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Democratic trio seek House interchange delay support

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WASHINGTON (4/1/11)--Rep. Debbie Wasserman Schultz (D-Fla.) and a pair of other legislators have urged their House colleagues to add their names to the list of representatives calling for a delay in interchange fee cap legislation. Reps. Jared Polis (D-Colo.) and Lynn Woolsey (D-Calif.) joined Wasserman Schultz in co-signing the letter. The legislators called the Consumer Payment System Protection Act (H.R. 1081), a bill that would delay implementation by one year, “a reasonable response" for those that are concerned about the impact that interchange fees and the pending interchange fee cap will have on their constituents. That bill, introduced by Rep. Shelley Moore Capito (R-W.V.), would also direct federal agencies to study the impact that interchange changes would have on credit unions and other card issuers, consumers, and merchants. The Thursday letter notes that Moore Capito’s legislation “doesn’t pick winners and losers” and “doesn’t overturn the rule.” Rather, the legislation promotes a brief year-long delay to enable legislators to address “questions about customer savings, consumer protection, and the rule’s effects on small businesses and low-income consumers.” “These are all issues that should have been considered before we passed the bill, but it is not too late to protect consumers,” the letter adds. The letter notes that the interchange legislation “was not considered in committee, no studies of its effects were performed, and no separate vote was held on the provision in the House." Moore Capito’s legislation had 59 co-sponsors as of late Thursday. Sens. Jon Tester (D-Mont.) and Bob Corker (R-Tenn.) have introduced similar legislation in the Senate. That bill would delay implementation by two years, and would also order a study of the effects of interchange.

Interchange MBLs see Thursday Senate spotlight

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WASHINGTON (4/1/11)—Two of the credit union world’s hot-button issues--delaying implementation of debit card interchange fee limits and lifting the member business lending (MBL) cap--were spotlighted Thursday in Senate floor remarks by key lawmakers. With Senate colleagues around him, Sen. Jon Tester (D-Mont.) urged support for legislation that would delay the implementation of the Federal Reserve’s planned interchange fee rate cap, noting that Congress should not let these new regulations come into effect before knowing both the intended and unintended consequences of this action. The interchange provisions, which could become effective in late July, could lower the amount of transaction fees charged to seven cents per card swipe. The legislation, as currently written, would exempt credit unions and other small institutions with assets of $10 billion and under from the terms of the regulations. However, there is much debate over whether this proposed exemption would work as planned. Federal regulators, including Federal Deposit Insurance Corp. (FDIC) Chairman Sheila Bair, have publicly questioned whether small issuers would benefit from this exemption. Fed Chairman Ben Bernanke this week said that his agency would not be able to meet a statutory April 21 deadline for the issuance of debit interchange fee standards. The new standards are currently set to come into law on July 21. The Credit Union National Association (CUNA) this week said that releasing a final version of the proposal so close to the deadline would not give institutions, networks, and the marketplace the time needed to prepare for compliance with a final rule. Tester and Senate colleague Bob Corker (R-Tenn.) have introduced legislation that would delay by one year the implementation of these new standards, and that legislation could be offered as an amendment to a still developing small business package. The Senator said that the interchange issue, which is contentious, is not about picking sides. Rather, he added, it is about not tramping on the financial infrastructure that communities nationwide need. “When government sets prices on swipe fees it's the little guy who gets hurt,” Tester said. The Montana Democrat said that the interchange regulations would only add to the costs incurred by credit unions and other small institutions. These costs would harm the ability of these institutions to compete with larger financial service providers, and could result in the closure of smaller institutions. This could, in the end, cause financial market consolidation, Tester said. Tester’s remarks followed an earlier floor statement in which Sen. Richard Durbin (D-Ill.), the architect of the interchange legislation, defended his bill against his bill's critics. Sen. Mark Udall (D-Colo.) earlier in the day highlighted his MBL cap legislation, and called on his fellow Senators to help him “get government out of the way” and allow credit unions to increase their lending to small businesses. He also criticized the current “arbitrary cap” limiting MBL activity to 12.25% of a credit union’s total assets. Udall’s S. 509, The Small Business Lending Enhancement Act of 2011, would increase the MBL cap to 27.5% of a credit union's assets. CUNA has estimated that the MBL cap lift could provide up to $13 billion to small businesses in the first year alone and create over 140,000 new jobs, at no cost to taxpayers. Udall clarified that Senate Banking Committee Chairman Tim Johnson (D-S.D.) does not oppose lifting the MBL cap, and has said that he would like to examine the issue further. Udall in a blog post released earlier this week said that he would "continue to fight" for his "common-sense and bipartisan" legislation.

CUNA in for the mile at 2011 CU Cherry Blossom Race

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WASHINGTON (4/1/11)—Around 15,000 runners will again take to the streets of the nation’s capital this weekend at the annual Credit Union Cherry Blossom 10-Mile Run. This will be the tenth straight year that the Credit Union National Association (CUNA) has worked in support of credit union involvement in the race. CUNA will again serve as a co-sponsor of the "Capitol Hill Competition," a race-within-a-race for runners from congressional offices and will take part in a Friday press conference at Children's Hospital in Washington to promote the race to trade and local press. Twenty-four CUNA volunteers will also work the race bag check tent, where more than 10,000 runners will store their belongings while they race. More than 700 credit union members work as race volunteers, and 7,000 of the racers themselves are credit union members. Four CUNA employees will be among the runners. Race organizers expect the all-time 200,000th finisher to cross the finish line this weekend. The title sponsor, Credit Union Miracle Day, Inc., has raised a total of $5 million dollars for the Children’s Miracle Network in its ten years of race sponsorship. Credit Union Miracle Day, Inc. is slated to sponsor the race through 2016.

Senate matches House bill to privatize Freddie Fannie

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WASHINGTON (4/1/11)—Senators John McCain (R-Ariz.) and Orrin Hatch (R-Utah) on Thursday introduced legislation that seeks to privatize government sponsored mortgage backers Fannie Mae and Freddie Mac and to end the ongoing taxpayer funding of those entities. The legislation would end the government conservatorship of Fannie Mae and Freddie Mac within two years. The maximum portfolio held by the GSEs would be limited to $700 billion, and this limit would be gradually reduced to $250 billion over the course of five years. The proposal would also limit Fannie and Freddie’s conforming loan limit to $417,000. The Senate bill is similar to House legislation introduced by House Financial Services Committee Chairman Rep. Spencer Bachus (R-Ala.) and committee vice chair Rep. Jeb Hensarling (R-Texas). House Republicans earlier this week unveiled eight bills aimed at reforming Fannie Mae and Freddie Mac. The eight bills are known as the Government Sponsored Entities (GSE) Credit Risk Equitable Treatment Act, The Equity in Government Compensation Act, The Portfolio Risk Reduction Act, The GSE Subsidy Elimination Act, The GSE Mission Improvement Act, The Fannie Mae and Freddie Mac Accountability and Transparency for Taxpayers Act, The GSE Risk and Activities Limitation Act, and The GSE Debt Issuance Approval Act.

Inside Washington (03/31/2011)

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* WASHINGTON (4/1/11)--Critics of the Dodd-Frank Act, already wary of overregulation, are also concerned that the costs of the law will be exorbitant. Dodd-Frank is expected to have a final price tag of about $30 billion, but its effect on the federal budget is difficult to forecast because much of the bill will be paid for through regulatory fees on financial institutions (American Banker March 31). The Congressional Budget Office estimates the government’s cost will be $1 billion over five years. But during a House Financial Services subcommittee hearing Wednesday on the law's budgetary and economic costs, Republicans said indirect costs such as losses in capital formation, credit availability, and the U.S economy's ability to compete globally should also be added to the law’s cost. Randy Neugebauer (R-Texas), who chaired the hearing, said regulators should slow the rulemaking process to do more thorough cost analyses. But Democrats said all legislation comes with a price. Jill Sommers, a member of the Commodity Futures Trading Commission, said agencies can do cost-benefit analyses as they implement rules … * WASHINGTON (4/1/11)--The Treasury Department on Wednesday claimed a $23.6 billion profit from measures put in place to stabilize the financial markets during the crisis. Critics were unconvinced (American Banker March 31). The government bailout includes the Troubled Asset Relief Program, programs administered by the Federal Reserve and Federal Deposit Insurance Corp., financial support for Fannie Mae and Freddie Mac, and other initiatives. But Rep. Patrick T. McHenry, (R-N.C.), who is chairman of the House oversight committee’s bailout panel, said the government’s estimates have been inaccurate in the past and Treasury has consistently changed the metric to measure success. But the Treasury maintained that even if the nearly $24 billion figure is optimistic, the positive swing still represents a major turnaround from losses predicted by many. Even the Obama administration projected a $100 billion loss a year ago … * WASHINGTON (4/1/11)--Rep. Spencer Bachus (R-Ala.), chairman of the House Financial Services Committee, and Rep. Shelley Moore Capito (R-W.Va.), head of the consumer credit subcommittee, have asked Elizabeth Warren, who is in charge of setting up the Consumer Financial Protection Bureau (CFPB), to clarify her role in the mortgage servicer settlement (American Banker March 31). Bachus and Capito sent Warren a letter after a document that she sent to Iowa Attorney General Tom Miller was leaked to the media. In the document, Warren maintains that the largest servicers cut corners in their servicing to save as much as $20 billion and should be fined for that amount. Warren has said her role is advisory, but Bachus and Capito maintain the document is proof that Warren has further involvement. A Warren spokesperson responded in an e-mail that, as Warren previously testified to Congress, the CFPB provided advice to various officials involved in the mortgage servicing law enforcement matter. Warren understands that not everyone agrees with that advice or how to address the deficiencies at the largest U.S. mortgage servicing firms, the e-mail said …

CUNA briefing covers CU advantage community work

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WASHINGTON (3/31/11)--Credit Union National Association (CUNA) Senior Legislative Representative Phil Drager highlighted the many benefits that credit unions offer their members, including lower interest rates and fees on loans and higher rates of return on deposits, during a recent congressional briefing on cooperative businesses.
Click to view larger image Rep. Fattah’s Deputy Chief of Staff Debra Anderson opens proceedings as CUNA’s Phil Drager, left, and National Cooperative Business Association President Paul Hazen look on. (NCBA Photo)
The briefing was sponsored by the offices of Reps. Chaka Fattah (D–Pa.) and Jo Ann Emerson (R–Mo.). The National Cooperative Business Association moderated a panel that included representatives from CUNA, the National Rural Electric Cooperative Association, food cooperative Weavers Way, and the Evergreen Cooperative Initiative. Drager in his briefing discussed the history of credit unions and covered the most defining difference between credit unions and banks: member, not shareholder, ownership. He noted the positive work that credit unions have done by reinvesting in their surrounding communities. One example is TruMark Financial CU’s work in Fattah’s own district of North Philadelphia. Trevose, Pennsylvania-based TruMark worked with community organization Asociación de Puertorriqueños en Marcha (APM) to open the first financial institution that the surrounding neighborhood had hosted in 60 years. TruMark said that the new branch would aid families in the neighborhood by providing them with access to check cashing services, money orders, and loans, without the high fees that can accompany those financial products. Drager also noted credit union work in Emerson’s district. Mid Missouri CU has provided credit counseling to over 6,000 military personnel and civilians in the Fort Leonard Wood, Missouri area.

CUNA engages on two fronts in interchange battle

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WASHINGTON (3/31/11)—The Credit Union National Association (CUNA) engaged in the interchange battle on two fronts Thursday: in a letter to Federal Reserve Board Chairman Ben Bernanke expressing concerns about a compressed timeframe for preparing for new rules, and in a Huffington Post article to debunk merchants' claims. In the letter to the Fed chairman, CUNA thanked Bernanke for his candid assessment to Congress that it is not possible for the agency to meet a statutory April 21 deadline for the issuance of debit interchange fee standards (See News Now March 30). However, CUNA President/CEO Bill Cheney underscored concerns that with the final rule being promulgated closer to the July 21 effective date, there will not be insufficient time for institutions, networks, and the marketplace to prepare for compliance with a final rule. “In light of all the concerns about the regulation of debit interchange fees, we firmly believe that a congressionally mandated delay is not only reasonable but also necessary in order to ensure small issuers will not be harmed and consumers that rely on them will not be disadvantaged,” Cheney wrote. And in a Huffington Post article published Wednesday, Cheney called it “grossly inaccurate” for retailers to claim to represent Main Street in the current interchange battle, and misleading to cast the debate as a fight between Main Street and Wall Street. Credit unions, which are aligned with banks in seeking a delay of pending interchange rules, are “cooperatives, locally based and owned by their 93 million members -- the people who do the saving and borrowing,” Cheney noted. “Many are teachers, firefighters, police officers, members of the military. That's as Main Street as you can get,” he said, and added that it is credit unions’ concerns for their members/owners that dictates the credit union position on interchange. Also, Cheney reminded, it is those consumers who can afford it least—low- and moderate-income Americans-- that are likely to be hurt the most if a current plan to limit fees goes forward. Cheney emphasized, “Our industry has no allegiance to the banks, which have a history of opposing pretty much everything credit unions try to do. We are only aligned with the banks on interchange because in this case our members will be harmed by the effects of the legislation and pending Fed proposal.” At the core of the interchange debate is a provision in the Dodd-Frank Wall Street Reform Act that requires the Federal Reserve to set limits on debit card interchange fees, the fees that card issuers charge merchants for use of this part of the payments system. “Credit unions receive on average about 44 cents per debit card transaction as interchange revenue. The Fed proposal would chop that to 12 cents, a figure that doesn't begin to account for the actual debit card service costs, such as those related to fraud and systems support,” Cheney noted. Credit union members will be hard hit by this change. As member-owned cooperative, the credit union business model passes savings onto its members--$6.5 billion just last year. “However, credit unions will have absolutely no choice but to pass the higher interchange costs on to their members, most likely by adding fees to debit cards or other services. And the people who can afford it least are the ones likely to be hurt most,” Cheney said. He also called an interchange law exemption for most community banks and credit unions--those with assets under $10 billion—“fatally flawed.” Overtime, he said, market pressures would force the interchange price that smaller institutions receive toward the lower, 12-cent rate, too. CUNA has called on Congress to order the Fed to halt work on its interchange proposal, and has urged lawmakers to go back and study the possible unintended consequences of the Dodd-Frank provision. Sen. Jon Tester (D-Mont.) has introduced a bill that would delay implementation, and in the House Rep. Shelley Moore Capito (R-W.Va.) has introduced a similar bill.

Regulators Incentive compensation proposal coming

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ALEXANDRIA, Va. (3/31/11)—The National Credit Union Administration (NCUA) has joined other federal financial regulatory agencies to release for public comment a joint proposed rule that would ensure that financial institutions account for risk when they design their individual incentive compensation arrangements, such as bonuses or commissions. The Federal Reserve, the Federal Deposit Insurance Corporation, the Federal Housing Finance Agency, the Office of the Comptroller of the Currency, the Office of Thrift Supervision, and the Securities and Exchange Commission also took part in the release. The joint proposal would implement a portion of the Dodd-Frank Wall Street Reform Act that requires financial regulators to adopt a rule to weed out incentive-based compensation practices that could expose an institution to great losses. The Dodd-Frank Act defines incentive-based compensation to mean any variable compensation, in any form, that serves as an incentive for performance. This compensation is in addition to any salary that is paid to executives or other certain staff members, such as loan officers. The proposal will be open for comment for 45 days after it is published in the Federal Register, and should be released soon, the regulators said. Under the joint agency proposal, financial institutions with $1 billion or more in assets would be required to ensure that their incentive-based compensation arrangements “appropriately balance risk and financial rewards,” are “compatible with effective controls and risk management,” and are “supported by strong corporate governance.” For-profit financial institutions with $50 billion or more in assets, and credit unions with $10 billion or more in assets, would be required to defer a minimum of 50% of their incentive-based compensation for at least three years, according to a joint agency release. The deferred amounts, when paid, should also “reflect losses or other aspects of performance over time,” the agencies added. Entities covered by the proposal would be required to cover the structure of their incentive compensation arrangements in yearly reports to their respective regulator. The proposal is part of the Dodd-Frank Act, and complements previously issued guidance and policies on incentive-based compensation. The NCUA released its own proposal in February. The Credit Union National Association at that time said that the NCUA should reconsider the proposed $10 billion asset threshold for credit unions, noting that credit unions are not known to have engaged in the kind of sketchy incentive-compensation practices that the Dodd-Frank Act seeks to address. (See related Feb. 18 story: NCUA proposes enhanced incentive-compensation rules) For the joint proposal, use the resource link.

CUNA concerned about risk-retention rule impact

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WASHINGTON (3/31/11)--Federal financial agencies this week are considering rules that would require a loan securitizer--but not most loan originators--to retain an economic interest in a material portion of the credit risk for any asset that it transfers, sells, or conveys to a third party. Federal Deposit Insurance Corporation (FDIC) Chairman Sheila Bair has said that requiring issuers of securitized loans--such as Wall Street banks and other entities that issue asset-backed securities--to retain a 5% interest in the risk of loss “will encourage better underwriting by assuring that originators and securitizers cannot escape the consequences of their own lending practices.” Credit Union National Association (CUNA) Deputy General Counsel Mary Dunn said that CUNA has raised concerns about the potential impact of the 5% risk requirement on the credit union mortgage market even though the proposal would generally exempt originators from these requirements. So far, the credit risk retention proposal has been jointly released by the FDIC and the Securities and Exchange Commission, with other relevant agencies expected to approve it in the near future. Those agencies are the Office of the Comptroller of the Currency, the Federal Reserve, the FDIC, the SEC, the Department of Housing and Urban Development, and the Federal Housing Finance Agency (FHFA). Dunn said that the regulatory proposal aims to address abuses in the mortgage lending market that contributed to the financial crisis. “Credit unions did not participate in those abusive practices, but CUNA is concerned that credit union mortgage lending will be impacted by these rules and standards that develop in the marketplace,” Dunn added. Loan originators would generally be exempt from the credit risk retention requirements as long as they contribute less than 20% of the loans or other collateral to a given pool of asset-backed securities. This threshold will likely mean that credit unions would be exempt from the proposed rule unless the credit union contributes a high percentage of loans or other assets backing a particular asset-backed security issuance. If the originator’s loans make up 20% or more of a pool of asset-backed securities, the originator would then be required to take on a portion of the loan securitizer’s risk retention requirement in the same percentage amount as its contributions to the asset pool. Qualified residential mortgages and U.S. government guaranteed mortgages such as FHFA and Veterans Administration mortgages would be exempt from all risk-retention requirements under the proposal. Government-sponsored entities Fannie Mae and Freddie Mac would also be exempt from the securitzer risk-retention requirements for as long as they are held under government conservatorship. CUNA’s Examination and Supervision Subcommittee and its Lending Council will soon review the complex risk proposal. Once concerns are identified, CUNA will comment to all federal agencies involved in the rulemaking, Dunn said.

NCUA 2010 financial results preview 2011s challenges

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ALEXANDRIA, Va. (3/31/11)--The National Credit Union Administration (NCUA) on Wednesday warned that “elevated levels of credit risk, interest rate risk, and concentration risk” will continue to challenge credit unions in 2011. NCUA Chairman Debbie Matz in a release added that “credit unions still face challenges in overcoming the effects of the economic downturn,” and said that NCUA examiners are working to “help mitigate existing and potential risks” to credit unions and to help those credit unions “maintain stable balance sheets.” These comments accompanied the release of the NCUA’s 2010 credit union industry financial results. Real estate and business loan delinquencies increased during 2010, but the agency in its report noted that delinquent loans as a percentage of total loans dropped to 1.74%. Net loan charge-offs also declined during the year. Modifications for real estate, consumer, and business loans increased $3.1 billion since March of 2010, and Matz noted that these types of modified loans could still create a risk of delinquency into 2011. Matz in her statement added that the NCUA “will maintain close supervision of credit unions in this area.” The agency is also “considering ways to enhance the business lending regulation to better ensure safe and sound underwriting and credit risk management,” Matz said. Matz also noted that concentration risk “has been an area of emphasis for NCUA examiners in recent months,” saying that the “high level of real estate loans to assets coupled with the stresses in real estate values across the country highlight the need for sound concentration risk mitigation practices.” The agency is developing a proposal that would place more emphasis on concentration risk factors for purposes of its prompt correct action regulations. Overall, the NCUA noted increases in credit union assets and net worth during the year, with asset increases totaling $29.87 billion and net worth increases totaling $4.51 billion at the end of the year. Earnings also slightly increased, with the return on average assets ratio of all federally insured credit unions increasing from 0.18% to 0.51% during the year. For the full NCUA release, use the resource link.

Inside Washington (03/30/2011)

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* WASHINGTON (3/31/11)--The House Financial Services subcommittee on capital markets and government-sponsored enterprises has scheduled a hearing today to study eight bills unveiled Monday and intended to provide immediate reforms to Fannie Mae and Freddie Mac. According to the hearing announcement, the subcommittee will examine legislative steps that can be undertaken by Congress to “rebuild a stable housing finance system based on private capital.” The titles of the bills scheduled for subcommittee scrutiny are GSE Credit Risk Equitable Treatment Act, The Equity In Government Compensation Act, The Portfolio Risk Reduction Act, The GSE Subsidy Elimination Act, The GSE Mission Improvement Act, The Fannie Mae and Freddie Mac Accountability And Transparency For Taxpayers Act, The GSE Risk and Activities Limitation Act, and The GSE Debt Issuance Approval Act … * WASHINGTON (3/31/11)--The chairmen of the House Financial Services Committee and its subcommittee on financial institutions and consumer credit have asked Elizabeth Warren if she wants to “clarify or correct” her recent testimony regarding the Consumer Financial Protection Bureau’s (CFPB) role in the ongoing mortgage servicing settlement negotiations. Warren has been appointed by the Obama administration to help set up the CFPB, which was created under the Dodd-Frank Wall Street Reform Act. Reps. Spencer Bachus (R-Ala.) and Shelley Moore Capito (R-W.Va.), heads of the committee and subcommittee respectively, noted in a letter to Warren that during a subcommittee hearing panel members questioned her about CFPB’s involvement in ongoing settlement discussions between mortgage servicers and state and federal authorities. The letters said Warren responded that CFPB had offered “advice" and “expertise” to the authorities. The letter alleged that recent reports indicate a more extensive role, and invited Warren to respond … * WASHINGTON (3/31/11)--In a largely symbolic gesture, the House of Representatives Tuesday voted to end the controversial Home Affordable Modification Program (HAMP)Politico March 30). In February 2009, President Barack Obama launched HAMP, saying it would help three million or four million American renegotiate the terms of their mortgages, but the program had only 522,000 ongoing mortgage modifications as of Dec. 31. Even with a 252-170 House vote, largely along political lines, to eliminate the program, the legislation will likely fail in the Senate. Also, the White House has said the president would veto the bill if it were to reach his desk … * WASHINGTON (3/31/11)--The Federal Reserve Board on Wednesday requested comment on a proposed rule that implements two provisions of the Dodd-Frank Act related to the supervision of financial market utilities (FMUs) designated as systemically important by the Financial Stability Oversight Council. FMUs, such as payment systems, central securities depositories and central counterparties, provide the essential infrastructure to clear and settle payments and other financial transactions. The proposed rule establishes risk-management standards governing the operations of payment, clearing, and settlement activities of FMUs, except those registered as a clearing agency with the Securities and Exchange Commission or as a derivatives clearing organization with the Commodity Futures Trading Commission. The proposed risk-management standards are based on the existing international standards that the Fed has incorporated previously into its policy on payment system risk. Second, the proposed rule establishes requirements and procedures for advance notice of material changes to the rules, procedures, or operations of a designated FMU for which the Board is the primary supervisor … * WASHINGTON (3/31/11)--Lenders would be required to offer mortgages with at least a 20% down payment if they want to securitize loans, according to a proposal released the Federal Deposit Insurance Corp. (FDIC) on Tuesday. Some observers fear the requirements will hamper the mortgage lending market (American Banker March 30). But FDIC Chairman Sheila Bair said the qualified residential mortgage requirement would apply to only a “small slice” of the mortgage market. While critics said the rule was narrow, Bair said the limitations were appropriate. Dodd-Frank requires issuers of securitized loans to retain a 5% interest in the risk of loss. The law provides an exception to that rule and directs the agencies to set a standard for underwriting and product features that result in a lower risk of default so risk retention is not necessary. Government-sponsored enterprises would be considered already in compliance because they retain all of the credit risk … * WASHINGTON (3/31/11)--The Federal Deposit Insurance Corp. (FDIC) on Tuesday issued a proposal requiring that the largest financial services companies provide plans for winding down in the event of a financial crisis (American Banker March 30). The draft rule requires companies to submit resolution plans, or “living wills,” with regular updates and reports on the firms’ credit exposures. The Federal Reserve, which co-wrote the rule, is expected to vote on it later this week. The proposal will then be open to public comment for 60 days, after which regulators will revise it and approve a final rule. The Dodd-Frank Act gave federal regulators authority to seize and break up troubled financial companies deemed “too big to fail” because of the risk their demise would present to the financial system. The proposal would require financial companies to provide information on credit exposures, funding, capital and cash flows. The plans are designed to help firms “rationalize” their business models and mitigate some of the risks that created the credit crisis in 2008. Under the proposal, part of a joint rulemaking with the Federal Reserve, plans would be required from U.S. bank holding companies $50 billion or more in assets and foreign-based lenders of similar size with U.S. operations …

FHFAs monitoring plan unneeded for CUs CUNA

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WASHINGTON (3/30/11)--Credit union commitment to long-term mortgage lending is unquestioned, and a Federal Housing Finance Administration (FHFA) does not need to impose ongoing mortgage lending monitoring requirements on credit unions who use the Federal Home Loan Bank (FHLB) System, the Credit Union National Association (CUNA) said in a recent comment letter. The FHFA has issued an advance notice of proposed rulemaking (ANPR) seeking comments regarding a plan to require FHLB-member institutions to periodically file reports in order to confirm that they remain committed to long-term mortgage lending. The ANPR noted the FHFA could at a future date also propose establishing a minimum dollar amount for volume of mortgage originations, and could propose requiring credit unions and other FHLB-members to continuously monitor their balance sheets to ensure that 10% of their total assets are residential mortgage-related assets. If FHFA chooses to move forward on the issues outlined in the ANPR, it would issue a proposed rule at a later date for an additional comment period. The Federal Home Loan Bank Act requires FHLB members to have at least 10% of their assets in long-term residential mortgages and also imposes other requirements related to residential mortgage lending activities on FHLB members; current FHLB policy, however, only requires institutions prove that they meet the act’s requirements at the time they apply to be an FHLB member. CUNA noted in its letter that credit unions already are subject to significant mortgage lending reporting requirements under the Home Mortgage Disclosure Act (HMDA), and said the FHFA plan would be duplicative and unnecessarily burdensome on “already over-burdened” credit unions. FHLB-member credit unions, CUNA wrote, meet or exceed the FHLB membership requirements, such as the requirement to hold 10% of assets in “residential mortgage assets” such as first and second residential mortgages and/or related products like residential mortgage-backed securities. “In the aggregate, credit unions held 38.9% of their assets in residential first mortgages and 15.6 % of their assets in second-lien residential mortgage products as of November 2010, far exceeding (the 10% requirement) without even considering credit union holdings in residential mortgage-backed Securities,” the letter said. CUNA added, “Credit unions—by their very nature as member-owned, not-for-profit cooperatives dedicated to promoting thrift and making loans to members at reasonable rates” meet the act’s requirements regarding members’ “character of management” and having a home-financing policy that is consistent with sound and economical home financing. If FHFA chooses to move forward with the ANPR, credit unions should not be subject to ongoing compliance reporting, but rather only be required to make a report to its FHLB if and when the credit union has fallen out of compliance, CUNA recommended. Also, any FHLB member which has fallen out of compliance should have at least 90 days to make such a report to its FHLB, and should be given at least a one year grace period to come back into compliance so long as the institution agrees to make a good faith effort to comply, CUNA said.

