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States grapple with budgets CUs told Stay vigilant

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MADISON, Wis. (2/3/09)--State governments' budgets are in distress, which means credit unions will be staying vigilant on measures their states may consider in providing relief, according to several leagues. About 46 states are facing budget shortfalls this year, and leagues have the job of not only monitoring the credit union-specific legislation, but also what their states are doing to plug up the shortfalls. California, the world's eighth largest economy, has made headlines with its budget problems, stemming from a $15 billion deficit--roughly more than 35% of its general fund--and a $346 million shortfall this month, necessitating delays in state tax refunds, payments to contractors and disbursements to counties and agencies that provide social services (CNNMoney.com Jan. 31) . Wisconsin's budget has a $5.7 billion short fall--the largest in the state's history-- created by the economic crisis, according to Gov. Jim Doyle (Wisconsin State Journal Feb. 1). The budget was the topic of a panel discussion at the Wisconsin Credit Union League's 2009 State Government Affairs Conference in January. During the session, it was revealed that Wisconsin may receive $2.5 billion to help pay for health care and education from the federal economic stimulus package. "Now is a very volatile time for Wisconsin credit unions as banks vow to continue their pursuit of CRA-like legislation to be imposed on credit unions or new taxation of credit unions in light of state budget deficits," said the league in introducing its Wisconsin Credit Unions 2008 Annual Report (The League News Jan. 29). Pennsylvania has a deficit estimated between $1.6 billion and $4.1 billion (Life is a Highway Jan. 16), and Gov. Edward Rendell is set to unveil his budget today. Solutions offered by the House Democratic Caucus include using the rainy day fund, a federal fiscal stimulus, increased efficiencies, program cuts, and tax or fee increases. Pennsylvania Credit Union Association governmental affairs staff, attended a session recently conducted by members of the General Assembly to monitor suggestions from community leaders, residents, regarding the budget. In North Carolina, as the legislative session begins, the league and credit unions participated in several events that kicked off "what will surely be an interesting legislative long session," said the North Carolina Credit Union League (Weekly Update Jan. 29). To one function newly elected Gov. Beverly Perdue talked about her plans to work with state legislature to get that state's economy on track. In Missouri, Gov. Jay Nixon outlined five initiatives for the state this year. Of most concern to credit unions, said the Missouri Credit Union Association (MCUA), are the fiscal responsibility, and transparent and accountable government initiatives. Nixon reported a shortfall in fiscal year 2009 of more than a quarter billion dollars. His initiatives include cutting 50 programs, eliminating more than 1,300 positions, cutting $200 million from overhead by position elimination and cutting bureaucracy, getting tough on tax credit programs, and setting up an Economic Stimulus Council. "Credit unions will need to remain vigilant--and keep building relationships with legislators. We do not want one of the cost-saving actions to affect our independent state regulator," said MCUA (The Missouri difference Jan. 30).

Fitch adjusts U.S. Centrals ratings again

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CHICAGO (2/3/09)--Fitch Ratings has adjusted the ratings of U.S. Central FCU down a notch, reflecting last week's news that the National Credit Union Administration (NCUA) was implementing a corporate stabilization plan and injecting $1 billion into U.S. Central, Fitch said Monday. U.S. Central's Individual Rating is now "F" and it has been removed from Rating Watch Negative. All other ratings, including the long- and short-term Issuer Default Ratings (IDR) of "AA" and "F1+," respectively, are now on Rating Watch Negative as Fitch waits to see how NCUA's stabilization plan and possible restructuring of the corporate credit union system play out. “We have strived throughout our history to be good stewards of credit union funds, investing them in highly rated securities,” said Francis Lee, president/CEO of U.S. Central. “We regret that the historical downturn in the housing market and the related increase of loan defaults and delinquencies have adversely impacted the ratings of a portion of our securities--and, in turn, our own credit ratings, along with those of almost all rated financial institutions,” Lee said. Fitch said the new rating reflects the loss realized by U.S. Central and the impairment to its capital base "that necessitated support from the National Credit Union Share Insurance Fund. The net loss of approximately $1.1 billion for 2008 exceeds USC's retained earnings, the recently issued $450 million of Paid-In-Capital (PIC) II and a portion of the original PIC issuance." Fitch noted the prospect of future losses remains, limiting the company's future capital generation capability. The latest rating reflects Fitch's opinion that "USC would have ultimately defaulted had it not received significant external support." The "F" rating will be in place for short time only, Fitch said. "Once clarity is achieved on how the support measures, as well as the proposed restructuring of the corporate credit union system impacts USC's financial profile and business model, Fitch will reassess the Individual rating." NCUA's support for U.S. Central through the $1 billion capital note injection, its guarantee for all uninsured member depository shares, and other recent initiatives to inject liquidity into the corporate credit union system, "substantiate the high probability of external support that Fitch factored into USC's current long- and short-term ratings," Fitch said. However, the announcement that NCUA is soliciting input for reforms to the corporate credit union system "signals probable future changes to the system that could impact Fitch's view of future support." Use the link to access Fitch Ratings' press release.

