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FASB agrees to guidance for illiquid markets

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FAIRFIELD, Conn. (3/17/09)--The Financial Accounting Standards Board (FASB) Monday agreed to provide guidance on applying mark-to-market accounting rules in illiquid markets. At an open board meeting, FASB staff presented two proposals regarding fair value accounting and rules to address other than temporarily impaired (OTTI) assets. After discussion, the board directed the staff to make changes to the proposals and release a final version today. Once issued, there will be a 15-day public comment period. The proposed effective date is for periods ending after March 15. FASB has concerns, however, that may be too soon for some. They may not be able to prepare the information in time for March 31 reporting. FASB will request comments on whether the guidance should be effective for periods ending after June 15, with early adoption permitted. Use the resource link below to access the FASB summary of its actions.

Agency helps CUs discuss corporate stabilization

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ALEXANDRIA, Va. (3/17/09)—Credit unions just got help from their federal regulator on how to communicate to members about recent actions taken to stabilize the corporate credit union system. The National Credit Union Administration (NCUA) sent a letter to credit unions to share with members that explains such things as the agency Corporate Stabilization Plan (CSP), as well as how stabilization efforts may affect federally insured credit unions. The NCUA encouraged credit unions to post the letter in lobbies, on websites and regular or electronic mail to ensure the broadest and most effective distribution. Use the resource link below to access the letter. Letter to Members

FinCEN Mortgage fraud connected to other crimes

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VIENNA, Va. (3/17/09)--The Financial Crimes Enforcement Network (FinCEN) Monday released a report showing a connection between those reported under the Bank Secrecy Act (BSA) of suspected mortgage loan fraud and possible involvement in other financial crimes. "This study analyzes the possible interrelationship of illicit activity occurring across different financial sectors,” said FinCEN Director James Freis in a release accompanying the report. “Criminal actors may attempt to exploit any vulnerability to commit fraud and launder money through a range of financial institutions," he said, and added, "The interconnected nature of suspicious activity across multiple financial sectors covered by FinCEN's Bank Secrecy Act (BSA) regulations underscores the immense value of combining insights from the different sectors for the purpose of detecting and thwarting criminal activity." Those reported through financial institution’s Suspicious Activity Reports (SARs) for possible mortgage fraud may also be involved in such illegal activities as check fraud, money laundering, stock manipulation, structuring to avoid currency transaction reporting requirements, FinCEN said. From depository institution Suspicious Activity Reports (SARs), FinCEN identified approximately 156,000 mortgage fraud subjects, and found that 2,360 were reported for suspicious activity in 3,680 of the other SAR types. The agency noted that, through SARs, it had identified approximately 156,000 mortgage fraud subjects, and found that 2,360 were reported for suspicious activity in 3,680 of the other SAR types. In 2009, FinCEN is conducting additional analyses to examine the relationship between mortgage loan fraud and other financial fraud, and will further explore reported activities, locations, and subjects. FinCEN Summary of Report Results FinCEN Report

CUNA to testify on three top CU issues

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WASHINGTON (3/17/09)—The Credit Union National Association (CUNA) is scheduled to testify three times in the next two weeks on some of the biggest issues facing credit unions and the financial services industry today. On Thursday afternoon, Terry West, chairman of CUNA's Corporate Credit Union Task Force, is scheduled to testify at the Senate Banking subcommittee on financial institutions’ hearing entitled, "Current Issues in Deposit Insurance." West is CEO of Vystar CU, Jacksonville, Fla. Also on Thursday afternoon, CUNA’s positions on bills to address unfair and abusive practices as relating to overdraft protection plans and credit card terms will be presented by Doug Fecher, president/CEO of Wright-Patt CU, Fairborn, Ohio. Fecher is scheduled to appear before the House Financial Services subcommittee on financial institutions and consumer credit, which is conducting a legislative hearing on H.R. 627, the Credit Cardholders' Bill of Rights Act, and H.R. 1456, the Consumer Overdraft Protection Fair Practices. Next week, on March 24, CUNA will be part of a panel of financial industry witnesses to testify before the Senate Banking Committee on "Modernizing Bank Supervision and Regulation." The committee has scheduled a series of hearing on the issues, which kicks off this Thursday with testimony from federal regulators. National Credit Union Administration Chairman Michael Fryzel is slated to be on that witness panel. Also on CUNA’s hearing radar for the week”
* On Tuesday, a House Financial Services Committee hearing entitled, "Perspectives on Regulation of Systemic Risk in the Financial Services Industry;" * On Wednesday, a Senate Banking Committee hearing entitled, "Lessons Learned in Risk Management Oversight at Federal Financial Regulators;" * On Thursday morning, the House Financial Services Committee subcommittee on capital markets, insurance and government-sponsored enterprises is may hold a session on the administration’s program designed to reduce the number of foreclosures by allowing eligible homeowners to refinance or modify the terms of their mortgages; * Also on Thursday morning, the House Ways and Means Committee subcommittee on oversight has scheduled a hearing entitled, "The Troubled Asset Relief Program: Oversight of Federal Borrowing and the Use of Federal Monies;" * Another on Thursday morning, the Senate Small Business Committee will hold a hearing entitled, "Perspectives from Main Street on Small Business Lending;" and * And on Friday, the House Financial Services Committee may conduct a hearing on financial fraud and enforcement.
Copies of CUNA's written testimony will be posted on the CUNA Legislative Affairs Website when available. Use the resource link below for CUNA website.

