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Udall keeps the heat on for MBL cap lift

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WASHINGTON (3/17/11)--Calling it “just the beginning” of action on member business lending (MBL) legislation this year, the Credit Union National Association (CUNA) thanked Sen. Mark Udall (D) for his intended effort to attach MBL language to a small business bill. The senator from Colorado Wednesday proposed to file the text of his S. 509 MBL bill as an amendment to S. 493, the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) Reauthorization Act of 2011. While the MBL language must meet the Senate’s strict rules for germaneness if it is to be attached to the core bill, CUNA Senior Vice President of Legislative Affairs John Magill said that Udall, with his announcement, found a good opportunity to signal his serious intent to increase the MBL cap to 27.5% of a credit union’s total assets, up from the current 12.25%. Udall’s S.509, known as the Small Business Lending Enhancement Act, could, according to an updated CUNA study, provide up to $13 billion to small businesses in the first year alone and create over 140,000 new jobs. CUNA underscores that these economic benefits come at no cost to taxpayers. Regarding Wednesday’s development, Magill said, “This is just the beginning. CUNA and credit unions are serious and engaged in the effort to remove the economically stifling and arbitrary cap on member business lending. And we are grateful that the Congress remains keenly focused on this important credit union issue.”

CUNA urges common sense jobs approach

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WASHINGTON (3/17/11)--Using a House capital markets subcommittee hearing on promoting job creation as a platform, Credit Union National Association (CUNA) President/CEO Bill Cheney said legislation that would lift the current cap on credit union member business lending (MBL) to 27.5% of total assets is a “commonsense economic recovery and job creation measure that requires no taxpayer money and does not expand the size of government.” Cheney made the remarks in a letter submitted for the record of a Wednesday subcommittee hearing. Sen. Mark Udall (D-Colo.) re-introduced the MBL legislation, known as the Small Business Lending Enhancement Act (S.509), last week. That legislation currently has several Democratic and Republican sponsors, with Sen. John Ensign (R-Nev.) becoming the latest Senator to back the bill earlier this week. Similar legislation was offered last year, and while it was not passed into law, it garnered support from the Obama administration and numerous members of Congress. The MBL legislation would allow credit unions to “lend an additional $13 billion to small businesses in the first year after implementation, helping them to create nearly 140,000 new jobs,” Cheney said. Cheney added that “unlike the recently enacted Small Business Lending Fund Act, which gave community banks $30 billion of taxpayer money as an incentive to lend to small businesses, increasing the credit union business lending cap could be done without spending a dime of taxpayer money and without increasing the size of government. “To be clear: credit unions do not need taxpayer money to lend more to small businesses: They need the authority from Congress to do so,” Cheney emphasized in his letter. Cheney also acknowledged that the banking industry stubbornly opposes the credit union business lending legislation – but noted the rationale is self-serving. “This legislation is not about credit unions; it is about helping small businesses access credit,” Cheney stated. “Yet, the bankers seem more concerned about keeping credit unions from helping small businesses than helping small businesses themselves.” CUNA has asked credit union backers nationwide to urge their respective senators to back S.509, and has issued a grassroots action alert to help constituents contact their representatives in Washington.

Hispanic Chamber adds support for interchange study

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WASHINGTON (3/17/11)—The U.S. Hispanic Chamber of Commerce (USHCC) has added its voice to those calling on Congress to instruct the Federal Reserve to study the real-world impact of pending interchange fee changes before implementing this provision of the Dodd-Frank Act. USHCC President/CEO Javier Palomarez said in a recent letter to Senate and House leaders that the Fed should move with caution as it devises a scheme to implement Dodd-Frank language that requires the agency to set debit card interchange fees that are “reasonable and proportionate” to the provision of the service. The letter was sent to Senate Majority Leader Harry Reid (D-Nev.), Senate Minority Leader Mitch McConnell (R-Ky.), House Speaker John Boehner (R-Ohio) and House Minority Leader Nancy Pelosi (D-Calif.). The USHCC advocates for nearly three million Hispanic-owned businesses nationwide and represents 200 separate local chambers of commerce. The Fed’s proposal would cap debit card interchange fees that are paid by merchants to large debit card issuers at no more than twelve cents per transaction. Issuers with under $10 billion in assets are entitled to be exempted from the interchange fee rate setting provisions, but there is great concern that this proposed exemption would not work as planned. Palomarez said that curtailing debit-related revenues for many issuers would increase the cost of providing and maintaining debit accounts, “thereby limiting the ability of small communities to be able to offer, accept and use debit as a form of payment.” He added that “without a thorough examination of the unintended effects” of the interchange amendment, “the Hispanic community – which relies heavily on debit cards – will suffer a significant burden. “ The USHCC CEO noted that many in communities that his group serves could be pushed out of the banking system and toward more expensive and often predatory check cashing businesses if the loss of debit revenue pushes local financial institutions to stop offering debit card programs. Palomarez noted that many of the un-banked or under-banked, and the merchants that serve them, benefit from the debit transactions. He added that consumers and merchants also benefit from the convenience, immediate access, and security that debit programs offer their members and consumers. Debit card programs also offer “a path towards the financial mainstream” for many individuals and provide a guaranteed payment option for merchants, he said. Legislation that would delay the implementation of interchange changes was introduced in the Senate and House on Tuesday. The two bills would also order regulators to study the impact that the proposed interchange changes would have on credit unions, small issuers, consumers and merchants. CUNA President/CEO Bill Cheney said earlier this week that the proposed interchange delays give credit union members and other consumers "a ray of hope that the debit card programs they have come to appreciate may continue unchanged, at least for the short term." (See related March 16 story: Senate, House bills would delay Fed interchange plan)

