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Inside Washington (11/19/2008)

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* WASHINGTON (11/20/08)--Treasury Secretary Henry Paulson was criticized Tuesday by lawmakers at a hearing for changing the course on the Troubled Asset Relief Program (TARP) and refusing to create of a loan modification program (American Banker Nov. 19). House Financial Services Committee members also suggested Paulson tricked congressional members into agreeing to the $700 billion bailout package. Rep. Gary Ackerman (D-N.Y.) said Paulson is “flying a $700 billion plane by the seat of [his] pants,” and the vote for TARP was the second-largest bait and switch scheme after the Iraq war. House Financial Services Committee Chairman Barney Frank (D-Mass.), who has worked with Paulson on policy, asked him why he would spend money to bail out American International Group but ignore Sheila Bair’s $24 billion loan modification plan. Bair’s plan is promising, Federal Reserve Board Chairman Ben Bernanke said during testimony at the hearing. Bernanke agreed the government needs to help more to prevent foreclosures ... * WASHINGTON (11/20/08)--The Federal Reserve Board approved the restructuring of the Fed’s check-processing operations in the Seventh District this week. Specifically, the Fed approved amendments to Appendix A of Regulation CC. The amendments are effective Jan. 31 ... * WASHINGTON (11/20/08)--The Federal Deposit Insurance Corp. (FDIC) announced that it will open a temporary office in Irvine, Calif., to manage receiverships and liquidate assets from failed financial institutions located in western states. The FDIC will hire non-permanent employees and contractors to work in the office based on the number of closings and receiverships ... * WASHINGTON (11/20/08)--In a speech Tuesday, Federal Deposit Insurance Corp. (FDIC) Chairman Sheila Bair indicated that debt coverage fees could drop. The agency has received comments for an interim rule on a temporary liquidity guarantee program, and “we are considering suggestions with regard to whether the debt guarantee program should cover very short-term funding or whether we should have a tiered-fee structure based upon the maturity of the debt guaranteed,” Bair said. The FDIC is scheduled to finalize the rule Friday ...

Underserved budget among NCUA agenda items today

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ALEXANDRIA, Va. (11/20/08)—The National Credit Union Administration (NCUA) is scheduled to address a broad array of agenda items at today’s open meeting, including the agency's 2009-2010 operating budget, issues regarding its examination program, and its underserved areas policy. At its annual budget briefing last month, NCUA projected a 15% budget increase to $182.9 million and an additional 85 staffers to accommodate program modifications the NCUA said were "necessary to address the current turbulent economic environment." The agency also said the overhead transfer rate is projected to be 55% and the operating fee is expected to increase 10% to oblige increased expenditures. The most significant NCUA program changes noted at the briefing would add additional staff, implement a 12-month examination cycle, develop a national examiner team to conduct high-risk exams, and centralize credit union chartering in 2009. The NCUA also proposed to allot a $300,000 expenditure over two years for the 75th Anniversary of the Federal Credit Union Act, an expense questioned by the Credit Union National Associtation in a recent comment letter to the agency. In fact, CUNA urged that the NCUA approach its entire budget with a sense of austerity, particularly in light of the troubling economic climate facing the nation and its credit unions currently. Also on today’s agenda, the NCUA is scheduled to vote on proposed revisions to the current federal regulatory process for approving multiple group credit unions' applications to serve underserved areas. CUNA does not support the plan and has questioned its very basis of the NCUA plan. "While we appreciate efforts to clarify and update rules, we are not aware of problems with the current process that indicate that the (field of membership) FOM Manual provisions on underserved applications are not clear and which would justify a broad new regulation on underserved areas and the application process," CUNA said in an August comment letter. Other agenda items include:
* A final rule addressing Part 702 of NCUA's Rules and Regulations, Prompt Corrective Action, expectd to be an amended definition of post-merger net worth; * A final rule addressing Parts 701 and 705, Low Income Definition; and * The quarterly insurance fund report.
To see the agenda, use the resource link below.