Composite 30-year mortgage rates rise in February

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WASHINGTON (3/30/11)--The national average interest rate for 30-year fixed-rate mortgages increased to 4.97% in February, a 12 basis point increase over the previous month’s total, the Federal Housing Finance Agency (FHFA) reported on Tuesday. The FHFA reported that the contract rate on the composite of all fixed- and adjustable-rate mortgages was 4.80% percent in February, up 10 basis points from 4.70 percent in January. The FHFA did not include separate information on adjustable rate mortgages. Mortgage totals average $216,900 during February, a $14,500 increase from January’s total of $202,400. One-time fees and other mortgage origination charges accounted for an average of 0.8% of the balance of all mortgage loans, and the average term of these mortgages was 27.2 years. The average loan-to-price ratio was 74.7%, the FHFA added. The FHFA rate survey reflects loans that closed between Feb. 22 and Feb. 28.

Udall touts MBL bill in blog post

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WASHINGTON (3/30/11)--Sen. Mark Udall (D-Colo.) continues to promote his recently introduced member business lending legislation, this time turning to his own blog to answer Facebook users questions about lifting the MBL cap for credit unions.
Click to view larger image Click for larger view
S. 509, The Small Business Lending Enhancement Act of 2011, would increase the MBL cap to 27.5% of a credit union's assets, up from the current 12.25%. The Credit Union National Association (CUNA) has estimated that the MBL cap lift could provide up to $13 billion to small businesses in the first year alone and create over 140,000 new jobs, at no cost to taxpayers. Udall in his blog post added that he would continue to fight for his common-sense and bipartisan legislation. In his blog post, Udall noted that the biggest opponent of his legislation, large banks, want the small-business lending market all to themselves, and dont want the extra credit union competition that the legislation would create. Udall also explained the history of the credit union MBL cap to an inquisitive Facebook user. He noted that credit unions had made business loans to their members as a standard practice until the late 1990s, when the current 12.25% of assets cap was slipped in to the Credit Union Membership Access Act. There was no safety and soundness basis for limiting credit unions' ability to offer loans to their business-owning members at that time, he said. Udall also tried to allay another Facebook users fear that legislators could be recklessly increasing risk by promoting increased business lending. The senator noted that his bill includes statutory criteria that ensures only prudent, experienced, well-managed, and well-capitalized credit unions can apply to increase their small-business lending portfolios beyond the current cap. If a credit union meets these specific criteria, the NCUA has the discretion to approve or deny a credit union's application to raise its business lending cap, Udall added. For the full blog post, use the resource link.

Bernanke Fed wont hit April interchange deadline

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WASHINGTON (3/30/11)--The final version of the Federal Reserve’s interchange fee cap proposal will not be released on April 21 as planned, but the Fed is still aiming for the rules to come into effect on July 21, Fed Chairman Ben Bernanke said in a Tuesday letter to members of Congress. The letter was sent to Senate Banking Chairman Tim Johnson (D-S.D.), Senate Committee Ranking Member Richard Shelby (R-Ala.), House Financial Services Chairman Spencer Bachus (R-Ala.), and House Committee Ranking Member Barney Frank (D-Mass.). Credit Union National Association (CUNA) President/CEO Bill Cheney said in response to the Fed’s admission that if the agency cannot meet the deadline imposed on it by Congress, then it is further proof that Congress must take action now to postpone this entire matter. “We remain deeply troubled overall by the impact of the statute itself, and will continue to urge Congress to adopt legislation to delay the overall implementation date of July 21 and carefully study the impact of the debit interchange provision, particularly on credit unions and their members,” Cheney said. Cheney also expressed concern that if the Fed adheres to the July 21 implementation date, a final rule will be issued without sufficient time to prepare for compliance. Bernanke said that the delay is partly due to the complexity of the issues raised by comments on the Fed’s proposal. The Fed has received more than 11,000 comments on the proposal, and Bernanke said that the sheer number of comments has also contributed to the delay. The Fed Chairman said that the “extraordinary volume of comments reflects the importance of debit cards” to consumers, and added that “the information provided in these comments is important for assessing fully the effect of the proposed rule on the U.S. payments system and its users and providers.” The Credit Union National Association (CUNA) estimates that 5,600 of these comment letters came from credit unions. 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. Bernanke last week said the Fed would ensure that this planned carveout would be effective. Legislation that would delay the implementation of the interchange fee cap was introduced in the Senate and House this month. The two bills would also order regulators to study the impact that the proposed interchange rules would have on credit unions, small issuers, consumers and merchants.

Housing reform spotlighted in Senate House

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WASHINGTON (3/30/11)—The Senate Banking Committee “needs to do its homework” and should “thoroughly examine federal housing policy” and identify problems within the current system “before Congress can consider legislation,” committee ranking minority member Richard Shelby said. Shelby made his remarks before a Tuesday Senate Banking Committee hearing titled, Public Proposals for the Future of the Housing Finance System,” one of a series on that topic scheduled by the banking panel. The Republican from Alabama said that without proper examination, the committee could “yield to the temptation of picking a solution before it has accurately described the problem. “Legislation should be driven by facts, not by pre-determined outcomes,” he added. Shelby suggested that the committee “establish a formal process for considering housing finance reform,” a process that could include investigative hearings, hearings on various reform proposals, and, finally, the act of crafting legislation. Shelby said that following this approach would help committee members make informed decisions and could ensure that any legislation is bipartisan, effective, and “has the fewest unintended consequences.” The committee chairman, Sen. Tim Johnson (D-S.D), said at an earlier hearing on housing finance reform, “We must find workable solutions that protect current homeowners and preserve the option of responsible homeownership for future buyers.” Witnesses at the hearing included Michael Berman, chairman of the Mortgage Bankers Association, Dr. Arnold Kling, member, Mercatus Center Financial Markets Working Group, George Mason University; Dr. Mark Zandi, chief economist, Moody's Analytics, and Janneke Ratcliff, senior fellow, Center for American Progress. The testimony overall, very generally speaking, called upon Congress for tough reforms in the country's housing policy, but the reforms recommended were divergent. On the House side, the Financial Services Committee Tuesday moved ahead with its own housing-related legislation, introducing eight separate bills aimed at reforming government-sponsored mortgage entities Fannie Mae and Freddie Mac. One bill introduced by Rep. Ed Royce (R-Calif.) would, according to Royce, “remove the congressional mandate placed on the GSEs requiring them to dedicate a portion of their business to affordable housing” to “scale back the disproportionate level of government intervention in the housing market." A markup session on GSE-related legislation will be held in the House Financial Services Committee next Tuesday, Politico has reported.

Inside Washington (03/29/2011)

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* WASHINGTON (3/30/11)--Efforts to reform government-sponsored enterprises could spell the end of the traditional 30-year mortgage (American Banker March 29). Observers are still in the process of evaluating the pros and cons of such a radical change to the mortgage market. The 30-year fixed mortgage has long-been the standard product, and the best option for most home buyers, in the housing market. But Bert Ely, an independent consultant based in Alexandria, Va., said the possible elimination of Freddie Mac and Fannie Mae are causing some in the industry to rethink the 30-year mortgage. Although the 30-year fixed-rate mortgage is the traditional home loan in the U.S., its long term requires that it be purchased by a securitization entity. A private buyer would not be guaranteed if Fannie Mae and Freddy Mac were eliminated and the government role in the housing market were reduced. Under the options proposed by the Treasury Department for reforming the housing sector, the government would provide less support, potentially making the cost of the 30-year mortgage more expensive. Under that scenario, adjustable rate mortgages could be more attractive to borrowers … * WASHINGTON (3/30/11)--When CNBC asked him about the proposed interchange rule, Rep. Barney Frank (D-Mass.) on Friday said he would urge bank customers to shop around and find community banks and credit unions that offer free services (Pennsylvania Credit Union Association’s Life is a Highway March 29). “America has one of the most competitive banking systems, if not the most competitive banking system, in the world,” said Frank, who is a ranking member of the House Financial Services Committee and a co-author of the Dodd-Frank Act. Big banks have lobbied against the proposed interchange rules, which they say would result in an estimated $12 billion in lost fees. As a result, bankers are looking to increase fees for their customers. The Credit Union National Association (CUNA) opposes the cap on interchange fees and has told federal lawmakers that such action would harm consumers by driving up costs of debit cards, limiting consumer options, competition and technological innovation. Interchange fees allow business costs, including the risk of consumer nonpayment, to be shared by the payments participants, CUNA says …

Inside Washington (03/28/2011)

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* WASHINGTON (3/29/11)--The Federal Reserve Board on Monday launched a new interactive Web-based guide to the Flow of Funds Accounts. The tools and descriptions in the guide are designed to help users explore the structure and content of the quarterly flow of funds statistical release and the integrated macroeconomic accounts for the U.S. Users of the guide can search for series, browse tables of data, and identify links among series within the flow of funds accounts. It also provides descriptions of each of the published tables and information on the source data underlying each series. Information in the guide will be updated quarterly. To access the guide visit: www.federalreserve.gov/apps/fof/. Printed copies of the Guide to the Flow of Funds Accounts will no longer be available for purchase, said the Fed …

CUNA seeks Treasury backing for interchange delay

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WASHINGTON (3/29/11)--In its continuing efforts to pursue relief for credit unions, the Credit Union National Association (CUNA) Monday encouraged the U.S. Treasury Department to support a delay in the debit fee interchange statute’s implementation. In a meeting with Treasury Deputy Assistant Secretary for Financial Institutions Lance Auer and others, CUNA also urged the department to continue its support of legislation that would increase the cap on credit union member business lending (MBL). The Obama administration has publicly endorsed the MBL plan that CUNA says would boost both credit availability for small businesses and the jobs market at no cost to taxpayers. Sen. Mark Udall (D-Colo.) has introduced legislation that would increase the MBL cap to 27.5% of a credit union’s assets. Auer indicated that the administration’s previous support for this legislation had not changed because the legislation itself has not changed since last year. CUNA also urged Treasury to support legislative reform to make supplemental capital available to credit unions, pointing out that U.S. credit unions are the only credit cooperatives in the world without access to such capital. CUNA also raised credit union concerns on regulatory examination issues. On interchange, CUNA asked the Treasury officials to support bills in the House and Senate that would order a delay in the implementation of the interchange rule contained in last year’s Dodd-Frank Wall Street Reform Act. That provision orders the Federal Reserve to set limits on the interchange fee that could be charged to merchants who use the debit card system. The interchange language was added to the Dodd-Frank bill “at the 11th hour,” CUNA notes, without congressional hearings. Although it contains a small-issuer exemption that covers all but three credit unions, CUNA and many other parties are concerned that the small-issuer exemption will not work in practice. While CUNA maintains that the government should not engage in price-fixing in interchange fees at all, at a minimum the association urges the U.S. Congress to “stop, study, and start over” on the issue, and asked Treasury to add its voice to that message. Also, as noted, CUNA raised another key credit union issue, noting the important role that supplemental capital could play in enabling credit unions to contribute to the economic recovery by serving their members more extensively. In addition, the CUNA representatives discussed concerns credit unions have with the regulatory examination process. Earlier this year, after an exhaustive look at credit unions' increasing frustrations with the examinations, CUNA developed a 64-page guidance document titled "Supervisory Issues and Examinations: Guidance For Credit Unions During The Current Economic Times And Beyond," and a 24-item bill of "examination rights."

NCUA announces April 4 closed meeting in Calif.

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ALEXANDRIA, Va. (3/29/11)--The National Credit Union Administation Monday announced a special closed meeting to be held April 4 in San Diego, Calif. The published agenda includes the following items:
* Consideration of Supervisory Activities. Closed pursuant to exemptions (8), (9)(A)(ii) and (9)(B); and * Personnel (2). Closed pursuant to exemption (2).
The meeting will be conducted at the Westin San Diego Hotel at 9:30 a.m. (PT).

FinCEN Mortgage fraud SARs up but rate is slowing

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VIENNA, Va. (3/29/11)--The Financial Crimes Enforcement Network (FinCEN) Monday released its new report, “Mortgage Loan Fraud SAR Filings In Fourth Quarter and Calendar Year 2010,” revealing the year’s experience with a 4% increase in suspicious activity reports (SAR) involving mortgage loan fraud (MLF SARs). In 2010, according to the report, 70,472 mortgage loan-related SARs were filed, compared with 67,507 in 2009. However, the report also shows that the growth rate of MLF SARs has slowed over the past two to three years. In fact, looking at just the 2010 fourth quarter, filers submitted 18,759 MLF SARs, which is a 1% decrease from the 18,884 filings over the same period in 2009. The FinCEN data also indicate a steady increase over time in the number of references to bankruptcy contained in the MLF SARs. In 2010, mortgage loan fraud was cited in 54% of all SARs referencing bankruptcy fraud, up from 42% in 2009. Some MLF SARs specified the type of bankruptcy filing, most frequently Chapter 7, which was cited in 27% of 2010 reports citing both bankruptcy and MLF. Also of interest: There was a decline in 2010 of all types of SARs filed by depository institutions; they fell 3% to 697,389 compared with 720,309 in 2009. And yet, the total number of SARs filed in 2010 by all types of financial institutions covered by the Bank Secrecy Act grew nearly 4%, the report said. FinCEN also announced it has reorganized its Web page on mortgage fraud and added a section that includes state, urban and county mortgage fraud SAR data. Use the resource link below for more information.

Comment due May 9 on CFPB info collection plan

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WASHINGTON (3/29/11)--Credit unions and other interested parties have until May 9 to comment on a Consumer Financial Protection Bureau (CFPB) plan to facilitate the centralized collection of, monitoring of, and responses to consumer complaints regarding financial products and services. The CFPB is developing online and paper intake methods that will include fields to be completed by consumers regarding complaints and questions. The CFPB’s request for comment pertains primarily to the burden on the consumer completing the form. The form has not yet been developed. However, the fields within the form will collect information regarding:
* The type of contact (such as online, by phone, and so on); * The substance of the complaint, question, or other issue; * The consumer’s contact information; * Identifying information about the consumer or consumer’s household; and * Information about the incident and institution giving rise to the complaint, question, or request for other information.
According to the CFPB’s initial estimates, each consumer complaint form will take about 10 minutes to complete and approximately one million to three million forms will be completed annually; the estimated total annual burden on consumers is approximately 330,000 hours. The CFPB provides no projections for regulatory burden on credit unions or other lending institutions. The Credit Union National Association has issued a Comment Call and is seeking credit union remarks on such questions as:
* Do you have any suggestions on how to enhance the quality, usefulness, and clarity of the information to be collected? * Do you have any suggestions on how to minimize the reporting and/or record keeping burdens on consumers, including the use of automated collection techniques or other forms of information technology? * Can you estimate the CFPB’s capital or start-up costs of operation, maintenance, and purchase of services to provide information?
Credit unions are asked to send their comments to CUNA by May 2.

CU comment sought on rate-risk plan

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WASHINGTON (3/29/11)--While acknowledging the importance of appropriate management of interest-rate risk, the Credit Union National Association (CUNA) is asking credit unions to weigh in on whether a recent regulatory proposal on risk management, which ties federal share insurance coverage to compliance, goes too far. The National Credit Union Administration (NCUA) is seeking comments through May 23 on the proposal. Issued at the March 17 open board meeting, the plan would require:
* A written policy on interest rate risk (IRR): and * An IRR management program.
Under the proposal, all federally insured credit unions would be required to have an IRR management program. There are asset-size and activity triggers for how the written IRR policy requirements would apply. (See resource link below for full details.) The proposal states that interest-rate risk is the: “Vulnerability of a credit union’s financial condition to adverse movement in market interest rates.” It also notes that credit unions have to address IRR from several sources which include re-pricing risk, yield curve risk, spread risk, basis risk and options risk. The proposal also states that the NCUA believes credit unions should have a written policy that expressly states the credit union’s IRR tolerance and an effective IRR program that “identifies, measures, monitors and controls IRR.” Such a program is an “essential component of safe and sound credit union operations.” However, CUNA notes in its Comment Call, the NCUA does not state clearly why the agency believes the recent proposal is needed at this time. As recently as January, the NCUA joined with other federal financial regulators to issue joint guidance on IRR management, and CUNA is not aware that the other regulators are currently developing further proposals like the NCUA’s recent action. The NCUA estimates that about 25% of credit unions, or around 800, will need to develop a written IRR policy, and surmises it will take about 16 hours for a credit union to comply. Among information CUNA asks credit unions to provide is an estimate of the burden the rule could pace on its staff. Use the resource link below to access the Comment Call.

House and Senate back in session

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WASHINGTON (3/29/11)--Both chambers of the U.S. Congress return to session this week after a 10-day District Work Break, during which credit union representatives were encouraged by the Credit Union National Association (CUNA) to contact lawmakers on their home turf regarding key issues for credit unions. Those issues include such legislation as a bill to allow credit unions to increase their member business lending (MBL), and others that would delay the implementation of an new law that requires the Federal Reserve to limit debit card interchange fees. In Washington this week, here is a recap of upcoming hearings of interest to credit unions:
* On Tuesday, the Senate Banking Committee will hold a hearing entitled, “Public Proposals for the Future of the Housing Finance System”; * On Wednesday, the House Financial Services subcommittee on oversight and investigations will conduct a hearing entitled, “The Cost of Implementing the Dodd-Frank Act: Budgetary and Economic”; * For Thursday, the House Financial Services subcommittee on capital markets and government-sponsored enterprises has scheduled a hearing entitled, “Immediate Steps to Protect Taxpayers from the Ongoing Bailout of Fannie Mae and Freddie Mac"; and * For Friday, the House Financial Services subcommittee on insurance, housing and community opportunity will hold a hearing entitled, “Legislative Proposals to Reform the National Flood Insurance Program.”
Watch News Now this week for a report on additional co-sponsors added to the MBL legislation, as well as the interchange bills.

Fed reveals 2012 FOMC meeting schedule

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WASHINGTON (3/28/11)--The Federal Reserve on Friday announced the tentative 2012 meeting schedule for its Federal Open Market Committee (FOMC). The FOMC holds eight regularly scheduled meetings per year, at which the panel reviews economic and financial conditions, determines the appropriate stance of monetary policy, and assesses the risks to its long-run goals of price stability and sustainable economic growth. The meetings will take place on the following dates:
* January 24-25 (Tuesday-Wednesday); * March 13 (Tuesday); * April 24-25 (Tuesday-Wednesday); * June 19-20 (Tuesday-Wednesday); * July 31 (Tuesday); * September 12 (Wednesday); * October 23-24 (Tuesday-Wednesday); * December 11 (Tuesday); and * January 29-30, 2013 (Tuesday-Wednesday).
The FOMC consists of twelve members--the seven members of the Fed board; the president of the Federal Reserve Bank of New York; and four of the remaining eleven Reserve Bank presidents, who serve one-year terms on a rotating basis.

FASB credit impairment comments due today

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WASHINGTON (3/28/11)--Credit unions that wish to comment on the Financial Accounting Standards Board’s (FASB) proposed accounting standards update on accounting for financial instruments must do so by the end of the day. FASB has proposed a number of significant changes to accounting for most financial assets and liabilities. Changes to the accounting standards on credit impairment are among those proposed by FASB. Under FASB’s proposal, entities would need to base expected losses on all available information—including forward-looking information. The proposal would also require an entity to determine an impairment allowance by assigning financial assets to a “bad book” or “good book,” depending on the degree of uncertainty about the collectability of the assets’ cash flows. CUNA has asked credit unions for input on whether or not FASB’s proposed approach for recognition of impairment addresses the issue of delayed recognition of expected credit losses. CUNA has also requested more general comment on whether or not FASB’s proposed approach would provide information that is useful for decision-making. FASB will assess the comments and could incorporate suggestions into their work as they attempt to create a convergent standard on accounting for impairment of financial assets. FASB has said that it will issue a final accounting standards update on accounting for financial instruments, including the credit impairment model, later in 2011. For the CUNA comment call, use the resource link.

Fed extends TILA Consumer Leasing Act

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WASHINGTON (3/28/11)--The Federal Reserve on Friday officially approved amendments to Regulation Z and Regulation M that would expand consumer protection rules to address credit transactions and high-value leases. The Fed amendments implement portions of the Dodd-Frank Wall Street Reform Act. The amendments will become effective on July 21. The new rule will increase the threshold for exempt consumer credit transactions under the Truth in Lending Act (TILA)/Regulation Z from $25,000 to $50,000. The threshold for leases under the Consumer Leasing Act (CLA) and Regulation M will be increased to the same level. These thresholds will be adjusted annually starting on Dec. 31. Consumer credit transactions of up to $25,000 are currently subject to several disclosure requirements under TILA and Regulation Z. Private education loans and loans secured by real property, such as mortgages, are subject to TILA regardless of the amount of the loan. Regulation Z implements the Home Ownership and Equity Protection Act (HOEPA) by adjusting the thresholds used to determine which loans are covered under HOEPA. The CLA requires lessors to provide consumers with disclosures regarding the cost and other terms of personal property leases, such as an automobile lease. The Credit Union National Association (CUNA) in a pair of comment letters issued earlier this year urged the Fed to minimize the regulatory burdens associated with the proposal, particularly for small credit unions. CUNA has noted that the final regulations show some improvements compared to the proposed rules, such as allowing an initial extension of consumer credit to be made after account opening. This change was suggestd in CUNA's comment letters.

Compliance Should all MLOs ID themselves

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WASHINGTON (3/28/11)--Should all mortgage loan originators (MLOs) that take part in a particular residential mortgage loan provide their Nationwide Mortgage Licensing System & Registry (NMLS) identification number on a member’s loan application? The Credit Union National Association, in this month’s Compliance Challenge, says yes. All MLO identification numbers should be provided, no matter how many originators have worked on a given loan application. The identification number is assigned to an MLO once they register with the NMLS, and is used to track the MLO and to allow public access to the MLO’s employment history. The identification number can also be used to track any disciplinary or enforcement actions that have been initiated against the individual. The identification number will remain the same, even if an MLO changes employment, moves, or changes his or her name, CUNA noted. The Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act) requires credit union mortgage loan originators and their employing institutions to register with the NMLS. The NMLS became active on earlier this year, and the initial registration period will run until July 29. For more of this month’s Compliance Challenge, use the resource link.

Inside Washington (03/25/2011)

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* WASHINGTON (3/28/11)--Lawmakers intent on limiting the authority of the newly formed Consumer Financial Protection Bureau should instead focus big Wall Street players that threaten the agency’s mission, Elizabeth Warren, the administration’s point person on CFPB, told Bloomberg News (March 25). Republican lawmakers have complained that the CFPB, created by the Dodd-Frank Act, lacks accountability. Republicans have proposed that the bureau’s budget be approved by Congress and it’s director position be replaced with a five-member commission. But Warren said worries about an agency that speaks up for consumers in the wake of the financial crisis is misguided. Dodd-Frank stipulates that funding for the CFPB be set as a percentage of the Federal Reserve’s operating budget, which could be as much as $500 million annually. Putting its budget into the appropriations debate would discourage examiners from making decisions that are unsuitable to big banks, Warren said … * WASHINGTON (3/28/11)--Fannie Mae was warned in a 2006 internal report of abuses about how lenders and their law firms handles foreclosures, The Wall Street Journal reported Thursday. The report said foreclosure attorneys in Florida had “routinely made” false statements in court to process foreclosures faster, The Wall Street Journal reported. Fannie Mae officials were under the impression that foreclosure counsel were “sacrificing accuracy for speed" but did not name any law firms, the Journal said. The report found no evidence that borrowers were improperly placed in foreclosure…

7M BSA penalty levied against Florida bank

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WASHINGTON (3/25/11)— Pacific National Bank, Miami, Fla., has been hit with a $7 million civil money penalty (CMP) for violations of an Office of the Comptroller of the Currency (OCC) consent order, as well as violations of the Bank Secrecy Act (BSA) and the USA PATRIOT Act, the OCC announced Thursday. The Financial Crimes Enforcement Network (FinCEN) also announced the assessment of a concurrent $7 million against Pacific National for the BSA violations, including BSA program implementation faults. The Florida bank neither admitted nor denied the charges. It did consent to paying the assessment in a single $7 million payment to the U.S. Treasury Department. The OCC issued a consent order to the bank late in 2005 that required the institution to enhance is BSA compliance program. The regulator credited the bank with taking “some necessary steps” to improve its program, but noted that efforts fell short of what was needed to bring its program into compliance with regulations and the 2005 order. Specifically, the OCC said, the bank failed in these areas: adequately identifying, monitoring, and reporting suspicious activities; adequately monitoring its foreign correspondent bank accounts; conducting sufficient due diligence; and adequately auditing its high risk areas and the transactions conducted in those areas. FinCEN had its say as well—determining that the bank failed to “implement adequate internal controls and independent testing at a level of consistency necessary to assure compliance with BSA anti-money laundering programs and suspicious activity reporting requirements.” FinCEN said Pacific National lacked “reasonably complete due diligence information for numerous customers,” information that FinCEN said is necessary to effectively monitor transactions and report suspicious activity in a timely manner. The bank violated BSA suspicious activity reporting requirements by filing numerous suspicious activity reports on a delayed or incomplete basis, FinCEN added. "Banks must devote appropriate resources commensurate with their risk profile and must take prompt and necessary steps to comply with the OCC enforcement actions to ensure compliance with the Bank Secrecy Act and the USA Patriot Act," said John Walsh, Acting Comptroller of the Currency, in a release.

