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Inside Washington (12/19/2007)

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* WASHINGTON (12/20/07)--The House passed a Senate bill Tuesday that would extend for seven years a government terrorism insurance program created after the Sept. 11 attacks. The bill also would include domestic terrorism coverage. The insurance program was scheduled to expire at the end of the year (American Banker Dec. 19). Rep. Gary Ackerman (D-N.Y.) said he was disappointed that the House didn’t expand the coverage program to include coverage for nuclear, biological, radiological and chemical terrorism, but added he would continue seeking additional coverage … * WASHINGTON (12/20/07)—Sen. John Kerry (D-Mass.) applauded the Senate's passage of a consolidated appropriations bill, which would provide more than $40 million in additional funding for key Small Business Administration (SBA) programs over last year's funding, according to a press release distributed by PRNewswire. He noted that it has been seven years since program spending levels have been increased. The Senate bill specifically would provide increases for the following SBA programs: Small Business Development Centers, up 9%, from $89 million to $97.1 million; Women's Business Centers, up 4% from $12.5 million to $13 million; Microloan Technical Assistance Grants, up 15% from $13 million to $15 million; Microloans, up 53% from $1.3 million to $2 million in funds to leverage almost $20 million in loans -- up from $12.7 million last year; Program for Investment in Microentrepreneurs - up 50% from $2 million to $3 million; 7(j) Technical Assistance, up 53% from $1.5 million to $2.3 million; HUBZone Program, up 5% from $2 million to $2.1 million; and the Surety Bond Program, up 6% from $2.8 million to $3 million. The legislation also provides that the SBA will be able to leverage up to $28 billion in loans and venture capital deals through the 7(a), 504, and Small Business Investment Company programs… * WASHINGTON (12/20/07)--The Treasury Department Tuesday announced the opening of the sixth round of competition for tax credits on $3.5 billion of equity investments under the New Markets Tax Credit Program. The program attracts private-sector capital investment into the nation’s urban and rural low-income areas to help finance community development projects, stimulate economic growth and create jobs. This year’s allocation round will emphasize placing investments in underserved rural communities. The application deadline is March 5, 2008 … * WASHINGTON (12/20/07)--The Federal Deposit Insurance Corp. (FDIC) board of directors approved a $1.14 billion corporate operating budget for 2008. The budget is 3.1% higher than 2007’s budget. The board also approved an increase in authorized FDIC staffing to 4,810 in 2008, from 4,716 in 2007. The added staff is primarily for bank examiner positions …

DIF income up 14 FDIC plans tweak to failure process

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WASHINGTON (12/20/07)—The Federal Deposit Insurance Corp. (FDIC) Wednesday announced a 14% increase in comprehensive income for the Deposit Insurance Fund (DIF) for the first nine months of this year. That increase represented earnings of $1.6 billion, which the FDIC said increased the fund balance to $51.8 billion as of Sept. 30. Also, excluding exit fees of $345 million earned during the first quarter of 2006, which was a one-time adjustment, comprehensive income rose by $539 million, or 51%, from a year ago. DIF assessments were $170 million for the third quarter of 2007, compared to $140 million for the second quarter. The $30 million increase primarily resulted from a reduction in the estimate of assessment credits to be used by financial institutions to offset gross assessments, according to an FDIC release. Also on Wednesday, the agency proposed a two-part plan to improve the process for determining uninsured depositors at larger institutions in the event of a failure. The measure was designed to enhance the FDIC's ability to make funds promptly available to insured deposit customers if a large financial institution were to be closed, an event the FDIC assured is “unlikely.” The first section of the proposal relates to “covered institutions,” which the FDIC said are those with at least $2 billion in domestic deposits, have more than 250,000 deposit accounts, or have total assets of more than $20 billion, regardless of the number of deposits or accounts. Currently, the agency identifies 159 FDIC-insured institutions that meet the criteria. The second section applies to all FDIC-insured institutions, regardless of size, and governs the specific time and circumstance under which account balances will be determined in the event of a failure, the release explained. The FDIC is proposing to use the end-of-day ledger balance as normally calculated by the institution. There will be a 90-day comment period beginning when the proposal is published in the Federal Register.