House backs bill ending foreclosure related program

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WASHINGTON (3/17/11)—The Neighborhood Stabilization Program (NSP), a U.S. Department of Housing and Urban Development (HUD)program that helps local authorities purchase foreclosed or abandoned homes, would be ended under legislation that was approved by the House on Monday. The NSP provides grants to state and local governments to purchase foreclosed or abandoned homes to prevent neighboring homes from incurring significant losses in resale value. Nonprofits may also apply for the funds. The Obama administration earmarked $7 billion in funding for NSP. The NSP was enacted in 2008, and Congress has provided $6 billion in funds since then, according to the Congressional Budget Office (CBO). The CBO noted that the government would likely obligate $1 billion in funding over the next few months. The House legislation, if passed, would not go into effect until the summer. Therefore, current NSP funding would not be impacted, as the bill only cancels unobligated funds, the CBO said. Federal bank and thrift regulators last year expanded the scope of transactions that qualify for Community Reinvestment Act (CRA) rule consideration to encourage banks and thrifts to support eligible development activities in areas designated under the NSP. Following the House vote, HUD officials in a blog post said that the NSP has positively impacted property prices and turned "houses that would be abandoned back into homes for American families." "To cut off funding just as this program is taking root would be counterproductive," the blog post added. However, critics of the program, including House Financial Services COmmittee Chairman Spencer Bachus (R-Ala.)have said the program creates incentives for banks and other lender to foreclose on homeowners. Bachus has called the NSP "bad for struggling homeowners" and "horrible for taxpayers." "We simply cannot continue to use taxpayer dollars to bailout those who made bad decisions,” Bachus said. The legislation must move on to the Senate for consideration.

NCUA today looks at low-risk assets interest-risk

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ALEXANDRIA, Va. (3/17/11)—A proposed rule on interest rate risk policy is expected to be released when the National Credit Union Administration (NCUA) Board holds its March open meeting later today. The Credit Union National Association’s (CUNA) Examination and Supervision Subcommittee will be closely reviewing the proposal and helping to formulate CUNA’s comments. The NCUA and the other regulators that comprise the Federal Financial Institutions Examination Council (FFIEC) early last year instructed credit unions and other financial institutions to ensure that they have the sound risk-management practices needed to “measure, monitor, and control IRR exposures." Those management practices must include “processes and systems commensurate” with the “complexity, business model, risk profile, and scope of operations" of the given financial institution. CUNA Senior Economist Mike Schenk at that time noted that low home prices, low mortgage interest rates, and government purchase incentives had translated into a fairly high volume of originations of fixed-rate, long-term mortgages, which can equal increased interest rate risk. However, Schenk added, while interest rate risk exposure did increase, it can be limited when balance sheets are viewed broadly. “Credit unions have a long track record that makes it clear that they are very good at measuring, monitoring and controlling this risk," Schenk added. The NCUA last year removed a scheduled discussion of a proposed rule on interest rate risk policies from the list of items to be considered at its June board meeting. The net worth proposal is expected to implement recent Federal Credit Union Act amendments that allow credit unions to count 208 assistance as net worth during mergers and other situations. CUNA supports this change. CUNA Deputy General Counsel Mary Dunn added that the NCUA's planned Corporate credit union technical changes, net worth and equity ratio definitions, and low-risk asset definitions are also on the agenda for today’s meeting. The NCUA's monthly report on the status of its insurance fund will also be delivered during the meeting. A closed NCUA session will follow the open meeting. Insurance appeals and supervisory matters will be discussed during the closed meeting. For the full NCUA meeting agenda, use the resource link.