CUNA encouraged by Bernanke interchange pledge

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WASHINGTON (3/25/11)--The Credit Union National Association (CUNA) on Thursday said it is encouraged by Federal Reserve Chairman Ben Bernanke’s pledge to ensure that a planned interchange rule carveout for small issuers is effective, but CUNA also emphasized the continued need to press for legislation to delay implementation of the overall rule. CUNA said that the delay, as proposed by bills pending in both the U.S. House and Senate, is imperative because no one outside of the Fed knows what the agency is considering to make good on the chairman’s pledge. Under the terms of the carveout, credit unions and other financial institutions with under $10 billion in assets would be exempt from portions of the proposed interchange rules that would limit the amount of interchange fees charged to twelve cents per card transaction. Bernanke in a speech delivered this week said that the Fed would do everything it could to ensure that this proposed carveout would work as planned. Bernanke's remarks were made before the Independent Community Bank Association's annual meeting. Bernanke has said the Fed may miss the April 21 deadline set by the statute, noting that the agency will have to take as much time as needed to draft the rule appropriately (Bloomberg March 2). Meanwhile, Sen. Richard Durbin (D-Ill.), who authored the interchange legislation, continues to maintain the exemption will shield small credit unions and banks, saying so again during a Thursday press conference. Durbin also noted that he did not anticipate the political response that his interchange legislation has received. CUNA and credit unions have been emphasizing to legislators and the Fed that the small institution exemption has inherent flaws and is unlikely to work. “The likely ineffectiveness of the exemption and the inability to enforce a two-tiered system are concerns voiced by more than 5,000 letters from credit unions in comments to the Federal Reserve Board,” CUNA President/CEO Bill Cheney reminded Durbin in a letter last week. “Commenters also underscored the fatal flaw of not including all costs in determining the interchange rate,” Cheney noted. Additionally, Federal Deposit Insurance Corporation Chairman Sheila Bair last month told the Senate Banking Committee that the interchange changes could harm small financial institutions far more than they would help merchants. A number of regulators and legislators have also noted that the proposed $10 billion exemption is likely to be impotent to protect small issuers. Bair more recently has said that the planned interchange fee regulation changes would not work in practice and needed “to be fixed." CUNA has repeatedly said that to ensure that the planned exemption is effective, Congress should halt the progress of the interchange rule. If an agreement to delay implementation cannot be reached, CUNA has called on the Fed to do all it can to ensure that the proposed exemption works as Congress said it would. CUNA has estimated that up to 67% of credit unions would lose money on their debit card programs if the interchange regulations reduced interchange-related revenues by 40%. A final version of the interchange rule is scheduled for an April release, and would become effective in late July. Legislation that would delay the implementation of the interchange fee cap has been introduced in the Senate and House. The two bills would also order regulators to study the impact that the proposed interchange rules would have on credit unions, small issuers, consumers and merchants.

Inside Washington (03/24/2011)

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* WASHINGTON (3/25/11)—Two congressional hearings of interest to credit unions were announced yesterday: one on the nation’s housing policy by the Senate Banking Committee and one on the implementation costs associated with the Dodd-Frank Wall Street Reform Act, to be conducted by a House subcommittee. The Senate Banking Committee will hold a hearing on public proposals for the future of the housing finance system on March 29 at 10 a.m. ET. Witnesses scheduled to appear are Michael Berman, chairman, Mortgage Bankers Association; Mark Zandi, chief economist, Moody’s Analytics; and Janneke Ratcliffe, senior fellow, Center for American Progress. Additional witnesses may be announced. In the House, the Financial Services subcommittee on oversight and investigations announce it will examine the costs and economic impact associated with implementing the approximately 300 rules created under the Dodd-Frank Act. The March 30, 2 p.m. (ET) session will feature witnesses from the government and academia. Subcommittee Chairman Randy Neugebauer (R-Texas), in announcing the hearing, said, “it is imperative for agencies to undertake a rigorous cost-benefit analysis of each (rule) to minimize these costs to the economy” …

Fed to hold periodic updates on FOMC projections

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WASHINGTON (3/25/11)—The Federal Reserve on Thursday announced that it will “further enhance the clarity and timeliness” of its monetary policy communication through quarterly press briefings by Fed Chairman Ben Bernanke. Bernanke will present the Federal Open Market Committee's (FOMC) economic projections and provide additional context for committee’s policy decisions during these briefings. The Fed has scheduled briefings for 2:15 P.M. ET on April 27, June 22 and November 2. The briefings will follow FOMC decisions, and will be broadcast live via webcast. The FOMC conducts eight meetings each year to review economic and financial conditions, determine issues involving monetary policy, and assess risks to price stability and sustainable economic growth. The committee is comprised of seven members of the Board of Governors of the Federal Reserve System; the president of the Federal Reserve Bank of New York; and four of the remaining 11 Reserve Bank presidents, who serve one-year terms on a rotating basis.

Small business group reiterates MBL support

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WASHINGTON (3/25/11)—Saying it is “confident that the nation’s credit unions stand ready to extend critical capital to America’s small-business owners,” the National Small Business Association (NSBA) this week again backed legislation that would lift the cap on credit union member business lending (MBL). This round of MBL cap lift support came in the form of a letter to Sen. Mark Udall (D-Colo.). Udall is the chief sponsor of the Small Business Lending Enhancement Act (S. 509), a bill that would lift the MBL cap to 27.5% of a credit union’s total assets. A total of 18 cosponsors have signed on to support that bill since it was introduced on March 8. The letter called on Congress to do “everything within its power to encourage and expand small-business lending. “If the nation’s credit unions stand ready, willing, and able to increase their lending to small firms beyond their current statutory cap of 12.25 percent of assets, then Congress immediately should increase credit unions’ small-business lending cap,” the letter added. Credit Union National Association (CUNA) research has shown that the increased MBL cap could 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. Tens of thousands of credit union advocates have urged their respective representatives to support the MBL legislation, and credit union representatives across the country are discussing several credit union-related issues this week during individual meetings and public town halls in their home districts.

iCompliance Challengei covers benefit garnishments

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WASHINGTON (3/24/11)—In this month’s Compliance Challenge, the Credit Union National Association (CUNA) notes that most, but not all federal benefits are exempt from garnishment. The U.S. Treasury, in conjunction with four other federal agencies, has issued an interim final rule which protects the following benefits payments from garnishments and claims of judgment creditors: social security payments, supplemental security income, veterans administration benefits, federal railroad retirement benefits, and federal employees retirement system benefits. The other agencies on the rule are, not surprisingly, the Social Security Administration, the Department of Veteran Affairs, the Railroad Retirement Board, and the Office of Personnel Management. CUNA notes, though, that the final rule provides that garnishment orders obtained by the U.S. and child support orders (for child support programs administered under Title IV-D of the Social Security Act) can be processed against these benefits. Credit unions may follow their normal procedures for garnishment orders in these instances. Credit unions generally must review a member’s account within two days of receiving any garnishment order, and must examine two months of recent account activity during this review. However, account reviews are not required if the garnishment order is obtained by the U.S. or is a child support-related order. Garnishment fees may not be charged against protected funds. However, garnishment fees may be charged against any petty cash that is in a given account at the time of a garnishment order review. For more of this month’s Compliance Challenge, use the resource link.

Wall St. right target to recoup corporate losses CUNA

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WASHINGTON (3/24/11)—Credit Union National Association (CUNA) General Counsel Eric Richard said the National Credit Union Administration (NCUA) is “looking at the right kind of parties” if the agency, as reported, intends to attempt to reclaim billions in securities-related corporate credit union losses from the biggest Wall Street firms. The Wall Street Journal on Wednesday reported that the NCUA has threatened legal action against Merrill Lynch, Goldman Sachs Group Inc., J.P. Morgan Chase, and Citigroup. The agency is reportedly seeking repayment of billions in losses that corporate credit unions sustained after their purchase of large amounts of mortgage-backed securities. The NCUA has said that it will sue if it is not paid, the Journal reported. CUNA’s Richard said that these Wall Street firms “have the potential to provide significant reimbursement of the credit union system’s recent losses.” However, reclaiming these losses may be a long, difficult process for the NCUA, Richard added. The NCUA told News Now that it does not comment on potential legal matters. Several corporate credit unions, including the conserved U.S. Central FCU and Western Corporate FCU, bought substantial amounts of highly rated mortgage-backed and asset-backed securities before 2009. These securities were severely devalued as a result of the turmoil in the overall mortgage market. The credit union regulator has reportedly alleged that the documentation for securities that Goldman sold to several now conserved corporate credit unions contained false statements and left out many key details. The NCUA took over more than $50 billion in mortgage-backed bonds from the failed credit unions. The agency was also forced to create a Temporary Corporate Credit Union Share Insurance Fund and is charging assessments to natural person credit unions to pay for the cost of stabilizing the troubled corporate credit union system. The NCUA has also repackaged and begun selling $35 billion of those bonds as NCUA Guaranteed Notes in another attempt to deal with these so-called legacy assets.

CUNA asks for CU input on Fed equal credit plan

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WASHINGTON (3/24/11)—The Credit Union National Association (CUNA) has issued a regulatory comment call on a Federal Reserve proposal that would require credit unions to disclose a member’s credit score and other information in the event of a so-called “adverse action.” Adverse actions can include instances where a credit request is rejected or an account interest rate is increased. Any key factors that adversely affected the member’s credit score, the date on which the credit score was created, and the name of the company or person that issued the credit score must also be disclosed under the Fed proposal. The proposal would add these disclosures to the model notices provided under Regulation B - Equal Credit Opportunity Act (ECOA). The new model notices would comply with the adverse action provisions of the ECOA and the Fair Credit Reporting Act (FCRA). Credit unions using the new model notices would not generally be liable for improper discrimination or use of credit information with respect to credit applications, according to CUNA. The new disclosures are required by the Dodd-Frank Act, and will become effective on July 21. CUNA in its comment call asks if the Fed should update any other model notices or forms. Credit unions may also comment on whether a portion of the proposal that requires creditors to provide both the key factors and the specific reasons for taking an adverse action should be changed. Comments should be submitted to CUNA by April 8. The Fed will receive public comments until April 14. For the comment call, use the resource link.

Key definitions could change CU comment sought

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WASHINGTON (3/24/11)—Proposed revisions to “net worth” and “equity ratio” definitions will soon be up for public comment, and the Credit Union National Association (CUNA) is asking credit unions to provide their own input on these proposals. One National Credit Union Administration (NCUA) proposal would amend the Federal Credit Union Act's definition of “net worth” for natural-person credit unions under NCUA’s Prompt Corrective Action (PCA) authorities to allow the NCUA’s Section 208 Assistance made to troubled credit unions to qualify as regulatory net worth. The NCUA proposal also included a “technical correction” to its regulatory definition of “net worth.” This technical correction would generally decrease the amount of a combined credit union’s “net worth” in a credit union merger. The proposed equity ratio changes would clarify that the National Credit Union Share Insurance Fund’s equity ratio must be based solely on the financial statements of the NCUSIF alone without consolidation with other statements, such as those of conserved credit unions. CUNA in the comment call asks credit unions if the proposed net worth changes are “reasonable,” and whether or not the NCUA remove any proposed requirements or add additional requirements when it creates its final rule. Credit unions may also generally address the NCUA’s equity ratio proposal in their comments. Comments should be submitted to CUNA by May 4. The NCUA proposal should be published in the Federal Register by the end of the month, and the agency will accept comments for 60 days after it has been published. For the comment call, use the resource link.

Inside Washington (03/23/2011)

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* WASHINGTON (3/24/11)--Large banks will have to pay more for deposit insurance under a new regulation set to go into effect April 1 (American Banker March 23). Under current rules, a bank's deposit insurance premium is based on its total domestic deposits, with adjustments made for examination ratings, brokered deposits and balance sheet risk. Under the new rules, mandated by the Dodd-Frank-Act, Federal Deposit Insurance Corp. deposit assessments will be based on a bank's average consolidated total assets, minus its average tangible equity capital. Community banks lobbied for the change, arguing that large banks are subject to more and should contribute more to the deposit insurance fund. In a white paper released this week, the deposit insurance assessments charged by regulators to credit unions and banks will be “very similar” over the coming decade, revising previous estimates that predicted higher bank assessments, according to Credit Union National Association (CUNA) Chief Economist Bill Hampel …

Association warns of interchange impact on teachers

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WASHINGTON (3/23/11)—Teachers and education support professionals could be hurt by the Federal Reserve's proposed interchange fee cap, according to a national association that represents the country's educators. The National Educators Association (NEA) said in a letter to key senator that the Fed rule “could have a significant negative impact on the cost of mainstream banking services" to many middle and lower-income consumers, including the group's constituents. 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 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. “Further study is warranted to determine if the proposed federal controls on interchange fees for debit swipes as currently mandated by the amendment will meaningfully benefit merchants and their customers, or if such controls will instead result in consumers paying higher prices for the banking services critical to their financial wellbeing,” the letter added. The interchange legislation may also have many unintended consequences, the NEA said. The NEA is a 3.2 million member advocacy organization that represents current and retired teachers, faculty members, and other education support professionals. Other organizations, including the U.S. Hispanic Chamber of Commerce (USHCC), have also called for a delay in the implementation of the new interchange regulation. Legislation that would delay the implementation of the interchange fee cap was introduced in the Senate and House on Tuesday. The two bills would also order regulators to study the impact that the proposed interchange rules would have on credit unions, small issuers, consumers and merchants. The Credit Union National Association (CUNA) supports the legislation. CUNA has encouraged credit unions across the country to contact their federal lawmakers, at home this week for a District Work Period, and ask them to "stop, study and start over” on interchange legislation.

CU bank premiums similar over next decade CUNA

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WASHINGTON (3/23/11)—The deposit insurance assessments charged by regulators to credit unions and banks will be “very similar” over the coming decade, revising previous estimates that predicted higher bank assessments, Credit Union National Association (CUNA) Chief Economist Bill Hampel said in a white paper released yesterday. CUNA’s previous estimates showed NCUA assessments averaging 8.2 basis points (bp) per year and FDIC assessments averaging 13.1 bp per year during the coming decade. However, Hampel noted that both the National Credit Union Administration (NCUA) and the Federal Deposit Insurance Corporation (FDIC) have recently released new information. “The NUCA estimates are down slightly; the FDIC estimates for smaller banks (with under $10 billion in assets) have fallen considerably” in the newly created estimates, Hampel said. Credit union assessments could average 7.7 bp over the next 10 years, while bank assessments could average 6.7 bp, Hampel predicted. The NCUA estimates changed in part due to indications that the agency may not charge an insurance premium this year, and may not use a prepayment feature to even out corporate credit union stabilization expensing. Given those two changes, NCUA total assessments will be higher than previously expected in the first two years, but lower in the following nine years. The FDIC has changed its assessment structure, with that regulator transferring much of the burden of rebuilding the FDIC’s fund balance to the very largest institutions. Hampel in the white paper noted that these predicted assessment rates could change. The rate of economic recovery, the performance of legacy assets held by the NCUA, or additional FDIC or NCUA policy changes could alter the course of assessment, he said. For the full white paper, use the resource link.

Fed Banks assets increased by 193B in 2010

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WASHINGTON (3/23/11)--The Federal Reserve this week reported $2.428 trillion in total reserve bank assets as of December 31, 2010, $193 billion more than was reported at the end of 2009. The Fed numbers were released as part of its 2010 comparative financial statements. The Fed in a release said that the statements combine the financial results of the Fed’s Banks, its 12 individual Federal Reserve Banks, the limited liability companies that were created to respond to strains in financial markets, and the Fed’s Board of Governors. The statements noted that the Fed’s U.S. Treasury securities holdings increased by $261 billion and its holdings of federal agency and government-sponsored enterprise (GSE) mortgage-backed securities (MBS) increased by $86 billion. The Fed said that this $347 billion increase was partly offset by two factors: a $96 billion decrease in loans to depository institutions and a $23 billion decrease in loans extended under the Fed’s Term Asset-Backed Securities Loan Facility. The Federal Reserve Banks' comprehensive income increased to $82 billion in 2010, up $28 billion from the previous year’s total. The Fed noted that the Reserve Banks transferred $79 billion of that $82 billion total to the U.S. Treasury. A total of $47 billion in comprehensive income was transferred to the Treasury in 2009, according to the Fed. For the full Fed financial statements, use the resource link.

NCUA Some CU volunteer costs can be reimbursed

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ALEXANDRIA, Va. (3/23/11)--Associate directors or other credit union officials that occupy volunteer positions established by credit union directors may be reimbursed for any training expenses or related traveling expenses, the National Credit Union Administration (NCUA) has said. The NCUA statement came in the form of a legal opinion. The legal opinion was a response to a question from Credit Union Executives Society President/CEO Fred Johnson. The NCUA opinion noted that the agency has previously stated that volunteer members of non-voting, advisory committees, such as emeritus or associate directors, should not be eligible to receive expense reimbursement or insurance benefits from the credit union they are serving. However, NCUA Associate General Counsel Hattie Ulan said that the NCUA has reconsidered this position, and has decided that these types of volunteers would be eligible for reimbursement for training and training-related expenses, so long as the volunteers are not simply serving in an honorary capacity and are providing services that are established by the credit union’s management team. “This interpretation is consistent with NCUA’s regulations on reimbursement,” Ulan said. Board and committee members are also allowed to be compensated for these sorts of expenses under the Federal Credit Union Act. For the full NCUA opinion, use the resource link.

Inside Washington (03/22/2011)

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* ALEXANDRIA, Va. (3/23/11)--The National Credit Union Administration (NCUA) is conducting one of its free special training sessions on the duties of federal credit union directors on April 12 at its headquarters in here. The session promises to cover the key requirements of the new rule (NCUA Regulations 701.4) addressing the financial education of credit union board members, including understanding the credit union’s balance sheet and income statement. Online registration is available. The NCUA headquarters is at 1775 Duke Street, Alexandria, Va…. * WASHINGTON (3/23/11)--The Supreme Court upheld a ruling that the U.S. Federal Reserve must disclose details about its emergency lending program to banks during the financial crisis in 2008. The Clearing Housing Association--representing large commercial banks--had asked the high court to reverse a ruling by a federal appeals court that required disclosure of the lending records (American BankerMarch 22). The justices today left intact a court order that gives the Fed five days to release the records, sought by Bloomberg News. The Fed responded to Bloomberg’s May 2008 Freedom of Information Act request by releasing only partial data regarding its lending programs, claiming exemptions that protected "trade secrets and commercial or financial information." A Fed spokesperson said the agency was in the process of fulfilling the requests following the Supreme Court ruling … * WASHINGTON (3/23/11)--Housing and Urban Development Secretary Shaun Donovan and Treasury Secretary Tim Geithner's responses to a question about whether the government-sponsored enterprises would be exempted from pending risk-retention requirements has created anxiety among investors (American BankerMarch 22). The question was posed by during a Senate Banking Committee hearing by Sen. David Vitter (R-La.) who asked if either Donovan or Geithner supported proposals to exempt GSE loans from risk-retention requirements. Donovan said he did not believe discussions about exemptions had taken place. He said the day’s discussion was focused on ensuring that the GSEs held adequate capital against their commitments. Geithner said the Obama administration’s objective is to have private markets with banks and investors shouldering more of the risk in housing finance. Douglas Harter, an analyst with Credit Suisse, said an absence of concrete information leaves such statements open for wide interpretation …

CU interchange MBL fight moves to home districts

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WASHINGTON (3/22/11)—With Congress leaving town for a week-long district work period, the front in the fight for interchange implementation delay and member business lending advocacy will spread to congressional districts across the country. Credit Union National Association (CUNA) Director of Grassroots Advocacy Elizabeth Kangas said that credit unions and their state leagues this week will be asking Congress to “stop, study and start over” on the interchange rule, as well as pushing hard for the MBL bill in individual district meetings with their members of Congress. Others will attend town hall-style meetings in the home district, she added. These district actions will seek to add to the growing list of cosponsors for legislation on both key credit union issues. CUNA has created a grassroots action alert to encourage credit union nationwide to contact their lawmakers to urge support of these vital pieces of credit union legislation. Tens of thousands of credit union advocates have reached out to their legislators within the past month on the interchange and MBL bills. Bills to delay the implementation of a cap for debit card interchange fees were introduced last week in both the House and Senate. The Senate version of the delay, which would push back implementation by two years, had a total of 13 cosponsors as of Monday. Sens. Daniel Akaka (D-Hawaii) and Max Baucus (D-Mont.) were the latest to sign on to the Senate interchange delay bill, with the pair adding their names as cosponsors last Thursday. Similar House legislation, introduced by Rep. Shelley Moore Capito (R-W. Va.) with 27 cosponsors, had reached 42 cosponsors as of yesterday. Sen. Mark Udall (D-Colo.) on March 8 introduced legislation (S. 509) that would establish a maximum MBL limit of 27.5% of a credit union's total assets. The MBL bill had 18 Senate co-sponsors as of Monday. Sens. Olympia Snowe (R-Maine), Charles Schumer (D-N.Y.), Barbara Boxer (D-Calif.), Sherrod Brown (D-Ohio), Susan Collins (R-Maine), Al Franken (D-Minn.), Kirsten Gillibrand (D-N.Y.), Patrick Leahy (D-Vt.), Joseph Lieberman (I-Conn.), Bill Nelson (D-Fla.), Jack Reed (D-R.I.), Sheldon Whitehouse (D-R.I.), and Ron Wyden (D-Ore.) joined Udall as original co-sponsors of the bill. Bernie Sanders (I-Vt.), John Ensign (R-Nev.), Daniel Inouye (D-Hawaii), Carl Levin (D-Mich.) and Debbie Ann Stabenow (D-Mich.) have signed on to support the bill following its March 8 debut. For the CUNA grassroots action alert, use the resource link.

CUNA calls for credit score comments

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WASHINGTON (3/22/11)--Credit unions are encouraged to comment on a joint agency proposal to require creditors that use a consumer's credit score in risk-based pricing to disclose that score and other related information to that consumer. Under the Federal Reserve-Federal Trade Commission (FTC) proposal, credit unions and others would be required to provide consumers with a statement that a credit score takes into account information in a consumer report and that a credit score can change over time. They must disclose the specific numerical credit score used in making the credit decision, as well as information on the full range of FICO scores that could be assessed for a given member or customer. The lender must also disclose any factors that adversely affected the credit score, the date on which that credit score was created, and the entity that provided the credit score. The Credit Union National Association (CUNA) has issued a Comment Call asking credit unions for general comment on several areas of the proposal. CUNA has also included a Fed and FTC request for additional information. The regulators have asked for additional comment on whether the proposed additional content for general risk-based pricing notices and account review notices in the proposed rules are appropriate. They have also solicited extra input on their proposal’s potential impact on smaller credit unions. The proposal is scheduled to go into effect on July 21. Comments should be submitted to CUNA by April 8. The Fed and FTC are accepting comments until April 14. Separate RegFlex analysis and any comments regarding the paperwork reduction act must be submitted by May 16.

Inside Washington (03/21/2011)

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* WASHINGTON (3/22/11)—The Federal Reserve has given the go-ahead to some of the country’s 19 largest banks to increase dividends, buy back their company’s shares or repay government aide—citing the country’s economic improvements and the banks’ marked improvement in capital standings as the reasons behind the decisions. The Fed recently released a paper that said the banks had increased common equity by more than $300 billion from the end of 2008 through the end of 2010. The Fed said in a release that both the quantity and quality of capital at many large bank holding companies, by and large, have improved since the financial crisis. In fact, the Fed noted that the 19 companies’ Tier 1 common ratio rose to 9.4% in the fourth quarter of 2010, up from a 2008 level of 5.4%. (Bloomberg March 21)… * WASHINGTON (3/22/11)--New York Banking Superintendent Richard Neiman is expected to step down in April (American Banker March 21). Neiman, who has been with the department for four years, has also served on Congressional Oversight Panel for the Troubled Asset Relief Program for the past two years. With the oversight panel terminating April 3, Neiman said the time was right for a transition. He has also been rumored as a candidate for the next comptroller of the currency or as a possible head of the Consumer Financial Protection Bureau. Prior to accepting his position with the New York State Banking Department, Neiman was the chairman, president and chief executive of TD Bank USA.

