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Inside Washington (10/14/2009)

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* WASHINGTON (10/15/09)--Representatives of the American Bankers Association Tuesday offered a plan for the federal government to resolve failed systemic financial institutions. Under the plan, the president could seize a systemic firm based on the recommendations of government entities, including the Treasury. A special agency would handle the resolution, which would be overseen by the Federal Deposit Insurance Corp. (FDIC). In July, Treasury proposed giving systemic authority to either the Securities and Exchange Commission or the FDIC. The bankers said the FDIC’s deposit insurance role should not be “disturbed” (American Banker Oct. 14) ... * WASHINGTON (10/15/09)--In order to strengthen the financial system, progress on three distinct fronts needs to be made, according to William Dudley, president/CEO of the Federal Reserve Bank of New York. Dudley spoke at a financial services luncheon in New York City Tuesday. The three fronts needing improvements are: a more thorough and complete risk capture so that the capital adequacy rules more effectively encompass a broader set of risk exposures than before; rules that encourage the conservation of capital in adverse economic and financial circumstances; and tougher regulatory requirements, including the use of a contingent capital instrument that would automatically replenish equity capital in times of stress ... * WASHINGTON (10/15/09)--The Treasury is pushing American International Group (AIG) to cut $198 million in scheduled retention payments as the company and government officials continue debating over executive pay packages that have triggered criticism in the financial industry (American Banker Oct. 14). The special inspector general for the Troubled Asset Relief Program, Neil Barofsky, has told the company to cut the payments. A decision on the payments is affecting efforts to recoup $45 million in retention payments given to AIG employees in March. About $19 million of the $45 million in pledged repayments have been received ...

NCUA NASCUS tell lawmakers tough times arent gone

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WASHINGTON (10/15/09)—Despite many signs of general economic improvement, National Credit Union Administration (NCUA) Chairman Deborah Matz said the credit union movement faces difficult challenges through 2010 and beyond as a result of the harsh effects of the economic downturn spurred by a mortgage market meltdown. Matz, testifying before the Senate Banking subcommittee on financial institutions on the state of the banking industry, said, however, she is “confident that the credit union industry can and will weather the storm.” She noted that the NCUA, in response to the harsh operating environment caused by problems in the economy, has enhanced supervision, shortened examination cycles, increased the number of federal examiners, and upgraded risk-management systems. “While the year ahead will be challenging, I am confident that we and the credit union industry we regulate will be stronger in the end,” Matz said. “NCUA has an obligation to consumers: As a safety and soundness regulator, we will be successful if we preserve strong credit unions capable of meeting the financial needs of their members.” Matz noted that 98% of federally insured CUs are adequately capitalized and, in written testimony, pointed out that a “savings flight to quality” has brought about a 16% increase in savings during the first half of this year. However, she also noted that assets in troubled, CAMEL 4 and 5-rated credit unions almost doubled from December 2008 to August 2009. The NCUA chairman also referenced the corporate credit unions’ exposure to mortgage-backed securities that first created a liquidity shortage, then later capital impairments, which, she said, “affected the entire credit union system.” “Given the tenuous real estate market,” Matz said. “NCUA expects additional losses to materialize.” Also testifying, National Association of State Credit Union Supervisors (NASCUS) Chairman Thomas Candon concurred that the state of the credit union industry is generally good, Still, he said, economic issues such as unemployment, delinquencies and charge-offs are affecting the consumer credit portfolios of credit unions. Candon told members of the subcommittee that credit unions need options to raise capital, specifically access to supplemental capital. “Allowing credit unions access to supplemental capital with regulatory approval and robust oversight will improve credit unions’ ability to react to market conditions, grow safely into the future and serve their members in this challenged economy,” stated Candon. “We feel strongly that now is the time to permit this important change.” The Credit Union National Association is currently working with NASCUS and the National Association of Federal Credit Unions to develop a joint proposal for reforming alternative capital rules for credit unions. In fact, CUNA and NAFCU met Wednesday to draft a letter to the NCUA regarding the plan. Other witnesses before the subcommittee included: Chairman Sheila Bair of the Federal Deposit Insurance Corp.; Comptroller of the Currency John Dugan; Federal Reserve Board Governor Daniel Tarullo; and Timothy Ward, deputy director of examinations, supervision, and consumer protection, of the Office of Thrift Supervision.

