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GAO TARP needs additional checks. balances

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WASHINGTON (12/3/08)—The Government Accountability Office (GAO) has issued a study on the U.S. Treasury Department’s Troubled Asset Relief Program and has found Treasury has yet to address a number of critical issues. The GAO acknowledged that TARP, created under the Emergency Economic Stabilization Act, had existed less than 90 days at the time of the study. It further noted a new program of such magnitude”faces many challenges, especially in this current uncertain economic climate.” However, Treasury has yet to address a number of critical issues, including determining how it will ensure that TARP’s capital purchase program ( CPP ) is achieving its intended goals and monitoring compliance with limitations on executive compensation and dividend payments. The CPP is a preferred stock and warrant purchase program, through which Treasury has provided more than $150 billion in capital to 52 institutions as of Nov. 25. To help ensure the program’s “integrity, accountability, and transparency,” GAO recommends that Treasury take the following steps:
* Work with the bank regulators to establish a systematic means of determining and reporting in a timely manner whether financial institutions’ activities are generally consistent with the purposes of CPP and help ensure an appropriate level of accountability and transparency; * Develop a means to ensure that institutions participating in CPP comply with key program requirements (e.g., executive compensation, dividend payments, and the repurchase of stock); * Formalize the existing communication strategy to ensure that external stakeholders, including Congress, are informed about the program’s current strategy and activities and understand the rationale for changes in this strategy to avoid information gaps and surprises; * Facilitate a smooth transition to the new administration by building on and formalizing ongoing activities, including ensuring that key Office of Financial Stability (OFS) leadership positions are filled during and after the transition; * Expedite OFS’s hiring efforts to ensure that Treasury has the personnel needed to carry out and oversee TARP; * Ensure that sufficient personnel are assigned and properly trained to oversee the performance of all contractors, especially for Contracts priced on a time and materials basis, and move toward fixed-price arrangements whenever possible; * Continue to develop a comprehensive system of internal control over TARP, including policies, procedures, and guidance that are robust enough to protect taxpayers interests and ensure that the program objectives are being met; * Issue final regulations on conflicts of interest quickly and review and renegotiate mitigation plans to enhance specificity and compliance; and * Institute a system to effectively manage and monitor the mitigation of conflicts of interest.
Every 60 days, the U.S. Comptroller General is required to report on a variety of areas associated with oversight of TARP. Use the resource link below to access the complete GAO report.

NCUAs Skiles to retire Marquis to succeed

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ALEXANDRIA, Va. (12/3/08)—National Credit Union Administration (NCUA) Executive Director Len Skiles is retiring as of year-end and will be succeeded in that position by David Marquis, who is currently the director of the agency’s Office of Examination and Insurance. The NCUA announcement followed, by a day, an unscheduled closed meeting Monday. While that meeting addressed a personnel matter, it was not specified that the meeting was held to discuss the executive director position. Credit Union National Association President/CEO Dan Mica said of the transition: “For nearly 40 years, Len Skiles provided dedicated service to NCUA with an eye toward maintaining the strength and independence of the agency. “We may have stood on different sides of issues at times, but he always respected our right and obligation to express our views with him in pursuit of credit unions’ best interests. “We wish him only the best in future endeavors.” Mica added CUNA’s congratulations to Marquis, and said CUNA looks forward to working with the new executive director after the first of the year. Skiles has been with the NCUA for 38 years, beginning his career there in 1973 as a staff attorney in the office of general counsel. Marquis began his NCUA career as an examiner in Baltimore in 1978. During his time with the agency, Marquis has served as a supervisory examiner, associate regional director, and regional director as well as deputy director of the Office of Examination and Insurance. NCUA Chairman Michael Fryzel called Skiles “an integral part of NCUA for most of its history” and added that “he will leave behind a legacy of excellence.” Part of that legacy has been an abundance of exceptionally talented staff, Fryzel said. "That," he added, "is one of the reasons why NCUA will continue to perform at a high-level with Dave Marquis at the ED helm.” “The turbulent financial times call for a steady, seamless transition, and Dave Marquis’ direct oversight of NCUA’s supervision programs, combined with his close work with the outgoing ED, make him the ideal replacement,“ Fryzel said.

