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Washington Archive

Washington

NEW: NCUA sues JP Morgan, WaMu, others over $22 billion in securities sales to corporates

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ALEXANDRIA, Va. (UPDATED: 10:30 A.M. ET, 1/7/12)--The National Credit Union Administration (NCUA) has filed suit against J.P. Morgan Securities as successor-in-interest to Washington Mutual Bank.

The agency alleges federal and state securities laws were violated when $2.2 billion of mortgage-backed securities were sold to three corporates.

J.P. Morgan Securities acquired Washington Mutual in 2008.

WaMu Capital Corp., Long Beach Securities Corp., and WaMu Asset Acceptance Corp. are also named as defendants in the suit.

The suit, which was filed late Friday in a U.S. District Court in Kansas, alleges that the firms made misrepresentations in connection with the underwriting and subsequent sale of $2.2 billion in mortgage-backed securities to three corporate credit unions--U.S. Central FCU, Western Corporate FCU and Southwest Corporate FCU.

The NCUA's complaint charges that underwriting guidelines in the offering documents were "systematically abandoned." Securities that were sold to the three corporates were "significantly riskier than represented in the offering documents," and the securities "were destined from inception to perform poorly," the NCUA complaint adds.

All three corporate credit unions failed as a result of these purchases, the NCUA alleges.

"The damage caused by the actions of firms like Washington Mutual has been extremely expensive to contain and repair, and that job isn't finished, yet," NCUA Chairman Debbie Matz said announcing the new lawsuit. "All the credit unions we supervise and insure have had to share this burden, so it's only right that the people who caused the damage be required to pick up that burden, as well."

This is the third time the agency has taken action against J.P. Morgan Securities. In December, in the largest suit filed by the agency, the NCUA took taken legal action against J.P. Morgan Securities and Bear, Stearns & Co. over $3.6 billion in mortgage-backed securities sold to four corporate credit unions.

The NCUA has also filed suit against Credit Suisse (USA), RBS Securities, Goldman Sachs, Barclays Capital and Wachovia, and each of these suits are progressing through the court system. The agency has settled with Citigroup, Deutsche Bank Securities, and HSBC, avoiding the cost of litigation and bringing in more than $170 million in funds that were lost due to the corporate credit union investments.

For the full NCUA release, use the resource link.

Inside Washington (01/07/2013)

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  • WASHINGTON (1/7/13)--The Office of the Comptroller of the Currency (OCC) said Thursday banks will be provided more time to comply with restrictions on swaps activities outlined in the Dodd-Frank Act. Under Dodd-Frank, banks are prohibited from using federal assistance such as federal deposit insurance or access to the discount window to support swaps activities (American Banker Jan. 4). The new rules will in effect force some banks to stop or divest their swaps businesses. Regulators, including the OCC, the Federal Reserve Board and the Federal Deposit Insurance Corp., had previously set an effective date of July 16. But Dodd-Frank allows a financial institution's primary regulator to extend the transition period. "An insured Federal depository institution that is or will be a swaps entity and that seeks a transition period for its nonconforming swaps activities should formally request a transition period from the OCC," said in the guidance. "The OCC is prepared to consider such requests favorably, provided that the requests conform to the guidance provided" …
  • WASHINGTON (1/7/13)--President Barack Obama must decide whether to re-nominate Tony West to become associate attorney general (American Banker Jan. 4). West's Senate confirmation process was disputed over when it is appropriate to charge banks with fair-lending violations. Last year, in a behind-the-scenes deal with the Justice Department, St. Paul, Minn., city officials agreed to drop their Supreme Court appeal of a case that many observers say would curtail the federal government's use of a controversial legal theory in fair-lending cases. In exchange for dropping the case, the Justice Department agreed not intervene in an unrelated lawsuit that could have yielded at least $180 million in damages for U.S. taxpayers, according to congressional Republicans. West, formerly the head of the Justice Department's civil division, was involved in the internal discussions that led to the St. Paul deal …

House majority whip, new Financial Services chair join GAC lineup

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WASHINGTON (1/7/13)--Two high-profile U.S. House members have been added to the growing Credit Union National Association (CUNA) 2013 Governmental Affairs Conference (GAC) lineup: House Majority Whip Kevin McCarthy (R-Calif.) and new House Financial Services Committee Chairman Jeb Hensarling (R-Texas).



McCarthy was recently elected to serve his fourth term in the House of Representatives, and remains a member of the House Financial Services Committee.

Hensarling, who officially began his stint as chairman of that committee when the 113th Congress convened last week, also served as Republican Committee chair in 2012 and was Republican Conference chair of 2011's Congressional Joint Select Committee on Deficit Reduction.



The 2013 GAC will also feature an enlightening point-counterpoint political discussion between national political stars Haley Barbour and Terry McAuliffe. Barbour, who was once called "the most powerful Republican in politics," has been hailed as one of the country's top political strategists. McAuliffe, former chairman of the Democratic National Committee (DNC) and Bill Clinton's re-election committee, most recently led Hillary Clinton's campaign for the Democratic nomination for president. The pair first encountered one another in the 1990s while respectively attacking and defending Clinton, have become friends as well as competitors, and are accustomed to sharing a stage.

NBC News anchor and best-selling author Tom Brokaw and award-winning personal finance journalist and author Jean Chatzky are also scheduled to speak on that same stage.

