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FHFA FHLB director elections draw CUNA comment

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WASHINGTON (12/4/09)--The Credit Union National Association has published a final rule analysis on the Federal Housing Finance Board’s final rule on the election of Federal Home Loan Bank (FHLB) directors. The Federal Housing Finance Agency’s amendment, which became effective on Nov. 6, will divide FHLB boards of directors into two categories, member directors and independent directors. Member directors will be elected on a state-by-state basis, and independent directors will be elected at-large by FHLB members. Directors will be limited to three consecutive terms of four years. To read the full analysis, use the resource link.

Lawmakers positive on reg reforms at CUNA breakfast

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WASHINGTON (12/4/09)--Speaking at a Thursday “Power Breakfast” sponsored by the Credit Union National Association (CUNA) and the National Journal Group, Reps. Ed Perlmutter (D-Colo.) and Brad Miller (D-N.C.) expressed optimism at the prospect of House passage of pending regulatory reform legislation on derivatives, systemic risk, the Consumer Financial Protection Agency (CFPA), and other initiatives. Both legislators said that Rep. Barney Frank (D-Mass.) is “certain” that the legislation will be on the floor next week, and Miller said that he does not expect that a vote on the bills will be delayed by any other matters. A vote is expected on Thursday. House members are expected to be given a chance to amend any of the bills before they are voted on. Miller, who is a member of North Carolina-based State Employee’s Credit Union, said that legislation to exclude credit unions with $10 billion or less in assets from the examination and supervision authority of the proposed CFPA would be offered as a managers’ amendment. The Federal Reserve’s role will likely change somewhat as a result of these regulatory reforms, especially the creation of the CFPA, and Miller said that there is also strong support in the House for Rep. Ron Paul’s (R-Tex.) amendment that would seek a Government Accountability Office audit of the Fed. Fellow “Power Breakfast” guest Perlmutter said that the balance of the regulatory reform package is so important that he would still ask his colleagues to support the legislation, even if the proposed CFPA is removed. Addressing the potential political impact of the ongoing regulatory reform work, Miller said that if Democrats cannot make the case to the American middle class that Republican opposition credit card and overdraft fee legislation is not in the best interest of the people, then they “really aren’t very good” at their job.

CUNA publishes final rule analysis on Reg E

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WASHINGTON (12/4/09)--The Credit Union National Association (CUNA) has analyzed a final rule by the Federal Reserve Board that would require consumers' affirmative consent (opt-in) before institutions could charge overdraft fees for ATM and one-time debit card transactions. The opt-in right applies to all account holders, including existing ones. However, before opting-in, the consumer must be given a notice explaining the overdraft service, including fees and the consumer's choices. The final rule also includes a model notice that is to be used. Financial institutions cannot require the opt-in as a condition for paying overdrafts for checks or other transactions, and consumers who do not opt-in must be provided with the same type of account that is provided to those who do opt-in. Consumers will have an ongoing right to revoke the consent. The final rules will be effective as of Jan. 19, 2010, and compliance will be mandatory as of July 1, 2010. However, fees may be assessed until Aug. 15, 2010 on accounts that were opened before July 1, 2010, regardless of whether the consumer has opted-in to the overdraft plan. For the full analysis, use the resource link. The Federal Reserve Board will discuss its recently enacted final rules on overdraft protections during its "Outlook Live" Audio Conference, which is scheduled for Dec. 10 from 1 until 2 p.m. ET. Use the link to register for the conference.

Inside Washington (12/03/2009)

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* WASHINGTON (12/4/09)--Federal Reserve Board Chairman Ben Bernanke defended the Fed’s response to the nation’s financial crisis during his reconfirmation hearing as Fed chief. The crisis would have been much worse without strong action from the Fed, Bernanke told the Senate Banking Committee (The Wall Street Journal Dec. 3). The Fed has been trying to learn from the crisis, and if confirmed for a second term, Bernanke said he would work with Congress to improve oversight. The Fed also must be ready for an exit plan for the stimulus pumped into the financial system to counter the recession, he added ... * WASHINGTON (12/4/09)--Financial observers question whether Government Accountability Office (GAO) audits of the Federal Reserve Board would threaten the central bank’s independence (American Banker Dec. 3). Under legislation pushed by Rep. Ron Paul (R-Texas), the Fed would be subject to audits on its operations, including monetary policymaking. The Fed has said if the audits are mandated, investors may lose faith in the central bank. Brian Gardner, KBW Inc. analyst, said a GAO report would have some significance. However, Mark Calabria, director of financial regulation studies at the Cato Institute, said the GAO may not have as much clout as some think. It has no “magic wands to wave,” he said. Markets are concerned that the audits would cause the Fed to use low-interest rate policies that benefit politicians running for office but trigger inflation. Calabria said the Fed already faces tremendous political pressure ... * WASHINGTON (12/4/09)--A regulatory reform report by the Pew Economic Policy Group said the Fed should be stripped of its bank regulatory authority, and a Financial Services Oversight Council should be created to regulate systemic risk. The Fed should still be allowed to collect any information from financial institutions to monitor systemic risk, however. The report also recommended that large financial institutions maintain higher capital standards. Back-up resolution and strengthened bankruptcy processes should be used to help systemically important firms that fail (American Banker Dec. 3). A recent Pew Charitable Trusts study favorably noted credit unions, saying that consumers should consider them when choosing a credit card (News Now Oct. 29) ...

