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Filed on March 27, 2009–March 29, 2009, published the first business day after.
- NCUA starts stakeholder reports on corporate CUs
- Flexible accounting stance may come from NCUA
- Community development CUs oppose CRA for all CUs
- Predatory lending bill introduced in House
- CU emails to agency ‘grassroots at work,’ says Hyland
- White House conference call adds detail to reg reform
- Webcast on due diligence April 7, 28
- Inside Washington
- Schenk: Tax increases affect few small businesses
- CU weighs in on overdraft fees in WSJ
- Minnesota CU Network helps stem state foreclosures
- NCUF distributes Filene tax report to REAL Solutions CUs
- Need a loan? Texas newspaper suggests CUs
- AVCU launches CU awareness campaign
- Market News
- News of the Competition
- Be on guard for tax-related ID theft
- NACUSO conference to include NCUA staff
NCUA starts stakeholder reports on corporate CUs
ALEXANDRIA, Va. (3/30/09)--The National Credit Union Administration (NCUA) Friday began what it said would be periodic reporting to stakeholders on the status of the corporate credit union system.
In its inaugural communication, the agency said normal operations and transactions have continued uninterrupted and liquidity remains stable at f U.S. Central FCU (U.S. Central) and Western Corporate FCU (WesCorp), after being placed in conservatorships last Friday.
The update recapped the agency's recent actions, such as the release of the two corporates' boards of directors, CEOs, and one senior staff member have been released.
It also said cross analysis of the value of held securities continues and that the release of specific comparisons can be expected soon.
NCUA Chairman Michael Fryzel defended his agency's action to place U.S. Central and WesCorp under conservatorships, an action that has been questioned as unnecessary by some.
"(T)he cost of the corporate credit union stabilization program would have increased even if NCUA had not placed U.S. Central and WesCorp into conservatorship.
"Barring a deepening of the recession beyond what was incorporated into the loss projections, and economic uncertainties do remain, the $5.9 billion reserve should be sufficient to cover expected credit losses of holding the distressed assets to maturity," Fryzel said in the release.
Highlighting another point of controversy, Fryzel said that while analysis by Pacific Investment Management Company LLC (PIMCO) was one factor in arriving at this reserve, it served to refine and supplement NCUA's own calculations.
Fryzel stated that NCUA selected PIMCO partly because it had not sold any of the bonds being analyzed and was not engaged in providing any other services to corporate credit unions.
Fryzel noted that any firm with expertise to evaluate the bonds is a potential purchaser. However, he said there is not conflict of interest in PIMCO's involvement because the NCUA intend to hold the securities to maturity, an action the chairman said was recommended by PIMCO.
The Credit Union National Association (CUNA) has urged the NCUA to make public more information on PIMCO and any analysis that lead to the agency's actions to conserve two corporate credit unions last week.
Flexible accounting stance may come from NCUA
WASHINGTON (3/30/09)—If an accountant is willing to be flexible about when a credit union books the cost of their 1% premium being assessed to replenish the National Credit Union Share Insurance Fund (NCUSIF), the National Credit Union Administration (NCUA) said it will be okay with that.
A senior NCUA staff member told the Credit Union National Association that the agency will not necessarily challenge a decision of a credit union's CPA or auditor to take into consideration a recent legislative proposal by the NCUA when making an accounting decision about when to book the replenishment.
The NCUA declared a premium would be collected from natural person credit unions later this year to cover the cost to the NCUSIF of the agency's actions to stabilize corporate credit unions liquidity.
The agency announced Thursday that it has drafted legislation to allow credit unions to spread the cost of the replenishment over as many as seven years. However, it will take an act of Congress to authorize the longer time frame.
Addressing the uncertain situation faced by credit unions, the NCUA staff member made the following points:
- NCUA does not set accounting rules;
- Based on what AICPA put out recently, credit unions can book their costs in 2008 or 2009;
- For credit unions that choose to book in this year, the NCUA already has advised that the 1% deposit replenishment must be booked by March 31;
- The premium will be assessed later in the year, likely September, and should be booked then; and
- The legislation being sought by the NCUA is not a certainly and therefore should not affect the March 31 statements.