Feds to extend student loan purchases

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WASHINGTON (12/3/08)—The government has announced that it will purchase additional loans under the authority granted under the Ensuring Continued Access to Student Loans Act of 2008. Under that authority the Department of Education may purchase, or enter into forward commitments to purchase, certain Federal Family Education Loan Program (``FFELP'') loans, such as subsidized and unsubsidized Stafford loans and PLUS loans. Those loans may be purchased on terms determined by Secretary of Education, the Secretary of the Treasury, and the Director of the Office of Management and Budget to be “in the best interest of the United States'' and that ``shall not result in any net cost to the Federal Government (including the cost of servicing the loans purchased).'' According to a recent Federal Register document, the Education Secretary initially exercised the purchase authority in this summer. The notice announcing the plan to purchase additional loans does the following:
* Establishes the terms and conditions that will govern certain additional loan purchases made under the amended Higher Education Act; * Outlines the methodology and factors that have been considered in evaluating the price at which the Education Department will purchase these additional FFELP loans, and * Describes how the use of those factors and methodology will ensure that the additional loan purchases do not result in any net cost to the federal government.
Use the resource link below to read the Federal Register announcement.

Inside Washington (12/02/2008)

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* WASHINGTON (12/3//08)—The Federal Deposit Insurance Corp. (FDIC) announced Tuesday that it has published a study on the types, characteristics, and use of overdraft programs operated by FDIC-supervised banks. The study shows rapid growth of overdraft programs in the last several years. Some of the study’s findings: Most banks (69.4%) initiated their automated overdraft programs after 2001; Large banks were more likely (55.4%) to have had an automated overdraft program in place in 2001; and most banks (75.1%) automatically enrolled customers in automated overdraft programs, although customers were usually permitted to affirmatively opt out of the program. Survey comments indicated that in some cases, customers were not given the choice to opt in or out of the automated program. By contrast, the study notes, almost all banks (94.7%) treated linked-account programs as opt-in programs, requiring that customers affirmatively request to have accounts linked. In addition, customers have to apply and qualify for an overdraft LOC program, so these programs typically operate on an opt-in basis… * WASHINGTON (12/3/08)—The Federal Reserve Board announced Tuesday that it would extend three liquidity facilities through April 30, 2009. They are: the Primary Dealer Credit Facility (PDCF), the Asset-Backed Commercial Paper Money Market Fund Liquidity Facility (AMLF), and the Term Securities Lending Facility (TSLF). These facilities had previously been authorized through January 30, 2009. The PDCF provides discount window loans to primary dealers. The AMLF provides loans to depository institutions to purchase asset-backed commercial paper from money market mutual funds. Under the TSLF, the Federal Reserve Bank of New York auctions term loans of U.S. Treasury securities to primary dealers… * WASHINGTON (12/3/08)—A search committee has been formed by the board of directors of the Federal Reserve Bank of New York to find a new president to success Timothy Geithner, who President-elect Barack Obama has said he will nominate to become U.S. Treasury Secretary. The New York Fed said in a release that its committee will complete its work as “promptly as it prudently can.” American Banker (Dec. 2) said Geithner will remain at the New York Fed "or the next several weeks but will not work with the central bank's policy-making committee…

New appraisal evaluation guidelines open for comment

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WASHINGTON (12/2/08)--The National Credit Union Administration (NCUA), along with federal bank and thrift regulators, proposed interagency appraisal and evaluation guidelines that outline supervisory expectations for sound real estate practices. The Credit Union National Association (CUNA) is asking credit unions to comment on the guidelines by Jan. 12. Comments are due to the agencies by Jan. 20. The guidelines are intended to clarify appropriate risk-management principles and internal controls for ensuring that real estate appraisals and other evaluations are reliable and support a real estate transaction. The proposed guidance would replace the 1994 Interagency Appraisal and Evaluation Guidelines and incorporate recent regulatory actions into the rules. The NCUA was not a party to the 1994 Guidelines. The new, more-detailed guidance would also reflect other changes in industry practices, uniform appraisal standards, and available technologies. It includes three appendices:
* One provides further clarification on real estate transactions that are exempt from the agencies’ appraisal regulations; * Another addresses acceptable evaluation alternatives, including the use of automated valuation models (AVMs); * The third appendix provides a glossary of terms.
Use the resource link below to read more about the joint-agency proposal and to read CUNA’s complete comment call.