community Development and Regulatory Improvement Act of 1994. In a statement accompanying the release, CDFI Fund Director Donna Gambrell said that she is “delighted to celebrate the CDFI Fund’s 15th Anniversary” by announcing the “largest-ever annually appropriated funding round” of the “cornerstone CDFI Program.” National Credit Union Administration (NCUA) Chairman Debbie Matz in a separate release encouraged credit unions to use the CDFI program as a means to “expand service to low-income consumers.” Consumers across the income spectrum benefit when credit union service is made more accessible, and CDFI has been a reliable partner for many credit unions in making this a reality,” Matz added. According to the NCUA, credit unions that are certified to take part in the CDFI program may apply for as much as $2 million in funding that will help maintain their credit union’s presence in the community. To see the CDFI Fund release, use the resource link.

Nance removed as U.S. Central conservator manager

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ALEXANDRIA, Va. (9/28/09)--U.S. Central Senior Vice President and General Counsel Francois Henriquez will step in as interim CEO after the U.S. Central Conservatorship Advisory Board voted to remove James Nance from his position as CEO, the National Credit Union Administration (NCUA) reported on Friday. Henriquez will oversee the activities of U.S. Central as the corporate credit union searches for a successor to Nance. In a statement, the NCUA said that while Nance "provided critical management skills" during U.S. Central's conservatorship, the decision to remove Nance from his position "was taken due to divergent views about how to move U.S. Central forward." In financial statements for the 2008 fiscal year released earlier this month, U.S. Central's auditors reported that the corporate credit union incurred an OTTI charge of $4.9 billion on its investments as of Dec. 31, 2008. To view an NCUA Frequently Asked Questions (FAQ) regarding the U.S. Central financial statement, use the resource link.

Inside Washington (09/25/2009)

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* WASHINGTON (9/28/09)--Credit quality significantly declined for loan commitments of $20 million or more held by multiple federally supervised financial institutions, according to the 2009 Shared National Credit (SNC) Review. Nonbanks held 47% of classified assets in the portfolio. Criticized assets--those seen as substandard--reached $642 billion, up from $373 billion last year. Classified assets increased to $447 billion from $163 billion. Special mention assets--those that exhibit potential weakness--declined to $195 billion from $210 billion. The severity of criticism increased with the volume of Shared National Credits classified as “doubtful” and “loss rising” to $110 billion, up from $8 billion in 2008 ... * WASHINGTON (9/28/09)--At a hearing last week, lawmakers urged the Treasury to let the Troubled Asset Relief Program (TARP) expire at year-end, but the Obama administration did not appear to give in. Treasury can extend TARP until Oct. 3, 2010. Several lawmakers said the economy has improved, so the program should end. Some Americans think TARP is becoming status quo, which leads to more government involvement in the marketplace, said Sen. David Vitter (R-La.). Senate Banking Committee Chairman Christopher Dodd said TARP can’t be permanent, but did not indicate if the program should be extended. Conversely, House Financial Services Committee Chairman Barney Frank (D-Mass.) told reporters Wednesday that TARP should be extended. Several banks have repaid their capital infusions from TARP back to the Treasury and the Treasury department expects more to be repaid within the next year and a half ... * WASHINGTON (9/28/09)--Reps. Barney Frank (D-Mass.) and Carolyn Maloney (D-N.Y.) introduced a bill Thursday to enact parts of the Credit Card Accountability, Responsibility and Disclosure (CARD) Act more quickly. The credit card industry has balked at the idea. Some of the CARD Act’s provisions gone into effect, with other provisions to be effective Feb. 22. Maloney and Frank’s bill would push that date to Dec. 1. Maloney and Frank criticized credit card issuers at a press conference Thursday for claiming that they needed until next spring to prepare for CARD Act rules. Card issuers are using the time to maximize profits by raising rates to make money off of consumers before the new rules are effective, the two legislators said. Frank and other policymakers have discussed moving ahead with the CARD Act compliance date. Frank said he thought the House could pass a bill on the matter within the next few weeks ... * WASHINGTON (9/28/09)--Rep. Paul Kanjorski (D-Pa.), chairman of the House Financial Services subcommittee on capital markets, insurance, and government sponsored enterprises, announced that he will conduct a hearing to examine reforming the regulation of credit rating agencies. The hearing is scheduled for Sept. 30 at 2 p.m. ET ...

Inside Washington (09/24/2009)

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* WASHINGTON (9/25/09)--H.R. 3614, portions of which correct the America’s Recovery Capital (ARC) loan program to give small businesses that qualify for 7(a) and ARC loans greater flexibility in how they use those loans, passed the House by a 417 to 2 vote earlier this week. The bill also extends all Small Business Administration programs through the end of October. The Credit Union National Association recently spoke in support of expanding the 7(a) Business Loan Program, saying that changes in the size criteria would help alleviate negative economic conditions by facilitating lending to small businesses ... * WASHINGTON (9/25/09)--At a Wednesday hearing, Treasury Secretary Timothy Geithner said that a draft bill by House Financial Services Committee Chairman Barney Frank (D-Mass.) on financial reform embraces some of the Obama administration’s reform ideas. Frank’s bill is expected to drop a requirement that forces banks to offer “plain vanilla” versions of their products (American Banker Sept. 24). Until Wednesday’s hearing, the Obama administration had supported the vanilla products idea, saying that it was necessary to protect consumers. However, banking groups had argued that the vanilla requirement would prevent innovation in the market and limit consumer choice. Geithner did not note any other compromises, but Frank said Wednesday that he expects disagreement in the House committee about a provision that would end national bank preemption. If passed, the legislation would give state regulators the ability to enforce national and state laws governing commercial banks. Lobbyists have said that the preemption rule would making financial institutions’ operation more difficult ... * WASHINGTON (9/25/09)--The Federal Reserve Board was absent at a House Financial Services Committee hearing attended Wednesday by officials of the Federal Deposit Insurance Corp., Office of the Comptroller of the Currency and the Office of Thrift Supervision. Fed Chairman Ben Bernanke did not attend the hearing because of a scheduling conflict and asked the panel if he could meet with the committee later, a spokesperson said (American Banker Sept. 24). He is scheduled to testify in front of the committee Oct. 1. The Fed has been viewed as a contender by financial observers to take over the role of systemic regulator ... * WASHINGTON (9/25/09)--Senate Banking Committee Chairman Christopher Dodd (D-Conn.) says he doesn’t think that easing overdraft fee programs at JPMorgan Chase, Wells Fargo and Bank of America will stop legislative efforts regarding the fees. Dodd is expected to release a bill that would require financial institutions to give accountholders the ability to opt in for overdraft protection (American Banker Sept. 24). He said that the changes enacted by the large banks to ease the fees is a positive step. He added that the legislation would target abusive fee practices that “should have never been instituted in the first place” ... * WASHINGTON (9/25/09)--A press conference is scheduled for today by Reps. Barney Frank (D-Mass.) and Carolyn Maloney (D-N.Y.) to move up the date that Credit Card Accountability, Responsibility and Disclosure (CARD) Act provisions go into effect. Maloney and Frank hope to move the date to December from February (The Wall Street Journal Sept. 24). Part of the legislation, which requires credit card companies to give their accountholders more time to pay their bills, was effective in August. Other changes aren’t slated to go into effect until spring. The conference comes as several card companies have announced interest rate increases and fees, a move that some say is being triggered by a weak economy. If the effective date is moved, it would signal that lawmakers are not happy with how credit card companies have reacted to the legislation, according to John Ulzheimer, president of education at Credit.com, a credit card educational website ... * WASHINGTON (9/25/09)--The House Financial Services Committee is slated to have a hearing today on H.R. 1207, the Federal Reserve Transparency Act of 2009. Witnesses include Scott G. Alvarez, general counsel at the Board of Governors of the Federal Reserve System, and Thomas E. Woods, from the Ludwig von Mises Institute. H.R. 1207 would change how the Board of Governors of the Fed is audited by the Comptroller of the Currency and how such audits are reported ...

New bill would advance some CARD Act protections

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WASHINGTON (9/25/09)--Reps. Carolyn Maloney (D-N.Y.) and Barney Frank (D-Mass.) on Thursday introduced legislation that would change the effective date of portions of the Credit Card Accountability, Responsibility and Disclosure (CARD) Act. Aside from generally setting an earlier effective date for the CARD Act, H.R. 3639, the “Expedited CARD Reform for Consumers Act of 2009,” would push forward the effective dates for CARD Act provisions addressing gift cards, reviews of past consumer interest rate increases, and requirements addressing the penalties and fees that can be assessed to credit accounts to Dec. 1. Commenting on the legislation, Maloney said that the “breadth and depth” of interest-rate hikes that credit card companies are imposing ahead of the full imposition of the CARD Act points to the need for “faster consumer protections.” Ryan Donovan, Credit Union National Association (CUNA) vice president of legislative affairs, said the outlook for the legislation is uncertain. "The legislation seeks to move a February effective date up to this December, which is only about 10 weeks from now. In order for the bill to become law in that timeframe, it would seem that the bill would need to move through the legislative process at incredible speed," he noted. The legislation will not affect the 21-day rule on open-end credit that took effect in August, and CUNA continues to be in contact with the Federal Reserve, the National Credit Union Administration, and key members of Congress to resolve the compliance issues that continue to face credit unions.

Keys FCU placed into conservatorship

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ALEXANDRIA, Va. (9/25/09)--The National Credit Union Administration (NCUA) on Thursday assumed control of the 13,000-member and $180 million assets Keys FCU of Key West, Fla. According to an NCUA release announcing that the credit union has been placed into conservatorship, service to members of Keys FCU will continue, and they will be able to continue to make deposits and loan payments while the credit union is under NCUA control. The deposits of members will continue to be insured by the National Credit Union Share Insurance Fund, the release added.

Former Fed Chairman Greenspan to speak at CUNA GAC

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WASHINGTON (9/25/09) -- Alan Greenspan, the former chairman of the Federal Reserve Board, will be a keynote speaker at the Credit Union National Association’s (CUNA’s) 2010 Governmental Affairs Conference in February. Greenspan, who served as Fed chairman for 18 1/2 years until Jan. 31, 2006, plans to engage in conversation with GAC attendees, devoting a large share of his presentation to fielding questions from the audience. “Alan Greenspan last addressed the GAC in 2004 as Fed chairman. In that role, his remarks were carefully measured. It will be very interesting to hear Dr. Greenspan’s take on the economy and current events given that he is no longer under those earlier constraints,” said Mark Wolff, CUNA senior vice president, communications. The former Fed chairman joins a GAC lineup that also includes remarks on the economy from Lawrence Kudlow, host of CNBC’s The Kudlow Report, and a political point-counterpoint discussion that pairs former Vermont governor and Democratic National Committee chairman Howard Dean with Joe Scarborough, former Republican congressman and now host of MSNBC’s popular “Morning Joe” program. Also, CUNA has already launched its housing and registration process. Those planning to attend can reserve hotel rooms Monday-Friday, 9 a.m. to 5 p.m. ET, both online and via phone call. New this year, a number of state credit union leagues have obtained housing blocks for use by their affiliated credit unions. CUNA’s 2010 GAC takes place Feb. 21–25 at the Washington Convention Center in Washington, DC.

Matzs first meeting 0.15 NCUSIF assessment CLF changes

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ALEXANDRIA, Va. (9/25/09)--As anticipated, the National Credit Union Administration (NCUA) on Thursday approved a 0.15% of insured shares assessment on federally insured credit unions. The action is intended to help the NCUA return the National Credit Union Share Insurance Fund’s (NCUSIF) equity to 1.3% of June 30, 2009 shares and repay $310 million in funds the Stabilization fund has borrowed from the U.S. Treasury. The assessment would also repay all interest accrued by the NCUSIF as of June 30, 2010. Assessments will be invoiced no later than mid-November of this year, and payments will be due by mid-December.
Click for slide show NCUA Chair Deborah Matz talks with CUNA President/CEO Dan Mica before she calls her first open board meeting to order in her role as the agency’s new leader. (CUNA Photo)
The NCUA did indicate that additional assessments could be imposed in 2010 or 2011. However, whether or not additional assessments would be charged is dependent on future economic conditions. NCUA Chairman Deborah Matz said that while the board cannot fully predict how much any future assessments, if necessary, would cost credit unions, she did say that the board would try to provide credit unions with a budgetary range for any future assessments at its upcoming October board meeting. The NCUA did not alter the NCUSIF’s operating level of 1.3%, but changes to that level could be proposed in the future. Agency staff indicated they are studying this issue and if an increase is recommended, the agency would seek public comments on such a move. Opening her first meeting as NCUA Chairman, Matz spoke on her new role as leader of the credit union system, saying that her first priority as a regulator is to protect the deposits of all credit union members. The NCUA Board approved amendments that will “clarify and reinforce” the NCUA’s guarantee for corporate credit unions issuing unsecured debt under the agency's Temporary Corporate Credit Union Liquidity Guarantee Program (TCCULGP) and “further enhance” corporate credit unions’ liquidity by increasing their access to low-cost borrowed funds. This means that additional borrowing costs for the corporates could be reduced because the “highest possible rating” could now be obtained for debt that is issued under the TCCULGP. Natural person credit unions could benefit from NCUA’s revisions to the investment and earnings retention policies of the Central Liquidity Fund (CLF). These changes will allow the CLF to support its own operations through retained earnings while “greatly enhancing” the CLF’s ability to support natural person credit unions, CLF President J. Owen Cole said. NCUA Chief Financial Officer Mary Ann Woodson also discussed natural person credit unions during the meeting, reporting that there are currently 315 CAMEL 4 and 5 credit unions, an increase from the 242 reported in August of 2008.

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 ...

NCUA closes Comunidades FCU accounts assumed

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ALEXANDRIA, Va. (9/23/09)— Water and Power Community CU Union of Los Angeles assumed the majority of the accounts of Comunidades FCU, also of Los Angeles, which was closed Tuesday by federal regulators. The Water and Power Community Credit Union share assumption, approved by the National Credit Union Administration (NCUA), assures that a majority of Comunidades members continue with uninterrupted credit union service. The NCUA said it closed Comunidades, a low-income commcredit union, because of a declining financial condition. It had $658,122 in assets and served 1,141 members. It is the sixth federally insured credit union liquidation in 2009. Water and Power Community CU, a full service institution, has $482.9 million in assets and serves approximately 52,340 members in and around the state of California, according to the NCUA. Its headquarters is located at 1053 W. Sunset Blvd., Los Angeles, California, and it has 6 branch locations and offers online transaction service as well.

CUNA to Congress Ease crunch through increased MBLs

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WASHINGTON (9/23/09)—As Congress addresses financial regulatory restructuring, it embraces the perfect opportunity to help America’s small businesses increase access to needed capital by allowing credit unions to make more small business loans to their members, Credit Union National Association (CUNA) Chief Economist Bill Hampel will tell a House committee today. Testifying before the House Small Business Committee at its hearing entitled “The Impact of Financial Regulatory Restructuring on Small Businesses and Community Lenders,” Hampel will urge enactment of legislation that will "restore credit unions’ ability to serve the lending needs of their business-owning members." Watch News Now Thursday for hearing coverage. Hampel is among 10 witnesses scheduled over two panels:
* Panel 1: Robert R. Harris, vice chair of the American Institute of Certified Public Accountants; Trevor Loy on behalf of the National Venture Capital Association; David T. Hirschmann for the U.S. Chamber of Commerce; Mike Anderson on behalf of the National Association of Mortgage Brokers; and J. Douglas Robinson on behalf of Property Casualty Insurers Association of America. * Panel 2: CUNA’s Hampel; Austin Roberts on behalf of the American Bankers Association; James D. MacPhee on behalf of Independent Community Bankers of America; Dawn Donovan on behalf of the National Association of Federal Credit Unions; and John Moloney on behalf of Securities Industry and Financial Markets Association.