Most important, NCUA said that if a credit union's CPA or auditor approves taking the legislation into consideration in deciding whether the 1% replenishment must be recognized by March 31st, NCUA will not necessarily challenge it.
Community development CUs oppose CRA for all CUs
WASHINGTON (3/30/09)—The National Federation of Community Development Credit Unions (Federation) reiterated its decade-long opposition to extending the Community Reinvest Act (CRA) to credit unions, while backing its application to mortgage banks, securities firms, insurance companies, and other entities.
Proposed legislation to expand the reach of CRA requirements specifically exempts low-income designated credit unions, such as community development credit unions (CDCUs), from coming under CRA, a fact the Federation noted in its position statement.
However, the group underscored the exemption is appropriate for all credit unions because of financial cooperatives' fundamental differences from other mortgage lenders, which include:
- Credit unions are non-profit, member-owned cooperatives.
- They have no outside shareholders who demand ever-increasing quarter-over-quarter profits.
- Excessive executive compensation has not been an issue with credit unions.
- Credit unions have, for the most part, maintained a direct relationship with their borrowers, enabling many to rapidly restructure and modify mortgage loans.
"This contrasts markedly with institutions which are intimately and inextricably bound in the complex chain of securitization that has greatly hindered efforts to untangle the foreclosure crisis," the Federation position paper said.
It added, "In short, we believe that the basic philosophic and structural principles of the credit union movement can well serve as a template for the restructuring of the entire financial system."
The position paper emphatically endorsed CRA, saying it has been "immensely important to the revitalization of our nation's distressed areas."
"We believe that CRA must, indeed, be expanded and modernized so that it reflects the migration of vast amounts of money to entities that are not subject to reinvestment regulations," the Federation said.
The Federation represents more than 200 credit unions in 46 states that serve low-income urban, rural, and reservation-based communities. They range from the smallest of depositories, with less than $1 million in assets, to credit unions with more than $1 billion in assets, which—the Federation noted--nonetheless serve predominantly low-income communities.
The legislation referred to by the Federation is a bill introduced March 12 by Rep. Eddie Bernice Johnson (D-Tex.). The Credit Union National Association (CUNA) strongly opposes the application of CRA requirements to credit unions.
CUNA Senior Vice President of Legislative Affairs John Magill has said: "CRA was enacted because banks were redlining—drawing circles around communities to which they would not lend. All available data suggests that credit unions, on the other hand, are out there lending to their members—even and especially in these tough times."
Predatory lending bill introduced in House
WASHINGTON (3/30/09)—Co-sponsors of a new bill to crack down on predatory lending say H.R. 1728 is a tougher version of a bill in the last Congress designed to overhaul mortgage regulations.
The new Mortgage Reform and Anti-Predatory Lending Act of 2009 is was scheduled for a vote tomorrow by the House Financial Services Committee, but that vote has been postponed.
The bill is modeled after North Carolina's predatory lending statute. In 1999, North Carolina passed the nation's first anti-predatory mortgage lending law. It is considered by many to be a model for preventing abusive lending practices, while preserving consumer access to credit.
The Credit Union National Association (CUNA) strongly supports congressional action to protect consumers from abusive and deceptive lending practices.
Yet, CUNA earlier has advised federal lawmakers that credit unions' long history of favorable lending practices, and the range of regulation under which the movement operates, makes some provisions of such legislation more appropriate for the mortgage brokerage industry.
The bill is sponsored by Reps. Barney Frank (D-Mass.), chairman of House Financial Services, Brad Miller (D-N.C.) and Mel Watts (D-N.C.).
In a release announcing the bill, Watt said, "This bill represents an important step toward preventing the predatory and questionable practices that took hold in the mortgage lending industry in the past several years and undoubtedly contributed to our current housing crisis."
Specifically, according to the co-sponsors, the new measure will strengthen restrictions on compensation paid to mortgage loan originators and brokers that is based on a loan's interest rate and terms—known as yield-spread premiums.
It also includes stronger language on "assignee liability," intended to make mortgage securitizers, who package home loans into securities, more liable for fraudulent loans.
A key element of the legislation prohibits lenders from underwriting loans that consumers do not have a reasonable ability to repay and prohibits practices that increase the risk of foreclosure for consumers.