Senate cramdown bill delayed

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WASHINGTON (3/17/09)—Senate Majority Leader Harry Reid (D-Nev.) announced last night that the Senate will not consider its mortgage bankruptcy bill before the Spring District Work Period begins April 6. Proponents of legislation to allow bankruptcy courts to modify—or “cramdown”-- the terms of existing mortgages were working to get their bill passed before Congress’ Spring recess, according to Ryan Donovan of the Credit Union National Association (CUNA). Donovan, CUNA’s vice president of legislation affairs, confirmed that lawmakers backing the mortgage bankruptcy bill, such as Sen. Charles Schumer (D-N.Y.), have been “reaching out” to groups like CUNA who strongly oppose the bill. “Those lawmakers are exploring what might be done to get needed support for the bill. They are considering adding separate provisions to the legislation to soften opposition to the bill in total,” Donovan said. He acknowledged that Schumer has called CUNA President/CEO Dan Mica to ascertain if adding language to lift the cap on member business lending (MBL) would be enough of a sweetener to get CUNA to remove its opposition to the cramdown language. “We let him know that the MBL issues itself is not enough to gain our support in the absence of some major changes to the cramdown provisions,” Donovan said. He said CUNA reminded the senator that the group’s opposition to cramdowns is a “principled position” based on concerns that, as written, the bill could promote “gaming” of the mortgage system. Earlier this month, Schumer announced he is designing legislation to lift the MBL cap. The New York Democrat said in a letter to colleagues that lifting the current 12.25% of assets cap would help small businesses facing a "gaping void" in credit availability. Schumer is a member of the Senate Finance Committee and the Senate Banking Committee. “Sen. Reid’s announcement affords us more time to work for modifications,” Donovan said.

CUs want TARP back up for NCUSIF CUNA survey

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WASHINGTON (3/17/09)—A majority of credit unions responding to a nationwide survey by the Credit Union National Association (CUNA) said they back CUNA’s idea to employ a U.S. Treasury Department back up for the National Credit Union Share Insurance Fund (NCUSIF). CUNA announced Monday that 55% of respondents supported approach of employing a Treasury back up for the NCUSIF as it is tapped to pay for the National Credit Union Administration’s (NCUA) Corporate Stabilization Program (CSP). The responders agreed with the statement: “CUNA should advocate for a set-aside of TARP (Troubled Asset Relief Program) funds to backstop the NCUA’s guarantee of deposits by natural person credit unions in corporate credit unions, only to be accessed if at least $500 million of loss from corporates is first absorbed by the NCUSIF.” Thirty-six percent disagreed with the statement, and 9% were neutral. In another development, the CUNA Board of Directors, upon review of the survey results, voted at a recent to keep all options open in finding alternatives for mitigating costs of credit unions of the NCUA CSP. “We acknowledge strong opinions are held on these issues," said CUNA Chairman Kris Mecham, CEO of Deseret First Credit Union, Salt Lake City, Utah. "This was no easy decision for the CUNA board, but it is in the long-term interests of the credit union movement." In announcing survey results, CUNA noted that it is possible that no Treasury funds would ever be tapped, in that other alternatives identified by CUNA would further mitigate costs for credit unions. Among those alternatives:
* Use the CLF as a source of funding, for loans or capital support; * Improve the accounting treatment of assets that are other-than-temporarily-impaired (OTTI); * Pursue accounting issues that could allow the NCUSIF to recognize its insurance costs over time; * Obtain long-term deposits from CUs into corporates; and * Expand NCUA's Credit Union System Investment Program (CU SIP) to make it more attractive to credit unions.