Letters to media CUs a good alternative

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PROVIDENCE, R.I., and COLUMBUS, Ohio (2/3/09)--Two letters written to newspapers in Rhode Island and Ohio emphasize credit unions as good alternatives to banks. Cidalia Rocha, chairman of the board of the Credit Union Association of Rhode Island and president/CEO of Columbus CU, Warren, R.I., noted in a letter to the Providence Journal Sunday that the state has 26 member-owned credit unions that meet the financial needs of one-third of the state’s population. “The nation and Rhode Island do have locally owned and operated credit unions that are focused on bringing value to the communities they serve,” Rocha wrote, adding that coverage of large banks in the media often casts a shadow over credit unions. Another letter, appearing in The Columbus (Ohio) Dispatch Jan. 28, encourages consumers to join credit unions. The writer, R.M. Baker, of Columbus, said that banks received a bailout from taxpayers, while credit unions didn’t. “Credit unions are more than willing to loan money for automobiles and for the purchase of new homes,” Baker wrote. “Maybe all of us should be considering joining credit unions, where customer service is more of a priority,” Baker said.

Md. Board of Education accepts fin lit recommendation

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ANNAPOLIS, Md. (2/3/09)--The Maryland State Board of Education (MSBE) voted to accept the recommendations of the State Task Force on Financial Literacy and begin to implement financial literacy instruction within the voluntary curriculum. Bert Hash, CEO of MECU, Baltimore, and a Maryland and District of Columbia Credit Union Association (MDDCCUA) board member, and Thom Beck, CEO of MCT FCU, Rockville, serve on the task force (Focus Newsletter Feb. 2). Members of the task force petitioned MSBE Jan. 27 to adopt its recommendations and implement some form of financial literacy education within the voluntary statewide curriculum. State Delegate Dana Stein (D-11), Delegate Susan Krebs (R-9B), and State Sen. Katherine Klausmeier (D-8), spoke on behalf of the task force during the hearing, and answered questions from the state board. Krebs stressed how important the subject is, pointing out that “students need to be educated on such basic issues as what goes into a credit score.” Stein reiterated how the past year’s negative economic effects have created a “broad coalition of support for financial literacy” within the Maryland General Assembly. Klausmeier also urged the board to support the task force’s recommendations, stating that it will be difficult to implement financial literacy within Maryland’s schools “without the help of the board of education.” Stein, Krebs and Klausmeier were able to assuage the concerns of the board by pointing to non-profit programs currently in place that, at a minimal cost, could be used to both help train teachers in financial literacy instruction and implement financial literacy courses in schools, said MDDCCUA. It is expected that MSBE will reply to the task force recommendations by March 1.