The bill also encourages the mortgage market to make it the norm to write 30-year, fixed-rate, fully documented loans, and move away from growth of "exotic" mortgages, which were a major factor in the current housing and foreclosure crisis.
Use the resource link below to read legislation details.
CU emails to agency ‘grassroots at work,’ says Hyland
ALEXANDRIA, Va. (3/30/09)—Credit union response to a Credit Unions National Association (CUNA) call to action on the on the need to spread out share insurance fund replenishment was "credit union grassroots at work," said National Credit Union Administration (NCUA) board member Gigi Hyland Friday.
CUNA specifically urged credit unions to contact the agency about the need to spread the costs of the NCUA's corporate stabilization efforts over a longer period of time and to request enhanced transparency on information underlying the board's corporate stabilization efforts.
CUNA launched the action alert in advance of a special closed NCUA meeting Thursday morning scheduled to discuss possible actions to mitigate the costs to natural person credit unions of the agency's actions to stabilize the corporate credit union system.
After the meeting, the NCUA announced a legislative proposal, which if enacted by Congress would create the Corporate Stabilization Fund. Through the fund, the costs of premiums and assessments could be spread over a period of up to 7 years.
In her release, Hyland also pledged to continue reviewing other available alternatives to further mitigate the cost to credit unions.
"These are difficult and challenging times for credit unions. While the agency must take appropriate supervisory action to assure the National Credit Union Share Insurance Fund is protected, we must also explore alternatives that alleviate the impact on credit unions," she said.
White House conference call adds detail to reg reform
WASHINGTON (3/30/09)—The White House and U.S. Treasury Department Friday gave more detail on its financial regulatory reform platform during a by-invitation conference call.
Those invited included the Credit Union National Association (CUNA) and other national financial services groups.
Jeffrey Bloch, senior assistant general counsel of the Credit Union National Association, said the call focused on four components of the Obama administration's restructuring efforts:
- Addressing systemic risk;
- Protecting consumers/investors;
- Eliminating gaps in the regulatory structure by reassigning resources and accountability; and
- Fostering international cooperation since U.S. actions will affect global markets.
The bulk of the call, Bloch said, was dedicated to discussing systemic risk. The administration described the following six areas to be explored to address systemic risk:
- Single independent regulator for all systemic important entities. Named by Congress, the regulator would issue substantive rules and responsibilities. The regulator would focus on risk, not the legal form of the entity and payments/settlement systems would be strengthened, such as for derivatives and other activities not currently closely supervised.
- Higher capital and risk management standards would be set for systemic important entities. Prompt Corrective Action requirements would be required at the holding company level.
- Hedge funds over a certain size would have to register and provide info to the Securities and Exchange Commission (SEC), and uniform requirements would be imposed. Data would be collected to assess the risk of these funds to determine how systemically significant they are.
- An addition of protection requirements for derivatives, such as credit default swaps. Dealers and others would be evaluated to determine their systemic importance, with a goal of increasing the amount of information reported and its transparency. There would also be more eligibility and suitability requirements with regard to derivatives.
- New SEC requirements for money market mutual funds would be implemented.
- Regulators would have stronger resolution authority for complex, non-bank entities.
Webcast on due diligence April 7, 28
WASHINGTON (3/30/09)--Credit unions and vendors seeking more information about due diligence can tune into a free webcast offered by VendorTrack April 7 or April 28.
The webcast will be held both days at 1 p.m. CT. VendorTrack was created by CUNA Strategic Services.
Under National Credit Union Administration requirements, credit unions must conduct due diligence on all third-party relationships. The webcast will discuss:
- How to increase exposure to credit unions that are potential customers;
- Ways to help credit unions meet their due diligence requirements;
- Methods to provide an efficient approach to request for proposals; and
- How to upload and store sensitive due diligence-related documents on a single, secure site.
For more information, use the link.