CUNA Bankruptcy issues to come in 111th Congress

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WASHINGTON (11/20/08)—The Credit Union National Association (CUNA) continues to assiduously monitor developments in bankruptcy legislation but is advising credit unions that the real story on changes to the code will unfold next year. CUNA's Governmental Affairs Committee is scheduled to meet in early December, and legislative pushes to change bankruptcy rules will be a top issue for discussion. Meanwhile, according to CUNA Vice President of Legislative Affairs Ryan Donovan, CUNA will be watching for a revised bill from Sen. Richard Durbin (D-Ill.), who is a proponent of giving judges authority to alter the terms of distressed mortgages in bankruptcy cases. Durbin, the Senate majority whip, this week announced introduction of his Homeowner Assistance and Taxpayer Protection Act, which is meant to provide foreclosure relief to mortgage borrowers. However, the bill varies little from legislation he offered at the beginning of the year, and which failed to clear the Senate. “The real story will be next year when he introduces his revised bankruptcy bill,” said Donovan Wednesday. Use the resource link below for CUNA resources on bankruptcy reform.

Senators uged to support MBL increase

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WASHINGTON (11/20/08)—Continuing its resolute push for increased member business lending (MBL) authority to help the country through its current credit drought, the Credit Union National Association (CUNA) urged top members of the Senate Budget Committee to consider such plan. In advance of the committee’s Wednesday hearing titled “The Economic Outlook and Options for Stimulus,” CUNA President/CEO Dan Mica sent the panel’s leaders a letter reiterating that without a statutory cap, credit unions could extend an additional $10 billion in business in the first year. “This represents significant economic stimulus that does not cost the taxpayers a dime and does not expand the size of government,” Mica said in his letter to Chairman Kent Conrad (D-N.D.) and ranking member Judd Gregg (R-N.H.). The CUNA letter also underscored that credit unions historically have lower net charge off rates for business loans than do banks. Referring to data from both the National Credit Union Administration and the Federal Deposit Insurance Corp., Mica noted that the average net charge off rate for credit union business loans was .19% in June 2008 compared to .73% for banks. In fact, he pointed out that for ten of the last eleven years, credit union net charge-off rates have been similarly lower than bank rates. “There is no economic, safety and soundness nor historical rationale to the (MBL) cap, which was enacted a decade ago. The cap exists to limit credit unions in this market – the only groups that benefits from credit unions being excluded are the banks that presently are withdrawing credit from small businesses,” Mica said in his letter. While bankers benefit, small businesses pay the price of the credit union business lending cap because they have fewer borrowing options, Mica said, and added, “(I)n the credit crunch, some are finding they have no options at all.” CUNA has sent similar letters to key House members.

NCUA seeks Treasury funds for distressed CU assets

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ALEXANDRIA, Va. (11/19/08)---National Credit Union Administration (NCUA) Chairman Michael Fryzel asked Congress Wednesday to encourage the U.S. Treasury Department to equip the NCUA to deal with troubled credit union assets. In a letter to congressional leaders, Fryzel asked federal lawmakers to intervene with the Treasury to secure funds necessary for the NCUA to construct a relief program for troubled assets. The NCUA chairman said the Treasury's recent decision not to purchase distressed assets under the Troubled Asset Relief Program (TARP), authorized under the Emergency Economic Stabilization Act, was a concern. He said NCUA stands ready to create a TARP-like program for credit unions, with Treasury back up, to serve as "an important potential avenue of relief." The NCUA would be responsible for establishing standards and procedures for the use of the funds under the plan. The NCUA letter was sent to the chairmen and ranking members of the House Financial Services Committee and Senate Banking Committee and House and Senate leadership. Credit Union National Association (CUNA) President/CEO Dan Mica said that access to Treasury funds through NCUA, as suggested by the NCUA chairman, could be “an important backstop for credit unions affected by the economic downturn.” “However,” he said, “CUNA continues to hear from credit unions who want a system-based solution that does not rely on Treasury funding to address credit union problems.” Mica noted that there are many ways such a solution could be structured to avoid reliance on taxpayer funds. “We will continue to work with Chairman Fryzel and the NCUA board to seek such an approach, which is reflective of the cooperative nature of the credit union movement and would not further burden the U.S. taxpayer,” the CUNA leader pledged.