Michigan governor pocket vetoes small claims bill

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LANSING, Mich. (2/3/09)--Michigan Gov. Jennifer Granholm pocket vetoed Senate Bill 786, which would have increased the jurisdictional monetary ceiling for filings in small claims court to $5,000 from $3,000 by 2011. The bill was supported by the Michigan Credit Union League (MCUL). SB 786, introduced by State Sen. Wayne Kuipers (R-Holland), passed the House with the Senate concurring in December. The bill then went to Granholm, but she did not sign it by the time the legislature adjourned. Normally, a bill not signed by the governor by the deadline becomes law, but when the legislature has adjourned at the end of the session, as it had in this case, bills not signed are vetoed (Michigan Monitor Feb. 2). “MCUL was successful in advocating for passage of this bill since its introduction in the fall of 2007,” said MCUL Executive Vice President Patrick La Pine. “The bill had strong support from both the House and Senate following amendments that would gradually raise the monetary ceiling over the next three years. “Unfortunately, while the MCUL continued to advocate for the bill, last-minute opposition from district court judges resulted in the governor choosing to abstain from signing and led to the pocket veto,” he added. Granholm’s spokesperson has indicated in a public report that the governor supported smaller increases to the monetary ceiling, spread over a longer period of time. SB 786, as originally introduced, would have increased the jurisdictional ceiling for small claims court to $6,000 from $3,000. A compromise in the Senate amended the bill to $5,000. While MCUL lobbied for this level, the district court judges worked with legislators to come up with a graduated increase over several years. As numerous versions of the increases were proposed as amendments, credit unions were successful in obtaining a higher-tiered threshold, MCUL said. The final bill would have raised the Small Claims Division monetary ceiling to $4,000 on July 1; $4,500 on July 1, 2010; and $5,000 on July 1, 2011. MCUL will continue to push for legislation that would raise the Small Claims Court monetary ceiling in 2009. It would help credit unions by allowing them to more frequently use the lower-cost, small-claims alternative in district courts, La Pine said.

WOCCU service award nominations due March 2

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MADISON, Wis. (2/3/09)--The nominations deadline for World Council of Credit Unions' (WOCCU) Distinguished Service Award (DSA) is March 2. The DSA recognizes the global credit union movement's most distinguished achievements. The award is presented to individuals and organizations that have offered exemplary service to the credit union movement and its practices. The DSA honor is not given every year; its presentation is governed by the viability and worthiness of candidates by the judges. All presentations are made at WOCCU's World Credit Union Conference, July 26-29 in Barcelona, Spain. “I encourage global credit union leaders to search within their own credit union communities to see if they have candidates who have distinguished themselves while serving the needs of others,” said Ron Hance, WOCCU awards committee chairman, a member of its board of directors and president/CEO of Heritage Family CU, Rutland, Vt. “DSA offers a wonderful opportunity to showcase one's past credit union achievements among his or her peers.” In the case of individuals, recipients may be WOCCU and member organization officers, directors or representatives; international credit union pioneers; field technicians with a long and outstanding service record; or persons whose actions have benefited global credit union development. No more than three individual awards is presented in a single year. Institutional recipients may be organizations or agencies that have provided financial and technical assistance to develop international credit union movements and their service infrastructures over an extended period. No more than one institutional award is granted each year. For more information, use the resource link.

CUs start setting goals for Youth Week Saving Challenge

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MADISON, Wis. (2/3/09)--Credit unions already are setting goals for this year’s National Credit Union Youth Week, April 19-25, sponsored by the Credit Union National Association (CUNA). The Saving Challenge will cover the entire month of April. Previously, the challenge was held during Youth Week. This year’s theme is “The Magic of Saving.” “We expanded the Saving Challenge to a full month at the request of credit unions,” Lin Standke, Youth Week manager, told News Now. “Now they can choose to run it as long as they want; one week or up to four. The good news is that results are only reported once, at the end of April. It's easier and more flexible for varying communities.” She encouraged credit unions setting savings goals to look at past savings history. If no history is available, credit unions can use reports of youth deposits for April 2008. “If you participated in previous years, start with a general goal of 10% more,” Standke said. Credit unions can report their results to be included in cash prize drawings and help draw attention to the efforts credit unions are taking to educate youth. Credit unions also can report any financial literacy presentations to the National Youth Involvement Board (NYIB). NYIB is an organization dedicated to helping youth become financially literate. Joanne Sepich, CUNA’s current Youth Week coordinator, will continue to assist during Youth Week as she transitions to coordinating International Credit Union Day. For more information, use the links.

