Archive Links

Consumer Archive
CU System Archive
Market Archive
Products Archive
Washington Archive

Washington Archive


Inside Washington (11/03/2009)

 Permanent link
* WASHINGTON (11/4/09)--The Community Development Advisory Board of the Community Development Financial Institutions (CDFI) Fund will meet Nov. 16 in Washington, D.C. Fifty seats are available. Members of the public can attend the meeting on a first-come, first-served basis. To attend, individuals must contact the CDFI Fund’s office by Nov. 11. The CDFI issues community development grants to financial institutions, including credit unions, to help the underserved access affordable financial services ... * WASHINGTON (11/4/09)--The Federal Home Loan Banks continue to be hurt by losses, despite changes by the Financial Accounting Standards Board (FASB) in March to stop the fallout of other-than-temporary impairment (OTTI) charges at the banks. During the third quarter, the system’s credit-related charges were $1.042 billion, more than half of the $1.995 billion charges the system has had this year. Last week, the system said it lost $165 million during the quarter. Despite the losses, financial observers said the situation could be worse, as noncredit-related charges were $84 billion during the first nine months of this year. Before the FASB changes, the banks would have had to deduct that amount from their earnings also (American Banker Nov. 3). Some said the models the banks use to determine charges are too conservative and actual losses are lower. There are potential recoveries because the charges may result from front-end accounting losses, said Jim Vogel, head of fixed-income research at First Horizon National Corp. However, Brian Harris, analyst at Moody’s Investors Services, said the losses are real ... * WASHINGTON (11/4/09)--When FBOP Corp.’s nine subsidiaries collapsed last week, the Federal Deposit Insurance Corp. (FDIC) brought back an old method, cross guaranty, to charge two viable banks--Park National, Oak Park, Ill., and Citizens National Bank, Teague, Texas--for the resolution costs incurred by the other institutions (American Banker Nov. 3). The action reduced the cost of the subsidiaries’ failures and may be a move the FDIC will use again to handle insolvencies. Using cross guaranty “could be a wake up call” for some banks, said Kip Weissman, partner at Luse Gorman. Under the law, the FDIC can use its cross guaranty power when it believes the assessment would be the least costly resolution. Usually, the amount of the assessment against viable institutions is equal to what the FDIC would lose in its Deposit Insurance Fund for a failure. Park National and Citizens could not pay the full amount of the resolution costs, so the Office of the Comptroller of the Currency closed them. Neither would have failed without cross guaranty, but observers said the move was justified. Richard Herring, finance professor at Wharton Business School, said the FDIC’s move was “perfectly logical,” because a bank holding company may not deserve “the benefit of a doubt if they’re running some dodgy banks and some better banks” ...

FBI warns consumers of increased phishing scam attempts

 Permanent link
WASHINGTON (11/4/09)--The Federal Bureau of Investigation on Tuesday warned consumers that it has “seen a significant increase in fraud involving the exploitation of valid online banking credentials belonging to small and medium businesses, municipal governments, and school districts” over the recent months. According to the FBI, potential victims of this type of fraud will receive a so-called “spear phishing” e-mail that contains an infected e-mail attachment or a link that sends the e-mail recipient to a website that is infected. Malware which contains a keylogger program is then installed on the victim’s computer once they click on the link or attachment. The keylogger is then used to track account information, and that information is used to steal from the victim via fund transfers or to create additional accounts in the victim’s name. The FBI has found that transferred funds of funds from the created accounts are then diverted into bank accounts of individuals that have been recruited to serve as payment processors through work-at-home advertisements or job search websites. The unwitting individuals then transfer the money that arrives in their accounts to overseas locales through a wire transfer service. The FBI has advised customers that do their banking online to contact their financial institution to ensure that they are employing all the appropriate security and fraud prevention services their institution offers.

FTC to delay red flag rule enforcement until June 1

 Permanent link
WASHINGTON (11/4/09)--The Federal Trade Commission (FTC) on Tuesday announced that it will delay enforcement of its so-called “red flags” rule, which addresses identity theft, until June 1, 2010. Congress requested that the FTC delay enforcement of the rule, which was developed to implement parts of the Fair and Accurate Credit Transactions (FACT) Act of 2003. The FTC action would only apply to state-chartered credit unions. Federal credit unions were required to comply with NCUA's red flag regulations on Nov. 1, 2008. FACTA directed financial regulatory agencies, including the FTC, to promulgate rules requiring those under its supervision that have covered accounts to implement programs to identify, detect, and respond to patterns, practices, or specific activities that could indicate identity theft. Consumer accounts or other accounts that financial institutions find to have a risk of identity theft are covered by the rule. The FTC previously delayed the enforcement of the rule until November 1, 2009.