Flood insurance Qs-and-As okay with tweaks says CUNA

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WASHINGTON (9/23/09)--In a comment letter responding to recent changes to federal regulators’ questions and answers regarding flood insurance policies, the Credit Union National Association (CUNA) said that some proposed changes to loan participations may “represent an inappropriate shifting of risk” from the original lender to entities that have assumed some control of a property. CUNA said that it has “no objections” to Q&As addressing replacement cost valuations “for property that will not be restored to its original purpose.” CUNA also found no issues with Q&As addressing force-placed insurance. However, Q&As addressing loan participation set unreasonable standards by forcing lenders that buy a participation interest in a loan on flood zone-based property to be responsible for ensuring that flood insurance requirements are met. CUNA also opposed shifting risk and responsibility surrounding the validity of flood insurance from loan originators to those who purchase participations in exiting loans. Use the resource link below to read CUNA's complete remarks.

Matz interview Mid-Nov. is target for new corp CU proposal

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WASHINGTON (9/23/09)--The National Credit Union Administration (NCUA) continues to develop new rules for corporate credit unions, and the board is looking to release a proposed version of these new rules by its mid-November board meeting, new NCUA Chairman Deborah Matz told News Now.
Deborah Matz
The corporate credit union situation is one of the dominant issues currently facing credit unions, and in an interview with News Now , Matz said that the NCUA also has its eye on the impact that the overall worldwide financial crisis is having on credit unions. While some past NCUA chairs have thought that the “best way to regulate was to end regulation or to modify them to provide extraordinary amounts of flexibility” to regulated credit unions, Matz believes that regulations serve a purpose, adding that she would look to propose new regulations and amend existing regulations to best ensure the safety and soundness of credit unions. However, regulations should not be excessive, according to Matz, who said that her “intent is not to over-regulate, but to have focused regulation” that protects credit union members. Communication, which Matz says can always be improved, is also a high priority for Matz, who plans to continue to hold town hall meetings with credit union officials on a yearly basis to gather input “directly from credit union staff and officers.” Regarding member business lending, Matz said that while she is an advocate of credit unions lending to member businesses, such practices can be risky and should be “done properly.” Matz opposes a statutory limit on MBL, saying that any such limit that could be imposed on credit unions is a regulatory issue and should be determined by the NCUA, “not Congress.” However, whether or not credit unions should be permitted to raise alternative sources of capital should be determined by Congress, and a resource group led by board member Hyland is developing an alternative capital proposal to submit to Congress. Matz also advised credit unions to be mindful of the concentrations of mortgages or indirect loans that they keep on their books. Matz also hopes to propose a division of consumer protection within the NCUA in 2010, whether or not the Consumer Financial Protection Agency is established in the near future. “I want NCUA to be recognized as the best regulator for consumers and that goes hand in hand with credit unions being recognized as the best financial institution for consumers,” Matz said. The change in board composition resulting from the addition of Matz, who is a Democrat, will not impact the way that the NCUA governs the credit union system, Matz added. A significant item that has been added to the regulatory agenda is the Credit Card Accountability, Responsibility and Disclosure (CARD) Act, and Matz said that while she has instructed NCUA examiners to provide some leeway to credit unions as they adapt to the new rules presented by the CARD Act, Credit unions will still have to comply “unless the law is changed.” The NCUA does not expect all credit unions to comply instantly with the new rules, but “they will have to have a business plan, they will have to allocate resources, and they will have to take steps to comply, and we’ll be examining for that,” Matz said. The NCUA examiners are meant to be an ally of credit unions, and are tasked with helping credit unions avoid “serious problems” in the future.

Fryzel says in-house consumer protection moves forward

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ALEXANDRIA, Va. (9/23/09)--Former National Credit Union Administration (NCUA) Chairman and current Board Member Michael Fryzel on Tuesday said that plans to create a division of consumer protection are moving forward within the agency. Fryzel earlier this year proposed the creation of the consumer protection office, which would consolidate existing consumer protection functions within the NCUA and create a liaison relationship with external groups, including the Obama Administration’s proposed Consumer Financial Protection Agency. In his speech before the National Association of Federal Credit Unions Congressional Caucus, held in Washington, D.C., Fryzel promised “improved regulatory control” from the Board and hinted that discussions of alternative capital for credit unions are ongoing. Fryzel also encouraged credit unions to work together as the financial crisis eases, saying that all members of the credit union system must “find new ways” of strengthening natural person credit unions, “bolstering” the share insurance fund, and rededicate themselves to “selflessly improving the financial lives” of credit union members. “While we cannot rest from working on a new corporate structure or maintaining adequate liquidity in our system, I believe we must position ourselves for growth and ensure that this growth is going to best help our members,” Fryzel added.

Inside Washington (09/22/2009)

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* WASHINGTON (9/23/09)--The hangover from the Troubled Asset Relief Program (TARP) will be felt for a long time, even after the TARP money is repaid, according to a former Federal Reserve Board lawyer. Cornelius Hurley said TARP was a “massive injection of taxpayer dollars.” It will be hard to recover from that, he added. William Isaac, former Federal Deposit Insurance Corp. chair, said TARP turned the banking system into a “public utility,” which will be hard to turn around. Financial observers have criticized TARP, saying that it was a mistake (American Banker Sept. 22). TARP ruined the working relationship between banks and the Treasury, said Robert Clarke, a former comptroller of the currency. The program could have been offered on an optional basis, he added. Alan Blinder, former Fed vice chair, agreed. The program should have been more voluntary, he said. About 37 institutions have repaid more than $70 billion in TARP funds. Of the first nine banks that received money, all but Wells Fargo, Citigroup and Bank of America have repaid their funds. The Treasury expects to receive $50 billion in repayments in the next year ... * WASHINGTON (9/23/09)--The push continues for legislation that would create a consumer protection agency. Many financial industry lobbyists have argued that the agency would limit access to credit, but the Obama administration is moving forward. House Financial Services Committee Chairman Barney Frank (D-Mass.) is working on the Treasury’s draft of the bill to lift concerns about the measure. Rep. Ed Perlmutter (D-Colo.) is concerned about the agency’s enforcement powers, while Rep. Melissa Bean (D-Ill.) is arguing for greater federal pre-emption (CongressDailyAM Sept. 22). Frank is expected to clarify in the draft who is included under the bill’s scope. He has said he would push for more disclosures on products offered in the marketplace. Frank’s goal is to get a pro-consumer bill out of the House so it has room for negotiations with Senate Banking Committee Chair Christopher Dodd (D-Conn.). Dodd has to get Richard Shelby (R-Ala.) to agree on the bill for the Senate to pass it ...

NCUA adds corporate CU liquidity item to agenda

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ALEXANDRIA, Va. (9/23/09)--The National Credit Union Administration (NCUA) on Tuesday added discussion of its Temporary Corporate Credit Union Liquidity Guarantee Program to the agenda for the open portion of its next board meeting, which is scheduled for 10 a.m. on Thursday in Alexandria. Among the items up for consideration during the open portion of the meeting, which will be the first under new NCUA Chairman Deborah Matz, are the National Credit Union Share Insurance Fund premium and stabilization fund assessment. The NCUA has said that the premium charged to credit unions should only be around .15 percent. The NCUA’s Central Liquidity Fund policies will also be discussed during the meeting, which will be the first under new NCUA Chairman Deborah Matz. A report on the status of the NCUA’s insurance fund is also on the agenda. Supervisory activities and personnel matters will be discussed during the closed portion of the meeting.

At CUNAs 75th Hyland stresses diversity leadership and more

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WASHINGTON (9/22/09)--National Credit Union Administration (NCUA) board member Gigi Hyland offered congratulations on the Credit Union National Association’s (CUNA’s) 75th anniversary and, looking ahead, stressed the importance of credit unions demonstrating diversity, financial education, collaboration and leadership.
Click to view larger imageNCUA board member Gigi Hyland offers congratulations to CUNA on its 75 years of accomplishments and says NCUA will have to take a leadership role in comments to the U.S. Treasury Department and the U.S. Congess on the topic of supplemental capital. (CUNA photo)
Hyland was a guest speaker last week at CUNA’s board of directors meeting held in Estes Park, Colo., in conjunction with the association’s 75th anniversary commemorative activities. “You have every right to be proud of this association that has accomplished so much over the years to ensure credit unions can execute their mission,” Hyland told the CUNA board. For the system to capably address future challenges, Hyland emphasized four goals:
* Be diverse. “I believe CU management and board staff should be as diverse as their membership,” she said, emphasizing the importance of ongoing recruitment of new volunteers. * Educate, educate, educate. “If members can’t learn the basics of a checking account, how to buy a house, or how to use a credit card from credit unions, it is unlikely they will be financially empowered from anywhere else,” she said. * Collaborate. “We’re good at it—sometimes,” she said and urged CUs to look for new opportunities to combine resources and collaborate, especially in these difficult economic times. * Lead. “Be a profile in courage,” Hyland said. “Let’s lead this system forward so we can ensure it thrives for the next 75 years and beyond.”
Hyland said in a Q&A with the CUNA board she believes the NCUA will “have to lead and be clear in comments to Treasury and Congress” on the topic of supplemental capital. Her office is continuing an effort to “synthesize regulatory concerns” that can be presented to the NCUA board. “My goal is to have a paper before the NCUA board in December for consideration and a vote,” she said, recognizing “there is an urgency” to this issue.

CUNA urges more changes to CARD Act rule

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WASHINGTON (9/22/09)—Minimum payment disclosure requirements that will be effective Feb. 22, 2010 under the new law known as the Credit CARD Act should apply only to credit cards, the Credit Union National Association (CUNA) urged the Federal Reserve Board, the agency charged with implementing the law. CUNA also emphasized that credit unions continue to experience severe difficulties as they struggle to comply with the 21-day rule, which requires creditors to adopt reasonable policies and procedures to ensure periodic statements for open-end accounts are mailed or delivered to borrowers at least 21 days before the payment is due. Otherwise, if the payment is made after that time frame, the creditor may not treat it as late for any purpose, including charging a late fee, reporting the account as delinquent to credit bureaus, or imposing a penalty interest rate. CUNA is seeking a targeted legislative remedy, and urges the Fed to support its efforts. CUNA has also worked extensively with Fed officials regarding the problems credit unions have confronted as they work to comply with the 21-day rule. In its eighth comment letter to the Fed on CARD Act issues this summer, this one dated Sept. 21, CUNA said that if the minimum payment disclosures are not limited to credit cards, credit unions will incur significant costs to provide information to their members that will be confusing and may lead some borrowers to make incorrect payments. CUNA added that limiting minimum payment disclosures to credit cards is wholly consistent with previous action by the Fed. The agency recognized similar problems, CUNA noted, when it issued rules earlier to implement similar minimum payment disclosure requirements under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. “The Board limited those statutory provisions regarding minimum payment disclosures to credit cards, and we urge the Board to do so again,” CUNA’s Deputy General Counsel Mary Dunn wrote. CUNA noted that the minimum payment disclosure issue is not part of the interim final rule that was open for comment, but that CUNA was compelled to address this issue now because of the problems that could arise if starting minimum payment disclosures have to be reflected for all open-end loan accounts on consolidated statements, which a number of credit unions provide to their members for all their accounts. CUNA also commented on the interim rule’s specific provisions. Use the resource link below to read CUNA’s complete remarks.

GAC housing sign up starts today

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WASHINGTON (9/22/09)--Beginning today, those planning to attend the Credit Union National Association's (CUNA’s) 2010 Governmental Affairs Conference Feb. 21-25 in Washington, D.C. can reserve hotel rooms Monday-Friday, 9 a.m. to 5 p.m. ET, both online and via phone call. New this year, a number of state credit union leagues have obtained housing blocks for use by their affiliated credit unions. Member credit unions from the following states, listed alphabetically, can use the link at the end of this article to download league housing information and contact their league representative:
* Alaska, Alabama, Arizona, California/Nevada, Colorado/Wyoming, Connecticut, Delaware, Florida, Georgia, Hawaii, Iowa, Idaho, Illinois, Kansas, Louisiana, Maine, Massachusetts/New Hampshire/Rhode Island, Minnesota, Missouri, Mississippi, Montana, North Carolina, New Jersey, New Mexico, New York, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, Texas, Utah, Virginia, and West Virginia.
Rooms are not guaranteed and are based on availability. Credit unions in states not listed above should use the second resource link to contact the CUNA Housing Bureau website, or call 1-800-974-3084 Monday-Friday from 9:00 a.m. - 5:00 p.m. ET, or, to reserve a room via fax, dial 1-800-521-6017 or 847-940-2386.

Vibrant 2010 GAC lineup building

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WASHINGTON (9/22/09)—To a back drop of the most aggressive agenda of financial services issues before the U.S. Congress and the administration in a generation, the 2010 Credit Union National Association (CUNA) Governmental Affairs Conference (GAC) will give credit union leaders the opportunity to learn the latest, first hand, from influential policymakers. Participants also have opportunities to speak out on critical issues, and ensure the credit union difference is well understood on Capitol Hill. And beginning today, those planning to attend the Feb.21-25 event in Washington, D.C, can reserve hotel rooms online or by phone. (See related story: GAC housing sign up starts today.) CUNA President/CEO Dan Mica, noting the pivotal events that are leading up to the coming year’s GAC said, “We have both serious challenges and real opportunity in the year ahead. The challenge will be to ensure credit unions are not disadvantaged or overburdened by new regulation and reform. The opportunity will be to advance our goals on member business lending and capital reform at a time when Congress is seeking ways to spur economic growth. We really need to make an impact. The GAC is the place to do it.” The 2010 GAC will feature an array of prominent speakers, including heavy hitters to address the nation’s economy. Larry Kudlow, host of CNBC’s “The Kudlow Report” is a renowned free-market, supply-side economist with a storied career spanning three decades. Scheduled to address the GAC, he will offer a wealth of insight and expertise to help credit union leaders better navigate tomorrow's evolving economic and political terrain. On the political front, the 2010 GAC will offer a lively “point-counterpoint” discussion on national issues of the day from two of the most prominent voices on the left and right: Former Vermont governor and Democratic National Committee Chairman Howard Dean will pair with Joe Scarborough, the former Republican congressman who now hosts MSNBC’s popular “Morning Joe” program. Additionally, key speakers from Congress, the administration and the financial regulatory agencies will be announced in coming weeks as the agenda takes shape for a conference that continues to draw many of the most influential policy makers in Washington to provide the latest information on legislation and regulation that affects credit unions and their ability to serve their members. The GAC’s on-point education sessions also will ensure credit unions are fully briefed on credit union legislative priorities, the impact of coming regulations, and grassroots political and campaign involvement strategies. As always, the conference will devote a day when credit union leaders deliver their message to Capitol Hill and meet personally with their state congressional delegations. “It’s important for meetings with members of Congress to take place year-round through such efforts as our Hike the Hill program. But the GAC is the one time during the year when thousands of credit union people are here together to deliver our message, tell our story and demonstrate our support to our friends on Capitol Hill,” says Mica. “As a former member of Congress, I can tell you for a fact that this has a great impact. But it all starts with you, and your own commitment to be involved and participate.” The 2010 GAC will again feature a special kickoff concert on Sunday evening, Feb. 21, presented by the CUNA Councils and preceded by a dessert reception in the Convention Center’s Grand Exhibit Hall. The band as well as more of the GAC’s featured general session speakers will be announced in the weeks to come. Watch CUNA’s News Now , on the CUNA website at www.cuna.org, and biweekly Credit Union NewsWatch newsletter for more details.