ABBA tribute band ABBA The Concert will kick off the 2013 GAC on Feb. 24, and more speakers and session topics will be added to the 2013 GAC lineup in the weeks to come.

The 2013 GAC will run until Feb. 28 at the Washington Convention Center.

This year's GAC theme, Powerful Cause, Positive Effect, reflects the credit union commitment to the 95 million working Americans who rely on credit unions every day.

CUNA's GAC is the credit union movement's premier political event and its largest national conference, each year providing more than 4,000 credit union executives and board members an opportunity to hear influential leaders from Congress, presidential administrations and federal regulatory agencies.

For more information, follow the @CUNAverse twitter hashtag #CUNAGAC.

Use the resource link to register for the GAC.

Hensarling sets committee sights on creating private flood insurance

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WASHINIGTON (1/7/13)--The new chairman of the House Financial Service Committee, Rep. Jeb Hensarling (R-Texas), has committed his panel to taking up the issue of flood insurance with a look at ways to privatize the flood insurance market.

In remarks to his House colleagues Friday, Hensarling called the existing National Flood Insurance Program (NFIP) "broke" and a taxpayer burden.

In the middle of 2012, Congress approved a five-year extension of NFIP and that legislation contained some reforms to the program. The Credit Union National Association (CUNA) strongly supported the extension for the certainly it lends credit unions as mortgage lenders.  Over time, the government program has been subject to almost a dozen short-term extensions--and even some lapses of authorization.

CUNA has said the erratic history has complicated the mortgage lending process and the longer-term extension helps ensure that credit unions--and the consumers they serve--can have a much greater degree of confidence in the lending process and the prospect of financing their homes.

Hensarling called the 2012 reforms "modest" and noted he has "long been critical" of government-provided flood insurance.

"As chairman of the Financial Services Committee, I wish to inform all members in this Congress, our committee will take up legislation to transition to a private, innovative, competitive, sustainable flood insurance market," he said Friday during debate on the $9.7 billion Hurricane Sandy aid package that was approved.

CUNA exam survey deadline is nearing

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WASHINGTON (1/7/13)--There is still time for credit unions to take part in the Credit Union National Association's (CUNA) examination survey, but that time is running out: the final deadline for responses is Jan. 15.

CUNA and state credit union leagues developed and released the short survey to give all credit unions a chance to describe the strengths and weaknesses of their state and federal regulatory examination experiences. Through the survey, credit unions can detail their own experiences with on-site examinations and discuss how satisfied they are with National Credit Union Administration (NCUA) and state examiner performance, and the results of those exams.

The information gleaned from the survey responses will help CUNA and the leagues hone their exam issue advocacy efforts.

CUNA will again remind credit unions that the deadline for responses is approaching in a Tuesday email.

Advocating on behalf of credit unions to improve the examination process is one of the highest priorities of both CUNA and credit union leagues. A firm grasp of the current state of credit union examination process is needed to ensure that credit unions are effectively represented by CUNA in discussions with the NCUA and state supervisory authorities.

Survey replies are confidential, and identifying information from individual credit union respondents will not be seen by individuals outside of CUNA's Market Research Department. Only summary results will be reported.

The CUNA/league exam survey has been sent to all affiliated credit unions except those in NCUA Region II. Those credit unions already have already participated in a similar survey spearheaded by the New Jersey Credit Union League.

CUNA members may use the resource link below to access the exam survey.

House Financial Services staffers named

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WASHINGTON (1/7/13)--New House Financial Services Committee Chairman Jeb Hensarling (R-Texas) has released his roster of senior committee staffers for the 113th Congress.

Hensarling's senior committee staff will consist of:

  • Staff Director Shannon McGahn;
  • Chief Counsel Jim Clinger;
  • Deputy Staff Director Kirsten Mork;
  • Parliamentarian and General Counsel Travis Norton; and
  • Deputy Staff Director for Communications Jeff Emerson.
Hensarling said his committee will "tackle a very busy agenda this year focused on reviving and strengthening the American economy and fostering the deepest, most liquid and innovative capital markets the world has ever known." The chairman said he looks forward to "working with this highly capable and experienced group of senior committee staff leaders."

For more on the staffers, use the resource link.

GAO report charts bank failures during crisis

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WASHINGTON (1/7/13)--The U.S. Government Accountability Office (GAO) last week released an extensive study detailing the causes and consequences of recent community bank and thrift failures that occurred between 2008 and 2011. The study does not address credit unions.

ommercial Real Estate (CRE) loan losses and the use of brokered deposits were common threads in many of the financial institution failures, the GAO study found. Failed banks "also had often pursued aggressive growth strategies using nontraditional, riskier funding sources and exhibited weak underwriting and credit administration practices," the report added.

Fair-value accounting has been cited as another potential factor in some failures, the GAO said. However, fair-value accounting losses in general "did not appear to be a major contributor" between 2007 and 2011, "as over two-thirds of small failed banks' assets were not subject to fair value accounting," the agency noted.

The report claimed that early recognition of loan losses could have alleviated some of the financial issues faced by banks. The GAO noted that a loan loss provision model proposed by the Financial Accounting Standards Board may help address the cycle of losses and failures that emerged in the recent crisis as banks were forced to increase loan loss allowances and raise capital when they were least able to do so.

The Credit Union National Association is analyzing the full 157-page report and will have more details to share soon.

For the full GAO report, use the resource link.