CURIA still counting Rep. Pearce signs on

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WASHINGTON (12/20/07)—Credit union supporters continue to add their names to the Credit Union Regulatory Improvements Act (CURIA, H.R. 1537) even as Congress zooms toward final adjournment for the year. Most recently, Rep. Steve Pearce (R-N.M.) became the 142 official backer of the bill. The Credit Union National Association (CUNA) continues to be in close contact with House Financial Services Committee leadership about a hearing date for H.R. 1537, a bill intended to modernize the regulatory structure for credit unions to enable them to offer improved service to members.
U.S. Rep. Steve Pearce (R-N.M.) met Dec 10 with New Mexico credit union officials and decided to sign on to CURIA. From left are U.S. New Mexico FCU CEO Jim Raquet, Pearce, Credit Union Association of New Mexico CEO Sylvia Lyon, New Mexico Energy FCU CEO Kathy Cranage, and CUANM Vice President of Governmental Affairs Juan Fernandez Ceballos. (Photo provided by CUANM)
As early as May this year, one of the bill’s chief sponsors, Rep. Ed Royce (R-Calif), said he had been assured of a hearing date by House Financial Services Committee Chairman Barney Frank (D-Mass.). Frank has since reiterated his intention to give the credit union bill a full hearing in the 110th Congress. Royce, together with Rep. Paul Kanjorski (D-Pa.), introduced the 2007 version of the credit union bill on March 15. CUNA Senior Vice President John Magill noted recently, "Bipartisan support for CURIA has been building rapidly in the 110th Congress and, thanks to the consistent efforts of credit unions and the leagues, that support keeps building even in the final hours of this session of the 110th Congress." Magill heads CUNA’s legislative affairs department. "CUNA continues to work for the broadest possible support for this important credit union legislation and will be encouraging leagues and credit unions to contact their federal lawmakers when they are home for the winter break," Magill has said. Two key provisions of CURIA would: implement a risk-based capital approach for credit unions to make it more closely resemble the current Federal Deposit Insurance Corp. capital standard for banks, and; raise the current threshold on credit unions' member-business lending to 20% of assets from the current 12.25%. The bill also proposes to clarify the 1998 Credit Union Membership Access Act to allow all credit unions, regardless of charter type, to serve those in underserved areas. The bill would also update the definition of an underserved area, incorporating definitions from the Community Development Financial Institutions Act and the New Markets Tax Credit.

NASCUS survey CUs serve all Americans

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ARLINGTON, Va. (12/20/07)—The National Association of State CU Supervisors (NASCUS) Wednesday released findings of its major survey of credit union service and reported that the income levels of credit union members tracks that of the U.S. population. NASCUS noted that although there are no state statutes, laws or regulations that specify credit unions shall serve individuals of low and modest means, more than 38 million members from all walks of life receive low-cost services from their credit union. That statement holds true, NASCUS said, regardless of charter type. The NASCUS research, based on a survey of 469 state-chartered credit unions, reflects the findings of a 2006 National Credit Union Administration (NCUA) report on credit union service. Both research projects were in response to a request by Rep. Bill Thomas (R-Calif.) who in 2005 chaired a House Ways and Means Committee hearing to examine the credit union tax status. Thomas has since retired from Congress. Credit Union National Association (CUNA) President/CEO Dan Mica said Wednesday, “The methodology and conclusions of the NASCUS report track very closely with the 2006 report released by the National Credit union Administration. “Taken together, these reports reflect that credit unions, regardless of charter type, are doing exactly what Congress intended them to do: serving ordinary working Americans. “CUNA is pleased that NASCUS's efforts add to the body of data that clearly demonstrate credit unions continue to offer a range of low-cost financial services and help a broad cross-section of the American public to make prudent financial decisions that promote thrift.” NASCUS said it analyzed more than 28 million account records for this report. The records represented accounts held by more than 14 million members of state-chartered credit unions. NASCUS focused on the committee’s four areas of inquiry: membership; executive compensation; Unrelated Business Income Tax (UBIT); and Credit Union Service Organizations (CUSOs). When the state regulators’ group launched its survey effort in September 2006, it explained that every state with state-chartered credit union but one would be included in the sampling. Alaska, with one such institution, would not be providing data. Some other states were expected to combine their information-gathering efforts due to such things as number of credit unions involved.

Mortgage debt forgiveness plan heading to President

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WASHINGTON (12/20/07)--The House Tuesday passed the "Mortgage Forgiveness Debt Relief Act" (H.R. 3648). The bill is identical to the bill the Senate passed late last week to provide temporary tax relief to homeowners who might lose their home to foreclosure or who negotiate a loan modification. President Bush is expected to sign the bill. On Dec. 6, as part of an administration plan to provide relief to subprime borrowers, the president urged Congress to "temporarily reform the tax code to help homeowners refinance during this time of housing market stress." Under current law, if the lender--voluntarily or involuntarily--forgives a portion of a borrower's mortgage debt, the tax code treats the amount forgiven as taxable income. Credit unions and other lenders are required to file Form 1099-C, "Cancellation of Debt," to report to the Internal Revenue Service any debt of $600 or more cancelled or forgiven. H.R. 3648 will allow the discharge of indebtedness on loans up to $2 million and secured by the borrower's principal residence not to trigger federal income taxation. The bill would only cover discharges made between Jan. 1, 2007 and Dec. 31, 2009. "Even though this bill, when signed by the president, will be retroactive to the beginning of the year, credit unions that have already filed 1099-C forms relating to home loans shouldn't feel they have to file amended returns. "We assume that the IRS will release some guidance on how to handle information returns in these situations for this temporary period," noted Kathy Thompson, SVP for Compliance for the Credit Union National Association. However, it should be noted that the Act does not impact a credit union's responsibility to file the 1099C forms when a discharge of indebtedness of $600 or more has occurred, she added. H.R. 3648 includes a number of unrelated tax provisions, most of which are included to help cover the cost of this tax relief. One provision provides a three-year extension of the personal tax deduction for the cost of private mortgage insurance premiums.