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Congress this week CUNA CUs watch for jobs bill vote

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WASHINGTON (2/23/10)--The House and Senate return to work this week, and while credit unions would not usually be overly concerned by the prospects of a job creation bill, the potential attachment of member business lending changes is meriting some attention. The jobs bill, the Hiring Incentives to Restore Employment (HIRE) Act, was introduced by Sen. Harry Reid (D-Nev.) earlier this month, and would provide tax credits for businesses that create jobs by granting employers social security payroll tax exemptions for any person they hire this year that has been unemployed for at least two months. The bill on Monday passed a cloture vote of 62 to 30. The Credit Union National Association (CUNA) is working with representatives on the Hill to attach legislation that would lift the member business lending cap to 25% of a credit union's assets, and CUNA plans to attach this legislation to a jobs bill at some point this year. Both employment and lending will be covered in congressional hearings scheduled for this week, with the House Financial Services Committee on Tuesday set to discuss whether additional stimulus is needed to create greater employment growth. That same committee on Wednesday will hear from Federal Reserve Chairman Ben Bernanke as he reports on the Fed's Semiannual Monetary Policy Report. Bernanke will also appear before the Senate Banking Committee on Thursday. The House committee will also be active on Thursday and Friday, with hearings on finance industry compensation and the condition of small business and commercial real estate lending in local markets scheduled, respectively. Credit unions and credit union leagues also will be active on the Hill,with plans to hike Capitol Hill to meet with their state representatives. During a legislative update Monday afternoon at the CUNA's Governmental Affairs Conference in Washington, D.C., CUNA’s legislative affairs staff briefed attendees on major legislative issues affecting credit unions. Some of the major issues CUNA staff noted:
* Member business lending (MBL). If caps on credit union member business lending are raised to 25% of assets from 12.25% of assets, $10 billion in new loans could be generated for the economy, creating 108,000 new jobs at zero cost to taxpayers; * Overdraft protection. A proposed bill would limit overdraft charges to one account per month and six charges per year. If this is enacted, credit unions would stop offering overdraft services, which means members would lose the benefit of that program; * Interchange fees, which support the debit and credit card programs that credit unions offer their members. Credit unions need to explain how debit and credit card programs help serve members; * The Community Reinvestment Act, which governs financial institutions to ensure they are adequately serving all aspects of their communities. Credit unions already serve their members and communities, CUNA staff said; and * Regulatory restructuring. The areas credit unions will most be interested in are systemic risk regulation and consumer protection.
CUNA staff leading the session included Ryan Donovan, vice president of legislative affairs; Richard Gose, senior vice president of political affairs; John Magill, senior vice president of legislative affairs, and Elizabeth Furey, director of grassroots advocacy for political affairs.

2009 financials see CUNA in healthy shape

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WASHINGTON (2/23/10)--The Credit Union National Association (CUNA), in its 2009 financial results released on Monday, reported an operating margin of $803,000 and a $6.8 million increase in net assets, an 185% increase from the results reported in 2008, returning CUNA firmly into the black. The financial results, which were announced at the Governmental Affairs Conference by CUNA Treasurer Pat Wesenberg,president/CEO of Stevens Point, Wis.-based Central City CU, showed 2009 operating revenues totaling $53.7 million and operating expenses totaling $52.3 million. CUNA's overall 2009 operating expenses were $6.9 million, or 12.3% below what was projected in the 2009 budget, and $4.6 million, or 8.6%, below the amounts reported in 2008. CUNA's net operating revenue for 2009 was $50 million, and the net operating expenses reported for that same period amounted to $49.2 million. These net operating revenues were $6.2 million, or 11% lower than projected in the 2009 budget, and $4 million, or 7.4% lower than the results reported in 2008. Revenues from operations declined by a total of $4.3 million, or 7% from the previous year, but these revenue declines were offset by expense savings that amounted to savings of $4.8 million, or 8.4% from 2008 expenses, Wesenberg added. CUNA reported a net operating margin of $1.4 million for 2009, and Wesenberg reported that CUNA has "effectively and prudently managed member assets" and generated a total of $9 million of positive operating income over the past six years. CUNA recognized 19.9% returns on its investment portfolio, a $4.9 million increase on the investment returns recorded in 2008.

