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Policymakers must know CUs remain strong says Mica

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WASHINGTON (1/23/08)--Credit union loan quality will continue to feel the strain from the turmoil in today’s economy but remains strong by historical standards, Credit Union National Association (CUNA) President/CEO Dan Mica noted following yesterday’s market activity. “Yes, we will probably see a rise in delinquencies and charge-offs, but nothing like other sectors are experiencing,” said Mica. “It’s important for policy makers, the media and others to view our situation in its proper perspective.” Mica noted, for example, that the credit union delinquency rate remains under 1% and the net charge-off rate is still less than half a percent. First-mortgage charge-offs at CUs in the third quarter were almost zero (0.02%). While these levels are expected to rise later this year and will eat into credit union net income, Mica sees the credit quality issues are manageable, especially given credit unions’ high levels of capital. “In the mortgage market, we’ve said that credit unions are part of the solution, not the problem, and that continues to be the case,” he added. Mica agreed yesterday’s 75 basis-point rate cut by the Federal Reserve would likely help mitigate the effects of the slowing economy (see related story).

CUNA supports delay in UBIT accounting guidance

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WASHINGTON (1/23/07)—There is too much confusion surrounding the Financial Accounting Standards Board’s (FASB’s) Interpretation 48 (FIN 48) for nonpublic entities and the issues involved to proceed with an original effective date, said the Credit Union National Association (CUNA) in a comment letter. FIN 48 is applicable to unrelated business income taxation (UBIT) for state-chartered credit unions and provides direction on how to financially recognize such tax when there is a question regarding the amount of the tax liability. It is also important to many CUSOs, which are subject to state and federal tax. The CUNA letter was in support of a recommendation by FASB’s own Private Company Financial Reporting Committee (PCFRC) that the effective date be delayed. Scott Waite, chairman of CUNA’s Accounting Task Force, noted a recent PCFRC survey on how FIN 48 would apply in situations in which the UBIT tax liability has not fully been determined. CUNA publicized the survey through its online news service, News Now, and encouraged affected credit unions nationwide to respond to the survey by a January 31st deadline. “In light of the FASB's own questions regarding the application of FIN 48 as well as the uncertainty of credit unions and accounting professionals, we strongly support the proposed delay in the effective date of FIN 48,” wrote Waite in the Jan. 18 letter. Waite is SVP/CFO of Patelco CU, in San Francisco, as well as a member of FASB’s Financial Accounting Standards Advisory Council and its Small Business Advisory Committee. Waite highlighted credit union concerns that the qualifications for a deferral in FSP 48-b were not very clear. For instance, he said, FSP 48-b assumes the adoption of FIN 48 if previously prepared GAAP financial statements have been provided to third parties. “We believe FASB has not provided sufficient guidance regarding which entities are included in the term, ‘third parties.’ For example, we believe that if a credit union has provided required statements that conform to GAAP to its regulator but has not adopted FIN 48, then it should, as a result, be entitled to the deferral," Waite told News Now Tuesday. The UBIT issue was in the news spotlight last week when Community First CU filed a complaint in federal court challenging the Internal Revenue Service (IRS) on its determinations that certain insurance products offered to members fall outside the credit union's main mission and are subject to the tax. Community First, based in Appleton, Wisc., seeks a refund of taxes paid on income from several insurance products. The credit union said at issue is about $54,000 in taxes it paid in 2006 on income from the sale of credit life and credit disability insurance, and guaranteed auto protection (GAP) insurance. Use the resource link below to access CUNA’s complete comment letter.

Inside Washington (01/22/2008)

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* WASHINGTON (1/23/08)--Although Federal Housing Administration and mortgage reform legislation is a priority for the Bush administration, it will not likely be a part of an economic stimulus plan Congress is working on, Treasury Secretary Henry Paulson said Friday (American Banker Jan. 22). The administration is working to help the economy more broadly in light of the housing price decline, he said. Sen. Charles Schumer (D-N.Y.) confirmed that the Bush administration supports increasing Fannie Mae’s and Freddie Mac’s loan limits temporarily, but not without comprehensive reform, he said. Paulson may support raising loan limits without comprehensive reform, but “it’s not worth slowing down the package,” Schumer said ... * WASHINGTON (1/23/08)--House Oversight and Government Reform Committee Chairman Henry Waxman is asking former chief executives of Citigroup Inc., Merrill Lynch and Co., and Countrywide Financial Corp. to justify their compensation at a Feb. 7 hearing (American Banker Jan. 22). Waxman charges that the executives pocketed large sums while the companies they ran lost money. None of the witnesses have agreed to show at the hearing. The executives include Charles Prince, E. Stanley O’Neal and Angelo Mozilo, respectively ... * WASHINGTON (1/23/08)--The U.S. Supreme Court Tuesday rejected an appeal for a $40 billion lawsuit brought against Wall Street firms that engaged in business with Enron Corp. The appeal rejection comes shortly after the Stoneridge ruling, which asserted that third parties are not liable for securities fraud unless they were involved with making investment decisions (The Wall Street Journal Jan. 22). Lower courts, using the Stoneridge precedent, will decide if the Enron case should be revived. The involved firms include Merrill Lynch and Co., Credit Suisse Group, Barclays PLC and Pershing LLC ... * WASHINGTON (1/23/08)—The Federal Deposit Insurance Corp. (FDIC) Tuesday named two long-time agency staffers to senior positions within its division of supervision and consumer protection. Robert W. Mooney, who joined the FDIC in 1989, was named deputy director for consumer protection and community affairs. Kathleen G. Nagle, who has 33 years of experience in the consumer protection field, was named associate director for consumer protection … * WASHINGTON (1/23/08)--National Credit Union Administration Board Chairman JoAnn Johnson highlighted the importance of financial education while volunteering at an elementary school branch of State Department FCU in Alexandria, Va., on Martin Luther King Jr. Day. She commended the credit union and other credit unions for their commitment to financial literacy. “[Volunteering] is a higher calling and for credit unions, it comes naturally,” she said ...