NCUF meeting in Orleans marks recovery process

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NEW ORLEANS (2/3/09)--For the first time, the National Credit Union Foundation (NCUF) held its Annual Meeting in New Orleans. The location was chosen so NCUF board members could tour the city’s low-lying areas to see progress of recovery efforts from Hurricane Katrina.
National Credit Union Foundation board members touring New Orleans saw many signs of recovery from Hurricane Katrina. (Photo provided by National Credit Union Foundation)
From 2005 through 2008, NCUF worked with credit union leagues on the Gulf Coast to make over $3.6 million in Katrina relief grants--the largest disaster relief fundraising effort in credit union history. The 2009 NCUF Annual Meeting was hosted at the new headquarters of Jefferson Financial CU, Harvey, La., which invested $2 million in the Community Investment Fund (CIF) to support both NCUF and the new Louisiana Credit Union Foundation (LCUF). The meeting featured guest presentations by LCUF and New Orleans Firemen’s FCU. Both offered lessons from their disaster recovery experiences. In the wake of Katrina, millions of relief dollars left the credit union community because contributors were not aware of an option within the credit union system, Louisiana Credit Union League President/CEO Anne Cochran said. Cochran encouraged credit unions to raise future relief funds through CU Aid, the online fundraising platform developed by NCUF to assist credit unions and credit union people impacted by disasters. “With CU Aid, we keep all relief dollars in the credit union community,” said NCUF Chairman Allan Kemp McMorris. “CU Aid’s mission mirrors the credit union philosophy of ‘People Helping People.’ In times of disaster, CU Aid is all about credit unions helping credit unions.”

Officers elected by NCUF board

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NEW ORLEANS (2/3/09)--At its annual meeting last week, the National Credit Union Foundation (NCUF) Board elected a new slate of board members and officers. Two new board members were elected to three-year terms:
* Paul Mercer, president of the Ohio Credit Union League in Columbus, and; * Christopher Roe, senior vice president of corporate and legislative affairs for CUNA Mutual Group.
Three current board members were re-elected to new three-year terms:
* John Gregoire, president, Pro-Con Group Ltd., Madison, Wis.; * Allan Kemp McMorris, president/CEO, Oakland County CU, Waterford, Mich.; and * John Radebaugh, president, North Carolina Credit Union League.
Laida Garcia, executive vice president of Florida Central CU, Tampa, will serve as NCUF Treasurer and chair NCUF’s Investment Advisory Committee for a one-year term. Three current officers were re-elected to new one-year terms:
* McMorris will serve a second year as NCUF Chairman. He advocates credit union membership growth and financial education--key goals of the two largest programs receiving NCUF funding: REAL Solutions and Biz Kid$; * Gary Oakland, president/CEO, BECU, Seattle, will serve a second year as NCUF Vice Chairman. Oakland will also continue to chair NCUF’s Fundraising Committee. Oakland directed the Fundraising Committee to create a Community Investment Fund (CIF) Task Force to explore “alternative fundraising strategies that could complement the traditional CIF strategy.” * Francois Henriquez, senior vice president and general counsel for U.S. Central FCU, Lenexa, Kan., will continue to serve as NCUF Secretary. Henriquez will continue to chair NCUF’s Governance and Nominations Committee and will serve on the new CIF Task Force.