Matz CUs have reason for long-term optimism

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WASHINGTON (2/23/10)--While the National Credit Union Administration (NCUA) recently has focused more on "addressing credit unions’ immediate problems,” NCUA Chairman Debbie Matz said that both the NCUA and the credit union movement in general "have stronger reason for long-term optimism" and "can again think of the credit union industry's longer-term potential" as the economy begins to recover. Before she began her formal address, Matz saluted outgoing Credit Union National Association (CUNA) President/CEO Dan Mica for his years of devotion to credit unions. Matz also thanked CUNA for its role in confronting the myriad challenges faced by credit unions in a difficult economic environment, and, turning to those very difficulties, said that the NCUA will closely monitor credit unions for any potential red flags. Specifically, the NCUA will look "very closely" at credit unions holding too many fixed-rate, long-term mortgages, and take additional actions to avert drains on the credit union system. In spite of a difficult economy, Matz reiterated that credit unions were one of the few parts of the financial system that did not buckle under the stress of the economic crisis, and continued to make loans, provide "advice and reassurance," modify mortgages, and help Americans regain their stability and financial confidence. After addressing the recent past, Matz outlined several areas where credit unions can make headway in the near future. These include expanding their online service offerings, offering low-cost, short-term loans to consumers “that are currently dependent on often harmful payday loan providers,” expanding member business lending by increasing or outright eliminating the current 12.25% of assets cap, and supplemental capital. Specifically, Matz said that increasing online offerings will reduce credit union expense ratios, "overcome physical distance, cost less and serve more members" while appealing to a "new generation of tech-savvy consumers, who expect more than face-to-face transactions at a teller window." Matz said that the NCUA, in conjunction with CUNA's Technology Council, will discuss the potential that increased use of new technology presents at an upcoming webinar this Spring. The NCUA later this year also hopes to release a proposal "that will make it more attractive for credit unions to offer payday-loan alternatives," such as short-term loans, Matz added. In a final note on the future of the credit union system, Matz also challenged credit unions to increase the total number of members nationwide to 100 million by 2015.

CUNA task force calls for new corporate model

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WASHINGTON (2/23/10)--The Credit Union National Association's (CUNA) Corporate Credit Union Task Force has weighed in on the status of the corporate credit union system and has proposed a series of dramatic changes to bolster the future viability of the corporate credit union system. A key principle behind the work of the task force was holding the interests of natural person credit unions "above all other,” and the task force report noted that risks related to the delivery of settlement, payment, and liquidity services must be well managed. CUNA’s Board has accepted the report and recommendations of the Task Force. The Task Force is comprised of nationwide credit union leaders, including Vystar CU CEO Terry West, Teachers FCU CEO Bob Allen, Suncoast Schools FCU CEO Tom Dorety, Tennessee CU League CEO Tom Gaines, Tropical Financial CU CEO Rich Helber, GECU CEO Harriet May, Georgia CU League president Mike Mercer, Allied CU CEO Frank Michael, and Virginia CU CEO Jane Watkins. CUNA Chairman and Deseret First CU CEO Kris Mecham took part as well. One of the task force’s main premises is that credit unions are unwilling to capitalize corporate credit unions under the current corporate business model, and, under the task force's proposal, both the amount of capital required of credit unions and the risks to that capital would be limited. An essential feature of that model is for corporates to hold much smaller balances sheets than they have in the past. While the task force agreed that the central elements of the National Credit Union Administration’s (NCUA) proposed corporate changes would be consistent with that sort of model, the task force believes that the proposal does overreach in some areas, and particularly called on the NCUA to address issues regarding corporate governance, derivatives and legacy assets. The NCUA proposal, which was released late last year, would adjust the current corporate capital requirements, impose new investment concentration limits, prevent corporate credit unions from investing in certain kinds of investments, and impose new restrictions on corporate credit union board membership and compensation. The task force has recommended a new model to serve natural person credit unions that would continue to provide payment and settlement services and act as an agent to provide investment and liquidity services to credit unions rather than providing those services on the corporates’ balance sheets. All of these services could be provided through an individual entity, subsidiaries, or vendors. The task force proposal noted that many credit unions and groups of credit unions are examining how they should respond to the need for change in the corporate system. Many corporate credit unions are also investigating new models and have weighed in on the NCUA's proposed changes to the corporate system. A particular concern raised by the task force is the need for a smooth and managed transition from the current system to the new, evolving system. The task force maintains that credit unions need to be assured that they will continue to have reliable access to the services they have received from corporates up until now. While the task force has not met directly with the NCUA administration on these issues, there have been some discussions, and a comment letter, which will be based on the corporate task force report, is pending.