Inside Washington (09/21/2009)

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* WASHINGTON (9/22/09)--Bank of America could face questions from the Committee on Oversight and Government Reform regarding some legal conversations that took place when BofA merged with Merrill Lynch. Rep. Edolphus Towns (D-N.Y.) wrote a letter to the bank Friday, saying that it can’t use attorney-client privileges to keep the conversations private from Congress (The New York Times Sept. 21). Towns gave BofA until noon Monday to provide him with the information, but the bank responded and asked to move the deadline until after today. Towns’ spokesperson said he would stick to the deadline. If BofA reveals the information, it will affect other investigations of the BofA and Merrill Lynch deal by the Securities and Exchange Commission (SEC) and Andrew Cuomo, New York attorney general ... * WASHINGTON (9/22/09)--Maine credit unions recently met with their federal delegates in Washington, D.C., during the Maine Credit Union League’s annual Hike the Hill trip Sept. 15-16. Sen. Olympia Snowe (R-Maine) told the group that “credit unions are great for Maine and their members.” Maine Sen. Susan Collins (R) and Maine Reps. Mike Michaud (D) and Chellie Pingree (D) made similar statements. Michaud said he appreciated what credit unions do and applauded them for providing credit when many banks are not. “I am a big believer in helping increase access to credit, and it seems to me that credit unions would be a great way to help small businesses because they have plenty of money to lend, which would be wonderful for the marketplace,” Pingree said. Pictured are: Michaud, left, who shook hands with Normand R. Dubreuil, president/CEO of Maine State CU, prior to meeting with credit union representatives at the Hill visit. Also present were: Oxford FCU’s Matt Kaubris, president/CEO; Pete Theriault, associate board member; Richard Bilodeau, board member at Rainbow FCU and Dan Daggett, vice president at Down East CU. (Photo provided by the Maine Credit Union League) ... * WASHINGTON (9/22/09)--The Federal Reserve Board has said no to a request by Treasury Secretary Timothy Geithner for a public review of the Fed’s structure and governance (Bloomberg.com Sept. 21). Fed officials saw a threat to the central bank’s independence from such a review. Lawmakers also have requested reviews of the Fed’s structure after some said Fed Chair Ben Bernanke overstepped bounds when he bailed out American International Group Inc. and Bear Stearns. The Fed has said it is conducting reviews of its structure. Fed. Gov. Elizabeth Duke said she is working on an internal study of roles of each director on the boards at regional Fed banks ... * WASHINGTON (9/22/09)--Sheila Bair, Federal Deposit Insurance Corp. (FDIC) chair, said that the agency is considering some other options instead of charging banks another special assessment fee. Lawmakers had urged the agency not to charge more fees. Bair said the agency will release a proposal with ways that the Deposit Insurance Fund can be replenished (American Banker Sept. 21). Some of the options the agency is considering include issuing debt to the financial industry, requiring institutions to prepay next year’s assessment, or tapping into a line of credit at the Treasury Department. Many media outlets have reported that the Deposit Insurance Fund is nearly broke ... * WASHINGTON (9/22/09)--Federal Reserve Board discount window borrowing is on the decline, following improvements in financial conditions, the Fed said Friday (American Banker Sept. 21). During four weeks ended Aug. 26, lending was split 50-50 at the lending window. The top 10 borrowers took $130 billion and the 355 institutions that borrowed less took another $130. The central bank held $540 billion in collateral ...

This week in Congress Could reg reform picture become clearer

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WASHINGTON (9/22/09)--Some elements of the House plan for financial regulatory reform could become clearer following a series of House Financial Services hearings scheduled for this week. The House will reopen debate on Wednesday, with Credit Union National Association Chief Economist Bill Hampel testifying on the impact of regulatory reform on credit unions before the House Small Business Committee on Wednesday afternoon. Treasury Secretary Timothy Geithner will address Chairman Rep. Barney Frank's (D-Mass.) House Financial Services Committee earlier in the day, presenting his views on the Administration's proposals for financial regulatory reform. The Committee will also hear from Federal regulators during a separate hearing later that afternoon. Further House hearings on regulatory restructuring are expected during October. However, the Senate has not announced a schedule for discussion of regulatory reform proposals. One item that could be on the Senate agenda this week is overdraft protection, as Senate Banking Committee Chairman Chris Dodd (D-Conn.) may introduce a bill that would require financial institutions to seek permission before they can enroll their accountholders in an overdraft protection program this week. A similar bill, introduced by Rep. Carolyn Maloney (D-N.Y.), is in the House, and Barney Frank recently told The Washington Post that the new Consumer Financial Protection Agency, if approved, could itself create new overdraft rules.

CUNA CEO search committee holds initial meeting

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WASHINGTON (9/21/09)--The first meeting of the Credit Union National Association (CUNA) committee to find a successor for the association's president and CEO was held in conjunction with the 75th anniversary celebration of the organization last week in Estes Park, Colo. The committee, appointed by CUNA Chairman Kris Mecham, is charged with finding a successor to Dan Mica, who announced he plans to step down as CEO in January 2011 after 13 years of service in the position. According to committee Chairman Harriet May, who is president/CEO of GECU in El Paso, Texas, and CUNA board vice chairman, the initial meeting focused on the selection of an executive search firm. "Generally, our aim is to select a search firm in November and begin the formal search in December," May said. The search committee consists of a chairman and four representatives from each of the four classes of CUNA directors: Class A (CUs with fewer than 20,000 members); Class B (20,000 to 73,999); Class C (74,000 and above) and Class D (state league presidents). Additionally there is one at-large member. Also serving on the committee are:
* Patricia Wesenberg, CEO, Central City CU, Stevens Point, WI (Class A) * Eugene Foley, CEO, Harvard University Employees CU, Cambridge, MA (Class B) * Tom Dorety, CEO, Suncoast Schools FCU, Tampa, FL (Class C) * Brett Thompson, CEO, Wisconsin Credit Union League (Class D) * Rudy Hanley, CEO, Schools First FCU, Santa Ana, CA (At-Large)
CUNA Chair Mecham serves ex officio on the committee, as does Dan Mica, who serves as the committee's liaison to CUNA management.

Dodd may introduce overdraft fee bill this week

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WASHINGTON (9/21/09)--Senate Banking Committee Chairman Chris Dodd as early as this week could introduce a bill that would require financial institutions to seek permission before they can enroll their accountholders in an overdraft protection program. Sen. Charles Schumer (D-N.Y.) himself recently came out in favor of increased consumer protections related to overdraft protection plans, saying that he would support legislation that targets abusive overdraft practices. Schumer is expected to co-sponsor Dodd’s legislation once it is introduced. Speaking at Albany, New York’s College of Saint Rose earlier this month, Schumer said that any pending overdraft legislation should require consumers to be given a chance to opt in or out of overdraft protection programs and increase the disclosure of fees and APR charges on overdraft loans. New York Democratic Rep. Carolyn Maloney has introduced House legislation, H.R. 1456, the Consumer Overdraft Protection Fair Practices Act, that would treat many of the same issues listed by Schumer. CUNA representatives have spoken with Senate Banking Committee members and staffers in an effort to “educate them about how and why credit unions offer this service to their members, the features of the various programs and our concerns regarding the legislation that has been introduced in the House,” CUNA Vice President of Legislative Affairs Ryan Donovan said.

NCUA to tackle premiums stabilization CLF policies

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ALEXANDRIA, Va. (9/21/09)—The National Credit Union Administration (NCUA) will begin its first board meeting with new Chairman Deborah Matz by discussing the National Credit Union Share Insurance Fund Premium (NCUSIF) and Stabilization Fund Assessment, which the NCUA has indicated would be in the range of .15 per cent of insured shares. The meeting, which will take place at 10 a.m. on September 24, will also feature board discussion on the NCUA’s Central Liquidity Fund (CLF)policies. The NCUA earlier this year transferred $1.8 billion in CLF funds that were held by U.S. Central FCU to the U.S. Treasury. Credit Union National Association Senior Vice President and Deputy General Counsel Mary Dunn said that the transfer “is not based on any issues with U.S. Central but is being taken in response to a concern raised by the U.S. Treasury that the deposits would be more appropriately held by Treasury.” According to Dunn, the NCUA should likely review longer term issues regarding CLF funding in the coming months. The board will also be updated on the performance of the insurance fund and on the number of credit unions that are currently financially distressed.

House committee announces additional reg reform hearings

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WASHINGTON (9/21/09)--The House Financial Services Committee last week announced a series of hearings on regulatory reform, with the first of many hearings being held on the morning of Wednesday, September 23. The first hearing, during which the full Committee will address the Obama Administration’s proposals for financial regulatory reform, will take place in the Rayburn House Office Building. The Committee will also discuss financial regulator’s perspectives on regulatory reform early that afternoon. The Committee also announced a hearing to address oversight and audit issues at the Federal Reserve, scheduled for this Friday morning. The Committee will again discuss the Consumer Financial Protection Agency on Wednesday, September 30, with the Capital Markets Subcommittee holding a hearing on credit ratings agencies later in the day. Witness lists and prepared statements were not available at press time.

Inside Washington (09/18/2009)

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* WASHINGTON (9/21/09)--Democratic members of the House Agriculture Committee Thursday rejected claims that derivative trades on clearing platforms or exchanges could be costly for counterparties (American Banker Sept. 18). Committee Chairman Collin Peterson (D-Minn.) said many large derivative traders and dealers would urge the committee to loosen proposed regulations to regulate derivatives so they would not lose profits. Under the bill, a central clearing party would set margin requirements. While there is a cost to central clearing, there also is a benefit, said Garry O’Connor, chief product officer for the International Derivatives Clearing Group. Companies that engage in derivatives trading could find a way to centrally clear their trades, even if they don’t have the cash for a clearing platform’s margin requirements, he said. The committee is scheduled to hold a second meeting Tuesday ... * WASHINGTON (9/21/09)--Treasury Secretary Timothy Geithner conducted a meeting Thursday regarding government actions against mortgage fraud (American Banker Sept. 18). At the meeting were Eric Holder, attorney general; Shaun Donovan, Housing and Urban Development secretary; Jon Leibowitz, Federal Trade Commission chairman; and Jim Freis, Financial Crimes Enforcement Network director. The meeting followed an April announcement about a multi-agency effort to stop fraud. The Obama administration is acting preemptively to stop fraud, Geithner said. Efforts include alerting financial institutions, education about fraud and increasing enforcement ... * WASHINGTON (9/21/09)--Panel members of the Financial Crisis Inquiry Commission discussed whether Congress should wait for the panel’s December 2010 report before overhauling the financial regulatory system (American Banker Sept. 18). Brooksley Born, former chairman of the Commodity Futures Trading Commission, and Bob Graham, former senator from Florida, said Congress should not wait. The commission should not contribute to procrastination, Graham said. Peter Wallison, fellow at the American Enterprise Institute, said Americans and Congress need to know the extent of the financial crisis before action is taken ... * WASHINGTON (9/21/09)--The Federal Reserve is working on a set of rules that would be one of the most sweeping to regulate pay at the nation’s banks. The rules would affect top executives, loan officers, traders and other staff. The Fed plans to analyze the compensation in terms of structure, bonuses and excessive risk-taking. Executive pay has been viewed by some financial experts as a contributor to the financial crisis. The rules won’t be ready for several weeks, but they are scheduled to be discussed at the Group of 20 meeting in Pittsburgh this week. The G-20 was created in 1999 to bring together systemically important developing and industrialized economies to discuss global economic issues ...

NCUA follow-up says substantial corporate impairment likely

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ALEXANDRIA, Va. (9/21/09)—In a follow-up letter to the release of U.S. Central’s 2008 audited financial statements, the National Credit Union Administration (NCUA) said it is likely all invested corporates will record substantial impairments in their reports due at the end of November. The letter from the NCUA’s Office of Corporate said each U.S. Central member corporate is expected to review the audited financial statement to determine if its U.S. Central capital assets have experienced other-than-temporary impairments that would require recognition and measurement on their financial statement. To facilitate that process, the OCCU set forth these expectations for the corporate members:
* Consult with their licensed independent accountants regarding the recognition of any impairment from U.S. Central capital accounts, and regarding the need to restate any earlier financial reports; * If losses associated with the depletion at U.S. Central create a retained earnings deficit at any quarterly or annual reporting period, deplete contributed capital as needed to replenish retained earnings to zero (in accordance with Part 704.2 of the NCUA Rules and Regulations); and, * If needed, submit revised 5310 Call Reports.
The letter noted that the above actions are to be accomplished with the issuance of a corporate credit union’s Oct. 31 regulatory reports and submitted no later than Nov. 30, and that the OCCU will monitor corporates’ efforts to comply.

Frank suggests expedited date for some CARD Act provisions

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WASHINGTON (9/18/09)--House Financial Services Chairman Barney Frank is reportedly considering introducing legislation that could move the implementation date for the remaining portions of the Credit Card Accountability, Responsibility and Disclosure (CARD) Act to December 1, Congress Daily reported on Thursday. Frank staffer Steven Adamske told Congress Daily that Frank’s staff were not pleased by what “banks and credit card companies are doing in advance of the effective date." Portions of the CARD Act became effective in late August, and the rest of the bill is scheduled to come into effect in February of 2010. This portion of the recently-passed legislation will restrict lenders ability to increase interest rates and to charge fees or penalties to cardholders. Credit Union National Association President/CEO Dan Mica has spoken out on the bill, saying that some portions of the legislation could "have the unintended consequence of raising compliance costs and making credit more expensive and less available to consumers."

NCUA releases Sept. 24 meeting agenda

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ALEXANDRIA, Va. (9/18/09)--The National Credit Union Administration (NCUA) Thursday released the following agenda for its Sept. 24 meeting:
1. National Credit Union Share Insurance Fund Premium and Stabilization Fund Assessment. 2. Central Liquidity Fund Policies. 3. Insurance Fund Report.
The meeting will be held at 10 a.m. at NCUA headquarters here and will be the first with Deborah Matz presiding as chairman. A closed meeting is scheduled to follow.

Inside Washington (09/17/2009)

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* WASHINGTON (9/18/09)--The Federal Deposit Insurance Corp. (FDIC) has reached an agreement with Residential Credit Solutions (RCS), the winning bidder in a pilot sale of receivership assets that the FDIC is conducting to test the funding mechanism for the Legacy Loans Program. RCS will pay $64 million in cash for a 50% equity stake in a limited liability company (LLC), and the LLC will issue a note of $727 million to the FDIC as receiver. The value of the bid is 70.63% of the outstanding principal balance of the portfolio. The closing is expected to take place later this month. RCS will manage the portfolio and service the loans under Home Affordable Modification Program guidelines ... * WASHINGTON (9/18/09)--Financial observers say the findings of the Financial Crisis Inquiry Commission could be more relevant because financial regulatory reform appears to be put on hold (American Banker Sept. 17). The commission was scheduled to hold its first meeting Thursday. Robert Litan, senior fellow at the Brookings Institution, said the panel could have a stronger impact as financial reform slows down. The commission was mandated by Congress in a mortgage fraud law in May. The panel is expected to study the roots of the nation’s financial crisis. Phil Angelides, former California state treasurer, is commission chairman ... * WASHINGTON (9/18/09)--Senior staff from the Credit Union Association of New York joined credit union leaders to meet with members of New York’s congressional delegation, including Sen. Charles Schumer (D-N.Y.) The credit union representatives urged delegates to lift or eliminate the cap on member business lending, and oppose interchange fee legislation and expansion of the Community Reinvestment Act to credit unions. The group hand-delivered letters from New York small-business owners to Schumer, urging him to continue to take action or lift the lending cap. From left are William J. Mellin, president/CEO of the Credit Union Association of New York, and Schumer. (Photo provided by the Credit Union Association of New York) ... * WASHINGTON (9/18/09)--Banks and insurers are battling for health savings accounts (HSAs) to remain an option for healthcare reform. Money in HSAs is used toward healthcare expenses and future medical expenses. If Congress passes a healthcare reform bill, health plans would have to fulfill certain standards to qualify as “adequate coverage” (The Wall Street Journal Sept. 17). Not all HSAs would make the cut, according to some financial industry experts. Rodney Hood, former National Credit Union Administration vice chair, said credit unions that provide HSAs offer an “exceptional advantage.” Credit unions offering HSAs help businesses with HSA plans, education and employee satisfaction, and provide employees and individuals increased membership to offer more products and services (News Now March 23). As more credit unions begin to offer HSAs, they will be better positioned to be a full-service provider for businesses, Hood added ...