Super Bowl ads tout CUs

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MADISON, Wis. (2/3/09)--Two credit unions used ads that aired during Super Bowl XLIII Sunday to tout the advantages they provide for members. Charlotte (N.C.) Metro CU, a $176 million asset credit union, ran an ad featuring a “fee pig” during the game, not just because viewership ratings are up for the event, but because of “eyeball glue” that holds people to the ads, said Nathan Tothrow, Charlotte Metro marketing director (Charlotteobserver.com Jan. 30). Charlotte Metro, which first advertised during the Super Bowl last year, said the ads helped the credit union nearly quadruple its growth goals. The credit union writes scripts and creates storyboards in-house instead of using an advertising agency, to save money, Tothrow added, declining to say how much was paid to advertise during the game. Research indicated that the credit union’s target demographic—25- to 45-year-old women--are fond of “fuzzy creatures,” appreciate humor and like direct messages. Tothrow wrote the script for the “fee pig” commercial, which makes fun of bank fees, recent bank mergers and the Charlotte bourgeoisie, he told the paper. The commercial will be in regular rotation as Charlotte Metro gears up its marketing after the Super Bowl and launches smaller spots to highlight specific credit union services, Tothrow added. Another credit union also took advantage of the event to advertise. Boeing Wichita CU changed its name Sunday to Meritrust CU and promoted the change with five TV spots that feature the same ad during the Super Bowl (Lawrence Journal World Feb. 1). After originally planning to introduce the name change at the beginning of this year, the credit union decided to publicize it during the Super Bowl because Super Bowl ads get a lot of attention, and the opportunity to target specific markets was inexpensive, Bob Corwin, Meritrust president/CEO, told the newspaper. The total cost of the ad was less than what Meritust spent to switch out signs at its 15 branches, Corwin added. The credit union hopes the ad will promote the name change and also regenerate interest about Meritrust in the communities it serves, Corwin said.

CU System briefs (02/02/2009)

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* HARRISBURG, Pa. (2/3/09)--The Pennsylvania Credit Union Foundation benefited from the Pittsburgh Steelers' 27-23 cliffhanger win over the Arizona Cardinals in Sunday's Super Bowl LXIII. In a friendly wager between the Pennsylvania Credit Union Association and the Arizona Credit Union League, PCUA issued a challenge that the losing state would make a contribution to the winner's state foundation. In recognition of the Steelers' sixth Super Bowl championship, the Arizona league will make a $100 contribution to the Pennsylvania foundation (Life is a Highway Feb. 2) … * FARMERS BRANCH, Texas (2/3/09)--The Texas Credit Union League (TCUL) has once again been ranked in the top 20 Lobby Power Groups in the state by Capitol Inside magazine. The league was ranked No. 17 out of 1,200 Texas trade associations. The article cited Jeff Huffman, Carolyn Merchan-Saegert (now a contract TCUL lobbyist), and Buddy Gill in the listing. No other financial services trade group made the publication's Top 20, said the league (The Advocate Feb. 1) … * HAGERSTOWN, Md. (2/3/09)--A former contract worker at Fannie Mae pleaded not guilty Friday to planting a virus in a computer to destroy all 4,000 computer servers nationwide at the nation's largest mortgage finance company. Rajendrasinh B. Makwana, 35, of Glen Allen, Va., pleaded not guilty to one count of computer intrusion. The Justice Department said that if the virus had been released as planned on Saturday, it would have shut down operations for a week and cost millions of dollars. Makwana, an Indian citizen who has lived in the U.S. since at least 2001, was fired Oct. 24 from his computer programming job at Fannie Mae in Urbana, Md., for erroneously writing programming instructions that changed the setting or servers, said the Federal Bureau of Investigation (Associated Press Jan. 31) … * WORCESTER, Mass. (2/3/09)--A man is charged in the robbery last week of Digital FCU's Worcester, Mass., branch after the taxi he planned to use as a getaway car left the scene and he was apprehended running down the street. The suspect, Lewis D. James, 25, allegedly took a cab to the credit union and told the driver to wait for him. When he returned carrying a duffel bag, the cab driver became suspicious, locked his doors, and took off. James is charged with armed and masked robbery in the incident Thursday. He also was charged in the Jan. 13 robbery of a bank (Worcester Telegram & Gazette Jan. 31) … * FARMERS BRANCH, Texas (2/3/09)- Walter J. Costello, longtime board chairman of Philadelphia Inquirer & Daily News Employees FCU (now Media Members FCU), died last week. He was 87. Costello served as board chairman from the late 1960s to the late 1990s. He retired from the newspaper in 1989, where he was advertising art director. At his retirement, he was named director emeritus--the only person at the credit union to receive that honor. (Life is a Highway Feb. 2) …