NCUA to host TARP call for CDCUs

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ALEXANDRIA, Va. (2/23/10)--The National Credit Union Administration (NCUA) and the National Federation of Community Development Credit Unions are offering a joint audio conference March 4 to provide low-income credit unions (LICUs) with specifics about how to access the U.S. Treasury’s new Community Development Capital Initiative. The NCUA earlier this month approved an interim final rule that allows LICUs to redeem all or part of government-funded secondary capital, along with its matching secondary capital at any time after it has been on deposit for two years. That change was made to enable certain credit unions to particpate in the new Treasury program. LICUs that wish to take part in this program must apply for funding by April 2. NCUA Chairman Debbie Matz strongly encouraged LICUs to take part in the audio conference to "learn more about how this capital infusion could help them better serve their members and reach out to more consumers." No registration is required for the 2 p.m. (ET) session. The call-in number for the free, 60-minute audio conference is 877-293-6129. To access the conference, provide Conference ID Number: 58577856. Additional details about the initiative are available on CDFI Fund’s website

Dodd asks regulators to report on CRE market

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WASHINGTON (2/23/10)--Senate Banking Committee Chair Christopher Dodd (D-Conn.) has asked federal regulators, including the National Credit Union Administration, to report on their efforts to stabilize the commercial real estate (CRE) market. Dodd sent a letter to Federal Reserve Board Chairman Ben Bernanke with his request. He cited a Congressional Research Service report that indicated delinquency rates for commercial mortgages increased to 6% in January from 4% at the end of the third quarter of 2009. He also noted that at a Congressional Oversight Panel hearing last month, a Fed official said that Fed examiners are reporting a “sharp deterioration in the credit performance of CRE loans in [financial institutions’] portfolios and loans in commercial mortgage-backed securities" and said more than $500 billion of CRE loans will mature each year over the next few years. The panel also reported that nearly half of CRE loans at present are underwater, and that the largest loan losses are projected for 2011 and beyond, Dodd said. “I believe that the weakness in the CRE market requires prompt and robust responses from the regulators to guard against harmful effects on financial institutions and the economy,” Dodd said. “I urge you to redouble your efforts to provide appropriate oversight of this vital component of our economy, and look forward to working with you to bring much-needed stability to the CRE market.”

Former presidential adviser backs more MBLs for CUs

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WASHINGTON (2/23/10)--CNN political analyst and former presidential adviser David Gergen offered a wide-ranging analysis of national politics Monday, within which he backed increase member business lending authority for credit unions as one way to stimulate the economy. Addressing the Credit Union National Association’s Governmental Affairs Conference meeting here this week, Gergen also said of credit unions, “(They) stand for thrift and discipline, and for the small-business person trying to get a loan. “You represent the spirit of people trying to do things for the country.” These are the values the country needs to get out of “this funk we’re in,” Gergen said. On another topic straight for today’s headlines, Gergen talked about jobs creations. He said the United States at one time was the great American job machine. The Clinton administration created 23 million jobs during its eight years. But since 1999 the country has “flat-lined on job creation.” The jobs problem can be solved only by becoming a more innovative and educated nation, he said. “We can’t borrow or spend or regulate our way out of it. We need jobs in the private sector.” Throughout most of the 20th century, the United States was the most educated nation in the world, but now it’s number 20 in the world in the number of high school graduates as a percent of the population. “We have to get our kids back to school.” To stay on the cutting edge, schools must emphasize science, math, and engineering—core competencies for the 21st century, Gergen opined. “We have it within us to be the most creative, entrepreneurial people in the world. It’s in our DNA.” Gergen’s Washington, D.C. experience includes posts in the Nixon and Ford administrations, as well as service as director of communications for the Reagan White House, and counselor to President William Clinton on foreign policy and domestic affairs.