EPC to IWash. PostI Consumers pay for interchange changes

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WASHINGTON (9/18/09)--The Electronic Payment Coalition (EPC) on Thursday responded to merchant claims that the current interchange fee regime should be changed by reiterating its claim that customers would ultimately pay for any interchange alterations that would benefit retailers, The Washington Post reported. In a story published Sept. 17, EPC representative Trish Wexler said that while merchants “appreciate” the benefit and convenience of receiving payments via electronic means, some of the “more vocal” retailers do not want to pay for that benefit. “Who's going to pay? The customers,” Wexler added. The Merchants Payments Coalition today released a study which found that retailers in Europe, Canada and New Zealand generally pay lower interchange fees. A Credit Union National Association (CUNA) epresentative also has detailed her thoughts on interchange fees to congressional staffers, telling them that interchange fee income is vital if her credit union is to stay competitive and relevant. CUNA itself has also spoken out against interchange fee changes, saying that changes to the current interchange fee structure would grant merchants an antitrust advantage in negotiations with card issuers, networks, and other payment system participants. While legislation that would allow merchants to negotiate interchange fees has been introduced on both the House and Senate sides of Congress, this legislation is not expected to be brought up during the fall session.

House votes to eliminate Ed. Loan program

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WASHINGTON (9/18/09)—The House voted 253-171 Thursday in favor of H.R. 3221, the Student Aid and Fiscal Responsibility Act of 2009, which would terminate the Federal Family Education Loan Program (FFELP). The Obama administration has estimated that eliminating the subsidies provided under FFELP could save the government more than $4 billion, annually. A portion of that $4 billion savings could then be used for direct loans to low-income students through need-based Pell Grants, the administration has said. The Credit Union National Association (CUNA)opposes elimination of the student loan program and has expressed concerns to lawmakers that an elimination of FFELP private student funding would remove a "valuable option" for students. More than 1,000 credit unions provide student loans, according to CUNA, with a particular concentration among credit unions that base their membership around a university. Credit unions that provide direct student loans also provide individualized service and support to loan holders, but these services would be jeopardized if the FFELP is discontinued, CUNA has warned. The next stop for this bill is the Senate. A comparable bill has not yet been introduced there.

CRA hearing largely uneventful for CUs

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WASHINGTON (9/17/09)--Rep. Eddie Bernice Johnson (D-Texas) on Wednesday indicated that she would support expanding the terms of H.R.1479, the Community Reinvestment Act (CRA) Modernization Act of 2009,to cover what she called “mainstream” credit unions. House Financial Services Committee Chairman Rep. Barney Frank (D-Mass.), who chaired much of the discussion during a Wednesday hearing before the committee, indicated that CRA legislation could be taken up later this year or early in 2010.
Click to view larger image House Financial Services Committee Chairman Barney Frank (D-Mass.), shown right, who says he wants to see a bill to enhance the Community Reinvestment Act this year or next, and committee member Rep. Jeb Hensarling (R-Texas), who proposes the act be "repealed not expanded" talk just prior to their panel's hearing Wednesday on CRA issues. (CUNA photo)
Rep. Luis Gutierrez (D-Ill.) spoke in support of keeping the CRA issue separate from the pending debate on the proposed Consumer Financial Protection Agency, stating that he would hold a full hearing on H.R. 1479 later in the year. While Rep. André Carson (D-Ind.) called for CRA requirements to be applied to all financial institutions, Rep. Jeb Hensarling (R-Tex.) said that CRA should be repealed. Rep. Michelle Bachmann (R-Minn.) also opposed any expansion of CRA, calling it irresponsible. National Community Reinvestment Coalition President/CEO John Taylor, Massachusetts Commissioner of Banks Steven Antonakes, and National Urban League President/CEO Marc Morial testified during the hearing, along with academics and representatives from various Washington-based interest groups. In the event that credit unions are brought under the scope of the CRA, Antonakes said that the costs born by credit unions should only be commensurate to their market share. Legislators should also add provisions that require a full review of all affiliate lending and that increase asset standards for large institutions to help focus on market share rather than asset size. Banks that originate unsustainable loans or that have partnerships which can harm the unbanked should be downgraded, he added. Senior Vice President of Legislative Affairs John Magill said that the Credit Union National Association (CUNA) will continue to watch CRA discussions on the Hill very closely. CUNA strongly opposes expansion of the act to cover credit unions. Of yesterday's hearing Magill observed that the focus clearly was not on credit unions. Rather, other issues, including federal funding for ACORN, took up the majority of discussion time.

Inside Washington (09/16/2009)

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* WASHINGTON (9/17/09)--Sen. Carl Levin (D-Mich.), in a letter to Federal Deposit Insurance Corp. (FDIC) Chairman Sheila Bair, urged the agency not to impose another special assessment fee on the banking industry. The FDIC should use its credit line--recently expanded by the Treasury Department--instead of charging more fees to community banks. Community banks’ capital would be depleted if they had to pay more fees. They also didn’t cause the economic crisis, Levin said (American Banker Sept. 16). In May, the FDIC said it would charge another special premium in addition to its normal assessments because its reserves are declining. Bair told CNBC Tuesday that that she could not say if the agency would ask Treasury for assistance ... * WASHINGTON (9/17/09)--Regulators are expected to release data that indicate a record number of syndicated loans have experienced a drop in credit quality. Classified loans--which are viewed as substandard--have tripled over the past year to 15.5% of the total syndicated loan portfolio (American Banker Sept. 16). Almost a quarter--22.3%--of the industry’s syndicated business loans is termed “criticized,” compared with 13.4% last year. In 1991, at the top of the savings and loan crisis, the proportion of criticized loans hit 16%. Kathy Murphy, chief accountant at the Office of the Comptroller of the Currency, said the picture is not expected to brighten, and there are still problems that need to be worked through ... * WASHINGTON (9/17/09)--The Federal Reserve announced Tuesday that it will implement a consumer compliance supervision program in nonbank subsidiaries of bank holding companies and foreign banking organizations with activities covered by the consumer protection laws and regulations it has the authority to enforce. The policy, announced today and effective immediately, also provides for the investigation of consumer complaints against nonbank entities. It builds upon the groundwork of a pilot program launched in 2007 by the Federal Trade Commission, Office of Thrift Supervision and two associations of state regulators. It is designed to improve the Federal Reserve's understanding of the consumer compliance risk that certain products and services may pose to the holding companies and consumers, and to guide supervisory activity for these entities, the Fed said ...

In letter CUNA opposes elimination of FFELP

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WASHINGTON (9/17/09)--The Credit Union National Association (CUNA) in a letter sent Wednesday to House Speaker Nancy Pelosi and other members of Congress expressed concern at the potential elimination of the Federal Family Education Loan Program (FFELP), stating that the elimination of this private student funding would remove a “valuable option” for students. H.R. 3221, the Student Aid and Fiscal Responsibility Act of 2009, which would terminate FFELP, is on the House floor this week. CUNA has lobbied against the bill. CUNA President/CEO Dan Mica urged legislators to “retain the FFELP program,” adding that the program is an “important service” for credit unions that provide student loans. Over 1,000 credit unions provide student loans, according to CUNA, with a particular concentration among credit unions that base their membership around a university. Credit unions that provide direct student loans also provide individualized service and support to loan holders, but these services would be jeopardized if the FFELP is discontinued. The Obama administration has estimated that eliminating the subsidies provided under FFELP could save over $4 billion, annually. A portion of that $4 billion surplus could then be loaned directly to low-income students through need-based Pell Grants, the administration has claimed.

Corporates rulemaking topics at 1st NCUA town hall

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ALEXANDRIA, Va. (9/17/09)--Corporate credit unions, the National Credit Union Administration’s (NCUA) pending rulemaking, and compliance with the Credit Card Accountability, Responsibility and Disclosure (CARD) Act were among the topics discussed during the first of three NCUA town hall meetings held this week near St. Louis, Missouri. NCUA Chairman Deborah Matz commented that while “the credit union industry, and NCUA, have been through a hard year,” she is “hopeful” that the town hall meetings will allow credit union insiders to “look forward.” “Together, we will get through the next year by working hard, talking honestly, and applying our best thinking to the critical issues facing the credit union industry,” she added. According to an NCUA release, the meeting, which was attended by 120 credit union and trade association representatives, featured discussions of corporate liquidity, the NCUA’s Temporary Corporate Share and Loan programs, future corporate capital requirements, corporate competition and governance, and the current and future role of the payment system. Matz, NCUA Board Member Michael Fryzel, and other members of the NCUA’s staff also led discussions detailing potential changes to the corporate credit union regime. NCUA General Counsel Bob Fenner addressed some of the specific actions that are being discussed by the NCUA, including capital requirements, concentration limits, maturity mismatches, corporate management accountability and transparency, and the future structure of the corporate system, the NCUA release said. The town hall meeting also featured discussion of the CARD Act and the possible creation of the Consumer Financial Protection Agency. The NCUA has planned additional town hall meetings in Oxon Hill, Md. And San Diego, Calif.

Top leaders in Congress congratulate CUNA

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WASHINGTON (9/17/09)—Senate Majority Leader Harry Reid (D-Nev.) and Speaker of the House Nancy Pelosi each sent congratulatory letters to the Credit Union National Association (CUNA) to mark the organization’s 75th year of operations. Delivered Wednesday at CUNA’s 75th anniversary meeting in Estes Park, Colo., the messages noted CUNA’s “major rile in the financial services industry,” as well as the group’s “dedicated service” and “commitment” to credit unions and the members they serve. Reid—extending his wishes for another 75 years of successful service—said he is not surprised by the “immense growth of CUNA” over the decades. “The establishment of this association in the wake of the Great Depression and the passage of the Federal Credit Union Act (FCUA) signifies the determination of (CUNA) members to provide quality financial services” to members, Reid wrote. The FCUS was signed in 1934 by President Franklin D. Roosevelt. Pelosi said she is proud of CUNA’s commitment to its member credit unions and the communities they serve and noted that 96 million people across the nation rely on credit unions “to save their hard-earned dollars, plan their financial futures, realize the dream of homeownership, and even send remittance to other countries.”

No can be strong tool for a leader Mica

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WASHINGTON (9/17/09)—Leaders—whether on K Street or in Congress—earn constituents’ respect by making the tough decisions, even when that decision demands a ‘no’ answer to the constituent’s request, advised Dan Mica, president/CEO of the Credit Union National Association (CUNA). Mica, with decades of experience both as a leader on Capitol Hill and as a lobbyist, said strong leaders will ultimately earn the respect of constituents and gain credibility if they ultimately push back to clear the way to do what is right. Mica made his observations in his most recent “K Street Insider” column penned for The Hill. Mica said he has successfully practiced his own advice both as a federal lawmakers and association executive. For instance, he noted that early on as head of CUNA the credit union world faced a tremendous battle to over turn a U.S. Supreme Court ruling that limited consumer’s ability to join credit unions. There was heady pressure to move quickly but Mica said no to acting rashly and instead pursued a strategy that took more time and ultimately gained the credit union movement what it sought. Constituents may object and “even yell and send you some sharp e-mails, “but, Mica said, by and large they will support the leader because he/she is doing what is best. As its name implies, The Hill's “K Street Insider” column focuses on the lobbying business rather than credit union issues. For the past two years, Mica has been one of a select number of former policymakers who became lobbyists that write the widely read column in rotation. Use the resource link to access the column.

No CRA for CUs CUNA urges

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WASHINGTON (9/16/09)--The Credit Union National Association (CUNA) has voiced its opposition to H.R. 1479, the Community Reinvestment Act (CRA) Modernization Act of 2009, in a letter sent to House Financial Services Committee Chairman Rep. Barney Frank (D-Mass.) ahead of Wednesday’s House hearing. Rep. Eddie Bernice Johnson (D-Texas), National Community Reinvestment Coalition President/CEO John Taylor, Massachusetts Commissioner of Banks Steven Antonakes, and National Urban League President/CEO Marc Morial will testify during the hearing, along with academics and representatives from various Washington-based interest groups. H.R. 1479, as currently written, would broaden the reach of CRA requirements to more entities, including credit unions. Under this legislation, credit unions would need regulatory approval to place new branches and would be forced to hold 30-day public comment periods before relocation, mergers, or field of membership expansions could be completed. While CUNA and credit unions in general support providing greater financial services to the underserved, CUNA opposes bringing credit unions under the purview of the broadened CRA legislation, saying that the “significant regulatory burdens” imposed on credit unions by this bill would create “unnecessary and possibly harmful” consequences for credit unions. According to CUNA, credit unions, which have not engaged in redlining nor reduced the amount of credit available to their members, “have done nothing to deserve the regulatory framework that has been rightly imposed on banks for their misdeeds.” The letter also takes issue with a recently released National Community Reinvestment Coalition (NCRC) paper that addresses whether or not credit unions are fulfilling their mission of serving their members. CUNA recently addressed the NCRC report, which unfavorably compares credit union lending practices to those of banks, dismissing it as a flawed report that should be dismissed by policymakers. This NCRC paper is expected to be discussed during the hearing, which is scheduled to take place at 10 a.m. today. The letter, which has also been delivered to members of the committee, includes a detailed response laying out what CUNA sees as the “fundamental flaws” in the NCRC report. To see the CUNA letter in full, and NewsNow’s coverage of the NCRC’s paper, use the resource links.

Inside Washington (09/15/2009)

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* WASHINGTON (9/16/09)--The Financial Crisis Inquiry Commission, which was established by Congress to investigate the causes of the financial crisis, scheduled its first public meeting for Thursday (Dow Jones Sept. 15). Thomas Greene, a lawyer in the California Attorney General’s office, will serve as executive director. Greene has been involved with coordinating multi-state, anti-trust remedies against Microsoft Corp. and civil actions against Enron. The 10-member commission will issue a final report to Congress by December 2010 ... * WASHINGTON (9/16/09)--The future of Fannie Mae and Freddie Mac is still unknown as the first anniversary of the day the federal government took the enterprises into conservatorship passed. Mike Williams, Fannie’s CEO, said in a speech marking the first anniversary last week of the conservatorship that his focus is on the housing crisis. At a Thursday press briefing, a Treasury Department official said Fannie and Freddie are “more of next year’s business than this year’s” (American Banker Sept. 15). The Obama administration has stated it would propose reforms to the enterprises this year ... * WASHINGTON (9/16/09)--President Barack Obama says job losses are bottoming out and the economy is growing again. However, in an interview with Bloomberg News, he warned against stopping government aid too early because it could stifle recovery plans (Bloomberg.com Sept. 15). Since December 2007, the U.S. has lost 6.9 million jobs. In other news, Obama said he was confident that plans to overhaul financial regulation would pass Congress this year, and said he would overcome bankers’ efforts to kill a proposal for a consumer protection agency. Obama also has opposed limiting pay to financial industry executives, despite criticism over the bonuses and high salaries Wall Street is paying. He questioned why the executives’ pay would be limited but not that of Silicon Valley entrepreneurs or NFL football players ...

Potential fair value changes concern Fed Reserve gov.

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WASHINGTON (9/16/09)--Federal Reserve Governor Elizabeth Duke this week expressed concern regarding whether or not financial institutions would be able to adequately comply with a potential new fair value rule, stating that the Federal Reserve has “very little actual experience in fair-valuing liabilities." Speaking on her own behalf at the American Institute of Certified Public Accountant’s conference on Banks and Savings Institutions, Duke said that it is “frustrating” to assess “the viability of individual financial institutions and the financial system as a whole” when the worth of an asset “is based on the nature of its acquisition rather than the way in which it is managed or the way in which its economic value is likely to be realized.” According to Duke, fair value has “relevance” in situations where business models are “predicated on the trading of financial instruments.” Increased use of fair value accounting “could create disincentives for lending to smaller businesses whose credit characteristics are not easily evaluated by the marketplace,” Duke added. Financial Accounting Standards Board Chairman Robert Herz recently disclosed that the agency plans to issue a broad-based exposure draft on fair value accounting around the end of this year. While Herz has not discussed the exposure draft in great detail, he said that the exposure draft would address fair value accounting rules for all financial instruments, including allowances related to loan loss accounts, adding that the board would provide the industry with the time needed to comment on the proposal once it has been issued. Any changes, if approved, would not go into effect until 2011, Herz added. The Credit Union National Association will discuss fair value and other matters of concern to credit unions during a Sept. 17 conference call with Chairman Herz.

