Archive Links

Consumer Archive
CU System Archive
Market Archive
Products Archive
Washington Archive

Washington Archive


Frank announces House hearing on compensation

 Permanent link
WASHINGTON (1/14/10)—House Financial Services Committee Chairman Rep. Barney Frank (D-Mass.) on Wednesday announced that the Committee will “discuss the issue of compensation practices for both financial and non-financial firms” at a Jan. 22 hearing. During the hearing, Frank said that “the question of compensation for people in the financial industry is a legitimate cause of concern in the country as a whole,” and he plans to look at the issue of compensation “in the broadest context.” Among the issues cited by Frank are the potential broadening of say on pay rules. Frank also said that he intends to explore the claims of many financial firms that they would lose key employees or simply move overseas if the tougher standards contained in recently passed legislation are imposed. The House passed a number of financial regulatory reforms before leaving for the recently completed winter recess, and the Senate plans to take up financial reforms after it returns to Washington early next week.

Mica encourages strengthening not abandoning CU charter

 Permanent link
WASHINGTON (1/14/10)--In a recently published letter to the editor of American Banker, Credit Union National Association President/CEO Dan Mica encouraged legislators to support “measures that would further strengthen” the credit union charter, “including alternative capital sources.” Responding to a recent Alan Theriault editorial which recommended “rules that more aggressively promote the conversion of credit unions to banks,” Mica said that “in this environment, credit unions are looking to enhance their charter, not run from it.” Theriault’s suggestion that credit unions abandon their charter “flies in the face of today's economic realities and public sentiment,” Mica added. Additionally, Mica said that current National Credit Union Administration rules permit credit unions to convert to different charters, including those of mutual savings banks, “provided clear and adequate disclosures are made to the credit unions' members.” However, “relatively few of the nation's 8,000 credit unions have opted to convert their charter” in “recent years.” Credit unions are thriving under their charter, in spite of the ongoing economic difficulties, and while Theriault in his editorial indicated that credit union capital is "decimated," Mica noted that the average capital-to-asset ratio for credit unions remains at 10%, “a number many banks would envy.” “Mr. Theriault's advocacy of a bank charter in these times amounts to swimming against the tide,” Mica said, citing public disgust with the behavior of many larger banks and a recently completed CUNA consumer survey which found that the majority of consumers identify credit unions as being more "financially safe and sound" than banks.

N.C.s Hagan pledges support for lifting MBL cap

 Permanent link
WASHINGTON (1/14/10)--Praising credit unions for their “critical role” in getting credit flowing, Sen. Kay Hagan (D-N.C.) announced her support for legislation that would increase the member business lending cap for credit unions. S. 2919, which would increase the credit union MBL cap to 25% of assets, was recently introduced by Sens. Mark Udall (D-Colo.), Charles Schumer (D-N.Y.), Barbara Boxer (D-Calif.), Joseph Lieberman (I-Conn.), Olympia Snowe (R-Maine), Susan Collins (R-Maine) and Kirsten Gillebrand (D-N.Y.). Gillibrand earlier this week also spoke in support of including S. 2919 as part of pending job-creation legislation that will soon come up in Congress. In her remarks, Hagan cited CUNA information that estimates that granting credit unions the higher business lending authority could provide $10 billion in new small business loans and at least 108,000 new jobs. “As we move forward this year with plans to create jobs in our country, we’ve got to ensure that we are doing all we can to support small businesses,” Hagan added.

CUNA monitors Obama bank-fee plan

 Permanent link
WASHINGTON (1/14/10)--The Obama administration today will likely present a plan that would replenish the funds spent to prop up failing banks by introducing a fee to be levied on large financial institutions. The exact amount set to be recouped is widely reported to be more than $120 billion over a 10-year period. While the Credit Union National Association has not seen the proposal, it is monitoring for any related developments. The proposal will reportedly only affect around 20 of the largest banks that accepted funds from the government’s Troubled Asset Relief Program (TARP). CUNA vice president of legislative affairs Ryan Donovan said that the proposal will likely mean little to credit unions. “ We're still waiting to see the details of the proposal, but based on what we have learned so far, if you accepted TARP money and you are a big bank, you might be subject to fees. If you do not and are not, then you likely will not,” he added. As reported by Reuters, a number of potential structures for the fee are being discussed, and the fee may be incorporated into the Obama administration’s fiscal 2011 budget proposal, which will be presented to Congress next month.