Inside Washington
- WASHINGTON (3/30/09)--A letter from the Credit Union National Association (CUNA) to federal regulators to request more information on corporate credit unions drew the attention of the Wall Street Journal last week. CUNA President/CEO Dan Mica wrote to the National Credit Union Administration (NCUA) requesting records of the securities held by the two corporate credit unions placed into conservatorships recently--U.S. Central FCU and Western Corporate FCU, known as WesCorp. The article noted CUNA welcomed the agency's recent legislative proposal to spread out over seven years costs associated with the NCUA's corporate stabilizations actions. But it also noted that Mica told the NCUA that credit unions are concerned about a lack of transparency, including how the NCUA arrived at estimates of losses and its decision to take control of the two corporates. The March 27 article noted CUNA's willingness to "do everything possible to avoid a legal battle" with the regulator while still looking at all options. Affected parties must decide by today whether to legally challenge the conservatorships of the two wholesale credit unions...
- WASHINGTON (3/30/09)--Sen. Christopher Dodd's (D-Conn.) legislation to crack down on abusive credit card practices could come up for a committee vote Tuesday. His bill would define universal default and double-cycle billing as unfair (American Banker March 27). It also would require that credit cardholders under 21 take a credit course or have a parent co-sign on the account and ban interest on fees. The Federal Reserve Board has proposed similar card regulations, but Dodd's proposal would be effective immediately, whereas the Fed's would take effect in 2010. Consumer groups said the bill is overdue, while the banking industry said they would fight it ...
- WASHINGTON (3/30/09)--An independent investigator of the Treasury Department indicated that it found cases where a bank regulator may have "ignored questionable backdating of capital injections" (Reuters March 27). The investigator found backdating while reviewing the IndyMac case, and indicated that an OTS official may have allowed the backdating to happen. On Thursday, the Office of Thrift Supervision (OTS) announced that Treasury Secretary Tim Geithner had removed Scott Polakoff, OTS acting director, and appointed John E. Bownman, deputy director and chief counsel, effective immediately. Polakoff is on leave pending a review by the Treasury of the OTS' August 2008 actions related to post-period capital contributions, OTS said ...
- WASHINGTON (3/30/09)--Though Treasury Secretary Timothy Geithner detailed his ideas for regulatory reform Thursday, he did not indicate which agency he thinks should oversee systemically significant institutions (American Banker March 27). Financial industry observers anticipate that the Federal Reserve Board would fill this role, but Geithner said there may be danger in giving one agency all of the power. The Treasury is looking at a range of suggestions, he added. Some lawmakers have said a new regulator should be created to oversee the institutions, but others, such as Rep. Barney Frank (D-Mass.), said doing so would take up too much time. The Treasury has introduced a bill that would place the Fed over systemically significant institutions, thought the Federal Deposit Insurance Corp. (FDIC) must consult with it before taking over an institution ...
- WASHINGTON (3/30/09)--The Financial Services Committee Thursday approved H.R. 1664, the Grayson-Himes Pay for Performance Act of 2009, which would prohibit certain compensation payments by companies that received money under the Troubled Asset Relief Program (TARP). The bill prohibits compensation payments that are unreasonable or excessive, restricts all non-performance based bonuses, and repeals a provision in the American Recovery and Reinvestment Act that would prevent employees from receiving bonuses if their company has not paid back TARP money. Financial institutions subject to the requirements also would have to submit a report the Treasury Secretary annually showing how many employees would or will receive compensation above specific dollar amounts during the fiscal year. The House could take up the bill this week ...
Schenk: Tax increases affect few small businesses
MADISON, Wis. (3/30/09)--Tax increases will affect only a small portion of small business owners, Mike Schenk, senior economist for the Credit Union National Association, told Business Week Thursday.
Debate among small business owners has raged since President Barack Obama announced a plan to cut back federal income taxes on those with incomes under $250,000, Business Week said.
Proponents claim less than 3% of small business owners have incomes above $250,000, while opponents counter that 15% or more of small business owners will be negatively affected by the proposal.
While the tax increases will have a substantial negative impact, they will only affect a small number of business owners, Schenk told the publication.
"I would ultimately conclude as an economist, that on balance there are some real positives to come out of [the budget proposal]," Schenk said. "The negatives will be apparent to a small sliver of the universe."
CU weighs in on overdraft fees in WSJ
NEW YORK (3/30/09)--An Oregon credit union administrator weighed in on the issue of overdraft fees in a Thursday article in The Wall Street Journal concerning the Federal Reserve's decision about whether to reign in the fees.