Government lets UBIT filing date pass

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WASHINGTON (9/16/09)—The government let its 60 days come and go and failed to file an appeal to a federal court judge’s July decision that backed a favorable verdict for credit unions in an unrelated business income tax (UBIT) case. The U.S. Department of Justice had until Sept. 12 to appeal the decision that backed Community First Credit Union in a suit against the Internal Revenue Service seeking refund for UBIT paid on credit life insurance, credit disability insurance and Guaranteed Asset Protection (GAP). The government’s decision to back off the lawsuit could have considerable impact on credit union UBIT issues. According to attorney Michael M. Conway of Foley & Lardner LLP, in Chicago, who represented Community First, “Now accountants and tax advisors to credit unions have this court decision as ‘substantial authority’ that UBIT is not due on income from credit life insurance, credit disability insurance and Guaranteed Asset Protection.” Back on May 14, a jury found in favor of the credit union's refund claim of $54,604, the full amount the credit union sought, plus costs. The Justice Department then asked a trial judge to overturn the jury's verdict, which resulted in a July 14 ruling by U.S. District Judge William Griesbach. Griesbach said that the government's challenge, which asked the court to "re-weigh the evidence and find that the jury should have preferred its version of the evidence" to the credit union's, was "outside the bounds" of what is allowed under Federal Rule 50. Under Federal Rule 50, courts may "grant judgment as a matter of law when a party has been fully heard on an issue and there is no legally sufficient evidentiary basis for a reasonable jury to find for that party on that issue." Eric Richard, general counsel of the Credit Union National Association, said Tuesday, “This event—or non event—is important to credit unions and could significant to the future of IRS UBIT opinions.” “After putting enormous Government resources into defending against this ‘test case’ and having lost at the trial level, the Government chose not to seek to overturn this decision on appeal,” said CUNA General Counsel and Executive Vice President Eric Richard. “Clearly, the government was unwilling to expose its reasoning to review by the Court of Appeals even though it had an absolute right to obtain this appellate review. Now accountants and tax advisors to credit unions have this court decision as substantial authority that UBIT is not due on credit life insurance, credit disability insurance and GAP.” In another UBIT case, Bellco Credit Union V. U.S. , Judge Christine Arguello asked both parties earlier this month reconsider their requests for a jury trial, which is currently set for Dec. 7. Bellco, of Grand Junction, Colo., has challenged the IRS assessment of UBIT on income from three of its products, and is seeking a refund of $199,293. The amount reflects what was paid on products such as accidental death and disability insurance (AD&D), credit life and disability insurance, and financial services such as investments in 2000, 2001 and 2003, plus statutory interest.

Inside Washington (09/14/2009)

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* WASHINGTON (9/15/09)--The Federal Deposit Insurance Corp. (FDIC) is encouraging its loss-share partner institutions to consider temporarily reducing mortgage payments for its borrowers who are underemployed or unemployed. Unemployment or underemployment is the primary cause for default on a home mortgage, according to FDIC. The agency is urging its partners to consider the borrower for a temporary forbearance plan, reducing the loan payment level for at least six months. The monthly payment should be established based on an affordable payment--given the borrower’s circumstances--and it should allow for reasonable living expenses after payment of mortgage-related expenses, FDIC said ... * WASHINGTON (9/15/09)--Rumors that the Federal Deposit Insurance Corp. (FDIC) is broke may be unfounded. The agency appeared on paper to have only $10 billion left at the second quarter to deal with bank failures, but the FDIC has more than $42 billion on hand--$4 billion less than it had nine months earlier (American Banker Sept. 14). Financial observers say the news media and analysts had incorrectly assumed that bank failures had risked emptying the fund. The media enjoys looking at fund balances, when a look at the “whole picture” is needed, said Paul Miller, managing director at Friedman, Billings, Ramsey & Co. Art Murton, FDIC division of insurance and research director, said the agency has been emphasizing that people need to look at federal reserves and contingent loss reserves ... * WASHINGTON (9/15/09)--In recent reports, the Office of the Inspector General of the Federal Deposit Insurance Corp. (FDIC) faulted the FDIC in three bank failures: Corn Belt Bank and Trust Company, Pittsfield, Ill.; FirstBank Financial Services, McDonough, Ga.; and Sherman County Bank, Loup City, Neb. Sherman County Bank failed because of its decisions to increase and fund loan commitments without considering borrowers’ ability to repay and underlying collateral. FirstBank failed due to its management’s pursuit of rapid growth in the commercial real estate lending in Atlanta. Corn Belt failed because its management did not implement sound risk management practices in loan underwriting and credit administration during a period of key growth. The FDIC could have taken more action in the Sherman County Bank and FirstBank cases, the report said. The FDIC should have required Corn Belt to hold more capital or submit a capital contingency plan ... * WASHINGTON (9/15/09)--President Barack Obama Monday discussed his administration’s work to keep the economy from collapsing. The economy is “beginning to return to normalcy,” but “normalcy cannot lead to complacency,” he said. Obama also noted his plan for financial reform. First, the administration would give the Federal Reserve Board the ability to oversee systemic risk. Second, a consumer agency would be created. Third, the government would have the power to resolve institutions slated “too big to fail.” Financial observers have said it’s too tough to pass financial reform this year, but Obama said he would continue to work on reform. Obama also rebutted some arguments against financial reform (American Banker Sept. 14). He said that criticisms that the consumer protection agency would hinder innovation are unfounded. Financial institutions could do better by not hiding the real costs, he said. Many credit cards and mortgages had attracted consumers with their low rates--which then increased to levels they could not afford ...

Matz Corporate CUs should consult auditors on impairments

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ALEXANDRIA, Va. (9/15/09)--National Credit Union Administration (NCUA) Chairman Deborah Matz on Monday advised corporate credit unions to “consult with their auditors to determine the potential impairment” of any assets related to U.S. Central Federal Credit Union following the recent release of that corporate credit union’s audit. According to Matz, the capital depletion figures reported by U.S. Central through June 30, 2009 “have not changed.” U.S. Central in its audit released last week reported an other-than-temporary-impairment charge of $4.9 billion and recorded $1.2 billion in expected credit losses related to investments as of Dec. 31, 2008. According to Matz, these losses do not affect “the depletion of capital” as the NCUA “determined that all depletion would be based on credit losses, not mark-to-market losses, consistent with the new accounting guidance” that was issued by the Financial Accounting Standards Board in April of this year. See related story in News Now's Sept. 14 edition, "U.S. Central 2008 financial statement released."

Go Direct Safety month ripe for direct deposit promo

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WASHINGTON (9/15/09)--The U.S. Treasury Department's "Go Direct" campaign is again telling partnered credit unions to educate their members on the safety benefits of using direct deposit for Social Security payments. The Go Direct promotional campaign is taking place during October, which is National Crime Prevention Month. The campaign, which is entering its fifth year, promotes the use of electronic delivery for government benefits checks. Using electronic delivery reduces the risk of identity theft and helps reduce stolen checks and forgeries, according to the release. The release also highlights free educational tools that credit unions can use to help their members, including PowerPoint slides and talking points and other communications materials. Over 485,000 Social Security and supplemental security income (SSI) checks were reported lost or stolen and $64 million in checks issued by the Treasury were fraudulently endorsed during 2008, according to the release. The Credit Union National Association is a national partner of the Go Direct campaign, and supports the goals of the program. Use the resource links below for more Go Direct information.

Congress CFPA off front burner CRA up for debate

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WASHINGTON (9/15/09)--WASHINGTON (9/15/09)--President Barack Obama in a speech delivered Monday called for "strong rules of the road to guard against the kind of systemic risks" that precipitated the ongoing financial crisis. Meanwhile, while members of the House and Senate continue to debate how best to reach the goal of enhanced financial oversight, there is little in the way of official debate on those matters scheduled for this week. However, the House Financial Services Committee on Wednesday will hold a hearing on proposals the committee says would enhance the Community Reinvestment Act. Although a full witness list was not released at press time, representatives of the Credit Union National Association (CUNA) have been told that representatives from the American Bankers Association, the National Community Reinvestment Coalition, and the Massachusetts Commissioner of Banks could testify before the Committee. Representative Eddie Bernice Johnson (D-Texas), who sponsored H.R. 1479, the Community Reinvestment Modernization Act, may also testify during the hearing. The status of the proposed Consumer Financial Protection Agency is another item that is likely to be on the mind of legislators, but CUNA believes that that legislation may not be considered until early next month. CUNA representatives have said with certainty that the legislation will not be marked up this week, but additional hearings on the CFPA may be held later on this month. Also, H.R. 3221, the Student Aid and Fiscal Responsibility Act of 2009, which would terminate the Federal Family Education Loan Program (FFELP), is currently being discussed in the House. CUNA has lobbied against the bill.

SBA Homeland Security unite on H1N1 guidance

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WASHINGTON (9/15/09)—The U.S. Small Business Administration (SBA) and U.S. Department of Homeland Security jointly announced the availability of a preparedness guide to assist small businesses to plan for the possibility of an H1N1 flu outbreak this fall. When unveiling the guide to reporters, SBA Administrator Karen Mills underscored the importance of flu preparedness for small businesses. “Small business owners should take the time to create a plan, talk with their employees and make sure they are prepared for flu season,” said Mills. “For countless small businesses, having even one or two employees out for a few days has the potential to negatively impact operations and their bottom line. A thoughtful plan will help keep employees and their families healthy, as well as protect small businesses and local economies.” The preparedness guide offers small business employers tools and information to help plan for varying levels of severity of an H1N1 outbreak— which may lead to increased absenteeism, and, if the outbreak becomes more severe, may include restricted service capabilities and supply chain disruptions.

U.S. Central 2008 financial statement released

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WASHINGTON (9/14/09)—When assessing the December 2008 U.S. Central FCU financial statement released Friday, interested parties should remember that the reporting was completed under a since revised accounting standard that forced the corporate credit union to record a larger other than temporarily impairment (OTTI) charge than current accounting rules require, the Credit Union National Association (CUNA) said upon the release of the statement. U.S. Central's auditors report that as of Dec. 31, 2008, U.S. Central incurred an OTTI charge of $4.9 billion on its investments. Under the old rule, whenever a security faced an expected credit loss, an OTTI charge had to be taken, not on the amount of the expected credit loss, but on the difference between the market or “fair” value of the security and its book value. As of December 2008, the expected credit losses on the portfolio were $1.2 billion. Thus, the OTTI charge of $4.9 billion, representing the difference between fair and book value, exceeded the expected credit losses by $3.7 billion. “Following criticism from many members of Congress and financial institutions that the OTTI standard was exacerbating the financial crisis, the Financial Accounting Standards Board (FAS B) changed the OTTI rule (FSP 115-2) so that going forward, in similar situations, only the expected credit loss would have to be expensed.” said CUNA Chief Economist Bill Hampel. In U.S. Central’s case, the $3.7 billion of market loss would only be recorded as an unrealized loss, netted against capital, and adjusted in future periods as the market value of the securities changed. “Unfortunately, the rule was not made retroactive,” Hampel said. Information issued by the National Credit Union Administration when it released the U.S. Central financial statement indicated that as a result of FASB adopting FSP-115-2 this April, U.S. Central reclassified $3.7 billion of non-credit losses included in the $4.9 billion of 2008 OTTI charges from retained earnings to accumulated other comprehensive loss (AOCL), a component of equity. “What we’ve learned from US Central’s 2008 audited financial statements is more or less in line with expectations. Credit losses of $1.2 billion at US Central over the next several years might even be less than what NCUA had in mind when it estimated the cost of guaranteeing credit union deposits in corporates at $5.9 billion. "Of course, no one knows what those credit losses will end up being, but if they are indeed in the neighborhood of $1.2 billion, and it US Central holds on to the securities, the $3.7 billion of so-called 'market loss' will not be incurred," Hampel said. For an NCUA Frequently Asked Questions (FAQ) regarding the U.S. Central financial statement, use the resource link below.

Compliance Proper policies procedures help CUs manage RDC risk

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WASHINGTON (9/14/09)--While extending remote deposit capture (RDC) to individual members can present some “operational and regulatory compliance risks,” the Credit Union National Association’s (CUNA) director of compliance information Valerie Moss writes that credit unions can address those risks by following “appropriate policies, procedures, and processes.” In the September issue of Credit Union Magazine, Moss said that credit unions that provide RDC, which allows credit union members to transmit scanned checks or share drafts to their credit union from remote locations, must do thorough due diligence on the third-party RDC vendor they enter into business with. The Federal Financial Institutions Examination Council (FFIEC) agencies, which includes the National Credit Union Administration, recommend that credit unions complete a “thorough risk assessment” and identify “the legal, regulatory compliance, reputation, and operational risks” related to the delivery system before they begin an RDC program, Moss added. Credit unions should also consider any legal and regulatory risks and should monitor RDC operations, safeguard account and personal information from their members, and be sure to comply with interagency internet authentication guidelines, Moss wrote. A full understanding of the operational risks related to the use of a RDC is also vital, and credit union managers must also have their credit union’s legal counsel review any contract that is entered into with an RDC service provider , she said. While the risks related to RDC are not substantively different from those related to any other financial transaction, altered checks or counterfeit funds may be harder to detect, Moss added. For the full story, use the resource link.

Inside Washington (09/11/2009)

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* WASHINGTON (9/14/09)--Government intervention in the financial crisis saved the economy, said Treasury Department officials Thursday at a hearing before the Troubled Asset Relief Program’s Congressional Oversight Panel (American Banker Sept. 11). Treasury Secretary Timothy Geithner said the programs that have been in place since the government bailed out the nation’s banks have stabilized the financial system. Many of the programs are winding down now, he added. Elizabeth Warren, the panel’s chair, said troubled assets are still a problem at small banks. The risk is unknown and unresolved, she said. Geithner also noted that he doesn’t want to give the impression the nation is not still facing economic challenges. However, he said the government would not repeat “classic errors” of economic policy.” His statements came after the Federal Deposit Insurance Corp. said it would end a program to guarantee bank debt Oct. 31. The Treasury’s guarantee program for money market mutual funds will end Friday ... * WASHINGTON (9/14/09)--The Federal Trade Commission has scheduled a two-day roundtable Sept. 29-30 to discuss consumer protection issues in litigation and arbitration proceedings to collect on consumer debt. The first day of discussion will cover the role of consumer choice, perceptions of bias, transparency of results, post-decision issues and future directions in arbitration of consumer debts. The second day will focus on consumer debt collection litigation proceedings ...

CUNA CEO search process begins

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WASHINGTON (9/14/09)--Credit Union National Association (CUNA) Chairman Kris Mecham Friday announced the formation of a search committee to begin the process of finding a successor to outgoing CUNA President/CEO Dan Mica. The action comes after Mica informed the CUNA board on Aug. 27 that he plans to step down in January 2011 after serving in the position for 13 years. “Dan Mica has been an outstanding leader for CUNA,” said Mecham, who is also CEO of Deseret First CU, Salt Lake City, Utah. “To say he leaves big shoes to fill would be a vast understatement. But the committee I am appointing today is up to the challenge of finding a successor who will build on Dan’s accomplishments and take CUNA to the next level.” The search committee consists of a chairman and four representatives from each of the four classes of CUNA directors: Class A (CUs with fewer than 20,000 members); Class B (20,000 to 73,999); Class C (74,000 and above) and Class D (state league presidents). Additionally there is one at-large member. Serving on the committee are:
* Harriet May, CEO, GECU, El Paso, Texas (chairman); * Patricia Wesenberg, CEO, Central City CU, Stevens Point, Wis. (Class A); * Eugene Foley, CEO, Harvard University Employees CU, Cambridge, Mass. (Class B); * Tom Dorety, CEO, Suncoast Schools FCU, Tampa, Fla. (Class C); * Brett Thompson, CEO, Wisconsin CU League (Class D); * Rudy Hanley, CEO, Schools First FCU, Santa Ana, Calif. (At-Large).
Also, Kris Mecham as CUNA chairman will serve ex officio on the committee; Dan Mica will also be an ex officio member and will serve as the committee’s liaison to CUNA management. “I have directed the search committee to begin its work immediately; its first task will be to select an executive search firm,” Mecham added.