Staatz warns overdraft bill has consequences

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WASHINGTON (12/4/09)--Consumer groups that favor overdraft
Rod Staatz, CEO of SECU in Linthicum, Md., talks about unintended consequences of a legislative proposal to ban some overdraft protection plan practices. He was addressing this week’s Consumer Federation of America conference on financial services. (CUNA Photo)
protection reform legislation need to be mindful of negative unintended consequences, cautioned Rod Staatz, CEO of SECU in Linthicum, Md., during a panel discussion at this week’s Consumer Federation of America conference on financial services. “Any time you propose legislation, you must think it through and be sure there are no unintended consequences, which could ultimately harm consumers in the end,” said Staatz, who also serves on the Credit Union National Association (CUNA) board. He participated in a CFA panel on overdraft protection issues and policy consequences along with Jean Ann Fox, CFA’s director of financial services, and Barbara Ryan, deputy to the vice chairman of the Federal Deposit Insurance Corp. Ryan summarized the results of a November 2008 FDIC study on use and cost of overdraft programs among FDIC-insured institutions. Fox explained why CFA supports overdraft protection legislation proposed by Rep. Carolyn Maloney (D-N.Y.) and Sen. Christopher Dodd (D-Conn.) over recent regulations adopted by the Federal Reserve Board requiring opt-in for ATM and debit transactions. "We welcome the Fed’s rule, but it doesn’t go far enough,” Fox said. Panel moderator Will Ogburn of the National Consumer Law Center noted the Fed rule only applies to one-time rather than recurring charges, does not cover checks, and places no limit on the number or size of overdraft fees. Staatz emphasized the Fed’s rules are preferable to the legislation, which contain some elements CUNA could support but also include provisions that would be extremely problematic for credit unions, such as limiting the number of a consumer’s ODP fees to one a month and six a year. The cost and compliance issues raised by theses legislative provisions could drive responsible providers like credit unions away from offering a service their members value, he explained. Noting again that many institutions offer the product responsibly, Staatz outlined the steps SECU takes to intercede when members over-use the service. He also highlighted voluntary ethical guidelines the CUNA board establisehd in 2004. Rep. Maloney, who addressed the CFA conference prior to the overdraft panel, called the new Fed rules “tremendously important” but said her bill is broader than the Fed approach and is still necessary.

CUNA Recovery should bring lower NCUA spending

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WASHINGTON (12/4/09)—In a letter addressing aspects of the National Credit Union Administration’s (NCUA) proposed 2010 budget, the Credit Union National Association (CUNA) acknowledged that some increase in the spending plan reflects current economic conditions, but urged assurances that the agency will reduce expenditures when the country returns to a more stable operating environment. CUNA President/CEO Dan Mica wrote that some budget increase is to be expected to support agency efforts to handle additional safety and soundness concerns wrought by troubled financial times. But once the crisis has passed, Mica urged, the agency must consider it a priority to determine how to reduce spending. CUNA also noted credit unions concerns regarding the size of the increase for agency staff compensation next year—a 6.6% net growth in merit pay and locality adjustment. The agency needs to be sensitive, Mica said, to the fact that credit unions across the nation are scaling back expenses, including employee benefits, and have been forced to reduce salaries, enforce unpaid furloughs, as well as execute reductions in the number of workers. Mica stated clearly that CUNA has no intention to try micromanage the NCUA’s financial resources, just as CUNA believes it would be inappropriate for the NCUA to micromanage individual credit unions’ budgets. However, Mica reminded that NCUA is in a unique stewardship position among agencies because it is credit unions, and not the federal government, that funds its general operations. The total 2010 budget proposed Nov. 19 by the NCUA is $200,923,512, an increase of 13% over the 2009 budget. At an open board meeting, NCUA Chairman Debbie Matz said the increased budget is a response both to past budget cuts as well as a current need for more funding due to the "state of the credit union industry." Over $14 million of the $23 million funding increase is related to NCUA program changes.