New IRS video helps late Form 990 filers

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WASHINGTON (10/15/09)--The Internal Revenue Service (IRS) announced its launch of a new case study and video program to help exempt organizations and their tax preparers better understand the revised Form 990 series, which must be filed for the 2008 tax year. State-chartered credit unions are required to file a Form 990 (unless included in a group 990), and must file it by the 15th day of the fifth month after the end of its fiscal year. For state chartered credit unions that are calendar year filers, the 2008 form was due May 15, but credit unions that filed for an extension may find the new IRS information helpful in understanding the revised reporting requirements. In April, the IRS provided a preparation checklist for tax-exempt organizations filing the Form 990 (see resource link below). The tips from the checklist that are most relevant to credit unions include:
* Determining if the organization is eligible to file the Form 990-EZ for 2008; *Reviewing the redesigned 2008 Form 990 and final instructions (released in December 2008); *Identifying the appropriate schedules to complete; * Identifying officers, directors, and key employees; * Preparing to answer new questions about governance, executive compensation and insider transactions; and * Establishing and modifying internal systems to prepare for filing season.
The new IRS video is intended to illustrate key points and answer important questions about the new Form 990, revised for the first time in 30 years. Use the link below to access the IRS video help.,,id=210358,00.html

CFPA percolating vote could come today

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WASHINGTON (10/15/09)--Votes and debate on a host of financial reforms will continue today as House Financial Services Committee Chairman Rep. Barney Frank (D-Mass.) on Wednesday said that further consideration would be delayed until later in the week. A vote on the Over-the-Counter Derivatives Markets Act of 2009 is expected to take place this morning. Frank did not say when a final vote on H.R. 3126, the Consumer Financial Protection Agency (CFPA) Act of 2009, could take place, but hinted that he would like to “move quickly” on the legislation, even though his committee has until Friday to potentially move the legislation forward. Frank targeted this afternoon for further debate on that legislation. A managers’ amendment from Frank, which includes changes to portions of the bill addressing examination and pre-emption, is expected to be discussed later today. Rep. Jeb Hensarling (R-Texas) spoke against the CFPA legislation, calling it a “new, large, draconian” agency with “sweeping powers” that would be based on “subjective opinions of what is abusive.” Some “non-controversial” amendments were offered on Wednesday afternoon, and a host of amendments to the CFPA legislation have been filed, one of which is a proposal to set a $1.5 billion asset trigger for credit unions and a $10 billion asset level for banks in terms of prudential regulator examination and enforcement authority. CUNA Vice President of Legislative Affairs Ryan Donovan said that CUNA “would not be in support of any legislative language that divides credit unions by setting different treatment by asset size.” Donovan added that the outcome of the amendment is unclear, and that secondary amendments which would be more favorable to credit unions may be offered. Even still, Donovan said, there may also be opportunity to further affect the legislation after mark-up. CUNA also expressed concern over a managers’ amendment to the CFPA legislation that would address remittances. In a joint letter with World Council of Credit Unions President/CEO Pete Crear and CUNA President/CEO Dan Mica highlighted the potential for increased costs as one drawback of this amendment. The amendment would also slow down the remittance process. The letter also criticized an amendment to the Federal Credit Union Act that is redundant with existing authority and could limit the capabilities of federal credit unions and their regulator. The letter noted that there are “many outstanding questions regarding this section of the manager’s amendment and its effect on the remittance services credit unions currently offer their members,” adding that while Mica and Crear hoped that the Committee would address their concerns during mark-up, they would “be happy” to work with committee members before the House begins consideration of the legislation.

Steve Bosack is NCUA chairmans chief of staff

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ALEXANDRIA, Va.(10/15/09)—National Credit Union Administration (NCUA) Chairman Debbie Matz announced that as of Oct. 13 her chief of staff is Steve Bosack, who exits as deputy director of the National Credit Union Foundation (NCUF) to take the new position. Bosack helped oversee numerous NCUF programs, including REAL Solutions, Credit Union Development Education, Social Impact Management, Innovation Grants, federal grants and CUAid. He played a major role in disaster relief efforts by helping distribute a record $3.5 million in grants to credit unions on the U.S. Gulf Coast following Hurricane Katrina. This is a second stint at NCUA for Bosack, as it is for his chairman. Bosack served as Matz’s top aide for almost two years when Matz was a member of the agency’s board from 2003-2005. Prior to that, Bosack worked for 10 years with the Credit Union National Association (CUNA), where he served as vice president of public relations and, later, vice president of information services. Before joining CUNA, Bosack was associate editor of Credit Union Times, a national credit union trade industry publication.