New fair lending guidance may help CUs comply

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ALEXANDRIA, Va. (9/14/09)--National Credit Union Administration Chairman Deborah Matz on Friday encouraged credit unions to use recently updated interagency fair lending examination procedures to design “appropriate compliance programs” that will meet the standard of “all laws and regulations applicable to fair lending.” The regulatory alert, which is accompanied by updated interagency guidance that was first published in 2000, addresses some of the “risks and potential fair lending implications associated with using brokers or other third party entities for various aspects of lending operations.” The guidance also contains best practices for ensuring that lenders are not steering borrowers to higher priced loan products. According to the NCUA, the guidance, which was jointly issued by the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the Federal Reserve Board, the Office of Thrift Supervision, and the NCUA, also addresses practices aimed at detecting disparities in loan pricing. For the NCUA regulatory alert and the interagency guidance, use the resource link.

NCUA Foreclosed-property tenants have 90 days to relocate

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WASHINGTON (9/11/09)--Credit unions that take control of foreclosed real estate must grant tenants of the property 90 days of notice before those tenants can be made to move, the National Credit Union Administration has advised. Under the terms outlined in the Helping Families Save Their Homes Act of 2009, financial institutions must also allow so-called “bona fide” tenants to occupy the foreclosed property until their existing lease expires. However, the 90-day eviction rule would still apply once the foreclosed property is purchased. According to the NCUA, a “bona fide” tenant is one that does not own the property nor is a parent, spouse or child of the property owner. According to the NCUA, the law “does not cover tenants facing eviction in a non-foreclosed property, tenants with a fraudulent lease, tenants who enter in lease agreements after a foreclosure sale, or homeowners in foreclosure.” The law also does not impact state or local laws aimed at protecting the rights of tenants. For the full NCUA release, use the resource link.

GAO analyzes Fannie Freddie options

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WASHINGTON (9/11/09)—The Government Accountability Office (GAO) released a study Thursday that analyzes options for revising the long-term structure of the government-sponsored enterprises, Fannie Mae and Freddie Mac. Just over a year ago, on Sept. 8, the Federal Housing Finance Agency (FHFA) placed the GSEs into conservatorship due to concern that their deteriorating financial condition—identified as $5.4 trillion in outstanding obligations-- would destabilize the financial system. “With estimates that the conservatorship will cost taxpayers nearly $400 billion, GAO initiated this report under the Comptroller General’s authority to help inform the forthcoming congressional debate on the enterprises’ future structures,” the report explains. The report discusses the enterprises’ performance in meeting mission requirements, identifies and analyzes options to revise their structures, and discusses key transition issues. It concludes that it will be necessary for Congress to “reevaluate the roles, structures, and performance of the enterprises, and to consider options to facilitate mortgage finance while mitigating safety and soundness and systemic risk concerns.” Among the options noted by GAO are the following:
* Reconstitute the enterprises as for-profit corporations with government sponsorship, but place additional restrictions on them. While restoring the enterprises to their previous status, this option would add controls to minimize risk; * Establish the enterprises as government corporations or agencies that would focus on purchasing qualifying mortgages and issuing mortgage-backed securities, but eliminate their mortgage portfolios. The Federal Housing Administration (FHA), which insures mortgages for low-income and first-time borrowers, could assume additional responsibilities for promoting homeownership for targeted groups; and * Privatize or terminate them. This option would abolish the enterprises in their current form and disperse mortgage lending and risk management throughout the private sector. Some proposals involve the establishment of a federal mortgage insurer to help protect mortgage lenders against catastrophic mortgage losses.
GAO, as is its practice, took no position on whether to privatize the GSEs or make them fully public, but the report did indicate that both options could have their problems and inefficiencies--like increasing mortgage rates. To read more, use the resource link below.

TARP accountability hearing next week

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WASHINGTON (9/11/09)--There will be a TARP accountability hearing next week, scheduled by the House Financial Services oversight and investigations subcommittee. The hearing is titled “Utilizing Technology to Improve TARP and Financial Oversight.” According to a release from Chairman Dennis Moore (D-Kan.) of the subcommittee the session will focus on the role of technology in efforts to provide transparency and accountability for programs, such as the U.S. Treasury Department’s TARP – or Troubled Asset Relief Program. The subcommittee will also be taking a look at the use of technology to ensure federal agencies provide strong, coordinated oversight of financial services activity. Witnesses are to be announced at a later date.

Inside Washington (09/10/2009)

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* WASHINGTON (9/11/09)--National Credit Union Administration (NCUA) board member Michael E. Fryzel welcomed representatives from FirstCorp CU, Phoenix, to the NCUA headquarters in Alexandria, Va., Wednesday. Fryzel stressed the importance of continuing credit union support for the corporate system. “It is important that natural person credit unions maintain a high degree of support for the corporate system,” he said. This system was created, managed and directed by credit unions, and the future form and function of the corporates is directly dependent on involvement by member credit unions.” From left are: Dave Doss, chairman, FirstCorp CU; Fryzel; Stacy Glidden, FirstCorp Chief Operating Officer, and Pete Pritts, FirstCorp CU chairman and Arizona State CU CEO. (Photo provided by the National Credit Union Administration) ... * WASHINGTON (9/11/09)--Sen. Christopher Dodd (D-Conn.) has said he will remain chairman of the Senate Banking Committee, and financial observers predict that his commitment to that and health care reform could slow financial regulatory reform. Some industry observers speculated that Dodd would succeed the late Sen. Edward Kennedy (D-Mass.) as chairman of the Health, Education, Labor and Pensions Committee (American Banker Sept. 10). Jaret Seiberg, financial services policy analyst for the Washington Research Group, commented that it would have been tough for the Senate to pass a financial reform bill this year even if Dodd had no other commitments. Brian Gardner, KBW Inc. analyst, said the timeline for financial services legislation is “up in the air” and will keep Washington and Wall Street guessing for the next couple months ... * WASHINGTON (9/11/09)--The Internal Revenue Service has released guidance for employer comparable contributions to Health Savings Accounts (HSAs). The guidance relates to the manner and method of reporting and paying the excise tax. The regulations affect employers contributing to employees’ HSAs and Archer MSAs, employers or employee organizations that sponsor a group health plan and certain third parties ... * WASHINGTON (9/11/09)--On Wednesday, the Federal Deposit Insurance Corp. (FDIC) approved a rule that would extend the temporary increase in the standard maximum deposit insurance amount to $250,000 through Dec. 31, 2013 and the 2008 interim rules regarding revocable trust accounts and mortgage servicing accounts ...

Inside Washington (09/09/2009)

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* WASHINGTON (9/10/09)--The Treasury is planning to encourage short sales and deeds with financial incentives, including a $1,000 success fee for servicers after a short sale is finished. The home seller would receive up to $1,500 for relocation expenses (American Banker Sept. 9). The plan, expected to be announced this month, aims to help troubled homeowners who are not eligible for the Obama administration’s loan modification program. Short sales allow homeowners to sell for less than what is owed on the mortgage and are viewed as less expensive than foreclosures ... * WASHINGTON (9/10/09)--The Federal Deposit Insurance Corp. (FDIC) Board adopted a notice of proposed rulemaking that phases out the debt guarantee component of the Temporary Liquidity Guarantee Program on Oct. 31. The FDIC seeks comment on whether a temporary, emergency facility should be left in place after the program expires. The FDIC has collected more than $9 billion in fees with the program and will use the money to offset resolution costs associated with bank failures, said FDIC Chairman Sheila Bair. The program was adopted by FDIC in October ... * WASHINGTON (9/10/09)--An analysis of the Home Mortgage Disclosure Act (HMDA), which could be released this week, is expected to bolster the case for a consumer financial protection agency, according to financial observers (American Banker Sept. 9). They expect the data will indicate a wide discrepancy in loans to minorities because of the financial crisis. The discrepancy could be used by consumer advocates to push for a consumer agency. Past data has indicated that minorities receive higher cost loans than white borrowers. Rep. Brad Miller (D-N.C.) has said banks haven’t used the HMDA data to improve lending, which is “proof” an agency is needed. However, Gil Schwartz, partner at Schwartz and Ballen LLP, said the data is often overstated ... * WASHINGTON (9/10/09)--The Senate Tuesday confirmed George W. Madison as Treasury general counsel, where Madison will serve as a senior legal and policy adviser to the secretary and other officials. He also will lead the Treasury’s legal division. Madison formerly served as executive vice president and general counsel of Teachers Insurance and Annuity Association, College Retirement Equities Fund ... * WASHINGTON (9/10/09)--Vice President Joe Biden held a meeting Wednesday with The White House Task Force on Middle Class Families at Syracuse University in New York to discuss ways to help families save and pay for college. At the meeting, Biden asked Treasury to look into 529 plans and find ways to make them more effective for middle-class families. A 529 plan functions like a ROTH Individual Retirement Account and helps families save for college. Contributions are made with after-tax income. The task force also released a report diagnosing the existing barriers to higher education and ways for families to access higher education ...

Mortgage cramdown issue rises from ashes in House

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WASHINGTON (9/10/09)—As recent reports predicted, House Financial Services Committee Chairman Barney Frank (D-Mass.) Wednesday announced his intention to get a mortgage “cramdown” bill through Congress next year. In March, the House passed a bill that would have, in part, allowed bankruptcy court judges to force modifications in existing home loans, an action known as a “cramdown,” but the Senate voted it down 51-45 in April. To protect credit union interests, the Credit Union National Association (CUNA) strongly opposed the legislation, while concurrently working with supporters of the measure to ensure credit unions were not adversely affected if the legislation became law. At a House Financial Services subcommittee hearing yesterday on the progress of the Obama administration's Making Home Affordable (MHA) loan modification program, Frank said, “The best lobbyists we have for (bankruptcy changes are) servicers that are not doing their job in trying to modify mortgages.” In outlining his plans for legislation, Frank said its reach would be limited to existing mortgages. In an interview with The Huffington Post news website, posted Sept. 9, Frank said he intends to include bankruptcy provisions in the financial industry regulatory reform measure. He added that in a recent meeting in Boston with Senate Majority Leader Harry Reid (D-Nev.), and Sens. Charles Schumer (D-N.Y.), Jack Reed (D-R.I.) and Tim Johnson (D-S.D.), the senators said they were ready for a major push to accomplish financial regulatory reform before the year ends.

Vibrant CU community recognized by House

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WASHINGTON (9/10/09)—Credit Union National Association (CUNA) President/CEO Dan Mica Wednesday thanked the House for its recognition of the 75th anniversary of Federal Credit Union Act and the “vibrant” credit union community. Mica said, “The House resolution is a fitting reminder that America’s state- and federally chartered credit unions have a long and proud history of helping members improve their financial well being, especially in hard economic times whether during the Great Depression or in today’s recessionary environment. “The Federal Credit Union Act was instrumental in making this possible by opening the door to the development of a credit union movement that is truly national in scope. We are honored to have the House recognize all that this vitally important law enabled credit unions to achieve.” The House passed H Res. 556 by voice vote Wednesday. The commemorative bill recognizes both credit unions’ past and present service to the country through their service to credit union members. The resolution notably commends credit unions for their “instrumental role in helping hard-working people in the United States recover after the Great Depression,” as well as their continued exemplification of “the American values of thrift, self-help, and volunteerism, carving out a special place for themselves among the Nation’s financial institutions.” In his statement, Mica extended CUNA’s specials thanks to Reps. Jim Himes (D-Conn.), Rick Larson (D-Wash.), and Paul Kanjorski (D-Pa.) for offering the credit union resolution. Reps. Scott Garrett (R-N.J.), Earl Blumenauer (D-Ore.) and Ed Royce (R-Calif.) also spoke on the House floor in favor of the recognition. The national recognition precedes CUNA's 75th anniversary celebration, which will be held in Estes Park, Colo. Sept. 14-17. A number of CUNA committee and board meetings will also take place during the celebration. National Credit Union Administration board member Gigi Hyland is also scheduled to speak during a meeting of board members.

FinCEN plan could reduce confusion about MSBs CUNA says

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WASHINGTON (9/10/09)--There is significant confusion within the financial sector and in the marketplace regarding the types of businesses and activities that fall under the Financial Crimes Enforcement Network’s (FinCEN’s) money services business (MSB) rule and the Credit Union National Association (CUNA) supports FinCEN’s attempts to minimize the confusion. FinCEN has proposed an update to its MSB regulations and definitions to reflect its past guidance, rulings, current business operations, and evolving technologies, as well as to bring certain foreign-located MSBs with a U.S. presence under the purview of the regulations. The proposal also incorporates a minor change to the stored-value product rules and seeks comments for substantive changes envisioned for a later time. In a Sept. 9 comment letter, CUNA said it generally agrees that FinCEN’s proposed amendments to the MSB definitions will improve financial institutions’ ability to determine what individuals and business activities are covered. The clarifications, CUNA added, will also help credit union and other financial institutions to manage risks involved in serving those individuals or businesses. CUNA also generally supported FinCEN’s review of a $1000 per-person, per-day threshold that is applied to certain categories of MSBs, but CUNA warned that substantially lowering the threshold could result in additional burdens for institutions. “Lowering the threshold would increase the number of businesses and individuals designated as MSBs and thus increase the risk management burden for financial institutions. In most cases, MSBs would be classified in a higher risk category than most consumers and would require a more stringent level of risk management,” the letter noted. About the stored-value rules, CUNA said that it supports the agency’s efforts to get financial institution comment, but believes the issue is more appropriately addressed in separate rulemaking. To read CUNA’s complete comments, use the resource link below.

CRA hearing set for next Wednesday

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WASHINGTON (9/10/09)—The House Financial Services Committee set next Wednesday as the date for its exploration of Community Reinvestment Act (CRA) issues. The committee Wednesday announced its hearing, titled “Proposals to Enhance the Community Reinvestment Act,” will start at 10. a.m. (ET) Sept. 16. Congress enacted the CRA in 1977 in response to banks’ and thrifts’ “redlining,” or denying credit to lower-income and minority neighborhoods during the 1960s and early 1970s. The purpose was to ensure that federal and state-chartered commercial and savings banks were adequately meeting the financial service needs of all parts of the communities from which they draw deposits. There have been past efforts to include credit unions under CRA, such asduring the passage of the Credit Union Membership Access Act (H.R. 1151). The Credit Union National Association (CUNA) is opposed to any effort to include credit unions under CRA requirements. “Credit unions, by their nature and mission of 'people helping people, already meet the financial needs of a broad spectrum of people that fall within their fields of membership, and play an active role in community development and growth,” John Magill, CUNA senior vice president of legislative affairs, said Wednesday. “Therefore, credit unions should not be subject to burdensome regulatory requirements when they are already meeting and exceeding the intent behind CRA,” he added.

CUNA NCRC report needs close look

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WASHINGTON (9/09/09)—The Credit Union National Association (CUNA) said Tuesday that a National Community Reinvestment Coalition (NCRC) report unfavorably comparing credit union fair lending practices to that of banks needs a closer look because past analysis of Home Mortgage Disclosure Act data has shown NCRC to be off base. “In fact,” said CUNA Vice President of Economics and Statistics Mike Schenk, “both lower-income and minority applicants are more likely to have their loans approved at credit unions than at banks.” He said CUNA will closely review the newest NCRC report, released late yesterday. The NCRC said it analyzed several credit unions and compared them to bank service to working and minority communities. The report contends credit unions lag behind banks on 64% of the fair lending indicators that were examined.