Fed could cut card availability too deeply CUNA

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WASHINGTON (3/22/11)—The Credit Union National Association (CUNA) continues to analyze the Federal Reserve’s proposed changes to rules governing open-end credit plans, and CUNA Deputy General Counsel Mary Dunn has noted that portions of the proposal could limit access to credit cards for some non-working members of households. The Fed proposal would prevent card issuers from requesting a consumer's household income on credit applications. The amended rule will instead require issuers to request a consumer's individual income or salary, the Fed said. Specifically, the rule states that if a card issuer prompts an applicant to provide his or her “household income” on a credit card application,the card issuer cannot rely solely on the information provided by an applicant to satisfy the proposed regulatory requirements. Instead, the card issuer would need to obtain additional information about an applicant’s independent income by contacting the applicant or through similar means. Dunn said that this is one of many issues that CUNA would like to discuss with members of the Consumer Financial Protection Bureau once that entity becomes fully operational later this year. The Fed release would also prohibit issuers from revoking initial offers of interest-free credit during a specified amount of time "unless the account becomes more than 60 days delinquent." The Fed currently imposes similar rules on so-called "teaser" credit card rates. It has also moved to include application and other first-time fees under a rule that limits the total amount of fees charged on a credit account to 25% of the account's credit limit. The proposed clarifications to Regulation Z, Truth in Lending, were released last Friday and total 323 pages in length. For the full proposal, use the resource link.

NCUA bans trio from CU-related work

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ALEXANDRIA, Va. (3/22/11)—Three former credit union employees have been banned from future work at any federally insured financial institution under prohibition orders issued by the National Credit Union Administration (NCUA). In a Monday announcement, the NCUA noted the following details of the enforcement orders:
* Virginia Anderson, a former employee of TPEA No. 5 CU in Del Rio, Texas, was convicted of theft and sentenced to one year of imprisonment, one year of probation, and ordered to pay just over $1.7 million in restitution; * Gary Ellis, a former employee of River Valley FCU in Brattleboro, Vermont, was convicted of embezzlement and sentenced to six months imprisonment, five years of probation, and ordered to pay $150,000 in restitution; * Kathleen Hammer, a former employee of Western Region FCU of Cleveland, Ohio, entered into a pretrial diversion program with the State of Ohio Court of Common Pleas-Cuyahoga County.
Violation of a prohibition order is a felony offense punishable by imprisonment and a fine of up to $1 million.

MBL leader Udall backs MBL bill in iThe Hilli blog post

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WASHINGTON (3/21/11)--Sen. Mark Udall (D-Colo.) last week reaffirmed his commitment to “finally taking the common sense step of allowing credit unions to increase the amount of money they can lend to small businesses” and touted his proposed member business lending (MBL) cap lift legislation in a blog post on The Hill’s Congress Blog. Udall’s legislation, the Small Business Lending Enhancement Act of 2011 (S. 509), currently has 17 sponsors. The bill would increase the MBL cap to 27.5% of a credit union's assets, up from the current 12.25%. The Credit Union National Association (CUNA) has estimated that the MBL cap lift could provide up to $13 billion to small businesses in the first year alone and create over 140,000 new jobs, at no cost to taxpayers. Udall in his blog post said that credit unions “know small businesses in their communities that need loans to expand and hire, and the credit unions have money to lend them.” He also noted that “nearly 350 credit unions, accounting for approximately 60% of all business loans subject to the 12.25% cap, are facing their cap and will have to dramatically slow their business lending.” The MBL cap lift is “a smart, no-cost way of increasing lending without drastically changing the composition of the small business lending market,” Udall added. The senator’s blog post mirrored comments he made on the Senate floor on Thursday. Sen. Olympia Snowe (R-Maine), a co-sponsor of S. 509, also backed the MBL legislation in her own Thursday comments. Snowe said that the MBL cap lift is “a critical way” of creating more jobs in America, and noted that the legislation would create 1,000 new jobs in her home state alone.

CUNA asks CFPB head to join interchange fight

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WASHINGTON (3/21/11)--Credit Union National Association (CUNA) President/CEO Bill Cheney last week asked Consumer Financial Protection Bureau (CFPB) architect Elizabeth Warren to join those who are requesting a delay in implementation of the Federal Reserve’s interchange fee changes. Cheney said that CUNA would “deeply appreciate” Warren’s input on the Fed’s interchange proposal, and would be glad to meet with her to discuss interchange further. CUNA met with Warren on the interchange issue during the recently completed 2011 Governmental Affairs Conference. CUNA representatives and Warren have also discussed the regulatory burden faced by credit unions and other issues during additional meetings. In this most recent communication, Cheney recommended that Warren consider adding a formal regulatory burden monitoring function to the CFPB’s pending Office of Community Banks and Credit Unions. The CUNA leader said that such a move would be “extremely well-received by credit unions.” Warren last week told members of the House Financial Services Committee that the CFPB would work with credit unions and other small institutions as it pursues various rulemaking priorities, and added that the agency would protect credit unions and community banks as it develops and revamps regulations. On the topic of interchange, regulators, legislators, consumer groups and members of the press have all come out in recent weeks to call for a delay in interchange regulation implementation. The Fed’s proposal, which is scheduled to go into effect on July 21, could cap the interchange fees paid to debit card issuers at as low as seven-to-12 cents per transaction. Active bills in both the House and Senate would push back implementation to allow further time for study of the interchange regulation’s impact on credit unions, small issuers, consumers and merchants.

TARP funding for large banks disadvantages CUs

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WASHINGTON (3/21/11)--The lasting legacy of the Troubled Asset Relief Program (TARP) could ultimately be the worsening of the problems posed by “too big to fail” financial institutions, as that program has helped many big banks grow even larger, TARP Special Inspector General Neil Barofsky said late last week. Testifying before the Senate Banking Committee on Thursday, Barofsky noted that TARP has put small issuers, such as credit unions, at a disadvantage by granting larger institutions greater access to cheap credit and capital. “Cheaper credit,” in this case, “is effectively a government-granted subsidy, which translates into greater profits, and which allows the largest institutions to become even larger” while “materially disadvantaging” smaller financial institutions, he added. The safety net provided by TARP has caused credit ratings agencies to continue to give higher credit ratings to large institutions, and has given executives of larger firms greater motivation to take greater risk, Barofsky said. “The prospect of a government bailout also reduces market discipline, giving creditors, investors and counterparties less incentive to monitor vigilantly those institutions that they perceive will not be allowed to fail,” he added. Barofsky said that while one of the central elements of the recently enacted Dodd-Frank financial reform package was to end "too big to fail," there is not sufficient evidence that the issue has been solved. In fact, Barofsky noted that the funding advantage that larger banks hold over their smaller competitors has increased since Dodd-Frank was signed into law. For more of Barofsky’s testimony, use the resource link.

Cheney briefs CFA on CUco-op difference

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WASHINGTON (3/21/11)--Credit Union National Association (CUNA) President Bill Cheney last Friday discussed the value of credit
Click to view larger image Credit Union National Association President/CEO Bill Cheney discusses the value of credit unions to consumers with Consumer Federation of America's (CFA) consumer advocates, in Washington for CFA's Consumer Assembly. (Photo provided by CUNA)
unions to consumers as part of an orientation on co-ops that the Consumer Federation of America (CFA) arranged for a group of its key state and local advocates in Washington to attend CFA’s Consumer Assembly. Cheney emphasized that having a cooperative financial services option in the marketplace “means consumers have an institution that gives them a voice, that provides great value, and that offers stellar service.” And they have a long history of doing so, he added. Cheney held up a copy of the very first issue of what is now Consumer Reports magazine, which is celebrating its 75th anniversary this year, and pointed out the inaugural issue had an article written by credit union pioneer Dora Maxwell on the benefits of credit unions to consumers. Cheney explained how credit unions as co-ops answer to their members, not outside stockholders. He cited CUNA research showing consumers saved $6.5 billion last year using credit unions rather than banks due to credit unions' better rates and lower fees, a figure that likely would be even higher if the interest-rate environment for savings was not so low. “And credit unions’ presence in the marketplace creates competitive pressure that helps bank customers, too,” he said. That savings amounts to about $3.5 billion a year, for a total savings to consumers of $10 billion a year. He also thanked CFA for its consistent support of credit unions' tax status. Noting that tax reform is an emerging issue in Congress, Cheney said credit unions “have a very good story to tell about the exemption they receive.” He also explained that revoking the exemption would effectively turn credit unions into banks, depriving consumers of a cooperative choice for their financial services. “If you tax credit unions, you eliminate credit unions--it’s game over,” he said. Also presenting at the session, organized by CFA Executive Director Stephen Brobeck, were National Cooperative Business Association CEO Paul Hazen and American Public Power Association chief lobbyist Joe Nipper.

Online gambling legalization bill introduced

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WASHINGTON (3/21/11)--Legislation that would allow the U.S. Treasury to license internet gambling operators and would permit approved operators to accept bets from U.S. citizens was again offered in the House late last week. The Internet Gambling Regulation, Consumer Protection, and Enforcement Act was introduced by Rep. John Campbell (R-Calif.), with Rep. Barney Frank (D-Mass.) serving as its main co-sponsor. Reps. Ed Perlmutter (D-Colo.) and Peter King (R-N.Y.) have also co-sponsored the bill. Frank introduced identical legislation last year, and that bill gained House Financial Services Committee approval in July. It did not come up for further vote in the full House, however. The new gaming legislation would ease the compliance burdens imposed by the Unlawful Internet Gaming Enforcement Act (UIGEA) by supplying a list of approved Internet gambling providers that financial institutions could use to help determine what transactions to validate. UIGEA, as currently constructed, requires credit unions and other financial institutions to establish and implement policies and procedures to identify and block restricted internet gambling transactions, or rely on those procedures established by the payments system. While many transactions that are made with illegal gambling operators are blocked, the UIGEA regulations do result in a large number of false positives, creating issues for both credit union members and credit unions.

Inside Washington (03/18/2011)

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* WASHINGTON (3/21/11)--The Treasury Department will place its own nominees on the boards of banks that fail to meet terms of their government bailouts, a senior official said Thursday (American Banker March 18). Treasury is in the process of identifying individuals who can have the most positive effect on bank boards, said Timothy Massad, acting assistant secretary for financial stability. The board nominations are expected to be announced soon, Massad said. Most of the $204.9 billion disbursed under the Troubled Asset Relief Program’s Capital Purchase Program have been paid back, but some banks have missed dividend or interest payments. As of the end of February, 189 banks had failed to make at least one scheduled dividend or interest payment. Thirty-two have yet to make at least six payments, the agency said. After an institution fails to make six payments, the Treasury has the right to elect two members to the bank's board of directors … * WASHINGTON (3/21/11)--The Federal Reserve last week clarified portions of its Regulation Z, altering the rule to prevent card issuers from requesting a consumer's household income on credit applications. The amended rule will instead require issuers to request a consumer’s individual income or salary, the Fed said. The amendment will also prohibit issuers from revoking initial offers of interest-free credit during a specified amount of time “unless the account becomes more than 60 days delinquent.” The Fed currently imposes similar rules on so-called “teaser” credit card rates. It has also moved to include application and other first-time fees under a rule that limits the total amount of fees charged on a credit account to 25% of the account’s credit limit... * WASHINGTON (3/21/11)--Community bankers are divided on a provision of the Dodd-Frank Act that would allow for the payment of interest on commercial checking accounts. Some believe the repeal of Reg Q could cut into margins and cause commercial clients to seek the highest bidder (American Banker March 18). Though the repeal of Reg Q is one paragraph in 2,300 pages of legislation it affects the foundation of many institutions’ commercial banking strategies, according to Cliff McCauley, a senior executive vice president at the Cullen/Frost Bankers Inc. unit Frost Bank and a former chairman of the Independent Bankers Association of Texas. The Independent Community Bankers of America (ICBA) is surveying its members on the repeal. Preliminary results show a split of opinion among ICBA members as to whether they believe they will be impacted by the repeal. Bankers more anxious about the change said those less concerned not may not be considering the long-term impact. Frank Sorrentino III, chairman/CEO of the $602 million-asset North Jersey Community Bank, Englewood Cliffs, N.J, said the repeal may not have an immediate effect in the current low-rate environment. But rates will eventually rise, he said, affecting each bank’s commercial viability … * WASHINGTON (3/21/11)—House Financial Services Committee Chairman Spencer Bachus (R-Ala.) announced the planned schedule for the rest of March and April. The schedule is tentative and will depend on witness availability and other factors that may require changes. Hearing witnesses will be announced at later dates. All times are Eastern. March 30: Oversight and Investigations Subcommittee hearing on cost of Dodd-Frank implementation, 2 p.m.; March 31: Capital Markets Subcommittee hearing on legislative proposals on GSEs, 10 a.m.; April 1: Insurance and Housing Subcommittee hearing on NFIP at 10 a.m.; April 5: Capital Markets Subcommittee markup of government-sponsored enterprise bills at 10 a.m.; April 6: Financial Institutions Subcommittee hearing on the small business lending fund at 10 a.m., and Insurance and Housing Subcommittee markup of the National Flood Insuranch Program bill at 2 p.m.; April 7: Domestic Monetary Policy Subcommittee hearing on the U.S. Mint Bullion Program at 10 a.m.; April 13: International Monetary Policy Subcommittee hearing on Ex-Im Bank at 10 a.m., and Insurance and Housing Subcommittee hearing on Federal Housing Administration and Ginnie Mae legislative proposal at 2 p.m.; April 14: Oversight and Investigations Subcommittee hearing on the Stanford Financial Ponzi scheme at 10 a.m., and Capital Markets Subcommittee hearing on risk retention at 2 p.m. …

Corp CU investment tech changes voted by NCUA

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ALEXANDRIA, Va. (3/18/11)--Definitions of the National Credit Union Share Insurance Fund’s (NCUSIF) “equity ratio” and credit union “net worth,” as found in the Federal Credit Union Act, would be revised by National Credit Union Administration (NCUA) actions proposed on Thursday. The equity ratio changes aim to clarify that the NCUSIF’s equity ratio must be based solely on the financial statements of the NCUSIF alone without consolidation with other statements, such as those of conserved credit unions. Under the net worth changes, credit unions will be permitted to count special section 208 assistance provided by the NCUSIF as part of their net worth ratio. The new net worth standards will apply to loans and accounts with remaining maturities of more than five years. These loans and accounts must be subordinate to all other claims, including those of shareholders, creditors, and the NCUSIF. They must not be pledged as a security on a loan to, or other obligation of, any party, and may not be insured by the NCUSIF. The agency also approved the final version of a rule that assigns a zero risk-weighting to the NCUA Guaranteed Notes (NGNs) for risk-based net worth requirements under PCA for complex credit unions purchasing the notes. The Credit Union National Association supported the NCUA’s implementation, and has noted that credit unions that invest in these notes will have no increased risk-based prompt corrective action requirements since they will be entered as a zero in the risk-based net worth equation. Corporate credit unions will also be able to invest in NGNs after the board approved a final rule that corrects the definition of “collateralized debt obligation.” This final rule also corrects the existing list of investments exempt from the single obligor limits and credit rating requirements.

NCUA could tighten rate-risk program rules

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ALEXANDRIA, Va. (3/18/11)—A proposed rule that would require federally backed credit unions to create written interest rate risk policies and develop an individual interest risk management insurance program was the central topic of Thursday’s National Credit Union Administration (NCUA) board meeting. The rate-risk policies must include procedures for identifying, measuring, monitoring, controlling, and reporting interest rate risk. The policies may be incorporated into many of a credit union’s existing policies, including its investment, asset liability management, funds management, or liquidity policies. However, the policies may also be handled separately, the NCUA said.
Click to view larger image The NCUA on Thursday emphasized that safety and soundness concerns were behind their introduction of new interest rate risk regulations. CUNA plans to review the NCUA's proposal, and will oppose any unneeded or superfluous requirements. (CUNA PHOTO)
Once the interest rate risk programs have been developed, they eill be monitored during the NCUA’s periodic credit union examinations. All credit unions with less than $10 million in assets would be excluded from the proposed rule. Credit unions with $10 million to $50 million in assets would also be excluded if their holdings of mortgages and investments with lifespans of over five years is less than 100% of the credit union’s net worth. Agency staff noted that the complexity of a given credit union’s policy should increaqse with its level of risk, and the amount of time needed to develop interest rate risk management policies will vary from institution to institution. NCUA Chairman Debbie Matz said that the agency is introducing the measure to avoid further credit union failures in the event that interest rates on share deposits and other sources of funds increase. Matz encouraged credit unions to begin planning for the rule as soon as possible. The interest rate risk proposal was unanimously supported by all board members. Low home prices and mortgage interest rates, combined with government home purchase incentives, have led to increased volumes of fixed-rate, long-term mortgage originations, and CUNA Senior Economist Mike Schenk has said that these factors can lead to increased interest rate risk because the cost of funding to hold these long-term loans and other assets in a rising rate environment could outstrip the interest income these long-term, fixed-rate investments earn. The NCUA board said it would be beneficial for credit unions to assess their interest rate risk while interest rates remain at historic low levels. Credit unions’ collective exposure to potential interest rate “shocks” imperils the safety and soundness of credit unions, the NCUA said. While she is sympathetic to the existing regulatory burden that is placed on credit unions, NCUA Board Member Gigi Hyland said that bringing credit unions’ interest rate risks under control is vital. Credit unions would have three months to comply if the rule is adopted as final. There is a 60-day comment period for the proposal. The Credit Union National Association continues to have concerns about over regulation. However, CUNA recognizes the need for credit unions to make sure they manage all risks appropriately, CUNA Deputy General Counsel Mary Dunn said. CUNA will be reviewing the proposal carefully with its examination and supervision subcommittee “and will certainly oppose any requirements they and other credit union officials identify as unnecessary or superfluous,” Dunn added.

Number of CAMEL 3-5 CUs dips slightly

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ALEXANDRIA, Va. (3/18/11)—The number of CAMEL Code 3, 4 and 5 credit unions fell between January and February, and those troubled credit unions hold a combined $172 billion in assets, the National Credit Union Administration (NCUA) reported on Thursday. NCUA CFO Mary Ann Woodson reported that there are currently 360 CAMEL 4 and 5 credit unions, representing 5% of insured shares, and 1803 CAMEL 3 credit unions, representing 18% of insured shares. The equity ratio of the National Credit Union Share Insurance Fund stood at 1.29% as of February 28, and the fund held $758 billion in insured shares and $1.2 billion in reserves at that time, Woodson said. The agency last month did not write off any of the NCUSIF’s assets as insurance loss expenses in February. The NCUA had budgeted $54.2 million in funds to cover insurance loss expenses during that month. Woodson also reported on the status of the Temporary Corporate Credit Union Stabilization Fund, noting that that fund’s net equity position was negative $5.984 billion as of February 28. This is an improvement from January’s numbers.

Govt. funding resolution cuts CDFI funds

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WASHINGTON (3/18/11)—The latest in a series of continuing resolutions to fund the federal government was signed into law on Thursday, and this resolution would again cut funding to the U.S. Treasury’s Community Development Financial Institutions (CDFI) Fund to the tune of $3 million. The resolution, which will fund the government until April 8, was passed by the Senate earlier in the day and passed the House on Tuesday. The CDFI Fund helps locally based financial institutions offer small business, consumer and home loans in communities and populations that lack access to affordable credit. According to the Treasury Department in January, credit unions represent 13% of the total applicant pool for the 2011 round of the CDFI Fund program. The administration sought $250 million in CDFI funding for FY 2011.

Inside Washington (03/17/2011)

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* WASHINGTON (3/18/11)--Federal Deposit Insurance Corp. Chairman Sheila Bair's last scheduled address to the American Bankers Association underscored the tension between the regulator and financial institutions, including credit unions. Bair was direct in her comments to the group, saying that financial institutions did not serve the best interests of American consumers in the events leading up to the financial crisis. “In policy terms, the success of the financial sector is not an end in itself, but a means to an end--which is to support the vitality of the real economy and the livelihood of the American people,” Bair said. “What really matters to the life of our nation is enabling entrepreneurs to build new businesses that create more well-paying jobs, and enabling families to put a roof over their heads and educate their children. In our national economic life, your contribution as bankers, and ours as regulators, can only be measured against this yardstick. And let’s be completely honest--in the period that led up to the financial crisis we did not get the job done.” The question-and-answer period of Bair’s presentation added to the tension (American Banker March 17). Bankers argued that the Dodd-Frank Act was overregulating their industry and interfering with their day-to-day operations. Credit unions have registered many of the same arguments. Bair said Dodd-Frank was targeted to large institutions and small financial institutions were exaggerating the effects of the law … * WASHINGTON (3/18/11)--The Department of Housing and Urban Development (HUD) has initiated an enforcement action against a large lender that coerced title agents into covering settlement costs that exceeded the amounts disclosed on good faith estimatex. HUD would not identify the lender (American Banker March 17). If closing costs end up exceeding the estimate given to loan applicants, the lender must repay borrowers above set amounts, according to Real Estate Settlement Procedures Act rules. The large lender sent letters and invoices to title agents demanding reimbursements and threatened to deny them future business if they didn’t pay, Laura Gipe, a Respa specialist at HUD, told the American Land Title Association on Tuesday … * WASHINGTON (3/18/11)--At a House hearing nominally scheduled as oversight of the rules creating the Consumer Financial Protection Bureau (CFPB), the conversation at one point turned to a settlement agreement being negotiated between a group of state attorneys general and several federal agencies with the major mortgage servicers. During the hearing, some lawmakers slammed Elizabeth Warren of the CFPB for her role in the negotiations. Meanwhile, outside the hearing room, two state attorneys general voiced their opposition to the proposed deal. Both indicated that mistakes banks had made in mortgage servicing needed to be corrected, but said the 27-page proposed agreement went too far when it pushed principal reductions and other broad changes (American Banker March 17) …

MBL cap gets Senate floor attention

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WASHINGTON (3/18/11)--As anticipated, Sen. Mark Udall (D-Colo.) took to the Senate floor Thursday and asked his colleagues to include an increased cap for credit union member business lending (MBL) in a small business bill currently under debate. Also as anticipated, it was questioned whether the MBL provision could be added to the larger bill under the Senate’s strict rules about germaneness--which demands that the amendment be acutely relevant to the core bill. The core bill came to the Senate Floor via the Committee on Small Business and Entrepreneurship. Sen. Mary Landrieu (D-La.) introduced the core small business bill (S. 495), which would revise provisions and extend the funding of the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR). Objecting to the MBL amendment’s addition, Landrieu said that the Senate Banking Committee would have jurisdiction over MBL legislation. Udall’s MBL bill would, in part, increase the MBL cap to 27.5% of a credit union’s assets, up from the current 12.25%. His bill, Small Business Lending Enhancement Act of 2011 (S. 509), currently has 17 sponsors. Credit Union National Association (CUNA) research has shown that the increased MBL cap could 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. CUNA Senior Vice President of Legislation John Magill reiterated Thursday that Udall’s action is “just the beginning” for MBL legislation this year. He said CUNA and credit unions are serious and engaged in the MBL effort, and are grateful that the Congress remains “keenly focused on this important credit union issue."

iWSJi editorial bashes interchange rule

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WASHINGTON (3/18/11)--A Thursday editorial featured in the Wall Street Journal had biting words for the Dodd-Frank Act provisions instructing the Federal Reserve to “fix prices on debit cards,” and for the lawmakers who supported the price-fixing. The editorial explains that Dodd-Frank ordered the Fed to “fix prices” on what card issuers may charge merchants “each time they swipe a transaction” with a customer’s debit card. “Under the new Fed rule, which will take effect in April unless Congress acts to stop it, that fee will be capped at 12 cents per transaction, reducing the charges by some $12 billion to $14 billion and in effect transferring the cost of debit cards from the merchants who pay the fees to the consumers who use them,” the editorial said. It also took aim at merchants’ claims that they would pass savings from the lower debit cahrge interchange fees on to consumers as lower prices on merchandise. “While that is doubtful, the loss of that revenue will force debit card issuers to raise fees elsewhere to compensate,” the editorial charged. Just look at the 2009 credit card reforms, which are driving free checking to extinctions, and you can extrapolate what will happen with debit cards, it said. While acknowledging the “Durbin amendment,” so called because it was drafted by Sen. Richard Durbin (D-Ill.), included an exemption for small issuers with $10 billion of less in assets, the Wall Street Journal said it was meaningless: “(F)ew small (issuers) will be able to compete in a marketplace blanketed with the artificially lowered fees of larger institutions. The editorial also gave the amendment’s congressional supporters a hard poke. “Amended to Dodd-Frank at the last moment, the Durbin gambit avoided the scrutiny of hearings and passed the Senate 64-33.” The bi-partisan nature of the vote, with 17 Republicans included, “proves that ignorance is bipartisan.

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...

CUNA to FOX Fed interchange plan needs work

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WASHINGTON (3/16/11)—The Credit Union National Association (CUNA) took its interchange fight to local airwaves this week, telling a D.C.-based Fox affiliate that the Federal Reserve’s interchange fee reduction plan does not account the total costs of running debit card accounts. The debit-related costs incurred by credit unions include the cost of dealing with instances of debit card fraud, attempts to prevent these types of fraud from occurring, and other varied costs associated with offering debit services to their members. Fixed costs, such as network fees, also factor in to the costs borne by credit unions, CUNA Chief Economist Bill Hampel said during the broadcast. The interchange fight was also covered this week in online news source CNNmoney.com, with CUNA’s Vice President of Communications and Media Outreach Pat Keefe counting the 4,000 recent attendees of CUNA's 2011 Governmental Affairs Conference among those that have discussed the interchange provisions with lawmakers. The Fed's proposed interchange rule would set a seven to 12 cent limit on the card swipe fees charged by many debit card issuers. Credit unions and other financial institutions with under $10 billion in assets are exempt from the proposed rule, but CUNA has voiced concerns that the exemption will not work in practice. CUNA, a number of legislators, and other organizations such as the NAACP have all urged the Fed to take greater time to consider the impact that interchange fee changes could have on financial institutions and consumers. Separate bills that would delay interchange implementation were released in both the House and Senate on Tuesday.