Task force meets to hammer out CUNA corp CU remarks

 Permanent link
WASHINGTON (1/14/10)--The Credit Union National Association’s (CUNA) corporate credit union task force has been reviewing the National Credit Union Administration’s (NCUA) comprehensive proposal in detail and discussing the corporate credit union system during a three day meeting in Washington. The task force, led by VyStar CU President/CEO Terry West, analyzed the NCUA’s recently proposed rules for corporate credit unions which would adjust the current corporate capital requirements by replacing the current 4% minimum total capital ratio with a 4% minimum leverage ratio, a 4% tier one risk-based capital ratio, and an 8% total risk-based capital ratio for adequately capitalized corporate credit unions. Corporate credit unions would be required to demonstrate capital ratios of 5%, 6% and 10%, respectively, to be considered well capitalized. The task force is comprised of federal credit unions, state credit unions, and state credit union leagues. The proposal would also prevent corporate credit unions from investing in collateralized debt obligations and net interest margin securities, and would limit so-called "golden parachutes" for troubled corporates and require corporate credit unions to disclose their executive compensation packages. The proposed rules also add new net economic value tests, impose new investment concentration limits and weighted average life constraints, and prohibit corporates from redeeming member certificates at a premium. The NCUA rules would also seek to ensure that corporate boards are mainly comprised of natural person credit union employees, and would require any of these board members to hold the position of CEO, CFO, or COO at their member entity. The CUNA task force met with a range of experts and stakeholders, including Community America Credit Union CEO Dennis Pierce, Association of Corporate Credit Unions executive director Brad Miller, SW Corporate CEO John Cassidy, First Corp CEO Pete Pritts, and Callahan and Associates CEO Chip Filson. NCUA General Counsel Bob Fenner, Office of Corporate Credit Unions Director Scott Hunt, and other senior NCUA staff also met with the group, and the NCUA will be holding conference calls and other meetings in the coming weeks. The NCUA is continuing to reach out to individual credit unions to discuss their corporate proposal, and the corporate proposal will be a topic of discussion at an upcoming NCUA town hall meeting to be held in Dallas, Texas. The NCUA has given a deadline of March 9, 2010 for all comments on its proposed changes to corporate credit union rules to be submitted. CUNA plans to develop a draft comment letter by mid-February, and will also address the NCUA proposal and key issues regarding corporate credit unions at a breakout session of the Governmental Affairs Conference on Feb. 23 at 2 p.m. For the NCUA proposal, CUNA's summary, and a chart comparing the proposal with the current rule, use the resource link.

Inside Washington (01/13/2010)

 Permanent link
* WASHINGTON (1/14/10)--The heads of four large Wall Street banks testified Wednesday before the Financial Crisis Inquiry Commission. The commission’s role is to find the cause of the economic crisis. Lloyd Blankfein of Goldman Sachs said there were three factors to blame for the crisis: 10 low, long-term interest rates; federal policies to promote homeownership; and huge growth in foreign capital (American Banker Jan. 14). John J. Mack of Morgan Stanley said proprietary trading should be scaled back, and noted he supported creating a systemic risk regulator and a federally regulated clearinghouse for derivatives. Jamie Dimon of JPMorgan Chase said lawmakers should re-examine regulators’ roles in the system. No institution should be too big to fail, he added. During his opening remarks, commission Chair Phil Angelides said that consumers are angry because Wall Street is earning record profits after receiving a government bailout while families are struggling. More than two million families have lost their homes and more than 16% of the work force are underemployed or unemployed ... * WASHINGTON (1/14/10)--The Federal Reserve Board does not want to be forced into revealing the names of financial firms that might have failed had the government not stepped in with bailout money, and the agency is asking a U.S. appeals court to overturn a federal judge’s order that the Fed do so. The case revolves around a formal information request made by Bloomberg LP, parent company of Bloomberg News. The Fed argues against making the information public, saying that action could cause a run on those lenders or prompt a sell-off by investors. Bloomberg, on the other hand, has argued that the public has the right to know. Whatever the outcome at the appeals court level—and a ruling is not anticipated there for months--it is unlikely that will be the end of the argument. The losing party may then seek a rehearing or appeal to the full appeals court, and could eventually even petition the U.S. Supreme Court (American Banker Jan. 13) … * WASHINGTON (1/14/10)--The Federal Deposit Insurance Corp. (FDIC) introduced its plan to link bank compensation practices to premium assessments, but Comptroller of the Currency John Dugan and Office of Thrift Supervision Director John Bowman opposed the move (American Banker Jan. 13). The plan conflicts with other pending policies to restrict compensation, Dugan and Bowman said. FDIC’s proposed model would not set specific limits on compensation. Rather, institutions would be discouraged from giving too much compensation up-front to lenders and employees in risky jobs. Employee pay plans also would have to be approved by a separate subcommittee. FDIC officials said “loose” pay practices have led to bank failures. Bowman, however, said most bank executives are not overpaid ... * WASHINGTON (1/14/10)--A review of 15 lenders by the Department of Housing and Urban Development (HUD) was not an investigation and the companies can continue writing Federal Housing Administration (FHA) loans, the department said Tuesday (American Banker Jan. 13). HUD picked 15 lenders for the review based on high default rates. The review aimed to determine why the companies had high rates and whether there was wrongdoing. Several lenders told American Banker they were surprised about the review. Bernie Cason, president of Mac-Clair Mortgage Corp., said he was blown away when he received a subpoena. Richard Reese, president of Dell Franklin Financial LLC, also said he was very surprised. Phillip Schulman, partner at K&L Gates LLP, said that HUD should not have released the names of the lenders under review because it looks as though the companies did not originate the loans in compliance with FHA standards ... * WASHINGTON (1/14/10)--Proposals that would open central bank policymaking to more scrutiny could lead to the politicization of the central bank, which puts the U.S. on a path to “economic ruin,” Richard Fisher, president of the Federal Reserve Bank of Dallas, warned Congress Tuesday. Fisher’s comments in a speech were aimed at a proposal by Rep. Ron Paul (R-Texas) that would subject the Federal Reserve to audits. The House approved Paul’s measure last month. The Senate version has 31 co-sponsors. Fisher also said Fed bank presidents shouldn’t be subject to Senate confirmation ...