Exclude CUs from systemic risk legislation CUNA says

 Permanent link
WASHINGTON (11/4/09)--In a Tuesday letter to House Financial Services Committee Chairman Barney Frank (D-Mass.) and ranking member Spencer Bachus (R-Ala.), Credit Union National Association (CUNA) President/CEO Dan Mica said that credit unions should not be entangled in the Financial Stability Improvement Act, which is meant to address “too big to fail” institutions and the dangers they impose on the U.S. financial system. Mica encouraged lawmakers to “consider the effect” that the systemic risk legislation, which was taken up for markup on Tuesday, “would have on credit unions, and whether it is good public policy for member-owned financial cooperatives to be asked to cover the losses of large, complex, for-profit financial companies.” The draft bill, according to a House summary, will “create a mechanism for monitoring and reducing the threats that systemically risky firms pose to the financial system, establish a process for winding down large, financially-troubled non-bank financial institutions in a way that protects American taxpayers and minimizes the impact on the financial system,” and “overhaul and update” the current financial regulatory system. Specifically, CUNA objects to portions of the legislation that would require credit unions with over $10 billion in assets to pay fees to the Federal Deposit Insurance Corporation to “insure risky behavior of huge, complex for-profit financial companies,” CUNA Vice President of Legislative Affairs Ryan Donovan said. According to Mica, credit unions should not be addressed by the legislation as they do not pose any systemic risk to the financial system. “In fact,” Mica added, “evidence suggests that the small number of credit unions facing challenges today are victims of the crisis, primarily resulting from the markets in which they operate.” Mica said that credit unions “continue to play a vital role in the financial well-being of their members,” continue to lend responsibly, and are well capitalized. The failure of any single credit union or a group of credit unions would not have a systemic impact on the financial system,” he added. Additionally, any issues within the greater credit union system have been resolved internally through the National Credit Union Share Insurance Fund (NCUSIF), Mica said. For the full CUNA letter, use the resource link.

Mica urges Congress to back MBL cap lift

 Permanent link
WASHINGTON (11/4/09)--The Credit Union National Association (CUNA) in a Tuesday letter urged U.S. House members to support increased business lending capacity for credit unions by backing HR 3380, the Promoting Lending for America’s Small Business Act, which would raise the amount of money a credit union can devote to business lending. In the letter, CUNA President/CEO Dan Mica said that HR 3380, if passed, “would enable credit unions to continue to provide significant capital to credit union member-owned small businesses – up to $10 billion in the first year – and create as many as 108,000 new jobs.” CUNA has sent similar letters to the Senate, President Barack Obama, and other top administration officials. As he advocated lifting the lending cap, Mica emphasized that credit unions are financial institutions that “know their members and know how to lend to their members” and “have demonstrated the ability to provide these loans safely and soundly.” “This is common sense legislation that will provide economic stimulus without increasing the size of government or costing taxpayers a dime,” he added. Mica also cited backing for HR 3380 from a number of small business and public policy groups, including Americans for Tax Reform, the Competitive Enterprise Institute, the National Association of Mortgage Brokers, and the National Small Business Association. HR 3380 would increase the MBL cap to 25% of a credit union's total assets. It also would raise the "de minimis" threshold for a loan to be considered a "member business loan" to $250,000, and exempt loans made to non-profit religious organizations as well as loans made in qualified underserved areas from the cap. While HR 3380 continues to await Congressional action, small business lending was addressed by the recently passed HR 3354, the Small Business Financing and Investment Act, which House Speaker Rep. Nancy Pelosi said would “comprehensively reform small business lending programs to spur job creation and meet the needs of American small business.” HR 3354, which passed the House by a vote of 389 to 32 on October 29, would give small banks and credit unions “the confidence to open lending to a wider community of entrepreneurs.” “By offering small businesses the tools and resources to endure our current crisis and thrive in the future, we are laying the foundation for our recovery and placing a down payment on our long-term economic growth," Pelosi added. For the full CUNA letter, use the resource link.