Fed should continue work toward interchange fix CUNA

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WASHINGTON (3/16/11)--The Credit Union National Association (CUNA) continues to “push aggressively” for credit union relief regarding debit card interchange fee regulation, urging President Barack Obama and Federal Reserve Chairman Ben Bernanke to help protect small issuers from the impact of the Dodd-Frank interchange amendment – as Congress pledged to do. The Fed's proposal, which was issued for a public comment period that ended December 16, 2010, does not provide any mechanism to enforce the exemption Congress provided to small issuers from the rate setting provisions under the proposed regulation. Also, the 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, despite the fact that costs to all issuers to provide debit card programs are much higher. By law, issuers with under $10 billion in assets are entitled to be exempted from the interchange fee rate setting provisions. However, if the exemption is not meaningful, all issuers may effectively be covered under the proposed rate caps, CUNA has said. CUNA President/CEO Bill Cheney in a Tuesday letter to Bernanke noted that the Fed leader and other federal regulators, including the heads of the National Credit Union Administration and the Federal Deposit Insurance Corp., have raised serious concerns about the impact of the proposal on small issuers. “No one has been able to prove that this proposed exemption would actually work as planned,” Cheney added. Allowing the interchange regulations to go forward as planned will force credit unions to “raise fees for accounts and services, or drop product offerings, or both, the CUNA leader said in his letter. “This cannot be sound public policy and cannot be what any policymaker intended. Credit unions want to continue providing attractive choices in the financial marketplace to their consumer and small business members,” Cheney added. The interchange rate setting provisions would become effective on July 21. However, delaying interchange implementation has been proposed to allow regulators and Congress additional time to study the issue. (See related story: Planned Senate delay ‘adequate’ for study: CUNA) CUNA has also urged Bernanke to support the delay. Cheney’s letter to President Obama is similar to the letter to Bernanke; a copy of the same letter is being sent to U.S. Treasury Secretary Tim Geithner and Consumer Financial Protection Bureau architect Elizabeth Warren. For the full Fed letter, use the resource link.

Lawmakers push FHFA on Fannie Freddie loan mods

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WASHINGTON (3/16/11)--A coalition U.S. House members have urged the Federal Housing Finance Agency to allow principal adjustments to mortgages held by its regulated entities, Fannie Mae and Freddie Mac. In a letter signed by the ranking minority member of the House Financial Services Committee, Rep. Barney Frank (D-Mass.) and 49 House colleagues, the lawmakers said that the guiding principal of FHFA’s conservatorship of the two housing government-sponsored enterprises must be “minimizing taxpayer loss.” The letter claims that the FHFA’s standing opposition to principal modifications in efforts to stave off foreclosures in fact drives up taxpayers’ costs. “Foreclosures result in a loss of 70% or more on the mortgage, and claims against the homeowners for the difference, even in jurisdictions that allow such claims, are usually worthless. Sustainable mortgage modifications that avoid foreclosure will almost always reduce the loss to the enterprise. The legislators letter follows reports last week (News Now March 10) of a group of state attorneys general (AG) and several federal agencies negotiating a settlement agreement with the major mortgage servicers. The state AGs circulated a 27-page outline of what they would like to see in a settlement agreement to address concerns about how mortgage servicers have handled foreclosures. Credit union would not be subject to such enforcement actions. However, the Credit Union National Association (CUNA) has strongly opposed federal legislation that would allow mortgage modifications, which are typically referred to as “cramdowns.” Bills promoting cramdowns have been defeated in recent years, and CUNA continues to monitor recent events for any possible impact on credit unions.

CUs have consumer track record CUNA tells Durbin

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WASHINGTON (3/16/11)--Credit unions are distinguished from all other interested parties in the ongoing interchange debate by having “the one demonstrated history of passing savings to consumers as part of a business model,” the Credit Union National Association (CUNA) said Tuesday in a letter to a key lawmaker. “What distinguishes credit unions from other financial firms and merchants in this debate is our concern for the impact on the consumer,” CUNA President/CEO Bill Cheney penned. “Last year alone, consumers benefited to the tune of $10 billion from better rates and lower fees by using credit unions rather than banks.” “Credit unions are different: the member-owned, not-for-profit structure is central to how they conduct business. At the end of the day, credit union members benefit when the credit union does well, and that benefit is reduced when the credit union is challenged,” Cheney added. The letter was addressed to the architect of the interchange language that was adopted as part of the Dodd-Frank Wall Street Reform Act, Sen. Richard Durbin. It was prompted when Illinois Democrat chided credit unions for their alliance with banks and other financial services providers in the interchange fight. CUNA has urged the U.S. Congress to “stop, study and start over” before the Federal Reserve Board implements its plan to set a seven to 12 cent cap on debit card interchange fees. CUNA is concerned that statutory language meant to exempt all but the three largest credit unions from the rule will fail to protect small issuers from the impact of the rule and will drive up costs to credit unions members and other consumers. As the Fed’s April implementation deadline draws closer, real concern about its potential negative impact is being expressed not only by credit unions and banks, Cheney noted, but by key regulatory officials, consumer groups and “other noteworthy commentators concerned about the impact on smaller financial institutions, consumers or both.” Cheney pledged to keep up the fight against the interchange plan on behalf of credit unions and consumers, and sought Durbin’s support for the growing effort to encourage the Fed to enforce the small issuer exemption, or to seek a legislative remedy in the likely event that the Fed concludes it does not have the authority to enforce the exemption.

Inside Washington (03/15/2011)

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* WASHINGTON (3/16/11)--The next meeting of the Financial Stability Oversight Council (FSOC) will take place at 3 p.m. ET Thursday, according to the U.S. Treasury Department. The council, created by the Dodd-Frank Act to identify threats to the financial system, will consider a proposal on designating financial market utilities. In January the council outlined a list of factors to use to help gauge when a firm poses risks to the system and merits additional oversight. The FSOC is chaired by Treasury Secretary Timothy Geithner and includes Federal Reserve Board Chairman Ben Bernanke as well as other key regulators from the Securities and Exchange Commission and the Commodity Futures Trading Commission. The meeting on Thursday will be the council’s fourth … * WASHINGTON (3/16/11)—U.S. Treasury Secretary Tim Geithner addressed the Obama administration’s proposals for mortgage market reform in a Tuesday Senate Banking Committee hearing, saying that the administration is “committed to a system in which the private market – subject to strong oversight and strong consumer investor protections – is the primary source of mortgage credit.” The Obama administration released its proposals for housing market reform last month. One proposal would almost completely privatize the housing finance system, limiting the government's role to assisting low-income and veteran homebuyers. A second proposal would create a system through which the government would back mortgages only in times of financial distress. Under a third proposed option, the government could also use a system of reinsurance to backstop private mortgage guarantors to a targeted range of mortgages. Geithner said that each of these solutions would require legislative action, and added that “failing to act would exacerbate market uncertainty.” However, he added, “haste would be counterproductive – possibly destabilizing the housing finance market or even disrupting the broader recovery”… * WASHINGTON (3/16/11)--Nearly 40 Missouri credit union representatives from 13 credit unions visited Capitol Hill to share
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concerns about debit interchange and member business lending with Missouri‟s federal lawmakers at the Credit Union National Association’s Governmental Affairs Conference Feb. 27-March 3. “Our elected officials listened to our issues and seemed to be engaged in working with us,” said Jason Peach, chief financial officer of West Community CU, O’Fallon, Mo. Lawmakers who met with credit unions included Sen. Roy Blunt (R); Rep. William “Lacy” Clay (D); Rep. Todd Akin (R), Rep. Russ Carnahan (D), Rep. Vicky Hartzler (R), Rep. Billy Long (R), Rep. Blaine Luetkemeyer (R) Pictured hee with Missouri credit unions and the Missouri Credit Union Association is Blunt, center. (Photo provided by Missouri Credit Union Association) ...

Senate House bills would delay Fed interchange plan

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WASHINGTON (3/16/11)—Credit Union National Association (CUNA)
Sen. Jon Tester (D-Mont.), shown here addressing CUNA’s 2011 Governmental Affairs Conference this month, introduced legislation Tuesday that would delay the effective date of a Dodd-Frank Act interchange rule by two years, to allow for more time to study its impact. (CUNA Photo)
President/CEO Bill Cheney said last night that the proposed interchange delays introduced in both the Senate and House Tuesday 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.” He urged House and Senate lawmakers to support the legislation that would extend the rulemaking timeline and effective date of proposed interchange fee regulatory changes. The Senate bill (S. 575), introduced by Sen. Jon Tester (D-Mont.), would establish a two-year delay for the Federal Reserve’s proposal to implement the Dodd-Frank interchange provisions, which limit debit card interchange fees. It would require the Fed, the National Credit Union Administration, the Federal Deposit Insurance Corp., and the Office of the Comptroller of the Currency to submit a study on the impact of any proposed interchange rule changes to the Senate Banking Committee and the House Financial Services Committee. The study would address the impact of the rules on credit unions and other debit card issuers, merchants, and consumers. The legislation, the Debit Interchange Fee Study Act, was co-sponsored by Sens. Bob Corker (R-Tenn.), Jon Kyl (R-Ariz.), Ben Nelson (D-Nev.), Tom Carper (D-Del.), Pat Roberts (R-Kan.), Chris Coons (D-Del.), Mike Lee (R-Utah) and Pat Toomey (R-Penn.). The House bill (H.R. 1081), introduced by Rep. Shelly Moore Capito (R-W.V.), would delay the interchange rule effective date for one year and would also direct federal agencies to study the impact that interchange changes would have on credit unions and other card issuers, consumers, and merchants. The bill would require the Fed to write new interchange regulations within four months if the study were to find that the proposed exemption for financial institutions with under $10 billion in assets would not be effective. The regulations would also need to be rewritten if the study found that the Fed’s proposal did not encompass all debit card-related costs or would harm consumers. “We very much appreciate the support both Rep. Capito and Sen. Tester have given to credit unions and their members. The legislation they have championed are important steps in the process of ensuring that, ultimately, seamlessly acceptable debit cards will continue to be available to credit union members at the lowest cost and the highest efficiency,” Cheney said in appreciation of the lawmakers’ efforts. He added,“We have a long way to go in this process, but credit unions and their members are much better positioned today than we were not so long ago, and particularly before we brought 4,000 credit union folks to town two weeks ago to make our voices heard on Capitol Hill.” Cheney was referring to the credit union representatives who participated in CUNA’s 2011 Governmental Affairs Conference here from Feb. 28-March 3, a regular part of which are visits with federal lawmakers to discuss key credit union issues. In addition to Moore Capito, House sponsors of the delay include Rep. Debbie Wasserman Schultz (D-Fla.), as well as 26 of their colleagues: Reps. Blaine Leutkemeyer (R-Mo.), Jim Renacci (R-Ohio), Ed Perlmutter (D-Colo.), Jeb Hensarling (R-Texas), Ed Royce (R-Calif.), Francisco Canseco (R-Texas), Randy Neugebauer (R-Texas), Michele Bachmann (R-Minn.), Gregory Meeks (D-N.Y.), Tom McClintock (R-Calif.), John Carney (D-Del.), Bob Gibbs (R-Ohio), Gary Peters (D-Mich.), Wally Herger (R-Calif.), Ken Marchant (R-Texas), Mike Kelly (R-Pa.), Roscoe Bartlett (R-Md,), Jason Chaffetz (R-Utah), Larry Kissell (D-N.C.), Gary Miller (R-Calif.), Dale Kildee (D-Mich.), Carolyn McCarthy (D-N.Y.), Jared Polis (D-Colo.), Gerry Connelly (D-Va.), Bill Owens (D-N.Y.), and Lynn Woolsey (D-Calif.). The interchange provisions, which under Dodd-Frank are scheduled to be made final in April and effective in late July, could lower the amount of transaction fees charged to seven cents per card swipe. CUNA has repeatedly suggested that the Fed should work with Congress to delay interchange regulation implementation to allow more time for consideration of how the interchange regulations would impact credit unions, as well as consumers. CUNA has created a grassroots action alert to encourage credit union nationwide to contact their legislators to urge support of the House and Senate bills. For CUNA’s action alert, use the resource link.

NACHA warns of phishing scam

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WASHINGTON (3/15/11)--NACHA, the electronic payments association, on Monday warned of a phishing scam perpetrated by individuals who are claiming to be representatives of NACHA. The emails, which contain harmful links, have been sent to both individuals and companies and bear the name of NACHA and, at times, the names of fictitious NACHA employees and departments. NACHA in its Monday release said that the organization “does not process nor touch [auto clearinghouse (ACH) transactions] that flow to and from organizations and financial institutions. “NACHA does not send communications to persons or organizations about individual ACH transactions that they originate or receive,” the organization added. NACHA warned recipients not to click on the link included in the email, and added that similar fraudulent emails, with some changes, could be sent in the future. NACHA also recommended the use of antivirus programs. NACHA most recently warned of a similar scam on Feb. 22, and has been the victim of other phishing scams in recent years. For the full NACHA release, use the resource link.

Hearings held ahead of Congresss spring break

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WASHINGTON (3/15/11)--Potential action on the interchange front and a host of hearings will fill the congressional schedule prior to the Congress’s scheduled spring District Work Break, which starts once Congress adjourns this week. Congress will be back in session on March 28. Several news sources have indicated that Sens. Jon Tester (D-Mont.) and Bob Corker (R-Tenn.) are working on legislation that would delay implementation of the interchange provisions. (See related story: Interchange legislation could be introduced this week) That legislation could be introduced this week, and similar legislation could also be offered in the House. More definite items on the legislative slate include a discussion of a short-term continuing resolution that would fund the government through April 8. This would also need a Senate vote, assuming it passes the House. Also of interest to credit unions is House legislation that could eliminate the Obama administration’s Home Affordable Modification Program (HAMP) and the Neighborhood Stabilization Program (NSP). Housing finance will also be the topic of a Tuesday Senate Banking Committee hearing. U.S. Treasury Secretary Tim Geithner and Housing and Urban Development Secretary Shaun Donovan are expected to testify. A Wednesday hearing will also feature federal testimony, with the Consumer Financial Protection Bureau architect Elizabeth Warren covering oversight of that agency as she speaks before the House Financial Services Committee subcommittee on financial institutions and consumer credit. Debt reduction and the budget will be covered by a Tuesday Senate Budget Committee hearing and a Wednesday House Financial Services Committee hearing, respectively. The House capital markets subcommittee will discuss legislative proposals to promote job creation on Thursday. The Troubled Asset Relief Program is also set to be discussed by the Senate Banking Committee on Thursday.

CUNA wins pair of political advocacy awards

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WASHINGTON (3/15/11)--Credit union-backed political campaign materials, produced by the Credit Union National Association's (CUNA) Credit Union Legislative Action Council (CULAC) and related
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partners, have received third place in the 2011 edition of the "Pollies," a series of awards that are presented each year by the American Association of Political Consultants (AAPC). The awards sometimes are described as the equivalent of the Oscars for the political consulting industry. Compass Media Group produced the ads. A direct mail piece for Sen. Harry Reid (D-Nev.), entitled "Yucca Mountain," won bronze in the best direct mail for an independent expenditure campaign category. This independent expenditure was paid for by CULAC. CUNA and the North Carolina CU League also won a bronze in the membership communications category for their partisan communications piece for Rep. Larry Kissell, entitled "Tough." This ad was sent to thousands of credit union members. Both of the award-winning pieces featured in extremely competitive reelection campaigns. CUNA Vice President of Political Affairs Trey Hawkins thanked the AAPC for its recognition of the quality of CUNA’s political communications. To view the ads in full, use the resource links.

Interchange legislation could be introduced this week

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WASHINGTON (3/15/11)—The Credit Union National Association (CUNA) has called on Congress to stop, study and start over on planned interchange fee regulations, and legislation that would do just that could be introduced later this week. A number of recent press reports have indicated that Sens. Jon Tester (D-Mont.) and Bob Corker (R-Tenn.) are working on legislation that would delay implementation of the interchange provisions. The interchange provisions, which are scheduled to be made final in April and could become effective in late July, could lower the amount of transaction fees charged to seven cents per card swipe. CUNA has repeatedly suggested that the Fed should work with Congress to delay interchange regulation implementation to allow more time for consideration of how the interchange regulations would impact credit unions, as well as consumers. Also recently, Federal Deposit Insurance Corp. Chairman Sheila Bair said in a letter to the Fed that the planned interchange fee regulations could result in significant income losses for small financial institutions if a planned exemption for institutions with under $10 billion in assets is not effective. Bair noted that many institutions “may be unable to receive the any tangible benefits from the statutory exemption if card networks do not implement a two-tier fee schedule.” She added that failing to execute this planned exemption “could create a bias toward large bank issuers that have lower marginal costs and greater opportunities to substitute income from non-core banking operations or alternative products.” Portions of the interchange provisions that implement network exclusivity and routing restrictions could also increase costs for small issuers and could lead merchants to discriminate against smaller issuers by “explicitly or ambiguously encouraging the use of large bank cards with lower fees” at the point of sale, Bair said.

Inside Washington (03/14/2011)

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* WASHINGTON (3/15/11)--Nearly 100 Ohio credit union leaders were in Washington, D.C., Feb 27-March 3, for the Credit Union National Association’s 2011 Governmental Affairs Conference (GAC). Advocating for the delay of the Fed’s interchange proposal topped their list of priorities, said the Ohio Credit Union League (eLumination March 9). Ohio credit union advocates also asked their congressional representatives to consider legislation that would increase credit union member business lending (MBL) authority and allow credit unions to generate supplemental capital. Rep. Steve Stivers (R) re-iterated his support for member business lending and informed the 4,000 credit union leaders in the audience of his recent letter to the Fed asking for delayed implementation of the interchange rule. House Speaker John Boehner (R), the first Speaker to attend the GAC since Newt Gingrich in 1998, praised the work of credit unions, but offered no specific promises. During legislative meetings on Capitol Hill, Ohioans received consistent support on interchange. Congressmen Steve Austria (R), Steve Chabot (R), Bill Johnson (R), Jim Jordan (R), Dennis Kucinich (D), Steve LaTourette (R), Jim Renacci (R), Tim Ryan (D), and Stivers all voiced support for delay of the proposed rule. The group also discussed the measure with Sen. Sherrod Brown (D), who serves as chairman of a key Senate banking sub-committee. Special guest Congresswoman Marcia Fudge (D) joined the Ohio delegation for a dinner hosted by the league. A member of Taleris CU in Cleveland, Fudge was introduced to the group by the credit union’s CEO, Robin Thomas … * WASHINGTON (3/15/11)--The Federal Housing Finance Agency has extended the Home Affordable Refinance Program (HARP), a refinancing program administered by Fannie Mae and Freddie Mac, to June 30, 2012. The program was set to expire on June 30 of this year. In addition, Fannie Mae and Freddie Mac will make these adjustments to their programs: Freddie Mac will exempt HARP loans from their recently announced price adjustments and Fannie Mae will conform their eligibility date to May 2009. The program expands access to refinancing for qualified individuals and families whose homes have lost value. Through 2010, Fannie Mae and Freddie Mac purchased or guaranteed more than 6.8 million refinanced mortgages. Of this total, 621,803 were HARP refinances with loan to values between 80% and 125%. This is up from 190,180 in 2009, when HARP began … * WASHINGTON (3/15/11)--Both of Michigan's U.S. senators announced
their support and co-sponsorship for The Small Business Lending Enhancement Act introduced in the Senate on Wednesday, said the Michigan Credit Union League (Michigan Monitor March 14). The bill would raise the cap on member business lending by credit unions from the current 12.25% of assets to 27.5%. League CEO David Adams lauded Sens. Carl Levin (D) and Debbie Stabenow (D) for their support. “Michigan desperately needs more capital for small businesses,” Adams said. “Our senators have given great momentum to this important legislation and we thank them.” He also noted that this MBL support also comes at a time when both Levin and Stabenow have pledged to look hard at credit unions’ No. 1 issue: the delay, study and fix for the debit interchange legislation that threatens to eliminate free checking accounts for consumers. “Both Senators Stabenow and Levin have expressed concern regarding potential harmful effects on credit unions and unintended consequences of higher fees on checking,” Adams said. “We will continue to seek our senators’ influence and action in the Senate as we seek to prevent the very negative effects of the debit interchange legislation on consumers. Raising the MBL is the MCUL’s next highest federal legislative priority, Adams said. As it was in the fall, the bill’s primary sponsor is Sen. Mark Udall (D-Colo.). U.S. Rep. Ed Royce, R-Calif., plans to introduce a companion measure in the House. “We applaud Sen. Udall for reintroducing legislation that will help not only credit unions but our nation’s economic recovery,” Credit Union National Association President CEO Bill Cheney said in statement. “Economic conditions may be improving, but the nation is still in need of more jobs, and small businesses are still in search of affordable and accessible options for capital. Credit unions can help on both fronts.” A recent CUNA study found that lifting the MBL could provide up to $13 billion to small businesses in the first year alone and create over 140,000 new jobs at no cost to taxpayers …

NAACP Delay interchange to assess consequences

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WASHINGTON (3/14/11)—The NAACP, the well-known civil rights organization, wrote to the Speaker of the U.S. House urging that a congressional review be launched before the Federal Reserve Board acts to implement limits on debit card interchange fees. In the letter to Speaker John Boehner (R-Ohio), NAACP Senior Vice President for Advocacy and Policy Hilary Shelton wrote, “We believe this rule should be thoroughly and expeditiously reviewed prior to implementation to ensure that it will not raise fees or otherwise harm at-risk communities, including communities of color.” Shelton noted that his organization backed the Durbin credit card amendment, which was a late addition to the Dodd-Frank Wall Street Reform Act. He said the amendment carried “needed provisions aimed at protecting Americans against predatory lending and providing oversight of mortgage, lending and other critical financial services.” However, he wrote urging Boehner to slow the rulemaking process, “It is my understanding no conclusive studies have been offered to fully predict the impact of this (interchange) rule.” “Given the complexity of the issues, we believe that it should be further examined fully to ensure that it does not have a negative impact on the communities it was meant to help.” Shelton outlined many of the complex issues surrounding the interchange plan proposed by the Fed, among them Fed Chairman Ben Bernanke’s February testimony that a planned exemption for any issuer under $10 billion in assets “may still leave our smaller community banks and credit unions at a significant disadvantage.

Inside Washington (03/11/2011)

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* WASHINGTON (3/14/11)--The House Financial Services subcommittee on financial institutions and consumer credit announced a March 16 oversight hearing of the Consumer Financial Protection Bureau (CFPB), at which Assistant to the President and Advisor to the Treasury Secretary Elizabeth Warren will testify. Rep. Shelley Moore Capito (R-W.V.), the subcommittee chairman, said she intends the hearing to be “the start of a robust discussion of how the (CFPB) will be implemented and what powers it should have in regulating consumer credit.” The chairman noted that some House members, herself included, have reservations about the bureau and “unintended consequences it could have on consumer choice in financial products" … * WASHINGTON (3/14/11)--During the Credit Union National Association
(CUNA) Governmental Affairs Conference in Washington, Feb. 27-March 3, about 100 North Carolina credit union advocates shared their perspectives on interchange, member business lending and supplemental capital with the state’s congressional delegation. Sen. Kay Hagan (D), who recently wrote the Federal Reserve about delaying interchange fee rule implementation, addressed North Carolina credit union representatives at a reception. Hagan expressed a strong commitment to helping small businesses in North Carolina gain access to capital to create jobs. Hagan’s appearance also gave the group an opportunity to thank the senator for the letter she wrote with Sen. Michael Bennet (D-Colo.) to Federal Reserve Board Chairman Ben Bernanke on the proposed interchange rules. The group also heard from Celia Sims, a key member of Sen. Richard Burr’s (R) legislative team in Washington. Sims highlighted the senator’s commitment to reigning in federal spending. Sims said Sen. Burr is aware that Bernanke had expressed concerns about the small issuer exemption in the board’s draft rules. Sims said that Burr supported the Fed board “getting it right.” The North Carolina credit union advocates later fanned out and met with members of Congress. The primary focus of their discussions with legislators was interchange and member business lending ... * WASHINGTON (3/14/11)--David Rainer, chairman, president/CEO of California United Bank, Encino, Calif., has been appointed to the board of directors of the Federal Reserve’s Los Angeles branch. Rainer, who has served as the head of California United Bank since its inception in 2005, joins six other directors, who meet monthly to discuss economic trends across their respective industries. Their input is compiled and shared directly with the Federal Reserve board of governors for consideration when making monetary policy decisions ...

FASB chair addresses non-public entity international rules

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WASHINGTON (3/14/11)--Leslie Seidman, a longtime Financial Accounting Standards Board (FASB) board and staff member who was appointed chairman last December, has indicated an increased priority in working directly with stakeholders as FASB focuses on improving accounting rules for nonpublic entities, including credit unions. These efforts are partially a result of the primary recommendationin a blue ribbon panel’s report (use resource link to read related News Now story) that a separate standards-setting board be established for nonpublic entities, Seidman noted. “I view the primary recommendation of the blue ribbon report as a very serious message to the FASB that we have to do a better job of listening to our private company constituents and understanding the unique needs of the users of their financial statements and the cost-benefit issues that the preparers of the financial statements are dealing with,” the FASB chairman said. Seidman, addressing a U.S. Chamber of Commerce luncheon late last week, said FASB is focusing on greater outreach with nonpublic entities and has asked FASB staff to try to articulate the different needs of the users of nonpublic entities’ financial statements as they move through the standard-setting process. Further, Seidman said that FASB is experimenting with different ways of obtaining input from nonpublic entities and that FASB is “very interested in trying to make it easier for people to participate in the [standard-setting] process.” Credit Union National Association (CUNA) Assistant General Counsel Luke Martone, who attended the Chamber’s session on the future of financial reporting, confirmed what the FASB chairman said, noting that CUNA has heard from several credit unions that they have been contacted by FASB regarding the potential impact of current and upcoming accounting proposals. Seidman also indicated that FASB is making some progress toward, as the Chamber session was titled, “achieving global harmonization of financial reporting” through a convergence of FASB rules with those of the International Accounting Standards Board (IASB). In its efforts to achieve a single set of accounting standards, she noted FASB has increased the frequency of meetings with the IASB, including several meetings scheduled for March instead of the usual one. IASB chairman Sir David Tweedie also spoke at the event, making his case for the United States to adopt international accounting standards this year. FASB's Seidman noted, however, that although FASB is interested in adopting convergent standards, it will refrain from doing so if it appears that this would not be in the best interest of entities that report under U.S. generally accepted accounting principles—or GAAP.