The Fed's 60-day public comment period on the matter ends March 30.
The Fed is contemplating several different approaches to the issue, ranging from not changing any current practices to requiring financial institutions to give notification to consumers on every purchase that would cause an overdraft, the newspaper said.
However, many financial institutions said the latter option is not realistic
"People think when they're making a purchase it's like a direct line into their account but it's not; it's a third-party processor making the transaction," Judy Rigwood, compliance director at TLC FCU, a $90 million asset, Tillamook, Ore.-based credit union, told the paper. "We don't have the technology to do that.
"Frankly, we offer overdraft service as a way to help our members," she added. "Some people rely on it almost like they would a payday loan. It allows them to make vital purchases."
Minnesota CU Network helps stem state foreclosures
SAINT PAUL, Minn. (3/30/09)--As foreclosures and their consequences continue to spread across the state and the nation, the Minnesota Credit Union Network (MnCUN) has teamed up with the Minnesota Home Ownership Center to provide credit unions access to a certified network of foreclosure counselors to help struggling members.
Through this network, counseling agencies are available in every county in the state. While Minnesota credit unions have been proactively working to assist members who encounter hard times, this relationship with the center gives credit unions another tool to have at their disposal.
Credit unions can refer members who are facing the threat of foreclosure to a Home Ownership Center-certified counselor, all of whom provide free services.
"Preventing foreclosures through counseling is a small fraction of the cost compared with the overall cost to families, neighborhoods and communities," said Ed Nelson from the center. "This program helps all Minnesotans. Every time a foreclosure is prevented, everybody wins--and even if the foreclosure can't be avoided, Minnesota families will be in a better position going forward for having worked with one of our counselors."
The number of Minnesota homes lost to foreclosure in 2008 was 26,265, a 29% increase over 2007, according to a report published by the center, The Family Housing Fund and The Greater Minnesota Housing Fund.
Through its network of local providers, the center assisted an estimated 20,000 people with pre-purchase, refinance and foreclosure prevention counseling last year. Of those families facing foreclosure, the center has an effectiveness rate higher than 50%.
The Minnesota Home Ownership Center is the state's leading independent, non-profit provider of information and resources aimed at helping Minnesotans obtain and maintain home ownership. With services available to all in need, the center places an emphasis on supporting low- and moderate-income Minnesotans and those who face barriers to home ownership by actively engaging in education, partnerships and outreach.
Counseling support is available in English, Hmong and Spanish. The center also will fund interpretation services in another language, if necessary, through the counseling network.
"Since credit unions are not-for-profit and have a true concern for their members' financial well being, this relationship with the Home Ownership Center can enhance credit unions' existing efforts and can be a win-win for all parties involved," said Mark D. Cummins, MnCUN president/CEO. "Oftentimes consumers at risk of foreclosure are scared or embarrassed of their situation. By publicizing this counseling network to their members, credit unions can position themselves--yet again--as a go-to resource for their members."
Also, the center will host free training workshops specially designed for organizations that have regular contact with at-risk homeowners, including credit unions. Marketing materials are also available for credit unions to promote the counseling network to their members.
NCUF distributes Filene tax report to REAL Solutions CUs
WASHINGTON (3/30/09)--As a resource for credit unions providing free tax services as part of the REAL Solutions program, the National Credit Union Foundation (NCUF) is distributing a new report that suggests credit unions can raise revenue by providing tax services in different venues.
The Economics of Serving Low-Income Employees at Tax Time: Implications for Credit Unions was published this month by the Filene Research Institute and partially funded by NCUF (News Now, March 26).
Rather than tweaking existing Volunteer Income Tax Assistance (VITA) programs, the report suggests opportunities for credit unions to provide fee-based tax assistance to:
- Credit union employees;
- Members and non-members--especially those residing in densely populated, low-income or underserved areas, and;
- Large companies' employees--especially select employee groups of credit unions.
The report suggests that credit unions could partner with tax preparers, non-profits, and corporations to provide fee-based tax assistance in the workplace--an often overlooked delivery channel.