Mica reminds White House CUs can help

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WASHINGTON (3/17/09)—Credit Union National Association (CUNA) President/CEO Dan Mica Monday delivered credit unions’ message directly to the White House: they are ready to help the country’s small businesses jumpstart the economy. Mica and CUNA Deputy General Counsel Mary Dunn attended President Barack Obama’s unveiling of his administration’s small business initiatives. Mica said the president made it clear he firmly believes an economic recovery will be driven in large part by America's small businesses, with their creation of new jobs. But President Obama noted, Mica said, that as the flow of credit has dried up during this recession, small business owners—even those who were prudent and responsible--have been set back by the behavior of others in our financial system who were not. “CUNA’s Mary Dunn, greeting the President, told him that credit unions want to help small businesses, too,” Mica said, adding he advocated for credit unions to work with senior White House staff. Mica reiterated that credit unions could lend up to $10 billion if a statutory 12.25% cap were lifted from their member business lending authority. Obama announced his program “Unlocking Credit for Small Businesses.” Under some of the program’s provisions:
* The U.S. Treasury Department will help provide a secondary market for small business loans by purchasing up to $15 billion in securities, and be prepared to purchase securities Pooled from the Small Business Administration’s (SBA) flagship 7 (a) guaranteed lending program; * The SBA will temporarily raise guarantees to up to 90% in the 7 (a) program, and temporarily eliminate certain SBA loan fees to reduce the cost of capital; and * The Treasury would require new reporting on lending to small businesses and promote greater efforts to extend small business loans.

Inside Washington (03/16/2009)

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* WASHINGTON (3/17/09)--President Barack Obama Monday ordered Treasury Secretary Timothy F. Geithner to "pursue every single legal angle" to block the ailing American International Group (A.I.G.) from paying its executives $165 million in bonuses after receiving substantial bailouts from the Treasury. "Under these circumstances, it's hard to understand how derivative traders like A.I.G. warranted any bonuses at all, much less $165 million in extra pay," Obama said, calling it an "outrage to the taxpayers who are keeping the company afloat." The administration is concerned a possible backlash against banks and Wall Street could be directed not only at financial institutions but also Congress and the White House, which could complicate the administration's efforts to win congressional approval of additional bailout packages (The New York Times March 16) … * WASHINGTON (3/17/09)--During an appearance Monday on the NBC "Today" program, House Financial Services Committee Chairman Rep. Barney Frank (D-Mass.) blasted American International Group's plan to pay $165 million in bonuses after it had received $173 billion in government bailouts. "The federal government is now 80% owner (of AIG)," Frank said, noting that bonuses "are going to people who screwed this thing up enormously… Since the federal government … now essentially owns that company, maybe it's time to fire some people," Frank said (Reuters and The Caucus Blog of The New York Times March 16) … * WASHINGTON (3/17/09)--The Federal Deposit Insurance Corp. (FDIC) is scrutinizing Community Reinvestment Act (CRA) compliance requirements more closely, say analysts. On March 5, FDIC announced five subpar CRA ratings. Three banks were told they need to improve. They were Salt Lake City-based CIT Bank, which was cited for buying $3.1 billion in subprime loans with predatory characteristics; Louisville-based Republic Bank and Trust Co., cited for tax refund anticipation loan violations; and Advanta Bank Corp., for "unfair and deceptive practices" in a cash-back award program. Analysts say this is a new precedent--that buying a product deemed predatory can adversely affect the CRA rating. Luke Brown, associate director of compliance policy at FDIC, said it is not drastically changing policy but added the current economic environment has led regulators to look more closely at compliance (Financial and American Banker March 16) … * WASHINGTON (3/17/09)--The New York Federal Reserve Bank will begin accepting applications Tuesday for the first batch of loans under the Term Asset-Backed Securities Loan Facility (TALF), a program that loans to investors to provide liquidity for consumer lending. Investors planning to apply for TALF funds will have two extra days to apply for the funds, instead of just one day--today--the bank said Friday. Investors can now apply through 5 p.m. EDT Thursday. The Fed said in a press release it extended the application time at the request of potential borrowers who needed more time to collect documentation required for the application. Funds will be distributed on March 25, it said …