Inside Washington (09/08/2009)

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* WASHINGTON (9/9/09)--Sen. Christopher Dodd (D-Conn.), chair of the Senate Banking Committee, has decided against succeeding the late Sen. Edward M. Kennedy (D-Mass.) as chair of the Senate Health, Education, Labor and Pensions (HELP) Committee, Washingtonpost.com reported late Tuesday. Dodd has scheduled an 11 a.m. press conference today to announce his decision. Dodd was overseer of the HELP Committee's health care legislatioin while Kennedy battled brain cancer for more than a year. According to a report in Roll Call earlier in the day, Dodd was being encouraged by some financial industry lobbyists to head the health panel. If Dodd had taken the position, Sen. Tim Johnson (D-S.D.) would have become chair of the Senate Banking Committee ... * WASHINGTON (9/9/09)--Rep. Barney Frank (D-Mass.) would like to be in President Barack Obama’s cabinet, according to Frank’s new biography, written by Stuart Weisberg (The Hill newspaper Sept. 7). Frank said his departure from Congress is not imminent. He wants to pass more legislation on affordable housing and to have at least two years with Obama as president and a Democratic Senate, he said ... * WASHINGTON (9/9/09)--Lenders are supporting the Small Business Administration’s decision to increase the amount of goodwill value a lender can finance when making a loan to a borrower that wants to buy a small business. The change, which doubles the goodwill value to $500,000, was announced by SBA last week. The SBA is “addressing our issues, and seems to be taking steps” to attract new lenders, said Tony Wilkinson, president, National Association of Government Guaranteed Lenders ... * WASHINGTON (9/9/09)--The Department of Housing and Urban Development (HUD) has confirmed a final rule attempts to improve the quality of HECM counseling. The rule amends the department’s Home Equity Conversion Mortgage (HECM) program by establishing testing standards to qualify individuals as HECM counselors eligible to provide counseling to prospective borrowers. It also establishes an HECM Counseling Roster of eligible counselors. The rule is effective Oct. 2 ...

Schumer to back Sen. overdraft bill

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WASHINGTON (9/09/09)—Sen. Charles Schumer (D-N.Y.) announced Tuesday that he wants to see more consumer protections associated with overdraft protection plans and that he will back legislation targeting abusive practices. Speaking at The College of Saint Rose in his state’s capitol, Albany, Schumer said overdraft legislation should:
* Require that consumers either must opt in, or have a chance to opt out, of financial institutions’ overdraft protection programs; * Increase disclosure of the fees and APR charges on overdraft loans to help consumers factor in that information when choosing a debit card provider; * Require a warning to consumers that an electronic transaction may trigger an overdraft loan fee. The warning should be joined with a notice allowing the consumer to cancel the transaction after receiving this warning; * Prohibit financial institutions from manipulating the order in which checks and other debits are posted if it causes more overdrafts and maximizes fees; and * Require them to gradate fees proportionally so that a fee for a nickel overdraft is lower than a fee for a $100 overdraft.
Legislation that has been introduced in the House by another New York Democrat, Rep. Carolyn Maloney (H.R. 1456, the Consumer Overdraft Protection Fair Practices Act), carries the provisions listed above. Schumer said Tuesday that he will be an original co-sponsor for legislation being introduced in the Senate by Sen. Christopher Dodd (D-Conn.), who heads the Senate Banking Committee. The Credit Union National Association (CUNA) has adopted policy positions supporting the ability of credit unions to offer overdraft privilege programs, but urging credit unions to avoid unfair or deceptive practices, which are inconsistent with credit philosophy and principles.

With Congress return reg revamp debate heats up

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WASHINGTON (9/9/09)--Congress came back to Washington this week and lawmakers face a full slate of legislative activity at the start of this eight-week legislative work period, including a hearing on Community Reinvestment Act issues, perhaps as early as next week. While the upcoming eight-week legislative period is expected to end on Oct. 30, there is speculation that work on Capitol Hill could continue beyond that deadline. Rep. Barney Frank (D-Mass.) recently stated that larger financial regulatory reforms could be passed by the House by October, with President Barack Obama signing the completed legislation by the end of this year. The House Financial Services Committee, which is chaired by Frank, today will open business with a hearing on the progress of the Obama administration’s “Making Home Affordable Program.” There are a number of other issues that are of great importance to credit unions on the legislative calendar, but one of the first credit union-specific pieces of legislation should be the simplest of all, as the House this week is expected to discuss H. Res. 556, which recognizes the 75th anniversary of the enactment of the Federal Credit Union Act. "This resolution not only recognizes the anniversary of the Act, but also the valuable service all credit unions provide their members as well as the economic stimulus credit unions are providing during the financial crisis," said Ryan Donovan, vice president of legislative affairs. It is also thought that the committee may soon mark up H.R. 3216, the Consumer Financial Protection Agency (CFPA) Act. This legislation would seek to protect consumers of financial products through the creation of a powerful independent agency with extensive rulemaking, oversight, and enforcement tools. Debate and markup of this legislation was scheduled to occur before the recently ended summer district work period, but other business prevented the Committee from taking any action at that time. Member business lending (MBL) is another important issue for credit unions, and Reps. Paul Kanjorski (D-Pa.) and Ed Royce (R-Calif.) in late July introduced legislation that would double the current statutory MBL cap of 12.25%, a move that CUNA believes could produce as much as $10 billion in new capital for investment in the first year of the change. The Credit Union National Association (CUNA), the National Credit Union Administration, and member credit unions continue to explore a legislative remedy addressing the unintended consequences of the 21-day rule in the recently enacted Credit Card Accountability, Responsibility, and Disclosure (CARD) Act. Legislation addressing interchange fees is not expected to be brought up during the fall session, but related measures were introduced on both the House and Senate sides in early summer, and similar legislation could be brought up during discussion of the CFPA. One such bill introduced by Rep. John Conyers (D-Mich.) would allow merchants to negotiate interchange with card issuers. However, federally chartered credit unions and all financial institutions with less than $1 billion in assets are exempted from the terms of the bill. Another bill from Sen. Richard Durbin (D-Ill.) would also provide for these sorts of negotiations. National convenience retailers Circle-K and 7-11 have circulated and are expected to present petitions claiming that consumers support their position on interchange, but CUNA’s Federal Legislative Affairs Director Michele Johnson has countered that argument, saying that changes to the current interchange fee structure would “give merchants an antitrust advantage in negotiations with card issuers, networks, and other payment system participants.”

Inside Washington (09/07/2009)

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* WASHINGTON (9/8/09)--The U.S. Small Business Administration (SBA) has raised the amount of goodwill value a lender can finance when making a loan to the buyer of a small business to $500,000 from $250,000 (American Banker Sept. 4). SBA also eliminated a provision requiring that goodwill financing can amount to no more than half of a loan value for the purchase of a small business ... * WASHINGTON (9/8/09)--Financial observers continue to speculate about the future of Fannie Mae and Freddie Mac, which were taken into conservatorship last year. Some have suggested turning the GSEs into a public utility model, allowing them to create special purpose vehicles to operate in the secondary market, or forming a good bank/bad bank structure. The Obama administration has said it would not move to change the GSEs until early 2010 (American Banker Sept. 4). The changes to Fannie and Freddie likely won’t happen fast, said John Courson, president/CEO of the Mortgage Bankers Association. Judy Kennedy, CEO of the National Association of Affordable Housing Lenders, said maybe Fannie and Freddie can’t be helped ... * WASHINGTON (9/8/09)--European countries are pushing to make bankers’ pay and bonuses a top agenda item for the Group of 20 (G-20). However, Treasury Secretary Timothy Geithner has not brought up the bonus issue; instead, he favors discussing a new international accord to increase banks’ capital (Associated Press Sept. 4). A new accord could put in place a more conservative framework of constraints on leverage in the financial sector, he said. The Obama administration has proposed stronger international standards for the reserves banks hold to cover losses. The U.S. hopes to get an international agreement on the accord by the end of next year, with implementation by the end of 2012 ...

NCUA announces agenda for first town hall meeting

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ALEXANDRIA, Va. (9/8/09)--The National Credit Union Administration has announced the agenda for the first of three planned town hall-style meetings. The first meeting, which will take place outside of St. Louis, Mo. in Clayton, Mo. on September 15, will include two lengthy question and answer sessions. The meeting will also feature opening and closing remarks from NCUA Chairman Deborah Matz. Other topics scheduled for discussion during the meeting include the ongoing implementation of the corporate credit union stabilization plan and the NCUA’s pending rulemaking on the corporates. NCUA Deputy Executive Director Larry Fazio, NCUA General Counsel Bob Fenner, and Office of Corporate Credit Unions official Scott Hunt will also speak during the meeting.

House to commemorate Federal Credit Union Act

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WASHINGTON (9/8/09)--The House of Representatives returns to Washington from summer recess this week, and one item on the table is H.Res. 556, a bill that recognizes the 75th anniversary of the passage of the federal credit union act. Credit Union National Association (CUNA) officials have been told that the commemorative bill, which celebrates the “vibrant Federal credit union community that was created” following the passage of the Act, would be considered under suspension of the rules this week. The bill also recognizes credit unions for their past service to the country as well as their continued “valuable services” provided to their members and the “economic stimulus” that credit unions have provided to the Nation “even as we face a financial crisis today.” The recognition precedes CUNA’s 75th anniversary celebration, which will be held in Estes Park, Colorado. A number of CUNA committee and board meetings will also take place during the celebration, which is scheduled for September 14-17. National Credit Union Administration board member Gigi Hyland is also scheduled to speak during a meeting of board members.

Matz continues to explore CARD Act concerns

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WASHINGTON (9/8/09) – Newly installed National Credit Union Administration (NCUA) Chairman Deborah Matz continues to examine credit union compliance hurdles related to the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act. On Friday, Matz gathered several credit union officials and representatives of the Credit Union National Association (CUNA), CUNA Mutual Group, and National Association of Federal Credit Unions to further explore and discuss the issues. Credit unions represented included Boeing Employees CU, Holy Rosary CU, American Airlines FCU, Missouri Central CU, and Justice Department FCU. Matz indicated NCUA has initiated efforts on Capitol Hill to get federal lawmakers to consider a legislative fix to the 21-day rule that is bedeviling credit union compliance efforts, reported CUNA Deputy General Counsel Mary Dunn, who represented CUNA. The CARD Act aims to prevent lenders from making arbitrary changes to interest rates and terms associated with credit cards that have an existing balance. However, credit unions have serious compliance challenges trying to meet provisions that prohibit creditors from treating a payment as late for any purpose, including reporting the late payment to the credit bureau, unless that creditor adopts reasonable procedures to ensure that periodic statements are delivered to consumers no later than 21 days before the payment due date. Matz reiterated at the Friday meeting that federal credit union examiners are being asked to take a close look at a credit union’s good-faith efforts to comply with the new law and demonstrate flexibility for a reasonable time while credit unions are developing compliance programs under the new law. Dunn said Matz, while saying credit unions need to respect the law, indicated a great deal of sympathy for credit unions trying to sort through what they need to do. She indicated a communication has gone to examiners directing them to work positively with credit unions that are making good faith efforts to comply. CUNA, the Connecticut Credit Union League, and other league representatives, have also been working toward a legislative fix to some of the compliance problems. In the meantime, Senate Banking Committee Chairman Christopher Dodd (D-Conn.) in August urged the Federal Reserve Board to provide relief to credit unions regarding the 21-day rule Act as it applies to open-end plans other than credit cards. In a letter to Federal Reserve Board Chairman Ben Bernanke, Dodd urged the Fed to allow credit unions "more time to come into compliance" for such open-end plans. CUNA has prepared a document to assist state leagues and credit unions with credit unions' questions regarding their compliance obligations under the Credit Card Accountability, Responsibility and Disclosure (CARD) Act provisions--especially on the 21-day periodic statements provision. Use the resource link below to access the document.

Judge may not order trial in Bellco UBIT case

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WASHINGTON (9/4/09)--Judge Christine Arguello asked both parties in the Bellco Credit Union V. U.S. unrelated business income tax case to reconsider their requests for a jury trial. During oral arguments late last week in Denver, Arguello asked several questions of both sides during a two-hour session. The oral argument portion of the trial followed the filing of separate motions for summary judgment by both Bellco and the U.S. Department of Justice. Bellco has challenged the assessment of unrelated business income tax (UBIT) on three of its products, and is seeking a refund of $199,293 that was paid on products such as accidental death and disability insurance (AD&D), credit life and disability insurance, and financial services such as investments in 2000, 2001 and 2003, plus statutory interest. One disputed issue is whether the sale of credit insurance and investment products are substantially related to the granting of loans and the promotion of thrift, and whether income from the sale of AD&D qualified as a royalty not subject to UBIT. The government has asserted that neither credit insurance nor financial services were related to the exercise or performance of Bellco's tax-exempt purposes. The government has also sought to exclude income from the sale of AD&D policies from being counted as royalty income. Arguello said she may ask for further briefings on the issues surrounding the case before making her final decision. The trial, if approved, would take place in December.

CU comment sought on Reg Z closed-end mortgage rules

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WASHINGTON (9/4/09)--The Credit Union National Association (CUNA) has issued a regulatory comment call on the Federal Reserve's proposal that will revise the disclosures that lenders must provide in connection with mortgage loans. The proposal will require that Fed-published documents be given to consumers at the time of application and will revise the other current disclosures, which must be provided within three days after application, as well as three days before loan consummation. This information is intended to outline additional information about certain loan features, especially in connection with adjustable rate mortgages. These changes, which would apply to disclosures for all closed-end credit transactions secured by real property, would also revise the annual percentage rate (APR) calculation to include most fees and settlement costs, many of which are currently excluded from the APR. The proposal will impose eligibility and disclosure requirements for credit insurance, debt cancellation, and debt suspension coverage. In addition, the Fed would require lenders to notify borrowers 60 days before any changes to their monthly payments on adjustable-rate loans are made. The Fed currently rules require lenders to give consumers 25 days of advance notice. Comments are due to CUNA by Dec. 10, and should be submitted to the Fed on Dec. 24. To view the CUNA comment call, use the link.

Inside Washington (09/03/2009)

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* WASHINGTON (9/4/09)--A hearing on the Securities and Exchange Commission’s (SEC) handling of the Bernie Madoff fraud case has been scheduled for Sept. 10, Senate Banking Committee Chairman Christopher Dodd (D-Conn.) announced Wednesday. The hearing will discuss a report released by an SEC inspector general Wednesday (American Banker Sept. 3). Dodd’s committee plans to use the report to learn what went wrong in the SEC’s oversight of the Madoff case, he said ... * WASHINGTON (9/4/09)--Fannie Mae and Freddie Mac sent a letter this week to their regulator, the Federal Housing Finance Agency (FHFA), saying they object to several parts of a July 2 interim rule that requires them to submit all activities and products to FHFA for review (American Banker Sept. 3). The rule is ineffective and burdensome, the enterprises said. The rule also makes it difficult for the enterprises to help during a financial crisis. The letter signals one of the first times the enterprises have publicly contacted their regulator about an issue. Both were placed into conservatorship by FHFA last year ... * WASHINGTON (9/4/09)--Members of the Federal Reserve Board’s policymaking open market committee were split on whether to purchase mortgage-backed securities associated with adjustable-rate mortgages, according to minutes released this week from the Aug. 11-12 committee meeting. Some participants said the securities would be useful because they could reduce the large spreads between the adjustable-rate mortgages and yields on similar-duration Treasury securities. Others saw little benefit, given the small stock and limited issuance on fixed-rate mortgages. The committee also discussed reducing the pace at which the Fed buys Treasury securities, agency debt and agency mortgage-backed securities before the end of the asset purchase programs. Slowing the pace of the purchases could promote a smooth transition in markets, participants said. However, no decisions were made on purchasing mortgage-backed securities or tapering the pace at which the Fed buys Treasury securities ...