In the report's case study, a large company--Staples--saved $480 for each employee who received tax assistance--at a cost of $75. It also proved to be an investment in loyalty. Employees who received tax assistance in the workplace were 32% more likely to remain with their employer a year later.
"Fee-based workplace tax assistance could be a new way for credit unions to expand services, build net income, attract new loyal members, and strengthen relationships with companies in their communities," said NCUF Executive Director Steve Delfin. "For all of these reasons, we plan to incorporate findings from this report into the REAL Solutions program moving forward."
Need a loan? Texas newspaper suggests CUs
SAN ANTONIO, Texas (3/30/09)--Scott Metzger, who owns a brewing company in San Antonio, Texas, turned to his local credit union for help when his bank loan fell through.
Security Service FCU, San Antonio, provided Metzger with a $550,000 small business loan and a $200,000 bridge loan (Express-News March 27).
Nick Naik, a hotel developer in the San Antonio area, also turned to the $5-billion-asset Security Service to refinance a $9 million loan for his hotel. His credit union experience was "excellent," simple and straightforward.
Both businessmen were interviewed by the Express-News for an article titled, "Need a Loan? Try a Credit Union," which noted that credit unions continue to lend money despite tough economic times.
Randolph-Brooks FCU, Universal City, Texas, also told the newspaper it provided funds for 215 real estate transactions in February. Credit unions can make loans because they didn't use the lending formulas that many banks used--which left them with toxic assets, said Robert Zearfoss, Randolph-Brooks senior vice president of mortgage lending.
Randolph-Brooks has $3.1 billion in assets.
Credit unions are "flush with cash," Texas Credit Union League CEO Dick Ensweiler told the Express-News. Credit unions are safe lenders and do not make risky loans, he added.
AVCU launches CU awareness campaign
SOUTH BURLINGTON, Vt. (3/30/09)--The Association of Vermont Credit Unions (AVCU) will launch a credit union awareness campaign April 6 that is modeled after the Pennsylvania Credit Union Association's iBelong campaign.
The campaign will use television ads to explain what credit unions are and how Vermont residents can find a credit union to join. The ads will air for eight weeks during morning network news shows, late afternoon talk shows, prime time shows and on cable networks (Newsline Express March 27).
The call-to-action of the campaign will be the iBelong website, where users can use a Google Maps locator to find a credit union. The iBelong website will go live this week and features a page about Vermont credit unions with links, and a "My Story" section where members can write about what their credit union means to them.
The ads also will run in the fall in conjunction with Co-op Month and International Credit Union Day.
Vermont is the third state, along with Illinois and Mississippi, to secure licensing for iBelong, AVCU said.
For more information, use the link.
Market News
MADISON, Wis. (3/30/09)
- Long-term mortgage rates fell to another record low last week, according to Freddie Mac. The average 30-year, fixed rate mortgage (FRM) dropped 13 basis points to 4.85%. That's a record low in Freddie's survey, which dates back to 1971 for the 30-year FRM. The 15-year FRM edged down 3 basis points to 4.58%, a record low for that series, which dates back to 1991. The one-year, adjustable-rate mortgage (ARM) declined 6 basis points to 4.85%. "The Federal Reserve's announcement that it intends to purchase Treasury securities over the next six months caused bond yields to drop and mortgage rates followed," said Freddie Mac Vice President and Chief Economist Frank Nothaft. "Rates for 30-year FRMs peaked last year at 6.63% on July 24th. With this week's 30-year FRM, the interest rate difference is almost 2 percentage points, which amounts to a savings of about $225 in monthly mortgage payments for a $200,000 loan," added Nothaft. For CUNA's Daily Financial Rates, use the link ...
- California remains ground zero for the housing crisis, according to a report by the state Association of Realtors. The median price for an existing, single-family home plunged 41% from a year earlier to $247,590 in February. In comparison, the U.S. median home price dropped 16% over the period. Foreclosed homes push down median prices because they typically are sold at a discount. California has one of the highest foreclosure rates in the U.S., according to Irvine, Calif.-based RealtyTrac Inc. Falling prices have lured homebuyers. Home sales in California jumped 83% in February from a year earlier, the state realtors group reported. And sales are clearing out inventories. At the current sales pace, the number of months needed to exhaust the supply of homes on the market in California fell to 6.5 months, down sharply from 15.3 months in February 2008 (Bloomberg.com March 25) ...