NCUA Ponzi scheme helped close St. Paul Croatian

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CLEVELAND, Ohio (3/14/11)—The National Credit Union Administration (NCUA) has filed an adversarial action in the U.S. Bankruptcy Court in an attempt to preclude a debtor from discharging include loans that he allegedly fraudulently obtained from the failed St. Paul Croatian FCU as part of his Chapter 7 bankruptcy filing. The debtor, Stanley Paulic, took out and refinanced several loans between July 10, 2008 and Feb. 25, 2010, all of them allegedly under false pretenses. The NCUA has alleged that Paulic owes the credit union a total of $1.2 million in unpaid loans and is asking that these loans not be discharged based on provisions in bankruptcy code pertaining to debts procured through fraud. Paulic was a co-owner of Arizona-based Integrity Financial AZ, LLC, a onetime real estate investment firm that the Securities and Exchange Commission has said raised over $8 million in funds from nearly 60 investors. Many of the investors were also members of the now-failed credit union. Those investors were sold promissory notes that were “purportedly secured by real estate in Tonopah, Arizona, a town 55 miles west of Phoenix,” the SEC said. Integrity financial used these individual investments to pay dividends to their clients, in a manner SEC characterized as a “ponzi scheme.” The SEC charged Paulic and three others with securities fraud for making false and misleading statements about the safety and performance of a real estate-based investment program. St. Paul Croatian was placed into conservatorship by the NCUA on April 23, 2010, and closed on May 1. The credit union held $238.8 million in funds from 5,400 members when it was closed. The NCUA’s Office of the Inspector General last year reported that fraudulent loans pushed the credit union into liquidation. A Cleveland-based federal grand jury has indicted nine individuals on related fraud charges. (See related March 4 story: Nine indicted in St. Paul Croatian FCU collapse)

CUNA trades file anti-interchange amicus brief

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WASHINGTON (3/14/11)--The Credit Union National Association (CUNA) on Friday joined several other financial trade associations, as expected, in filing a statement in support of TCF National Bank's (TCF) lawsuit against the debit card interchange fee provisions of the Dodd-Frank Act. A federal court granted the “amicus brief” request last week. CUNA is joined in the statement by The Clearing House Association L.L.C., American Bankers Association, Consumer Bankers Association, The Financial Services Roundtable, Independent Community Bankers of America, Midsize Bank Coalition of America, and the National Association of Federal Credit Unions. The TCF filed suit last October, alleging that portions of the Dodd-Frank Act that would require the Federal Reserve Board to set restrictions on card swipe-related debit card fees are unconstitutional. The bank argues that the Fed's implementation plan restricts a financial institution’s ability to recover costs associated with providing the debit card service. CUNA and the other groups are backing TCF in an effort to explain the detrimental effect that the Fed's interchange provisions would have on the "stability of the electronic payment structure that undergirds literally trillions of dollars of our economy, as well as the serious constitutional issues the (Fed's) action raises." The Fed proposal could cap interchange fees at as little as seven cents per card transaction. The Fed is expected to release a final interchange fee proposal in April, and that proposal should be enacted in July. CUNA and others have urged Congress to take time to further study the various issues that the interchange changes could create for consumers and financial institutions.

CDFI Fund to hold certification conference calls

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WASHINGTON (3/14/11)--The U.S. Treasury's Community Development Financial Institutions (CDFI) Fund last week announced a series of five CDFI Certification Conference Calls, the first of which will take place on March 17. The CDFI Fund said that the monthly calls are meant to “serve as a forum for potential CDFI Certification Applicants, certified CDFIs, and other CDFI certification stakeholders to ask questions and discuss CDFI certification and the CDFI certification process.” Additional CDFI Certification Conference Calls will take place on the following dates:
* Thursday, April 14; * Thursday, May, 19; * Thursday, June 16; and * Thursday, July 21.
All calls will begin at 3 p.m. ET and are scheduled to last for one hour. The Obama administration has sought $250 million in CDFI funding for fiscal 2011, but House Republicans have proposed cutting the CDFI Fund’s funding to $50 million. The CDFI Fund helps locally based financial institutions offer small business, consumer and home loans in communities and populations that lack access to affordable credit. According to the Treasury Department in January, credit unions represent 13% of the total applicant pool for the 2011 round of the CDFI Fund program. Potential participants can call the toll-free number, (888) 677-5132, and enter in pin number 1458624 to join the calls. For more on the conference calls, use the resource link.

Improving employment evens mortgage averages

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WASHINGTON (3/14/11)—Thirty-year fixed-rate mortgages averaged 4.88% during the week ended March 10, a slight increase from the 4.87% mortgage rate average reported last week. Those same mortgages averaged 5.05% during the week ended Feb. 10, the highest average mortgage rate recorded since April 2010. Fifteen-year fixed rate mortgages held steady at 4.15%. Five-year and one-year adjustable rate mortgages (ARM) remained essentially even, with five-year ARMs increasing to 3.73%, .01% up from the previous weeks average, and one-year ARMs averaging 3.21%, down .02% from the previous week’s average. Five-year ARMs averaged 4.05% this time last year, while one-year ARMs averaged 4.22%. Freddie Mac Vice President/Chief Economist Frank Nothaft said that positive employment numbers helped mortgage rates hold steady. The sub-5% average mortgage rates that have continued for all but one week this year have also contributed to “record home affordability,” Nothaft added. For the full survey, use the resource link.

AG cramdown efforts get some Hill heat

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WASHINGTON (3/11/11)--Legislators this week criticized a potential mortgage modification settlement that a group of state attorneys general and mortgage servicers are negotiating, with Senate Banking Committee Ranking Member Richard Shelby (R-Ala.) calling the discussions an “end-around” past Congress. A group of state attorneys general and several federal agencies have been negotiating a settlement agreement with the major mortgage servicers which could create a loan modification process similar to mortgage cramdown proposals. A cramdown proposal that proposed to permit judicial modification of mortgage terms under the bankruptcy law was pushed back in 2009, and similar legislation has not been brought to the floor in Congress since then. Speaking during a Wednesday committee hearing on the state of the housing market, Shelby said that the cramdown discussion raised “serious concerns” and requested that his committee look into these developments immediately. Shelby also called on federal government agencies to delay any related actions. Republican members of the House also criticized the negotiations in a recent letter, saying that the settlement, if imposed, “would transform the mortgage servicing industry and fundamentally change the rules that have historically governed relationships among borrowers, servicers and investors.” The letter also questions whether the Obama administration and state agencies “are attempting to legislate through litigation,” and asked U.S. Treasury Secretary Tim Geithner to respond to a number of detailed legal and policy questions. The letter questions what authority grants federal and state regulators the power to require mortgage principal writedowns or to legislate new mortgage servicing industry standards. The state attorneys general have circulated a 27-page outline of what they would like to see in a settlement agreement to address concerns about how mortgage servicers have handled foreclosures. One of the so-called "remedies" proposed by the attorneys general is "a loss mitigation duty," which would require covered servicers to "thoroughly evaluate borrowers for all available loss mitigation options prior to foreclosure referral." This would apply to all eligible borrowers, including borrowers in bankruptcy. Servicers subject to the agreement would have to "facilitate" modifications, such as helping to fill out the application, when a modification would result in a greater "net present value" (NPV) than foreclosure. Servicers would be expected to "consider and apply" reductions in principal and in bankruptcy cases to reduce the interest rate on a mortgage loan to zero percent for the first five years. The proposed agreement envisions the new Consumer Financial Protection Bureau involved in monitoring the calculation of the NPV, as well as other aspects of the agreement. Credit Union National Association General Counsel Eric Richard said that the CFPB’s involvement raises questions as to whether some terms of the agreement could become standards applied to mortgage lenders in general. CUNA continues to closely monitor the situation. (See related March 10 story: State AGs want principal adjustments before foreclosure.)

Interest-risk policy leads NCUA March agenda

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ALEXANDRIA, Va. (3/11/11)—A proposed rule addressing interest rate risk policy will be one of many items on the National Credit Union Administration (NCUA) Board's agenda when it next meets at 10:00 a.m. (ET) on March 17. While exact details on the NCUA’s proposal are not known at the time, the Credit Union National Association’s (CUNA) Senior Vice President for Compliance Kathy Thompson said that action on interest rate risk has long been awaited. Net worth and equity ratio definitions, corporate credit union technical corrections and low-risk asset definitions are also on the agenda. 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 are not expected to be substantive. However, the NCUA is expected to discuss allowing corporate credit unions to purchase its NCUA Guaranteed Notes, Dunn added. The NCUA's monthly report on the status of its insurance funds 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.

CU rep tells Fed panel of interchange concern

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WASHINGTON (3/11/11)-- Mike Long, a member of the Federal Reserve Board’s Consumer Advisory Council (CAC) and executive vice president/chief credit officer of UW CU, in Madison, reiterated credit union concerns with the Fed’s interchange fee proposal Thursday at a CAC meeting. Long is a member of the Credit Union National Association’s (CUNA) Consumer Protection Subcommittee and a member of the Executive Committee of the CUNA Lending Council. His comments involved the Fed’s implementation plan for a statutory cap on debit card interchange fees. Credit unions under $10 billion in assets are exempt from the proposed rule, but CUNA has voiced concerns that the exemption will not work in practice. Long reminded the Fed advisory panel that UW CU, like all credit unions, is a not-for-profit cooperative and that a need to impose a fee on currently free checking accounts may be necessary to recoup the revenue UW CU will likely lose if the Federal Reserve finalizes its proposed debit interchange regulation. He underscored that increased fees by credit unions would only be to cover the cost of operating checking accounts that are currently paid for through debit card interchange income, and not from greed, as some have charged of banks. Long said his credit union falls below the $10 billion threshold, but added the exemption will not likely work in practice. He said the Fed’s rule, that sets a seven to 12 cent fee limit for large issuers and could, de facto, do the same for his credit union, could reduce his credit union’s net income by 87% in 2012. Long urged the Fed to study the full impact of its regulation before moving to a final rule. Currently, the Fed rule is expected to go into effect in July. CUNA has asked the U.S. Congress to instruct the Fed to “slow down, study, and start over” on its implementation plan. CUNA is concerned that while the law requires the Fed to set a debit card interchange fee that is “reasonable and proportionate,” the Fed plan does not consider all costs associated with providing the service.

Flood insurance revamp hearing is today

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WASHINGTON (3/11/11)--A House Financial Services subcommittee today will conduct a hearing to study legislative proposals to reform the country’s flood insurance program, which is intended to offer some security to homeowners and business in flood-prone areas. Rep. Judy Biggert (R-Ill.), chairman of the subcommittee on insurance, housing and community opportunity, which is conducting the review, cited “inadequate management and insufficient funds,” as key problems of the program her subcommittee is scheduled to examine. “It’s crucial that we begin to restore the financial integrity of (the National Flood Insurance Program) NFIP so that homeowners and businesses in flood-prone areas, like many in Illinois, are not left without any protection and taxpayers are not on the hook for the failings of NFIP," she said. Witnesses for the hearing include: Craig Fugate, administrator, Federal Emergency Management Agency Orice Williams Brown, managing director, Government Accountability Office (GAO), Sally McConkey, vice chair, Association of State Flood Plain Managers and manager, Coordinated Hazard Assessment and Mapping Program, Illinois State Water Survey. For a complete witness list, use the resource link below.

Inside Washington (03/10/2011)

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* WASHINGTON (3/11/11)--While at the Credit Union National
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Association’s (CUNA) Governmental Affairs Conference last week, the Louisiana Credit Union League arranged a special opportunity for Louisiana attendees. On Tuesday, the state’s credit unions took part in the Wreath Ceremony at the Tomb of the Unknown Soldier in Arlington National Cemetery (Louisiana Credit Union League eNews March 10). Escorted by a military guard, four individuals representing Louisiana credit unions presented a wreath at the tomb as a bugler played “Taps.” Presenting the wreath were: Al Oar, Barksdale FCU, Bossier City, representing the Air Force; Cortez Bridges, Bossier FCU, Bossier City, Army; Rhonda Hotard, Louisiana FCU, Laplace, Navy; and Richard Pelloquin, CSE FCU, Lake Charles, Navy. More than 90 Louisiana credit union professionals and volunteers attended the GAC. On Wednesday, Louisiana credit unions spoke with one voice while visiting with their congressional delegation on Capitol Hill. They visited with: Sen. David Vitter (R), Rep. Steve Scalise (R), Rep. Cedric Richmond (D), Rep. John Fleming (R), Rep. Bill Cassidy (R), and Rep. Charles W. Boustany (R). Sen. Mary L. Landrieu (D) and Rep. Rodney Alexander (R) sent staff representatives. During the visits, attendees addressed key issues and stressed the credit union difference. They emphasized the importance of raising the member business lending cap and the positive impact it would have on small businesses and employment. A recent CUNA study found that lifting the MBL cap to 27.5% of assets from the current 12.25% limit would provide up to $13 billion to small businesses in the first year alone and create over 140,000 new jobs at no cost to taxpayers … * WASHINGTON (3/11/11)--Agricultural lending is thriving in an otherwise sluggish lending environment, and regulators are wary. Thursday the Federal Deposit Insurance Corp. (FDIC) hosted a half-day symposium to discuss issues associated with escalating farmland values during the previous decade. “Farmland values have doubled on average in the past 10 years, and continue to rise in an environment of ample liquidity and low interest rates,” FDIC Chairman Sheila C. Bair said in announcing the symposium. “While we see strong fundamentals in the farm sector at present, the sector remains vulnerable to a reversal of market conditions or a rise in interest rates.” The FDIC also issued a financial institution letter in December on prudent management of agricultural credit through farming and economic cycles. During the symposium, the FDIC explored whether the growth represents an asset bubble similar to the residential real estate and dot.com booms, or a reordering of asset prices that reflect long-term economic changes … * WASHINGTON (3/11/11)--The Federal Deposit Insurance Corp. board will propose a new resolution rule during its board meeting Tuesday (American Banker March 10). The Dodd-Frank Act granted the FDIC authority to unwind large companies that would jolt the financial system if they went bankrupt. The board will not consider requirements for lenders that retain pieces of securitized loans. In January, the agency clarified how it will treat certain creditor claims under the authority provided by Dodd-Frank. The agenda for Tuesday’s meeting did not include the risk retention rule. As outlined in Dodd-Frank, several regulators are required to collaborate on the risk-retention rule. The process has been delayed as regulators consider whether to include new servicing rules within the risk-retention proposal …

State AGs want principal adjustments before foreclosure

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WASHINGTON (3/10/11)—Federal legislation that proposed to permit judicial modification of mortgage terms under the bankruptcy law--typically referred to as “cramdowns”-- has been defeated in recent years. However, a group of state attorneys general and several federal agencies have been negotiating a settlement agreement with the major mortgage servicers which could create a possible loan modification process that could be viewed as having a similar result, at least for the servicers subject to the agreement. This settlement agreement is intended to resolve enforcement actions that have been brought against the mortgage servicers. Credit Union National Association (CUNA) General Counsel Eric Richard said that although credit unions are not subject to such enforcement actions, CUNA continues to monitor these for any possible impact on credit unions. Last week, the attorneys general circulated a 27-page outline of what they would like to see in a settlement agreement to address concerns about how mortgage servicers have handled foreclosures. The mortgage servicers are now reviewing the proposal, so nothing is finalized, Richard emphasizes. Included in the “remedies” proposed by the attorneys general are “a loss mitigation duty,” which would require covered servicers to “thoroughly evaluate borrowers for all available loss mitigation options prior to foreclosure referral.” This would apply to all eligible borrowers, including borrowers in bankruptcy. Servicers subject to the agreement would have to “facilitate” modifications, such as helping to fill out the application, when a modification would result in a greater “net present value” (NPV) than foreclosure. Servicers would be expected to “consider and apply” reductions in principal and in bankruptcy cases to reduce the interest rate on a mortgage loan to zero percent for the first five years. The proposed agreement envisions the new Consumer Financial Protection Bureau involved in monitoring the calculation of the NPV, as well as other aspects of the agreement. “Including the CFPB in the proposed settlement document raises questions as to whether some terms of the agreement could become standards applied to mortgage lenders in general,” Richard noted. “It’s also unclear how the brief reference that servicers’ loan modification programs are to modify secondary liens could work in practice. These are some of the provisions that CUNA is tracking closely.” The proposed agreement attempts to address a wide range of problems that have come to light about servicers and the foreclosure process, including: Robo-signing of documents with no verification of accuracy; failure to document the chain of assignment; the inability of borrowers and housing counselors to communicate with servicers; failure of temporary modifications being made permanent after months of on-time payments by borrowers; violations of the Servicemembers Civil Relief Act; and failure of servicers to respond to short sale offers. Use the resource link for the settlement terms document.

CUs urged to action on MBL bill CUNA

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WASHINGTON (3/10/11)--The Credit Union National Association (CUNA) is asking credit union backers nationwide to urge their respective Senators to back the Small Business Lending Enhancement Act, S.509, legislation that would raise the credit union member business lending cap to 27.5% of assets. A recent CUNA study found that lifting the MBL cap in this fashion could provide up to $13 billion to small businesses in the first year alone and create over 140,000 new jobs at no cost to taxpayers. The CUNA Action Alert, issued on Tuesday, also asks credit union representatives to thank their legislators that have already backed 2. 509. The legislation was introduced by Sen. Mark Udall (D-Colo.) on Tuesday. Sens. Olympia Snowe (R-Maine), Charles Schumer (D-N.Y.), Barbara Boxer (D-Calif.), Sherrod Brown (D-Ohio), Susan Collins (R-Maine), Al Franken (D-Minn.), Kirsten Gillibrand (D-N.Y.), Patrick Leahy (D-Vt.), Joseph Lieberman (I-Conn.), Bill Nelson (D-Fla.), Jack Reed (D-R.I.), Sheldon Whitehouse (D-R.I.), and Ron Wyden (D-Ore.) have signed on as co-sponsors of the bill. CUNA thanked the Senators for their help in a Tuesday letter. (Use resource link below to read related March 9 story: CUNA urges senators for MBL bill support) MBL legislation was introduced last year, and while it had significant bipartisan support from both legislative bodies, it did not make its way to President Obama’s desk to be signed into law. CUNA President/CEO Bill Cheney commented on the re-introduction of the MBL legislation, noting that while economic conditions may be improving, “the nation is still in need of more jobs, and small businesses are still in search of affordable and accessible options for capital. Credit unions can help on both fronts.” "Raising the statutory cap is a no-cost way to free credit unions to do more of what they are doing now: making safe and responsible loans to help their members start or grow their small businesses,” Cheney added. Udall’s legislation would limit the growth of a given credit union's MBL portfolio to no more than 30% annually, and would require credit unions to be well capitalized and to be lending at a ratio near the current 12.25% cap for the previous four quarters. Eligible credit unions would also need to have a minimum of five years of underwriting and servicing MBLs and would need to demonstrate sufficient prior experience in managing these types of loans. Udall’s legislation would also give the National Credit Union Administration (NCUA) the authority to set intermediate (MBL) limits. Rep. Ed Royce (R-Calif.) told attendees of CUNA’s recently completed Governmental Affairs Conference that he intends to introduce his own MBL cap legislation in the House. To take action advocates can visit the Grassroots Action Center.

Inside Washington (03/09/2011)

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* WASHINGTON (3/10/11)--Rep. Scott Garrett (R-N.J.), chairman of the House Financial Services subcommittee on capital markets and government-sponsored enterprises, has introduced a bill to help establish a U.S. covered bond market. The bill was co-sponsored by Rep. Carolyn Maloney (D-N.Y.), ranking member of the House Financial Services subcommittee on financial institutions and consumer credit. Covered bonds have been used in Europe for decades to help provide additional funding options for issuing institutions and are a major source of liquidity for many European nations’ mortgage markets. The purpose of the U.S. Covered Bond Act of 2011 is to create a legislative framework for U.S. covered bonds to allow credit to flow more freely from the capital markets to households, small businesses and state and local governments in a way that enhances stability of the broader financial system. “As our country recovers from the fallout of the financial crisis, it’s more important now than ever before to provide the U.S. capital markets with new and innovative ways to unlock credit and encourage private sector capital to get off the sidelines,” Garrett said … * WASHINGTON (3/10/11)--In a comment letter sent to the Federal Reserve Board, Acting Comptroller of the Currency John Walsh warned that the proposed debit interchange rule could be detrimental to banks of all sizes. Walsh said the proposal is too narrow and could threaten the safety and soundness of banks (American Banker March 8). Under the Dodd-Frank Act, the Fed is charged with keeping debit interchange fees “reasonable and proportional.” The Fed proposal, issued in December, limits interchange to 12 cents per transaction. But Walsh said the board overreached its authority and was required only to set reasonable standard, not an allowable fee. “Within the constraints of this statutory framework, we believe there is flexibility for the board to consider alternative approaches that could enable debit card issuers to recover identifiable costs of conducting a debit card business,” Walsh wrote. Credit Union National Association President/CEO Bill Cheney last week called for the Fed to stop, study and start over on interchange fee regulations and encouraged members of Congress to strike a legislative remedy that will ensure a meaningful interchange fee carve-out …

NCUA launches MyCreditUnion.gov

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ALEXANDRIA, Va. (3/10/11)--The National Credit Union Administration (NCUA) on Wednesday launched MyCreditUnion.gov, a new website that will offer “a one-stop toolbox of educational information and personal finance tips designed to help individuals in making smart financial decisions and better choices for their money.” The website contains background information on the credit union system and tells interested parties how they can start their own credit union. The site also addresses the needs of consumers by helping users locate local credit unions and reminding existing and potential members that up to $250,000 worth of funds placed in a credit union are covered by the NCUA’s deposit insurance fund. The site also “provides important pointers for resolving credit union member complaints,” according to the NCUA. More general information on key financial concepts like saving, borrowing, managing credit, and obtaining free credit reports are covered by the site. “The best way for consumers to protect their money and to get the best financial deal is to learn the most that they can about financial products and services before signing on the dotted line,” NCUA Chairman Debbie Matz said in comments accompanying the release. “Whether it’s a car loan, a mortgage, a credit card, or a short-term alternative loan, smart consumers need to do their financial homework.” The NCUA has timed the launch to coincide with National Consumer Protection Week, which runs through March 12 and aims to highlight consumer protection and education efforts around the country. For more on the new NCUA site, use the resource link.

Compliance CFPB will affect CUs

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WASHINGTON (3/9/11)—While all but the three largest credit unions do not fall under the enforcement authority of the new Consumer Financial Protection Bureau (CFPB) established by the Dodd-Frank Act, credit unions will be affected as the CFPB works to increase consumer protections in the financial world. The bureau, officially to begin its operations on July 21, is currently under the auspices of the U.S. Treasury Department, which is getting the bureau off the ground until the Senate confirms a director. As Kathy Thompson, Credit Union National Association (CUNA) senior vice president for compliance says in a March article in CUNA’s Credit Union Magazine, Treasury envisions the CFPB “will look out for people as they borrow money or use other financial services.” The CFPB will also monitor the financial marketplace to ensure markets “work as transparently as they can for consumers.” “This is a sweeping mandate for the CFPB and raises questions about how this new agency will affect credit unions,” Thompson writes, and she pens “10 points credit unions should know about the CFPB.” Some of the ten points identified by Thompson include:
* Funding: It has been an issue from the start. CUNA adamantly opposed any plan that would make credit unions partly responsible for the funding. The solution was to make the CFPB part of the Fed, which covers expenses primarily from the income its large portfolio of federal government securities generates. What the Fed doesn’t spend, it returns to the Treasury. So taxpayers will pay for the CFPB operations but not through the normal appropriations process —but this could be revisited by Congress. * Staffing: Most of the new agency’s staff will transfer from existing federal agencies, most notably from the Federal Reserve Board’s Consumer Affairs Division—the group that already writes most of the rules implementing federal consumer protection laws. As the financial crisis unfolded, the Fed and other agencies became more active in rewriting consumer regulations, and credit unions must expect more, not fewer, consumer regulations in the next few years. * Examinations. The CFPB has “exclusive authority” for examinations of banks and credit unions with more than $10 billion in assets for compliance with the laws it oversees. Three credit unions currently have more than $10 billion in assets, and the bureau must coordinate its exam schedule with the National Credit Union Administration (NCUA) or state regulators. This does not mean, however, that other credit unions can expect the bureau to be hands-off. For instance, CFPB will have access to all examination reports, regardless of credit unions’ size or charter. This is another reason to expect consistent—and undoubtedly more detailed—consumer protection exams by NCUA and state regulators. * Enforcement. The new bureau also will have “exclusive” enforcement of the consumer laws under its jurisdiction for the three credit unions with more than $10 billion in assets as well as for privately insured credit unions. For federally insured credit unions with less than $10 billion in assets, NCUA will maintain enforcement authority, but NCUA can refer a problem to the bureau, which can initiate the enforcement action. And if the bureau spots a compliance problem, it can ask NCUA to investigate.
This is just a quick glimpse of some of Thompson’s observations and CUNA members can access the entire article using the resource link below.

CUNA urges senators for MBL bill support

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WASHINGTON (3/9/11)—The Credit Union National Association (CUNA) wrote key senators Tuesday to thank them for their support of “commonsense economic recovery and job creation” through their sponsorship of legislation that would increase the credit union member business lending cap to 27.5% of total assets, up from the current 12.25% limit. The letter was first sent to Sen. Mark Udall (D-Colo.), who drafted MBL legislation introduced in the Senate Tuesday, and to his primary co-sponsors, Sens. Olympia Snowe (R-Maine) and Charles Schumer (D-N.Y.). It was also sent to all Senate offices later in the day, to outline the benefits to the economy represented by the bill. (See related story: MBL bill introduced in Senate.) The letter recaps the 100-year history of credit unions serving the credit needs of their small business-owning members, and how it was just since 1998 that an “arbitrary statutory cap” was imposed. “In an effort to promote economic recovery and job creation, we strongly urge Congress to increase the credit union member business lending cap,” the CUNA letter said, adding, “While not the largest portion of credit union lending, small business lending is the fastest growing segment of credit union lending by a significant margin.” CUNA said it’s most recent research conservatively estimates that the MBL cap is lifted by Congress to 27.5% , credit unions could lend an additional $13 billion to small businesses in the first year after implementation, helping them to create nearly 140,000 new jobs. “To be clear,” the letter from CUNA President/CEO Bill Cheney said, “credit unions do not need taxpayer money to lend more to small businesses: they need the authority from Congress to do so.” The letter also noted bankers’ objection to increased business lending for credit unions. “Let’s face it: the banker’s objection is rooted in their fear of competition, which given the circumstances is relatively hollow,” Cheney wrote. “Credit unions currently hold 5% of the small business loans issued by depository institutions. We believe that many of the additional business loans granted by credit unions once the cap is increased would not be loans otherwise made by banks,” He added. Cheney said for the most part the loans supplied by credit unions would generally be “too small for a bank to consider” and would go to “borrowers unwilling to deal with a bank.” “However, even if all of the new credit union loans would have been made by banks, and if credit union business lending doubled (both quite unlikely), that would still leave banks with 90% of the business lending market,” Cheney said. More importantly and more troubling, Cheney added, is that the bankers’ rhetorical arguments miss the point of this legislation entirely. “This legislation is not about credit unions; it is about helping small businesses access credit.”