CFPB focus of hearing new bill

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WASHINGTON (3/17/11)--The single Consumer Financial Protection Bureau (CFPB) director proposed by the Dodd-Frank Act would be replaced by a five-member, bipartisan panel if the “Responsible Consumer Financial Protection Regulations Act,” which was introduced by House Financial Services Committee Chairman Spencer Bachus (R-Ala.) on Wednesday, becomes law. Bachus released the bill shortly after a Wednesday House Financial Services Committee hearing on CFPB oversight. That hearing featured testimony from CFPB architect Elizabeth Warren. Warren defended her agency during the hearing, saying that the country “would not be in the mess we are today" if the CFPB had existed six to eight years ago. "The consumer bureau’s mission is straightforward -- make prices clear, make risks clear, so consumers can compare one product to two or three others," Warren said. She also repeated what she told credit union representatives earlier this month: that one of the CFPB’s first missions would be to combine current mortgage disclosure requirements into a single page document that is easier for mortgage providers and holders to understand. Warren made her remarks to credit unions at the Credit Union National Association’s Governmental Affairs Conference earlier this month. At the hearing, Warren said that the CFPB would work with credit unions and other small institutions as it pursues this and other rulemaking priorities, and added that the agency would protect credit unions and community banks as it develops and revamps regulations. On the legislative front, Bachus in a release said that the bill would “ensure that a non-partisan, balanced approach to consumer protection prevails” at the CFPB. “Empanelling a five-member commission is an important first step in ending predatory financial practices without inappropriately limiting access to credit that small businesses and individuals want and need. We can achieve consumer protection without a credit czar,” he added. He noted that several other regulators, including the Securities and Exchange Commission, the Federal Deposit Insurance Corp., and the Federal Trade Commission have similar leadership structure, and that structure has worked well for those regulatory groups. A five-member CFPB panel was considered by the House last year, but that concept was dropped when the Dodd-Frank legislation went to a Senate conference committee prior to passage. The CFPB will take over a number of regulatory roles from the Federal Reserve and other agencies on July 21. The National Credit Union Administration (NCUA) will remain independent and credit unions holding under $10 billion in assets will not be examined by the CFPB. The NCUA will have a seat on a pending regulatory council.

Inside Washington (03/16/2011)

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* WASHINGTON (3/17/11)--The Federal Deposit Insurance Corp. (FDIC) Tuesday voted unanimously in favor of a plan that would build an infrastructure to support the agency’s new resolution powers over nonbanks as granted by the Dodd-Frank Act. The plan provides details of how the agency could in the future take control of a giant firm--and restore it to health. The plan, proposed with a 60-day comment period, describes the order of priority for which claims against a firm would be paid off. It also describes the process through which creditors would file claims, and how creditors can petition a court for relief. The FDIC chairman, Sheila Bair, said of the proposed process that it aims to impose market discipline, making it clear to shareholder and creditors that if their institutions fails, they--not taxpayers--are on the line for losses. (American Banker March 16)… * WASHINGTON (3/17/11)--Department of Housing and Urban Development Secretary Shaun Donovan and Treasury Secretary Timothy Geithner, in testimony this week, appeared to refute earlier reports that predicted Fannie Mae and Freddie Mac would be exempted from a pending proposal to help standardize mortgages sold into the secondary market--at least while the government-sponsored enterprises (GSEs) are under conservatorship. (American Banker March 16) Geithner indicated an exemption for the GSEs would be contrary to the proposals intent of establishing industry-wide rules to govern mortgage securitization by requiring lenders to retain 5% of the credit risk of loans they sell, in most circumstances. Donovan concurred saying every bit of the two Obama administration witnesses testimony before the Senate Banking Committee backed the idea of making sure the GSEs hold adequate capital against risk… * WASHINGTON (3/17/11)--Interested parties have until May 16 to comment on the U.S. Small Business Administration’s (SBA) proposed increases to the revenue-based size definition businesses in 36 industries, and on sub-industry, need to meet to qualify as small businesses for SBA loans. The SBA reviewed 46 industries and three sub-industries and determined the majority needed their size definitions updated. The proposed changes could allow some small businesses already close to topping out on current size standards to retain small business eligibility, which in turn, the SBA says, gives federal agencies a larger selection of small businesses to choose from for small business procurement opportunities. SBA estimates as many as 9,450 additional firms will become eligible for SBA programs as a result of the proposed revisions, if they are adopted. In 2007, the SBA began the process of reviewing and updating size standards based on industry-specific data...