- Seven states saw unemployment rates of more than 10% in February--up from 4 states in January, the Labor Department reported Friday. At 12%, Michigan had the highest jobless rate in the country, followed by South Carolina (11%) and Oregon (10.8%). North Carolina's rate rose to a record-high 10.7%. Rhode Island's rate increased to a record-high 10.5%. California's rate also was 10.5%, while Nevada saw a 10.1% rate. Nationwide, the unemployment rate rose to a 25-year high of 8.1% in February. Analysts expect the rate to hit 10% by year end (Associated Press via Yahoo! News March 27) ...
- Even hedge fund managers are suffering in the deep recession, relatively speaking. Top hedge fund managers on average earned 48% less in 2008 than the previous year, but top managers James Simons, John Paulson, John Arnold, and George Soros still received more than $1 billion each, according to Alpha Magazine. The 25 top managers made an average of $464 million each last year--down from a record $892 million each in 2007. "The fact remains that $464 million is a kingly sum, especially during a year of global recession, stock market wipeouts and vanishing wealth," noted the magazine. The credit crisis hit the hedge-fund industry hard last year, forcing many managers to sell assets and return money to clients. Managers lost more than 18%, on average, according to Hedge Fund Research--the weakest results since the research firm started tracking the data in 1990. Hedge-fund investors expect another $168 billion to leave the industry this year, according to a Deutsche Bank poll (MarketWatch March 26) ...
- Personal income declined last month while spending slowed, the Labor Department reported Friday. Personal income fell 0.2% in February, the fourth decline in the last five months. Personal consumption expenditures (PCE) rose 0.2%, slowing from a 1% advance in January. However, much of the small gain in consumer spending last month was due to an increase in prices. Real (inflation-adjusted) PCE fell 0.2%. Real income declined 0.4%. Income from wages and salaries dropped 0.4% in February, the fourth consecutive decline, as job losses continued to mount. The personal savings rate fell to 4.2% from 4.4%. Inflation remained tame last month. The core PCE price index, the Federal Reserve's preferred inflation gauge, rose 1.8% over the past year, within the Fed's comfort zone ...
- Consumer confidence remained near a 28-year low in March. The Reuters/ University of Michigan Surveys of Consumers' final index of sentiment edged up to 57.3, from 56.3 in February and not far from the 28-year low of 55.3 hit in November. The record low for the survey was 51.7 in May 1980. Consumers anticipated the smallest annual income gains ever recorded, at –0.2%, compared with 2.5% a year earlier. The index of consumer expectations, which is correlated with consumer spending, increased to 53.5 from 50.5. The index of current conditions fell to 63.3 from 65.5. "Although the data indicate that the downward momentum in confidence ended in the closing months of 2008, there is no evidence that consumers expect their finances to improve any time soon," said Survey Director Richard Curtin (Reuters via CNNMoney.com and Bloomberg.com March 27) ...
News of the Competition
MADISON, Wis. (3/30/09)
- A Michigan banker sued Citizen's Republic Bancorp Inc., claiming he was fired for questioning the legitimacy of a $7.5 million bonus for the company's CEO on the eve of a federal bailout payment. John D. Schwab alleged he was fired from his position of executive vice president by then-CEO William Hartman. Schwab opposed a four-year contract for Hartman that included the bonus. Schwab filed the lawsuit Tuesday in Genesee County Circuit Court in Flint, Mich. The suit alleges that Hartman had sought the deal in anticipation of obtaining $30 million in federal aid (Workforce Management March 26) ...
- The Federal Deposit Insurance Corporation (FDIC) is seeking public comment until April 10 on it plan to auction and sell toxic assets. FDIC is asking a wide range of questions on the matter--such as which assets should be eligible, and how the fees for government-guaranteed debt should be assessed. The FDIC plan asked what priorities the government agency should consider in deciding which pools to set for the initial auction and what the best size and characteristics of the pool should be, analysts said. "How can the FDIC best encourage a broad and diverse range of investment participation?" the agency's plan asked. "How can the FDIC best structure the valuation and bidding process to motivate sellers to bring assets to the "public-private investment funds?" (American Banker March 27) ...