Udall introduces MBL bill in Senate

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WASHINGTON (3/9/11)—A bill introduced Tuesday in the Senate to increase the member business lending (MBL) cap for credit unions could bring 140,000 new jobs and $13 billion of new small business lending into the economy, according to updated figures from the Credit Union National Association (CUNA). The economic benefits, CUNA underscores, come at no cost to taxpayers.
Click to view larger image Sen. Mark Udall (D-Colo.) addresses the audience of the CUNA 2011 GAC last week, at which more than 4,000 credit union representatives participated. Udall noted his intention to reintroduce MBL legislation at the GAC. (CUNA Photo)
CUNA President/CEO Bill Cheney thanked Sen. Mark Udall (D-Colo.) for his introduction yesterday of legislation ((S.509) that would establish a maximum MBL limit of 27.5% of a credit union's total assets. Cheney said, “Economic conditions may be improving, but the nation is still in need of more jobs, and small businesses are still in search of affordable and accessible options for capital. Credit unions can help on both fronts.” Udall sponsored an MBL-increase bill last year, but when Congress adjourned without having taken action on it, it became procedurally necessary to reintroduce the bill in the new 112th Congress. Cheney noted, “Unlike last year’s legislation that handed community banks $30 billion to make new loans, Sen. Udall’s bill will spur more small business lending by credit unions without burdening U.S. taxpayers or creating a new federal program.” “Raising the statutory cap is a no-cost way to free credit unions to do more of what they are doing now: making safe and responsible loans to help their members start or grow their small businesses. After focusing last year on the banks, it is time for Congress to pass Sen. Udall’s common-sense small business lending bill and recognize that credit unions want to be, ought to be, and deserve to be part of the solution,” the CUNA leader said. Under provisions of the new Udall bill, substantially similar to the 2010 legislation, growth of a given credit union's MBL portfolio may be no more than 30% annually. Credit unions that wish to lift their MBL cap above the current level of 12.25% of total assets must be well capitalized, must be lending at a ratio near the current cap for the previous four quarters, must have a minimum of five years of underwriting and servicing MBLs, and must demonstrate sufficient experience in managing these types of loans, under the Udall plan. The National Credit Union Administration (NCUA) also would be granted the authority to "set rules creating intermediate (MBL) limits and to require approval before any credit union can move to the next higher limit." The bill calls on the NCUA to "be vigilant and carefully oversee implementation" of the MBL program by reporting on MBL "activity and loan performance." The language of the Udall bill closely reflects language drafted by the U.S. Treasury Department last year and endorsed by the Obama administration. Prior to the bill’s introduction, CUNA sent a letter of support to Udall and his co-sponsors, Sens. Olympia Snowe (R-Maine) and Charles Schumer (D-N.Y.), which also urged their Senate colleagues to pass the MBL cap increase. (See related story: CUNA urges senators for MBL bill support; thanks leaders) Original co-sponsors of the bill also include Sens. Barbara Boxer (D-Calif.), Sherrod Brown (D-Ohio), Susan Collins (R-Maine), Al Franken (D-Minn.), Kirsten Gillibrand (D-N.Y.), Patrick Leahy (D-Vt.), Joseph Lieberman (I-Conn.), Bill Nelson (D-Fla.), Jack Reed (D-R.I.), Sheldon Whitehouse (D-R.I.), and Ron Wyden (D-Ore.). Last week Udall made known his intentions to reintroduce the MBL increase at CUNA’s Governmental Affairs Conference, at which more than 4,000 credit union representatives were present. Many of those representatives made personal visits to Capitol Hill to advocate to lawmakers on behalf of increased MBL authority to increase jobs and provide more capital for small business, as well as other key credit union issues. Also at the GAC, Rep. Ed Royce (R-Calif.), a House champion of MBL legislation, said he intends soon to re-introduce a bill to increase the cap in that chamber.

Inside Washington (03/08/2011)

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* WASHINGTON (3/9/11)--The 27-page term sheet forwarded by federal regulators to the five largest mortgage servicers last week is an indication of major changes in the future relationship among servicers, investors and borrowers. The term sheet’s operating directions for servicers includes new requirements for mortgage documentation, guidance on working with borrowers and active military personnel, loan modifications, principal reductions, bankruptcy proceedings, short sales and technology systems. The term sheet is an introduction to negotiations for the punishment process by state and federal agencies of servicers who were negligent in their foreclosure process. The details of the requirements had not been made public until now. View the entire document here … * WASHINGTON (3/9/11)--During the Credit Union National
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Association’s (CUNA) Governmental Affair’s Conference in Washington, Michigan credit union representatives took time to educate their state lawmakers. One group visited Reps. Dale Kildee (D-Mich.), Justin Amash (R-Mich.) and Tim Walberg (R-Mich.), focusing on three main topics of concern for credit unions: maintaining the tax-exempt status, fixing interchange and increasing credit union member business lending authority. On Wednesday, the Michigan delegation hosted the traditional breakfast with home state legislators. Congressmen Dave Camp, Bill Huizenga and Gary Peters (Michigan Credit Union League 2011 Legislator of the Year) joined the group to discuss maintaining credit unions’ tax status, fixing interchange, raising the cap on member business lending and supplemental capital. Michigan’s credit unions spent the rest of the day visiting lawmakers on Capitol Hill to lobby for their support on issues. See the video above recapping Wednesday’s activities …

Land of Enchantment FCU closed by NCUA

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ALEXANDRIA, Va. (3/8/11)--Land of Enchantment FCU, established in 1951 to serve the employees of the New Mexico Department of Public Welfare, was closed yesterday by the National Credit Union Administration (NCUA). It had approximately $8.6 million in assets and served 1,593 members. Guadalupe CU, based in Sante Fe, as was Land of Enchantment, purchased and assumed the liquidated credit union’s assets, liabilities and members. Former members of Land of Enchantment will experience no interruption in credit union service, and their accounts, of course, remain federally insured up to at least $250,000 by the National Credit Union Share Insurance Fund. Guadalupe CU has $102 million in assets and serves approximately 10,500 members. NCUA assumed control of operations at Land of Enchantment FCU with a goal of continuing credit union service to the members at a safe, sound credit union. This was the fifth federally insured credit union liquidation in 2011.

Inside Washington (03/07/2011)

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* WASHINGTON (3/8/11)--House Financial Services Committee Chairman Spencer Bachus said on Monday U.S. House lawmakers will wait for the Senate to offer changes to the Federal Reserve’s interchange proposal. Bachus (R-Ala.), speaking at a conference hosted by the Institute of International Bankers in Washington, said House members wanted assurance that the Senate would move to change the law as well (Bloomberg.com March 7). The House committee’s decision to wait for the Democrat-controlled Senate to act may delay legislative activity on the rule. Sen. Richard Durbin (D-Ill.), who introduced the proposal under the Dodd-Frank Act, said he will block efforts to change that provision of the regulatory law. Fed Chairman Ben S. Bernanke and Federal Deposit Insurance Corp. Chairman Sheila Bair have questioned whether the proposal’s exemption for financial institutions under $10 billion in assets would make community banks and credit unions less competitive … * WASHINGTON (3/8/11)--During the Credit Union National Association (CUNA) Governmental Affairs Conference, in Washington, Minnesota credit union leaders spent an afternoon on Capitol Hill urging (members of Minnesota’s congressional delegation to join credit unions in their efforts to better serve American consumers. Interchange has been a concern for the state’s credit unions since December when the Federal Reserve Board released its proposed rule to reduce interchange fees by an estimated 70%. Advocates stressed to elected officials that even though most credit unions are technically exempt from the proposed rule, it will affect Minnesota credit unions’ ability to offer affordable checking products. For this reason, credit unions urged Minnesota’s Congressional Delegation to support measures that would allow Congress to stop, study and start over on the interchange issue. Minnesota credit unions also asked members of Congress to co-sponsor a bill that would increase credit unions’ member business lending (MBL) cap from 12.25% of total assets to 27%. The MBL increase would generate an additional $180 million in small business loans and nearly 2,000 jobs in Minnesota, according to CUNA. Prior to Hill visits, Minnesota legislators attended a luncheon and issues briefing coordinated by the Minnesota Credit Union Network. Sen. Amy Klobuchar, shown here, (D-Minn.) keynoted the luncheon and commended credit unions for their role in the economy … * WASHINGTON (3/8/11)--A free webinar on Small Business Administration (SBA) disaster assistance funding, hosted by the SBA and Agility Recovery Solutions, will be held at 2 p.m. ET March 15. Representatives from SBA’s Office of Disaster Assistance will explain how the disaster loan program works, how an SBA declaration is made, details on the application process, and tips on managing a swift recovery. A question and answer session will follow. SBA has partnered with Agility Recovery Solutions, which is also a CUNA Strategic Services Provider, to offer business continuity strategies for entrepreneurs via their “PrepareMyBusiness” website. Visit www.preparemybusiness.org to access previous webinars and for more preparedness tips.

Congress this week Housing tax policies in focus

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WASHINGTON (3/8/11)--National housing policy and reform of the tax code may be the two biggest issues of credit union interest facing the U.S. House and Senate this week. On the congressional agenda:
* On Tuesday, the Senate Budget Committee will conduct a hearing on the report of the National Commission on Fiscal Responsibility and Reform. Former Sen. Alan Simpson (R-Wyo.), and Erskine Bowles, former White House chief of staff, who are co-chairman of the National Commission on Fiscal Responsibility and Reform, are expected to testify. Also, the Senate Finance Committee has scheduled a hearing, "Does the Tax System Support Economic Efficiency, Job Creation and Broad-Based Economic Growth?" This hearing will feature several witnesses from academia. * Also on Tuesday, the House Oversight and Government Reform Committee will hold a field hearing on "The Foreclosure Crisis," focusing on abuses by mortgage servicing companies, including allegations of fraud. Maryland Governor Martin O’Malley, Baltimore Mayor Stephanie Rawlings-Blake and others will testify. The hearing will take place in Baltimore, Md. * On Wednesday, the Senate Budget Committee will conduct a look at "Distribution and Efficiency of Spending in the Tax Code." Witnesses from the Center for Budget and Policy, Citizens for Tax Justice, and the Tax Foundation are expected to testify. And the Senate Banking Committee will conduct a hearing on the state of the housing market, with witnesses from the National Association of Home Builders, the National Association of Realtors and the Center for Housing Policy expected to testify. * Also on Wednesday, the House Financial Services Committee will hold a full committee markup of H.R.839, the "HAMP (Home Affordable Modification Program) Termination Act"; and H.R.861, the "Neighborhood Stabilization Program Termination Act." This vote was rescheduled from last week. * On Thursday, the Senate Judiciary Committee vote on pending nominations and legislation, including S. 222, the Limiting Investor and Homeowner Loss in Foreclosure Act of 2010.
Also of interest, the Senate Banking Committee Tuesday will hold a hearing on the nominations of Peter Diamond to be a member of the Federal Reserve Board of Governors; Katharine Abraham to be a member of the Council of Economic Advisers; and Carl Shapiro to be a member of the Council of Economic Advisers. And on Friday, the House Financial Services subcommittee on insurance, housing and community opportunity will hold a hearing on the reauthorization of the National Flood Insurance Program. Also on the radar, last week at the Credit Union National Association's Governmental Affairs Conference, House and Senate lawmakers indicated that they soon would re-introduce bills to increase the member business lending cap.

Heartland podcast features Cheney on interchange

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WASHINGTON (3/8/11)--A Washington, D.C.-based think tank, The Heartland Institute, recently interviewed Credit Union National Association (CUNA) President/CEO Bill Cheney on the impact of the Dodd-Frank Act-imposed debit interchange rule. The interview was for a podcast included in the institute’s series on financial issues. Cheney, the sole interview on the podcast, reiterated the concerns that credit unions and other debit card issuers have regarding the Dodd-Frank Act mandate that the Federal Reserve Board cap debit card fees, but without being able to consider all the costs that go into the service. “There are flaws in the legislation and they are being translated into regulation,” Cheney told interviewer Erin Greenwood. He warned that the long-term consequences of these flaws will be that consumers will pay more for debit card service. Cheney noted the “eleventh hour” passage of the interchange language by the U.S. Congress last year, and said that CUNA is seeking a delay in the July implementation date of the Fed’s proposed interchange rule. He said CUNA is urging Congress to take time to study any legitimate interchange issues through the regular hearing process, a process, he noted, the interchange amendment escaped the first time around. Use the resource link below to access the entire podcast.

NCUA Directors can delegate authority with limits

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WASHINGTON (3/8/11)--In a Letter to Federal Credit Unions (11-FCU-02), which discusses the general authorities and duties of directors in new Section 701.4, the National Credit Union Administration (NCUA) said an FCU’s board can, with some limitations, delegate to its CEO the authority to hire, fire, and compensate subordinate employees, including other management personnel. NCUA General Counsel Robert Fenner recently explained in a legal opinions letter that if a board delegates to the CEO the authority to hire, fire, fix the compensation of, or discipline other senior managers the board place “appropriate standards and controls on such delegated authority.” “This is particularly true in larger, complex credit unions where senior managers wield much more power than the “tellers, clerks, and bookkeepers” specifically named in articles of the bylaws, Fenner added. The letter, written in response to questions posed by the National Association of Federal Credit Unions, also addressed other clarifications of the agency rules regarding the duties of federal credit union directors. Use the resource link to access the full letter.

CUNA major trades to support interchange suit

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WASHINGTON (3/8/11)--A federal court granted a request by the Credit Union National Association (CUNA), and other financial trade associations, to be allowed to file a statement in support of TCF National Bank’s (TCF) lawsuit against the debit card interchange fee provisions of the Dodd-Frank Act. With the court’s favorable ruling, CUNA and the other associations could file the “amicus brief,” as early as Friday. The TCF suit, filed last October, charges that the interchange provisions of Dodd-Frank, which require the Federal Reserve Board to set restrictions on the fees debit card issuers can charge for the service they provide, are unconstitutional. The bank argues that the Fed’s implementation plan restricts the bank’s ability to recover costs associated with providing the debit card service. CUNA’s partners in the requested amicus brief represent “every major national banks and credit union trade association” in the United States, the petition notes. In addition to CUNA, the groups represented, in alphabetical order as they appear in the document, are The Clearing House Association L.L.C., American Bankers Association, Consumer Bankers Association, The Financial Services Roundtable, Independent Community Bankers of America, Midsize Bank Coalition of America, and the National Association of Federal Credit Unions. In the request to the U.S. District Court of the South Dakota Southern Division to file a brief, CUNA and the other groups state they should be heard in the case, in part, because the financial institutions represented have “collectively invested billions of dollars to help develop and efficient, convenient, and secure debit card payment system.” The groups want to formally support TCF in its case, the petition says, to explain the detrimental effect the Fed’s proposed plan to implement the interchange provisions would have on the “stability of the electronic payment structure that undergirds literally trillions of dollars of our economy, as well as the serious constitutional issues the (Fed’s) action raises.”

CoVantage CU assumes small Wis. Heights CU

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ALEXANDRIA, Va. (3/7/11)--Wisconsin Heights CU, of Ogema, Wis., was liquidated by the National Credit Union Administration (NCUA), and its members, assets, and liabilities were assumed by with CoVantage CU, of Antigo, Wis. Wisconsin Heights' declining financial condition led to its closure and subsequent purchase and assumption, the NCUA said in its liquidation announcement. At the time it was closed, the small credit union had $713,000 in assets and served 501 members. It was the fourth federally insured credit union to be liquidated this year. CoVantage serves the people who live or work in the Wisconsin counties of Brown, Clark, Florence, Forest, Langlade, Lincoln, Marathon, Menominee, Oconto, Oneida, Outagamie, Portage, Shawano, Waupaca and Wood; or Dickinson and Iron counties in Michigan. It has $861 million in assets and serves over 62,000 members. CoVantage is a full-service credit union with eight branches in Wisconsin and two branches in the Upper Peninsula of Michigan. Former Wisconsin Heights members will experience no interruption of credit union service.

Inside Washington (03/04/2011)

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* WASHINGTON (3/7/11)--The House Financial Services Committee on Thursday passed legislation that would end two federal foreclosure programs. The measures, though touted by Republicans as a savings for taxpayers, are largely seen as symbolic by observers (American Banker March 4). The votes on Thursday would cut the Federal Housing Administration’s (FHA) Refinance Program and the Emergency Relief Program. Both are expected to be approved by the full House next week. But the Senate is not expected to take up the legislation. The FHA Refinance Program, announced in March 2010 by the Obama administration, encourages lenders and borrowers to work together to restructure underwater mortgages. Borrowers who qualify can receive FHA refinance loans through the program. The Emergency Homeowner Relief Program provides loans to unemployed borrowers for a period of 12 months, with a possible 12-month extension. At issue between Democrats and Republicans is whether the government should use taxpayer money to assist homeowners. The Home Affordable Modification Program is scheduled for a separate vote next week … * WASHINGTON (3/7/11)--The National Association of Home Builders (NAHB) is urging members of the House of Representatives to keep the mortgage interest tax deduction. The NAHB, with about 160,000 members, asked House lawmakers to sign a resolution introduced by Rep. Gary Miller (R-Calif.) to stop efforts to eliminate or reduce the mortgage interest deduction. There are 40 co-sponsors of the resolution. “The mortgage interest deduction has been a cornerstone of the nation’s housing policy for almost a century, and it is vital to homeownership and healthy housing markets,” said Bob Nielsen, the NAHB’s chairman. The association maintains that eliminating the deduction would destabilize housing markets, increase homeownership costs, create more foreclosures and curb job creation in the housing sector …

FDIC Chair Interchange exemption needs to be fixed

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WASHINGTON (3/7/11)—A plan that would exempt credit unions and other financial institutions from the Federal Reserve’s planned interchange fee regulation changes would not work in practice, and “needs to be fixed,” Federal Deposit Insurance Corporation Chairman Sheila Bair said in a recent television appearance. Bair appeared on the March 3 edition of CNBC’s The Kudlow Report . When questioned by Kudlow, Bair said that she “would be fine” with allowing the market to determine the amount of interchange fees. Bair added that it makes her nervous “when the government tries to start doing rate regulation and charging fees.” The FDIC Chair added that there appears to be “a movement afoot” to delay interchange implementation. Bair in testimony delivered before the Senate Banking Committee last month speculated that the interchange changes could harm small financial institutions far more than they would help merchants, and a number of regulators and legislators have also noted that the proposed $10 billion exemption is likely to be impotent to protect small issuers. Credit Union National Association President/CEO Bill Cheney last week called for the Fed to stop, study and start over on interchange fee regulations and encouraged members of Congress to strike a legislative remedy that will ensure a meaningful interchange fee carve-out. (See related March 3 story: Cheney warns reg burden is growing ‘crisis’) Rep. Debbie Wasserman Schultz (D-Fla.) repeated the call for delay during CUNA’s recently completed 2011 Governmental Affairs Conference, and said that she would work with any legislator that aimed to halt the progress of the interchange fee regulation changes. (See related March 3 story: Wasserman Schultz: CUs can halt interchange train) The interchange fee regulations, which could limit the amount of interchange fees charged per purchase to as little as 7 cents, are currently set to come into effect in July. For video of Bair’s appearance, use the resource link.

NCUA to participate in 2011 NCPW

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WASHINGTON (3/7/11)—The 13th annual National Consumer Protection Week (NCPW) began on Sunday and continues through the end of this week, and the National Credit Union Administration (NCUA) plans to join several federal, state and local governmental agencies and consumer protection organizations as a participant. NCUA plans to announce how it will observe the week later this week. The agency in previous years has joined federal agencies and consumer groups at Capitol Hill-based events. NCUA representatives and others answered questions and handed out materials to interested lawmakers and their staff. The NCPW aims to highlight consumer protection and education efforts around the country. The NCPW homepage notes that the members of Congress hold town halls and other outreach projects as part of the week. The NCPW website also features a blog where visitors can find resources and read stories about consumer protection. The blog allows visitors to connect directly with representatives of public and private consumer protection agencies, and highlights available resources and fraud and scam alerts. Credit unions, libraries, schools, colleges, city halls, and senior centers across the U.S. are participating in NCPW. Check out the event page on the NCPW website to find consumer protection fairs, shredathons or workshops in your area. The NCPW runs through March 12.

Fed FTC plan could ease credit score access

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WASHINGTON (3/4/11)--The Federal Reserve this week joined the Federal Trade Commission (FTC) to propose changes that would likely ease access to credit scores for consumers. In a joint release, the Fed and FTC said that their proposal would impact when credit providers are required to provide cardholders with their credit scores. The proposal would require creditors to disclose credit scores and related information to consumers in risk-based pricing and adverse action notices under the Fair Credit Reporting Act (FCRA) if a credit score was used in setting the credit terms or taking adverse action. The changes would also revise content requirements for risk-based pricing notices and add related model forms to reflect the new credit score disclosure requirements, according to the Fed/FTC release. The changes were proposed by the Dodd-Frank Act, which passed last year. The proposed rules will address both federal- and state-chartered credit unions, and the National Credit Union Administration will not be required to independently address these matters. However, the NCUA could release its own proposal if it feels the need to further clarify on the Fed/FTC action. Comments on the proposal will be accepted for 30 days after it is published in the Federal Register. For the full Fed/FTC joint release, use the resource link.

CUs blanket Hill with message on key issues

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WASHINGTON (3/4/11)—A week of credit union advocacy continued on Wednesday as thousands of credit union representatives from across the country flooded the halls of Congress as part of the Credit Union National Association’s (CUNA) 2011 Governmental Affairs Conference.
Click for slide showRep. Ed Perlmutter (D-Colo.), right, goes into great depth during a discussion on member business lending, interchange fees, and other issues facing credit unions. Perlmutter met with representatives of the Colorado Credit Union League and various state credit unions during their Wednesday Capitol Hill hike. (CUNA Photo)
CUNA primed the credit union reps ahead of their Capitol Hill hikes, identifying credit unions’ tax exempt status, interchange fee regulations, member business lending (MBL), supplemental capital, and the overall credit union difference as key concepts to be communicated to Congress. Representatives from New York state credit unions and the Credit Union Association of New York (CUANY) during their visits asked Rep. Peter King (R) to consider their position on the major issues confronting credit unions today: interchange, supplemental capital, member business lending and maintaining credit union non-tax status. CUANY President/CEO William Mellin during that meeting described the interchange proposal as “well intended legislation that’s going to hurt American consumers.” Supplemental capital and extended MBL authority would allow credit unions to offer more services to their members at a time when credit and job creation are critical to growing the U.S. economy, Mellin said, adding that the MBL legislation is “similar to an economic stimulus package that has zero cost to the American taxpayer.” CUNA has estimated that increasing the MBL cap to 27.5% of assets would inject $10 billion into the U.S. economy and create 100,000 jobs. The New York group also thanked co-sponsor Charles Schumer (D) for his work on behalf on credit unions during a late Wednesday meeting. A Colorado contingent also stressed the credit union position on interchange, supplemental capital, MBL, and tax exemption during their meetings with legislators. Rep. Ed Perlmutter (D) listened to the group’s concerns on supplemental capital, MBL and the credit union tax exemption, and said that his top near-term credit union legislative priority was interchange. “If we can get a delay for some time to study this issue and take into account the needs of consumers, the safety and soundness of financial institutions and the margins of the merchants, I think we can find a solution,” Perlmutter said. Michigan Credit Union League President/CEO Dave Adams said that his group’s Wednesday visits were extremely productive, and particularly noted his visits with Reps. Gary Peters (D) and Dave Camp (R). Camp remains “a good friend of credit unions,” and Peters during their meeting reaffirmed that the debit interchange issue will have “unintended consequences” and needs to be fixed. Peters “understands the on-the-street effect” of interchange, “and he is helping us with it,” Adams added. Michigan legislators have consistently backed credit union causes in Washington, Adams noted. Credit union groups from Alaska, North Carolina, Hawaii, California and Nevada, Virginia, Wisconsin and Maine were among the many groups that offered access to their representatives through legislative receptions. The New Jersey Credit Union League added that the GAC-related hikes demonstrate to members of Congress just how committed credit unions are to playing an active role in the public policy process.

NCUA reports CU key ratios improved in 2010

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ALEXANDRIA, Va. (3/4/11)--Nationwide credit union membership inched up during 2010, totaling 90.5 million by the end of the year, and credit union investment, earnings and assets also grew last year, the National Credit Union Administration (NCUA) reported on Thursday. “While credit unions are still not back to their pre-recession performance, they are showing decent signs of recovery," Credit Union National Association Chief Economist Bill Hampel said. "CUNA expects 2011 to be even better than 2010, with continued declines in loan losses and some modest improvement in earnings,” Hampel added. The NCUA’s December 2010 Call Report data note that loan delinquencies and charge-offs both declined during the year. Although total loans outstanding fell by 1.3% in 2010, used-vehicle loans increased by 3.4%, first mortgage real estate loans increased by 2.7%, and unsecured credit card lending rose by 3.1%. The agency also noted a 16.4% decrease in new-car loans during 2010. According to the NCUA report:
* Assets increased 3.4%, totaling $914.5 billion; * Loans declined 1.3%, totaling $564.8 billion; * Shares increased 4.5% to $786.5 billion; * Investments increased 13.4% to $238.9 billion; and * Net income increased 208.3%.
Net income for 2010 totaled $4.6 billion, up from 2009’s total of $1.5 billion NCUA Chairman Debbie Matz said that “credit unions, as a whole, are exhibiting positive trends in their operations,” adding that the recovering economy helped net worth climb to 10.1% and increased credit unions’ return on average assets (ROA) by 33 basis points. Credit union ROA totaled 0.51% in 2010, up from the 2009 total of 0.18%. “To the maximum extent possible, NCUA will continue to ensure that this progress persists and credit unions remain well-positioned to serve American consumers,” Matz added. For the full NCUA report, use the resource link.