CUNA NAFCU put forward unified corporate CU plan

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WASHINGTON (9/4/09)-- A unified credit union view of the future of the corporate credit union system is the product of a joint task force appointed by the chairs of the Credit Union National Association (CUNA) and the National Association of Federal Credit Unions (NAFCU). The task force’s detailed recommendations cover the major areas of the corporate credit union system: services, capital, structure, corporate governance, federal regulatory oversight and insurance of shares and deposits in corporates. The task force’s recommendations are offered as a comprehensive plan. The task force recognized that the suggestions being made represent a departure from the current corporate system. The proposed system implied by the task force’s suggestions represents a future corporate system that the task force believes that natural person credit unions would support and use. Some of the key findings of the joint CUNA-NAFCU task force include:
* Services of corporates should be limited to a defined set, including payments and settlements, liquidity and short-term investments. Further, longer-term, on-balance sheet investments should not be offered by corporates; * Contributed capital should be required for membership and service use by credit unions; corporates will have to present a sufficiently compelling business case covering both the value of services provided and strong risk control; * With limits on risk-taking, competition among corporates will be driven by efficiency, placing a premium on economies of scale and thus creating substantial pressures for consolidation; * Insurance coverage for natural-person credit union (NPCU) shares and deposits in corporate credit unions must be limited to the maximum coverage for personal deposits and shares in the NPCUs; * National Credit Union Administration (NCUA) oversight of corporates must be improved, with adequate qualified staff with special knowledge of the complex operations of corporate credit unions; * Corporate board members must have sufficient expertise to govern their corporate consistent with the powers of the corporate credit union.
The task force delivered its views Thursday in a report to the NCUA board, and effort intended to maximize credit unions’ impact on the NCUA’s rulemaking process concerning corporate credit unions. “The circumstances of the current corporate credit union system have had an enormous impact on the credit union industry, and we want to make sure going forward that credit unions have as much input as possible on how to best enhance the system for the future,” said NAFCU Chair Brad Beal. “We undertook this as a collaborative effort because we wanted to develop recommendations that were comprehensive and strategic. We strived to address the challenges of balancing risk and the needs of natural person and corporate credit unions in our recommendations,” said CUNA Chair Kris Mecham. The task force’s recommendations, CUNA and NAFCU said in a release, are a departure from the current corporate system and represent a future corporate system that the task force believes that natural person credit unions would support and use Use the resource link below to access the complete report.

Obama loan mod program to be subject of hearing

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WASHINGTON (9/4/09)—The House Financial Services subcommittee on housing and community opportunity will be turning the spotlight on the Obama administration’s Making Home Affordable (MHA) Program later this month. In a scheduled Sept. 9 hearing the subcommittee chaired by Rep. Maxine Waters (D-Calif.) will take a look at the outcomes for homeowners eligible for the program and what are the obstacles to the program’s success. The Making Homes Affordable Program was launched with the intention of easing the crush of home mortgage disclosures by encouraging lenders to execute more loan modifications for responsible borrowers. However, the program has been criticized for not reaching enough troubled homeowners. For instance, a Sept. 1 article in CNN’s Politics.com said that now, six months into the program, only 6% of four million homeowners identified as eligible have gotten help. The article says borrowers have expressed frustrations that some lenders just give them a runaround. To help support credit union participation in the loan modification program, the National Credit Union Administration (NCUA) in June issued an interim final rule allowing credit unions to modify second mortgage loans to match the terms of modified first mortgages. Although the Treasury had recently added a second lien program to its MHA, many credit unions could not participate due to an NCUA lending rule that imposed a 20-year maturity limit on second mortgage loans secured by the member-borrower's primary residence. A witness list has not yet been made public for the subcommittee hearing.

Appeals court UIGEA is not unconstitutionally vague

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WASHINGTON (9/3/09)—The Unlawful Internet Gambling Enforcement Act (UIGEA) has had its vocal detractors and staunch supporters since even before it became law in 2006 and regulators have since been struggling with the task of implementation. In a recent opinion issued this week, the U.S. Court of Appeals in Philadelphia ruled that UIGEA is neither unconstitutionally vague nor does it violate gamblers’ right to privacy. The decision involves a suit filed in 2007 by the Interactive Media Entertainment & Gaming Association Inc., of New Jersey, against the U.S. Attorney General, the Federal Trade Commission (FTC) and the Federal Reserve System. The FTC and Fed are the federal regulatory bodies tasked with crafting rules to put the law into effect. In March 2008, U.S. District Judge Mary L. Cooper dismissed the New Jersey association’s challenge of UIGEA’s constitutionality and the Sept. 1 court of appeals decision upholds that ruling. The Internet Gambling law forbids the placing, receiving or in any other way knowingly transmitting a bet or wager using the Internet. Financial institutions are statutorily prohibits financial institutions from processing transactions used to place illegal bets online. A three-judge appeals court panel, rendering the 10-page decision, declared that UIGEA “clearly provides a person of ordinary intelligence with adequate notice of the conduct that it prohibits.” Credit Union National Association (CUNA) General Counsel Eric Richard Wednesday said, “This decision, however, in no way addresses the costly and vague unfunded mandate this law place on credit unions and other financial depository institutions.” Richard reiterated CUNA’s support for enforcement of reasonable laws to prohibit unlawful Internet gambling. “However, UIGEA inflicts unreasonable policing requirements on financial institutions, which have proven difficult for financial institutions to meet,” he said. House Financial Services Committee Chairman Barney Frank (D-Mass.) has introduced two bills on this issue. The first, the Reasonable Prudence in Regulation Act (H.R. 2266), would push back implementation of UIGEA by a year. It’s currently due to take effect on Dec. 1, this year. CUNA supports this bill. Frank’s second bill, the Internet Gambling Regulation Consumer Protection and Enforcement Act (H.R. 2267), would allow Internet gambling companies to accept bets from persons in the United States if they are licensed by the U.S. Treasury Department and maintain effective protections against underage and compulsive gambling and money laundering and fraud. CUNA hasn’t taken a position on this legislation. Neither bill has yet been scheduled for committee consideration.

Inside Washington (09/02/2009)

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* WASHINGTON (9/3/09)--Two reports criticizing federal regulators’ oversight of failed banks were issued last week. The reports come after the Federal Deposit Insurance Corp. (FDIC) was criticized in July for “slow and inefficient” oversight of the failed Franklin Bank of Houston (News Now July 9). The reports state that regulators should have been tougher with the National Bank of Ocala, Fla., and MagnetBank in Salt Lake City. Both failed in January (American Banker Sept. 2). FDIC’s inspector general said the FDIC supervised MagnetBank but could have taken more action, such as noting a 2007 exam that indicated problems with the bank’s commercial real estate lending. The report also said the Office of the Comptroller of the Currency should have been quicker to address problems it identified at National Bank, which failed because of construction and development loan losses ... * WASHINGTON (9/3/09)--The Federal Reserve Bank of New York has expanded its network of Term Asset-Backed Securities Loan Facility (Talf) agents to include investors Wells Fargo Securities LLC, Williams Capital Group LP, Loop Capital Markets LLC and CastleOak Securities LP (American Banker Sept. 2). TALF is intended to make credit available to consumers and small businesses by facilitating the issuance of asset-backed securities ... * WASHINGTON (9/3/09)--The Mortgage Bankers Association (MBA) was expected to propose a framework Wednesday that would overhaul Fannie Mae and Freddie Mac by allowing them to create securities that could be backed by certain kinds of mortgages (The Wall Street Journal Sept. 2). The companies would back the securities against defaults and pay fees into a federal insurance fund that would in return guarantee interest and principal payments to bondholders. However, the insurance fund would only go into effect if the companies suffered big losses. The framework would replace the current system--which assumes that the government would back Fannie and Freddie if they ran into trouble. The proposed backstop is needed to revive investor confidence, said John Courson, MBA president/CEO. Foreign investors have reduced their holdings in companies’ debts even though the government had infused Fannie and Freddie with capital. On Tuesday, Fannie and Freddie’s shares reportedly fell 17% in the New York Stock Exchange ...

CU-backed candidate wins Calif. special election

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WASHINGTON (9/03/09)--Credit union-backed candidate John Garamendi on Tuesday won a California special primary and will serve as the Democratic candidate for the congressional seat that will be vacated by incoming State Department official and current representative Ellen Tauscher (D-Calif). Garamendi, who currently serves as lieutenant governor and previously served as state insurance commissioner, was supported by the California Credit Union League and the Credit Union Legislative Action Council (CULAC), and defeated 13 fellow candidates by gaining 26.2% of the total vote. However, Garamendi will next need to win a special general election on Nov. 3, since he did not win the 50% of votes needed to automatically assume the vacant congressional seat. Garamendi is expected to win the seat because District 10, which spans Contra Costa, Solano and Alameda counties in Northern California, is mainly Democratic. Garamendi’s main opposition will be Republican David Harmer, with American Independence Party candidate Jerry Denham, Green Party candidate Jeremy Cloward, and Peace and Freedom Party candidate Mary McIlroy also set to contest the open seat. If Garamendi wins the November election, California Governor Arnold Schwarzenegger would appoint a replacement lieutenant governor. CULAC and the league earlier this year also supported Judy Chu (D-Calif.), who won a special election for the House seat from the 32nd district.

CDFI announces 100 of Recovery Act funds deployed

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WASHINGTON (9/3/09)--Money awarded through the U.S. Treasury’s Community Development Financial Institutions (CDFI) Fund has been dispensed in record time, with the full $98 million in Recovery Act funds for financial assistance being distributed to a total 59 CDFIs and 10 Native American CDFIs within two months of the start of this year’s program, the Treasury announced this week. In a statement announcing the distribution of the funds, CDFI Fund Director Donna J. Gambrell said that the release of the funds was a “significant accomplishment” that was “achieved by utilizing new internal business practices that enabled the disbursement of the Recovery Act resources faster than ever before.” These financial assistance awards are "critical to getting these community-based lenders the capital they need to provide distressed communities they serve with the resources to stimulate local economic recovery,” she added. Gambrell earlier this year reported that recent economic and political changes, combined with the decline of loan availability from the mainstream lending community, caused demand for CDFIs to "skyrocket." “Moving quickly to support communities made particularly vulnerable by the economic downturn” was a top priority for the CDFI Fund, Gambrell said in the recent release.

Free-market think tank backs increased MBL power

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WASHINGTON (9/3/09)--Existing restrictions on credit union business lending should be lifted through legislative action, the pro-free market, Washington, D.C.-based Competitive Enterprise Institute (CEI) advocated in a letter sent to Senate offices early this week. Though his organization promotes the complete removal of any rules that place caps on a credit union’s ability to provide loans to its members, CEI’s Director of the Center for Risk, Regulation, and Markets Eli Lehrer said that H.R. 3380, the Promoting Lending to America’s Small Businesses Act, is “a good start” that is “worthy” of “careful consideration.” The legislation, which was introduced in late July by co-sponsors Rep. Paul Kanjorski (D-Pa.) and Rep. Ed Royce (R-Calif.), would double the current statutory Member Business Lending (MBL) cap of 12.25%, and would exclude from the new 25% statutory cap loans of less than $250,000, business loans in underserved areas, and loans to non-profit religious institutions. Reiterating credit union claims that lifting the MBL cap could produce as much as $25 billion in new capital for investment, the letter added that the legislation would “expand credit where it is needed most” which could “presumably increase the level of prudential care taken with regard to credit-worthiness standards.” According to the letter, the smaller size and “narrowly-focused” lending standards of the “average credit union” result in the majority of available credit going to “smaller businesses that wish to use difficult-to-value assets,” businesses that can experience difficulties if they try to borrow from other financial institutions.

SafeAmerica CU to take on liquidated Kaiser Lakesides members assets

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ALEXANDRIA, Va. (9/2/09)--Oakland, Calif.-based Kaiser Lakeside CU early this week was acquired by SafeAmerica CU following a National Credit Union Administration (NCUA)-directed liquidation of the firm. According to an NCUA release, Pleasanton, Calif.’s SafeAmerica will assume the $24 million in assets and 3,500 members left behind by Kaiser Lakeside’s failure. SafeAmerica, which holds $315 million in assets from over 26,000 members, will now serve the former members of Kaiser Lakeside. Seven federally insured credit unions have liquidated and a further seven have merged with assistance as of August of 2009, an NCUA staffer told News Now. A total of 84 individual banks have failed during this calendar year, according to information available on the Federal Deposit Insurance Corporation’s Web site.

Barkdull appointment would enhance Feds consumer council CUNA

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WASHINGTON (9/2/09)--American Southwest CU President/CEO Brian Barkdull is the Credit Union National Association’s (CUNA) choice to represent credit union interests in the Federal Reserve’s Consumer Advisory Council (CAC) following his nomination earlier this week. Barkdull, who has served as American Southwest CEO for 11 years and has participated in the credit union movement for a total of 21 years, also recently served on CUNA’s Consumer Protection Subcommittee. If appointed, Barkdull would join Idaho CU League President Alan Cameron on the CAC. While Cameron does currently serve on the CAC, CUNA believes that adding an additional credit union representative to the board would enhance the work of the CAC. In comments accompanying the CUNA nomination letter, CUNA Chairman Kris Mecham said that Barkdull is a “well-respected financial institution leader” who is “extremely knowledgeable and articulate regarding consumer protection issues.” The Fed's Consumer Advocacy Council, which seeks to align the shared interests of consumers, communities, and the financial services industry and advise the Fed on the exercise of its responsibilities under consumer financial protection regulations, is composed of 30 members that serve three-year terms each. The Fed earlier this year requested nominations to the CAC, as 10 of the CAC's 30 members will be leaving the board at the end of the calendar year.

Inside Washington (09/01/2009)

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* WASHINGTON (9/2/09)--Senate Banking Committee Chair Christopher Dodd (D-Conn.) is considering a bill that would consolidate oversight for financial institutions into a single regulator, taking away powers from existing agencies. The bill, which is still being drafted, also would create an interagency systemic risk council (American Banker Sept. 1). Dodd’s committee hopes to pass the legislation this year. Dodd last brought up the idea of a single regulator during a hearing Aug. 4, but he wasn’t clear how much he would push for it ... * WASHINGTON (9/2/09)--Sen. Robert Menendez (D-N.J.) is pushing Federal Reserve Board Chairman Ben Bernanke and Treasury Secretary Timothy Geithner to focus on the commercial real estate markets. Tight credit and high vacancy rates are plaguing the markets, the senator said. The government needs to encourage commercial lending and kick-start the market for commercial mortgage-backed securities, Menendez wrote in a letter to Bernanke and Geithner Thursday (American Banker Sept. 1) ... * WASHINGTON (9/2/09)--The Federal Deposit Insurance Corp. (FDIC) Monday released some tips for financial institutions as they comply with the Credit Card Accountability, Responsibility and Disclosures (CARD) Act. Most of the CARD Act’s provisions take effect next year, but some took effect Aug. 20. The Summer 2009 issue of FDIC Consumer News provides information about changes in the rules and what they mean for the public ... * WASHINGTON (9/2/09)--Federal Deposit Insurance Corp. (FDIC)-insured institutions lost $3.7 billion in the second quarter, according to the FDIC. Total assets of insured institutions declined by $238 billion, and the number of institutions on the FDIC’s Problem List rose to 416 from 305 on March 31. Total reserves of the Deposit Insurance Fund stood at $42 billion. Loan losses, which totaled $66.9 billion, have had the greatest impact on industry earnings, according to FDIC Chairman Sheila Bair ... * WASHINGTON (9/2/09)--Registration is open for the Go Direct campaign’s two recognition programs for financial institutions--Go Direct Champions and Go Direct Community Ambassadors. The campaigns encourage consumers to sign up for direct deposit. Deadline for registration is Sept. 30 ...

CUNA analyzes NCUA overdraft electronic disclosures rule

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WASHINGTON (9/2/09)--The Credit Union National Association (CUNA) has posted a final rule analysis on the recent addition by the National Credit Union Administration (NCUA) of rules that mirror the standards set forth by the Federal Reserve Board’s recent additions to Regulation DD of the Truth in Savings Act. The NCUA amendments are similar in content to existing Fed standards that impose requirements for overdraft protection plan fees and electronic disclosures. Specifically, the NCUA will require credit unions to disclose on periodic financial statements the amount charged for overdraft fees and returned item fees. Credit unions will also be required to provide account balance information through an automated system that discloses only the amount of funds available for withdrawal, without including the additional funds that would be available under an overdraft program. CUNA reports that there are “no significant differences” between the NCUA and the Fed rules, barring the fact that the NCUA rules apply to credit unions. The NCUA rules will become effective in January of 2010. For more detailed analysis of the new rules, use the resource link.