Sponsors urge colleagues add MBLs to jobs bill

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WASHINGTON (2/23/10)—The primary sponsors of a House bill to increase the credit union member business lending (MBL) cap have urged their lawmaking colleagues to support adding the MBL language to a jobs-creation legislative package. Reps. Paul Kanjorski (D-Pa.), Ed Royce (R-Calif.), and Marcy Kaptur (D-Ohio) Monday sent a letter to each House member asking them to sign on to a letter to House Speaker Nancy Pelosi, of California, and Republican Leader John Boehner, of Ohio, that will seek this new approach to MBL legislation. “We need to create more jobs and help small business expand. One way to do so is to unleash the power of America’s credit unions to make more member business loan as proposed in H.R. 3380, the Promoting Lending to America’s Small Businesses Act,” the lawmakers wrote in the “dear colleague” letter. That bill would, among other things, increase the MBL cap to 25% of assets, up from the current 12.25%. The letter to Pelosi and Boehner will note that increased MBL authority, as specified in H.R. 3380, could result in credit unions lending up to $10 billion in new capital to small businesses in the first year after enactment, helping them to create more than 100,000 new jobs. “By enhancing credit unions’ ability to extend loans to America’s small businesses, we can quickly help to advance much-needed economic growth. Increasing competition in the small business loan marketplace will also increase the efficiency of capital allocation,” the letter will tell the House leaders. The letter to colleagues was sent on the first day of the Credit Union National Association’s (CUNA’s) Governmental Affairs Conference in Washington, D.C. One pivotal part of the annual CUNA session is credit union representatives’ visits to lawmakers on Capitol Hill to discuss key issues. Kanjorski has asked CUNA and the leagues to help get as many co-signers to the Pelosi-Boehner letter as possible, asking credit unions to make this a priority during their visit. The deadline for members to sign on to the letter is noon Friday.

Inside Washington (02/22/2010)

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* WASHINGTON (2/23/10)--Noting Monday's effective date of new rules under the Credit Card Accountability, Responsibility, and Disclosure Act, signed into law by last spring, U.S. Treasury Secretary Timothy Geithner said Monday the implementation of protections is a “critical step forward” in efforts “to protect American families by prohibiting the use of unfair retroactive rate hikes and late fee and over-limit fee traps by credit card companies.” He said the administration will “continue to work on strengthening consumer protections and disclosure for a wide array of financial products.” Geithner noted that work includes efforts to consolidate “the fragmented authority of seven separate agencies” into a single, independent Consumer Financial Protection Agency … * WASHINGTON (2/23/10)--National Credit Union Administration (NCUA) Board Member Michael Fryzel (pictured) commended defense credit union representatives for their leadership in the industry and their service to members, and stressed that more needs to be done during a speech at the Defense Credit Union Council’s Defense Issues Meeting in Washington, D.C. Fryzel emphasized continued commitment and involvement for credit unions. “When you put your shoulder to wheel, good things happen. The industry expects this of you, and I look forward to your continued assistance and involvement.” He also urged attendees to talk with their senators and representatives during the financial crisis to “give fresh energy to those who work here and take fresh energy home with you to do the best job you possibly can.” (Photo provided by the National Credit Union Administration) … * WASHINGTON (2/23/10)--The future of the Federal Home Loan Banks (FHLBs) may be held by Fannie Mae and Freddie Mac, according to financial observers. The House Financial Services Committee is scheduled to meet March 2 to talk about the enterprises’ futures and the housing market. Lawmakers’ conclusions on the matters will likely have significant implications for the FHLBs--including their regulator and what they will do with remaining debt. The FHLBs have suffered losses because of problems with private-label mortgage-backed securities, and the system lost $165 million in the third quarter, said American Banker (Feb. 22) ... * WASHINGTON (2/23/10)--On Friday, President Barack Obama announced a program that would place $1.5 billion into states so they can help unemployed, second-lien or underwater borrowers. The administration will move the money from the Troubled Asset Relief Program to housing finance agencies in five states that have experienced a drop in home prices of 20% on average (American Banker Feb. 22). Treasury will need to approve the programs, but then the agencies will determine how the funds will be used in their markets …