- Less strain in the U.S. financial system is the apparent reason for U.S. banks and financial companies borrowing less from the Federal Reserve's discount window in the latest week. Total borrowings averaged $134.34 billion per day in the week ended March 25--a drop from a daily rate of $138.18 billion a week earlier. However, the Fed's balance sheet--a general barometer of its overall lending--grew slightly to $2.055 trillion Wednesday from $2.051 trillion a week earlier. Analysts said the majority of the increase is due to the start of the government's Term-Asset-backed Securities Loan Facility--otherwise known as TALF--last week (Reuters March 26) ...
- Card issuers' profits are being threatened by rising unemployment, according to a report issued Thursday by Keefe, Bruyette & Woods Inc. Large card issuers could handle up to a 12% unemployment rate--even though that would create substantially higher charge-offs---but a higher unemployment rate would create significant liquidity and capital problems, according to the report's author, Sanjay Sakhrani. The report predicts that American Express Co. will have charge-off rates of roughly 8.7% for the first quarter and 13.2% for the fourth quarter. MasterCard and Visa are fairly well-positioned to get through the downturn, Sakhrani said (American Banker March 27) ...
Be on guard for tax-related ID theft
SAN FRANCISCO (3/30/09)--Tax documents are teeming with personal information for crooks to capture and use to compromise your identity. Whether you file taxes electronically or prefer traditional pen and paper, take steps to prevent personal data from reaching the wrong hands (MarketWatch March 24).
While millions of taxpayers safely file with the Internal Revenue Service (IRS) every year, the security of your personal information is never guaranteed. Thieves can capture data in a number of ways, including swiping tax papers from your mailbox, hacking in to your computer, or confiscating your information from a tax preparer who unknowingly--or intentionally--leaks your information. Also, the upsurge in online filing--up 20% from last year--can give crooks easier access to personal information unless you take the proper precautions.
However you file, you can help protect yourself by taking the proper precautions:
Filing electronically:
- Don't file-share. File-sharing software that has access to your hard drive can share anything stored on it—including your tax return and other sensitive documents. Also, downloads from file-sharing sites may be infected with keylogging viruses or malware, detailing your every stroke to thieves.
- Secure your computer. Install a firewall and update anti-virus and anti-spyware software often.
- Create strong passwords. Use a combination of capital and lowercase letters, numbers and symbols when creating passwords to download your W2 forms, 1099s, and other personal tax documents from your employer. Don't save these passwords in your web browser (smallbiztechnology March 16). Better yet, think of a sentence you won't forget, and create a password from that sentence; for example, "My #1 dog is a Lab the color of night," becomes "M#1diaLtcon." You won't need to write down the password as long as you remember the sentence.
Using a tax preparer:
- Check out the preparer's reputation. Check with the Better Business Bureau (bbb.org) to ensure you are working with a reputable tax preparation firm.
- Ask about security policies. How many people have access to your information? Do they encrypt electronic transmissions? How do they keep data safe?
Pen-and-paper filer:
- Cover your tracks. When making photocopies of any financial document, be sure the copier does not save images in memory. Shred any documents used in tax preparation you no longer need.
- Secure your mail. Don't let tax documents sit in your unlocked mailbox. Instead, mail your tax return from a secure location such as the post office or an official U.S. Postal Service collection box.
For more information, read "How to Be ‘Spywary': It's More Software Than You Bargained For" in Home & Family Finance Resource Center.
NACUSO conference to include NCUA staff
NEWPORT BEACH, Calif. (3/30/09)--Attendees of the National Association of Credit Union Service Organizations (NACUSO) 2009 Annual Conference can speak directly with National Credit Union Administration (NCUA) board and senior staff, NACUSO said.
NCUA will share its strategy to deal with the financial crisis, its vision for the corporate system, the role it sees credit union service organizations playing to shape credit unions during recovery, and regulatory changes with attendees.
Staff also will answer credit unions' questions and help them in meeting any challenges related to the corporate stabilization effort, NACUSO said.
The conference is scheduled for May 3-6 in Las Vegas.
Copyright © 2009 - Credit Union National Association, Inc.
