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Inside Washington (02/09/2009)

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* WASHINGTON (2/10/09)--Last week, Sen. Robert Menendez (D-N.J.), a member of the Senate Banking Committee, introduced broad credit card reforms (American Banker Feb. 9). His bill would take up some consumers’ complaints about card solicitations to young adults and require consumers under the age of 21 to opt in for card solicitations. The bill, like similar legislation in the House, would ban universal default and retroactive interest rate increases. The Menendez bill also would ban card companies from changing terms of card agreements. Along with capping penalty interest rates to an increase of seven percentage points, the bill also would require "pre-approved" offers to be legitimate, firm offers of credit with details on the interest rate, fees, and amount of credit ... * WASHINGTON (2/10/09)--The Obama administration is developing guidance for a loan modification program for loans that already are delinquent or are in danger of defaulting (American Banker Feb. 9). The guidance would serve as a national standard for modifications. Under the guidance, regulators would provide best practices guidance to servicers conducting the modifications. Specifics of the program--such as eligibility and a launch date--have not been determined. The administration has debated how a loan modification program would be shaped. One idea involves servicers partnering with the government to reduce the cost of troubled mortgages. Another would allow servicers to collect a fee from the government if they modify a loan ... * WASHINGTON (2/10/09)--The Federal Reserve Board Friday released loan rates and collateral haircuts for the Term Asset-Backed Securities Loan Facility (TALF). The new terms also include a revised definition of eligible borrowers and additional specifications regarding eligible asset-backed securities (ABS) collateral. The board authorized TALF on Nov. 24 and provided terms and conditions for the program on Dec. 19. TALF aims to increase credit availability and support economic activity by facilitating the issuance of ABS collateralized by certain consumer and small business loans. Under TALF, the Federal Reserve Bank of New York will lend up to $200 billion to eligible owners of certain AAA-rated ABS backed by new and recent originated auto loans, credit card loans, student loans and Small Business Association-guaranteed small business loans ... * WASHINGTON (2/10/09)--The U.S. Small Business Administration’s (SBA) Patriot Express Pilot Loan initiative has approved more than $250 million in loan guarantees to 2,900 veterans and their spouses. More than 20% of the loan applications have come in the first quarter of this year. Loan amounts average $88,000. About 15% of the loans have gone to military spouses, the SBA said. Patriot Express, launched June 28, 2007, builds on the more than $1 billion in loans SBA guarantees annually for veteran-owned businesses. More than 14% of businesses in the U.S. are veteran-owned ...

CUNA Corporate CU group investigates options

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WASHINGTON (2/10/09)—The Credit Union National Association (CUNA) Corporate CU Task Force will meet here this week to continue to develop and flesh out alternative funding plans for a corporate credit union stabilization plan. CUNA maintains that there is no “silver bullet” approach—no single answer—to the challenge of providing adequate money for the National Credit Union Administration’s corporate liquidity program. CUNA has warned, however, that the current plan to assess a 2009 share insurance premium on credit unions could put too much pressure on a system that is already coping with tough economic conditions. At its Thursday session, the CUNA task force will continue to flesh out a series of alternatives that CUNA has urged lawmakers and regulators to consider. These alternate funding solutions, CUNA has said, would provide the needed support to the corporates while mitigating costs to credit unions. They include:
* Long-term deposits from CUs into corporates; * Use of Central Liquidity Facility (CLF) funds to loan to the National Credit Union Share Insurance Fund (NCUSIF), and seek legislation to allow funding directly to the corporates; * Tap the U.S. Treasury Department’s Troubled Asset Relief Program (TARP) for back-up assistance to the NCUSIF; * Assess the premium assessment in stages; * Expand the “CU System Investment Program (CU SIP) to make it more attractive to credit unions; * Address accounting issues that could allow the NCUSIF to recognize the premium expense over time, thus giving credit unions some flexibility on when they must accent for these expense: and * Allow natural person CUs to purchase corporates’ troubled assets.
In addition to developing the options above, the CUNA task force will be taking a fresh look at additional options, including those proposed recently by credit unions. Use the resource links below for a CUNA compendium of resources.

Feb. vote possible for House deposit insurance bill

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WASHINGTON (2/10/09)—A House vote could come as early as this month on legislation to make permanent the $250,000 share and deposit insurance increase enacted as part of the Emergency Economic Stabilization Act of 2008, according to Ryan Donovan of the Credit Union National Association (CUNA). The CUNA vice president of legislative affairs said Monday that H.R. 786 could be considered by the House when it returns from next week’s District Work Period. “The bill is not currently scheduled for a vote this week—but even that can change at the discretion of House leadership,” Donovan noted. During the House Financial Services Committee consideration of the bill last week, the panel approved two amendments that CUNA suggested in a letter to the committee on Feb. 3. They would:
* Extend the amount of time the National Credit Union Administration (NCUA) has to restore its insurance fund to its statutorily required levels to five years from the current one year. * Increase NCUA's borrowing authority from the Treasury Department from $100 million to $6 billion.
The NCUA’s current borrowing level was set 38 years ago. CUNA believes the increased borrowing authority should give the NCUA additional resources to manage the NCUSIF and deal with problems that may arise.

Treasury to unveil new TARP strategy today

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WASHINGTON (2/9/09)--U.S. Treasury Secretary Timothy Geithner delayed by a day his intentions to speak on the Obama administration’s plans to revamp the federal government’s $700 billion bailout plan. Geithner is expected to unveil today the administration’s strategy to increase liquidity and new measures to strengthen oversight and accountability in how taxpayer dollars are spent. The plan may include new injections of taxpayer funds into banks, targeted at those regulators have determined are in deepest need of new capital. A Federal Reserve program intended to bolster consumer and small business loans may also be expanded, Bloomberg reported Monday. Under the original Troubled Asset Relief Program (TARP), the Treasury was authorized to spend $700 billion to buy troubled assets from financial institutions, although the department has been criticized for how it has spent the money thus far. Over the weekend, Obama administration officials revised their plans to reveal their TARP strategy Monday so Geithner and others could give full attention to the Senate’s consideration of the President’s economic stimulus plan.