Mica With the right attitude CUs prosperous

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WASHINGTON (2/23/10)—Credit unions, with the right attitude, can create another 100 years of prosperity for their communities and their members, Credit Union National Association (CUNA) President/CEO Dan Mica told attendees of the Governmental Affairs Conference (GAC) morning session Monday. During what will be his last GAC as CUNA’s leader, Mica took the stage Monday morning during the conference opening session and asked the crowd as he has the last 14 years: “Isn’t it great to be in Washington, D.C.?” After receiving a standing ovation from the crowd, Mica reflected on credit unions’ successes in the past 100 years. He also thanked credit unions for the work they have done during the past 14 years he has served as president/CEO of CUNA, encouraging them to “think positive” and to use technology to move forward. Even the smallest credit union can seem large to its members with the right use of technology, he said. Mica also touched on two pertinent issues for credit unions: alternative capital and member business lending. Mica said regulators would likely move toward raising requirements for all financial institutions, including credit unions. He urged credit unions to be “respectful but insistent” when addressing federal lawmakers on these issues--especially in terms of generating support for raising member business lending caps. If the caps are raised, credit unions could generate an extra $10 billion into the economy and create more jobs, he added. Mica closed his speech with some advice for credit unions—to speak with one voice, and to resist partisanship. “We should never be viewed as Democrats or Republicans, but as Americans,” he said. Overall, Mica expressed his confidence in the credit union movement and what it can offer the nation. “America is crying out for a basic philosophy to live by,” he said. “We [credit unions] offer it.”

CUNA leaders 2009 an unprecedented year

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WASHINGTON (2/23/10)—2009 proved to be a very busy year for the Credit Union National Association (CUNA)—and one that was also the most politically challenging CUNA President/CEO Dan Mica has seen in 40 years.
Click for slide show Dan Mica greets GAC attendees with , "Isn’t it great to be in Washington D.C., and isn’t great to be a credit union professional?"--the same warm welcome the outgoing CUNA chief has used during each of his 14 years as CUNA president and CEO. Getting down to business, Mica told his audience that just as the Great Depression of the 1930s created conditions that ultimately resulted in growth, the current difficult economic years will create growth for credit unions. (CUNA photo)
Mica addressed the CUNA board and attendees of the Governmental Affairs Conference during CUNA’s annual general meeting, which took place at Monday morning’s opening session. Among CUNA’s accomplishments in advocacy, Mica noted that CUNA:
* Worked with the leagues to defuse a 21-day requirement on open-ended lending products under the Credit Card Accountability, Responsibility and Disclosures (CARD) Act, convincing Congress to enact a fix clarifying that the law applies only to credit cards; * Worked to lift the borrowing cap for the National Credit Union Administration’s Central Liquidity Fund to $41 billion from $1 billion; * Dealt a blow to Unrelated Business Income Tax (UBIT) by backing Community First CU’s, Appleton, Wis., successful federal court challenge of UBIT; and * Preserved strong congressional relations while helping to defeat cramdown legislation. CUNA maintained its integrity and as a result, Congress "called on us more than ever before," Mica said.
CUNA also successfully kept itself on track financially, despite a grim economy. CUNA projects a positive margin for year-end 2009, he said. CUNA also generated positive press coverage from national news, broadcast and on TV. "Fourteen years ago, 99% of the news [about credit unions] was in the trades," Mica said. Kris Mecham, CUNA board chairman, echoed Mica’s thoughts on the busy and challenging year CUNA has faced. But he also noted another challenge the board has--to find Mica’s replacement. Mica, who began as president/CEO of CUNA in 1996, announced in August that he would step down from his position this year. Mecham said that when he heard Mica was leaving it was "certainly a sad day in my life." However, he assured attendees that the board has a slate of talented individuals from which to pick. "[Mica] has delivered exceptional results," Mecham said. "We are very grateful to [him]."