Inside Washington (03/03/2011)

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* ALEXANDRIA, VA. (3/4/11)--The National Credit Union Association’s (NCUA) next free Credit Union Roundtable session is coming up April 14 in Birmingham, Ala., at the Doubletree Hotel. Stipends are available up to $350 from the NCUA for credit unions with assets of $10 million or less. The workshop, however, is open to all credit unions regardless of asset size. Roundtable topics are to include: issues facing credit unions; financial literacy, education, and savings; what the NCUA’s Consumer Protection Office means to credit unions; and more. Registration is open now … * WASHINGTON (3/4/11)--The House Financial Services Committee, expected to vote Thursday on a bill that would kill the Obama administration’s often-criticized Home Affordable Modification Program (HAMP), has pushed that vote back to a later time. (Reuters March 3) The committee intended to keep its Thursday vote schedule for two smaller housing programs, but Chairman Spencer Bachus (R-Ala.) announced the HAMP vote would be delayed until next week …

Udall announces MBL cap lift legislation at GAC

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WASHINGTON (3/3/11)--Addressing a Credit Union National Association (CUNA) 2011 Governmental Affairs Conference audience, Sen. Mark Udall announced the release of a bipartisan letter stating his
Click to view larger image Sen. Mark Udall (left), who introduced legislation in the Senate during the last session of the U.S. Congress that would have raised the member business lending cap to 27.5% of assets, said that credit unions can push MBL legislation through in 2011. (Shown here with Udall are: Michele Johnson (center), CUNA director of federal legislative affairs, and Ryan Donovan (right), CUNA vice president of legislative affairs. Also at the GAC, Rep. Ed Royce (R-Calif.) said he would re-introduce an MBL bill on the House side soon. (CUNA Photo)
intention to introduce legislation that would increase credit union member business lending (MBL) authority in 2011. The letter, co-signed by Udall (D-Colo.), Sen. Olympia Snowe (R-Maine) and Sen. Charles Schumer (D-N.Y.), describes the Small Business Lending Enhancement Act, which would allow credit unions to increase their small business lending to 27.5% of assets from the current limit of 12.25%. The bills states that to go above 12.25% for MBLs, a credit union must be well capitalized and have a history of MBL experience, be near the lower cap for one year prior to exceeding it, and receive approval by the National Credit Union Administration to lend in excess of the old cap. After a higher limit is approved, if the credit union’s net worth drops below 7%, its must halt further member business lending. At the GAC and in the letter, Udall restated CUNA's position that the MBL limit increase would inject an expected $10 billion into the U.S. economy and create an estimated 100,000 jobs. "We've worked this out," he said. "It makes sense. We ought to put it into law. We came very close last year."

Bachus CUs sold a bill of goods on interchange

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Click to view larger imageSpeaking at CUNA’s GAC, Rep. Spencer Bachus (R-Ala.) said that the proposed interchange rule would directly affect the credit unions’ bottom line. He said it is important to the nation’s economic health that credit unions can survive as Main St. financial institutions. (CUNA Photo)
WASHINGTON (3/3/11)--Rep. Spencer Bachus (R-Ala.) told the Credit Union National Association 2011 Governmental Affairs Conference audience that credit unions were “sold a bill of goods” on the proposed interchange rule, which threatens the existence of small financial institutions. “You were sold a bill of goods in October when you were told as credit unions that the interchange fees didn’t apply to you,” Bachus said. “Well, it’s March, and you know it applies to you. “ Bachus said because the interchange rule would directly affect the bottom line of credit unions and small banks--unlike larger financial institutions that offer a wider array of services--smaller credit unions and banks will be less able extend credit to their members and customers. “We know with interchange fees that if we don’t get it right, credit unions and community banks are not going to be there," he said. “And we know that the big banks will." Bachus assured the audience that several senators have talked directly with Sen. Richard Durbin (D-Ill.) about the potential negative effects of the bill. Durbin drafted the interchange language that was folded into the Dodd-Frank Act. Bachus also opined that the newly formed Consumer Financial Protection Bureau unfairly regulates credit unions in the wake of the financial crisis. “You were told the Consumer Financial Protection Bureau wouldn’t apply to credit unions,” Bachus said. “Credit unions didn’t cause what happened in 2008. I have yet to find anyone in or out of Congress that said credit unions did anything to cause or precipitate the financial crisis. "You played by the rules. You kept the rules. Now you’re told because of sins of others you’re going to have to pay for it, just like too big to fail.” As chairman of the House Financial Services Committee, Bachus promised that credit unions would still be offered protection from interest rate increases following the restructuring of Fannie Mae and Freddie Mac, but added it was essential that in the future, institutions that guarantee loans must be responsible for their losses.

Blunt warns of consequences of big government

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WASHINGTON (3/3/11)--Sen. Roy Blunt (R-Mo.) told a Credit Union National Association 2011 Governmental Affairs audience that more governmental regulation creates uncertainty and “unintended consequences” for the financial services industry. “With these new bureaus that are being created,” Blunt said, “you can be guaranteed that the unintended consequences will not be what people thought. And the unintended consequences of government are the most certain consequences.” Coming out of the financial crisis, Blunt said, the U.S. economy requires more certainty. He cautioned against a “rush to regulate.” One of the unintended consequences he referred to was higher fees that could result from the Federal Reserve's proposed debit interchange rule that is opposed by credit unions. “Higher fees are going to force more people into the unbanked community, and nobody benefits from that,” Blunt said. He repeatedly called for less governmental intervention in American business and the everyday lives of American consumers. “We are at critical moment of deciding what kind of country we are going to live in,” Blunt said. "Are we going to live in a country where the government is bigger than the people? Or the people are bigger than the government?" He said issues such as the interchange proposal are examples of overregulation in the wake of the financial crisis, when the big banks deemed too big to fail were bailed out by the government. “We can’t have the federal government saying it’s okay for big banks to lose money, but it’s not okay to earn money,” Blunt said.

Boehner says new rules punish CUs

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WASHINGTON (3/3/11)--House speaker John Boehner (R-Ohio) warned a Credit Union National Association (CUNA) 2011 Governmental Affairs Conference audience that the new rules and regulations created by
Click to view larger image House Speaker John Boehner (R-Ohio) said at CUNA’s GAC that American consumer access to credit provided by credit unions is essential to economic growth and job creation. Boehner is concerned that bigger government leaves less money for Americans to invest in their families and communities. (CUNA Photo)
Click to view larger image Speaker of the House John Boehner (right) meets with CUNA President/CEO Bill Cheney (left) before the Ohio Republican hits center stage to address CUNA’s 2011 Governmental Affairs Conference, which ran from Feb. 27-March 2. Boehner told his credit union audience that spending cuts and job creation are Republicans' top priorities in the next year. (CUNA Photo)
the Dodd-Frank Act will punish those who are the least responsible for the financial meltdown of 2008. “All this will do is punish everyone who had nothing to do with the Wall Street crash two-and-a-half years ago,” Boehner said. “It puts in place rules and regulation limiting your ability to provide credit to your members.” Access to credit is essential to grow the economy and create new jobs, Boehner said. He cited job creation and reining in spending as two critical economic issues. “The real battle” on those issues begins with the federal budget, Boehner said, and he didn’t mince words when commenting on President Barack Obama’s efforts in meeting the challenge presented by the budget. Boehner noted that with a $1.6 trillion budget deficit, the U.S. has to borrow 40 cents for every dollar it spends. “I think all of us in America owe it to ourselves to get our arms around this,” he said. Boehner’s answer to meeting the demands of cutting the deficit are less government and more “common sense.” “The bigger government gets, the smaller the people get,” Boehner said. “The more government takes from people, the less they have to invest in their families, their communities and themselves.”

Wasserman Schultz CUs can halt interchange train

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WASHINGTON (3/3/11)--The “runaway interchange train” may have recently left the station, “but the time has come to stop it in its tracks,” Rep. Debbie Wasserman Schultz (D-Fla.) told attendees at the Wednesday session of the Credit Union National Association’s (CUNA) 2011 Governmental Affairs Conference.
Click to view larger image After “smoking out” merchants’ true interchange intentions, Rep. Debbie Wasserman Schultz (D-Fla.) said that she has turned her eyes toward halting the progress of the Federal Reserve’s interchange fee proposal. (CUNA Photo)
“There is too much at stake. We must get this right,” she said. She called on credit unions to help her fight for further consideration of interchange fee changes, and added that she would work with any legislator who wants to help fix interchange issue facing credit unions and other small issuers. Wasserman-Schultz, who was one of 105 House members who tried to keep language on interchange fees out of the final comprehensive financial regulatory legislative package, added that the Federal Reserve’s interchange fee proposal is “deeply wrong, deeply flawed, and needs to be fixed.” She echoed CUNA’s call to stop, study and start over on interchange legislation. While the interchange fee legislation was ultimately passed, credit union advocacy helped Wasserman Schultz and other House colleagues modify the interchange provision to make it less harmful to credit unions, small issuers, and government benefit programs. The legislator also directly questioned merchants' claims that the savings realized from lower interchange fees would be passed on to consumers. “I smoked out the merchants' true intentions, and exposed their true intentions, and they have no intention of passing those savings along to consumers,” Wasserman Schultz said. Noting the "key role" that credit unions have played in helping the American economy get back up and running, Wasserman Schultz also praised credit unions for filling the lending gap left open by many banks. She added that credit unions must be able to provide the credit that small businesses need to start up, to hire new workers, and to expand their existing operations. “Main Street, not Wall Street, continues to lead our economic comeback,” and credit unions must be able to provide these key resources to their members, she added.

Tester urges CU on to fight interchange

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WASHINGTON (3/3/11)--Sen. Jon Tester (D-Mont.) said the credit union community must urge Congress to reopen the subject of interchange fees. “I think you should suggest Congress needs to stop and study,” he told Credit Union National Association members attending the 2011 Governmental Affairs Conference Wednesday. “The stakes are too high for credit unions and community banks.” Tester, a member of the Senate Banking Committee, said he opposed the interchange fee legislation when it was approved by the Senate. “I opposed [the legislation] because I know how much damage will result for credit union members,“ he told the session. The senator said that if credit unions and other opponents do not defeat the interchange fees, it will lead to further industry consolidation.

House Majority Whip Were at a crossroads

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WASHINGTON (3/3/11)--Rep. Kevin McCarthy (R-Calif.) said the nation needs to unite for an all-out assault on the federal deficit. “We are at a crossroads,” he added, during a speech before credit unions at the Credit Union National Association's 2011 Governmental Affairs Conference. The crisis today is far different than the one posed by World War II, when all political parties pitched in to help win that conflict, he said. “Today we are divided,” he said. “When one party says one thing, the other says something else.” McCarthy, who is the House Republican Whip, said Congress needs to unite and reform the tax code. The current dependence on foreign entities such as China to finance debt is a hazardous course, he added. “Why should we put ourselves in that position?” he questioned. McCarthy said future elections will be crucial because the American public is eagerly searching for someone to tackle the current crisis.

High government spending a concern Moore Capito

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WASHINGTON (3/3/11)--Rep. Shelley Moore Capito (R-W.Va.) believes concern about runaway government spending is starting to seep into average American households. She said it is due in part to the economic recession, which has made more citizens budget conscious. “The good thing about American families is they know what we are up against in Washington,” she told a morning general session of the Credit Union National Association’s (CUNA) 2011 Governmental Affairs Conference. “They know from their own experiences,” said Capito, who is a member of the House Financial Services Committee. “We are creating debt as far as the eye can see,” she added. Capito said CUNA can make a meaningful contribution in the area of fiscal responsibility because of its role as “one of the most forceful and effective lobbies on Capitol Hill.” During the speech, she also was critical of the proposed new Consumer Financial Protection Bureau, questioning whether it might stifle the financial sector. “It would mean that we will have nine different agencies overseeing banks, and various types of financial institutions,” she said.

Crapo CFPB rules likely to get lawmakers review

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WASHINGTON (3/3/11)--Sen. Mike Crapo (R-Idaho) said he expects Congress to conduct public hearings on future regulations by the Consumer Financial Protection Bureau (CFPB). Crapo told a session at the Credit Union National Association’s (CUNA) Governmental Affairs Conference Wednesday the proposed new agency “doesn’t do what it claims.” The CFPB was created by the Dodd-Frank Wall Street Reform Act, which became law last year. The bill has been subject to hearings in the last few weeks. For instance, CUNA President/CEO Bill Cheney testified before a House subcommittee, also Wednesday, on the impact of the act on credit unions (See related story: "Cheney warns reg burden is growing ‘crisis.’") Crapo, the ranking Republican on the Senate Banking subcommittee on financial institutions, also said that the CFPB would “burden financial institutions with new rules, without preventing the kind of too-big-to-fail financial conglomerates that was a big factor in the recession.” The Idaho senator also said he hopes Congress will take another look at the controversial interchange fee provisions that were added to the Dodd-Frank Act at the last minute. The interchange provisions are currently scheduled to go into effect in July. He said efforts to write an effective exemption, as required by the law, for small card issuers like credit unions, have failed. He told the GAC session that credit unions should use their political influence to urge the Senate to take a second look at the interchange proposal.

Lawmakers query CUNA on Dodd-Frank impact

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WASHINGTON (3/3/11)--After testifying on the impact of the Dodd-
"We are concerned that this is a train wreck for consumers," CUNA President/CEO Bill Cheney said when questioned by federal lawmakers on the impact statutory changes to interchange fees would have. "But we can stop it before it happens," the CUNA leader added. (CUNA Photo)
Frank law on credit unions, Credit Union National Association (CUNA) President/CEO Bill Cheney responded to lawmakers’ questions on interchange provisions, at one point saying, “We’re concerned this is a train wreck for consumers, but we can stop it before it happens.” Cheney had just finished testifying at the House Financial Services subcommittee on financial institutions and consumer credit hearing. Responding to a question from Rep. David Scott (D-Ga.), Cheney went on to say that without regulatory enforcement of an intended small-issuer exemption that would cover all but three credit unions, consumers’ costs for debit card services could be driven up. And that, the CUNA leader said, “drives people out of the banking system and impacts most those who can least afford it.” Cheney also fielded questions from Rep. Carolyn Maloney (D-N.Y.), who underscored that the crisis, intended to be addressed by Dodd-Frank, was not caused by small institutions. “If anything you were a rock on which to lean, and continue to be,” she said. Does this help bring in payday lenders and other players in the “shadow” banking system under the same regulation, she asked. Cheney responded: “Credit unions already are the most highly regulated financial institutions. We’re not in favor of additional regulation for other financial institutions. But I do think parts of the financial services system not currently regulated could benefit from additional oversight.” Maloney went on to ask how the credit union burden could be further reduced. “We can’t simplify just by creating new regulation. We have to peel back outdated and duplicative regulation,” Cheney answered. Rep. Jim Renacci (R-Ohio) asked a question about credit union costs for sustaining capital. “Every dollar credit unions have to spend on compliance is a dollar that has to come out of the bottom line and their retained earnings.” For credit unions, Cheney noted, that $1.5 billion cost is the difference between continued economic recovery and continued losses.

Cheney warns reg burden is growing crisis

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WASHINGTON (3/3/11)--Credit unions, owned by their members, already have strong incentives to treat consumers well, but they face a crushing “crisis of creeping complexity” under a steady accumulation of regulatory requirements, Credit Union National Association (CUNA) President/CEO Bill Cheney testified before a House subcommittee
Click to view larger image CUNA President/CEO Bill Cheney (left) is greeted by Rep. Shelley Moore Capito (R-W.Va.) before she opens her House subcommittee hearing on the impact of the Dodd-Frank bill on small financial institutions and small business, at which Cheney testified on behalf of credit unions. Moore Capito addressed CUNA's Governmental Affairs Conference earlier in the day. (CUNA Photo)
Wednesday. In opening statements to the hearing, subcommittee member after member voiced concerns about one of those burdens--the interchange fee regulations contained in the Dodd-Frank Act. The afternoon hearing conducted by the House subcommittee on financial institutions and consumer credit was titled, “The Effect of Dodd-Frank on Small Financial Institutions and Small Businesses.” Cheney noted for the panel of federal lawmakers that as credit unions are not-for-profit financial cooperatives, members are the ones who receive the benefit of ownership, through reduced fees, lower interest costs, and higher rates on savings. “Every dollar that a credit union spends complying with an unnecessary or overly burdensome regulation is a dollar that is not used to benefit the credit union’s membership,” Cheney stated. He warned that the increasing regulatory requirements pursuant to Dodd-Frank and other government initiatives--called by some the “creeping crisis of complexity”--is a major driver behind current credit union consolidations, making it impossible for smaller credit unions to exist. He added that credit unions are concerned that the increasing regulatory burdens also stifle innovation. The CUNA leader also highlighted two key areas of the Dodd-Frank law, which he termed “very significant” to credit unions First, he exhorted Congress to create a legislative remedy that will ensure a meaningful carve-out from interchange fee restrictions for small debit card issuers, such as all but three credit unions, as intended in the original bill. There has been a growing cry from regulators and legislators alike that the Federal Reserve Board’s proposed implementation of the statutory exemption is likely to be impotent to protect small issuers. The second area of credit union concern addressed by Cheney: provisons of Dodd-Frank intended to reduce regulatory burden by requiring the Consumer Financial Protection Bureau (CFPB) reduce "unwarranted" burdend and assess the impact of proposed rules on credit unions and community banks with less than $10 billion in assets. Cheney said that it is feared that the result of the CFPB’s comprehensive review process will be an increased, not decreased, regulatory burden. On another key credit union topic, Cheney urged lawmakers to increase the statutory credit union member business lending cap to create an influx of $10 billion in new credit for small business in the first year, more than 100,000 new jobs--all at no cost to taxpayers. Also, see related story in this issue of News Now, “Lawmakers query CUNA on interchange impact.”

Hyland Collaboration is road to the future

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WASHINGTON (3/3/11)--National Credit Union Administration (NCUA) board member Gigi Hyland Wednesday said if economic recovery is to be fully achieved by credit unions, they need to “look for more avenues of growth through collaborative business models.”
Click to view larger imageNCUA board member Gigi Hyland discusses the road to the credit union future, which she says prominently features collaborative efforts among credit unions. (CUNA Photo)
“The credit union movement is still about the people,” she said during her address to the Credit Union National Association’s Governmental Affairs Conference here. “Your power is in mutuality, cooperation, and collaboration,” she said, underscoring that she believes the “bright future” of the credit union movement “resides in collaboration.” Hyland also noted that she believes that the NCUA should not take a regulatory stance that pushes credit unions to be “completely risk averse.” "We need to focus on making sure that you are managing that risk" properly, but not stifling service to members, she said. "(The NCUA) can't waiver from its regulatory responsibilities" of protecting safety and soundness, Hyland said, "but we have to make sure the pendulum does not swing too far" to one side or the other of the risk equation. Hyland, an NCUA member since November 2005, said that going forward “there must be capital reform” for credit unions, both in the form of prompt corrective action (PCA) changes and in pursuing authority for supplemental sources of capital. She said PCA rules should move away from the current approach that can be categorized as a “one-size-fits-all” rule. Hyland also backed the idea of an NCUA review of the definition of a small credit union, set at $1 million in assets in 1997 and updated to $10 million in 2003. She noted that in 2003, the $10 million cutoff represented 54% of credit unions. Hyland suggested that $50 million might be a more realistic threshold now. “The world had changed a lot” since 2003, Hyland remarked, and she suggested it is now time for the agency to study if a new definition of small credit union is in order as a means to increase regulatory flexibility for more institutions. Noting that it is her idea and not necessarily representative of her agency, Hyland said she also favors an idea fostered by Sen. Mark Warner (D-Va.), which promotes a regulatory “Pay Go” plan. Under the plan, a regulatory agency would have to eliminate one regulation for every regulation added to reduce the burden of cumbersome and duplicative rules. Hyland reminded her credit union audience of her agency’s long-term efforts to reduce regulatory burden by reviewing one-third of its regulations each year to eliminate redundant or outdated rules.

Inside Washington (03/02/2011)

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* WASHINGTON (3/3/11)--Although U.S. Treasury Secretary Tim Geithner did not endorse a specific approach that would take the country into the future of its housing finance system, he did offer clues to the future of the government-sponsored housing enterprises (GSE) when he testified Tuesday before the House Financial Services Committee (American Banker March 2). The Obama administration has outlined three options for reforming the GSEs. One option would significantly cut back government support, leaving just the Federal Housing authority and a few other programs to help low-income borrowers with housing needs. A second, similar plan would create a government guarantee that could play a larger role in tough times but be scaled back during an economic boom. The last option would allow a group of private mortgage companies to provide guarantees for mortgage-backed securities. They would have to meet some tough underwriting standards, and only then would the federal government supply reinsurance to the securities holders, for which it would charge a premium to offset taxpayer losses. And holders of the securities would get paid only if shareholders were wiped out ... * NEW YORK (3/3/11)--Formerly the top economic researcher at the Federal Reserve Bank of San Francisco, John Williams has been named to serve as its president/CEO (Dow Jones March 2). Williams' appointment was effective immediately when announced Tuesday; he replaces Janet Yellin, who resigned last October ...

CFPBs Warren plans CU partnership

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WASHINGTON (3/2/11)--Citing credit unions as “an example of giving real value to customers and to communities,” Consumer Financial Protection Bureau (CFPB) architect Elizabeth Warren said that the agency will be an ally to credit unions and help ensure that the goals of the credit union movement become reality.
Click for slide show Consumer Financial Protection Bureau (CFPB) leader Elizabeth Warren told credit unions at CUNA's GAC that she wants to work with them. She said it is her intention that the CFPB will build the perspective of credit unions into the agency from the beginning. (CUNA Photo)
Credit unions must remain a major presence in the economy, Warren said, adding that American families will not be well served in the long run if only a few trillion-dollar financial firms survive these hard economic times. Warren spoke during the Credit Union National Association’s 2011 Governmental Affairs Conference (GAC). She covered her professional and personal work with credit unions in her remarks, saying that the CFPB will remain in constant contact with credit unions as it develops its rules. While admitting that government regulation can sometimes be part of the problem, Warren said that the CFPB is “working with credit unions from the beginning” as the agency streamlines Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA) forms into a single form and works on other financial regulations. Credit unions will be an integral part of the CFPB’s processes, and will not only become part of the process when final rules are issued, Warren said. Warren also noted that her longtime membership in her local credit union, Harvard University Employees CU, has helped her understand the fine detail of both good and bad financial business practices, and recounted a deeply personal story. When her niece got into financial trouble, Warren recommended that she talk with her local credit union. While Warren did not go into details, she did say this: “That credit union will forever be a trusted and important member of our family.” CUNA President/CEO Bill Cheney, Massachusetts Credit Union League President/CEO Dan Egan, Ohio Credit Union League President Paul Mercer, Harvard University Employees CU President/CEO Gene Foley, and senior CUNA staff met with Warren following her speech. The credit union representatives took the opportunity to further discuss regulatory burden concerns, streamlining regulatory and reporting requirements, and what sets credit unions apart from other financial institutions with Warren.

CU NCUA reps repeat CUs control corporate makeup

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WASHINGTON (3/2/11)--As the corporate credit union system continues to be restructured, natural person credit unions should remember that, as members, they own the corporates, and should tell the corporates what services they will want from them in the future, Terry West, president/CEO of VyStar CU and chairman of the Credit Union National Association’s (CUNA) Corporate Credit Union Next Steps Working Group, said on Tuesday. West appeared as part of a panel discussion at CUNA’s 2011 Governmental Affairs Conference. CUNA Chief Economist Bill Hampel moderated the panel discussion on the future of the corporate system, which also featured National Credit Union Administration (NCUA) Deputy Executive Director Larry Fazio and NCUA Office of Corporate Credit Unions Director Scott Hunt.
Click to view larger image Natural person credit unions will play a large part in determining the future of the corporate credit union system, and the structure of those corporate credit unions will be determined in the coming months, panelists at a Tuesday GAC discussion said. From left: CUNA Chief Economist Bill Hampel, VyStar CU President/CEO and CUNA Corporate Credit Union Next Steps Working Group Chairman Terry West, NCUA Deputy Executive Director Larry Fazio, and NCUA Office of Corporate Credit Unions Director Scott Hunt.(CUNA photo)
West advised natural person credit union managements to clearly understand their potential corporate’s business model, perform the necessary research, and have a secondary option if it appears that their first choice will not work out as planned. He also reminded credit unions of the risks of looking outside of the credit union industry for many of the services traditionally provided by the corporates. The NCUA last year finalized several revisions to Part 704, NCUA's rule governing corporate credit unions. The NCUA proposal established a new capital structure for corporate credit unions, including risk-based capital requirements, to provide corporates with a stronger capital base. Under the NCUA’s changes, corporate credit unions will focus more on aiding credit unions in their operations and less on making investments. Hunt said that final versions of a pair of NCUA corporate rulemaking proposals could be released at the agency’s April or May board meeting. One proposal would allow privately insured credit unions and non-credit unions, such as credit union leagues, that are members of a corporate to pay "voluntary" Temporary Corporate Credit Union Stabilization Fund (TCCUSF) assessments. A second proposal would limit credit union membership in corporates to one corporate at a time. Hunt said that while there have been reports of potential corporate credit union mergers in the works, there are currently no merger applications in his office. He also noted that the NCUA is not recommending that any of the corporates pursue consolidation, but said that some may ultimately recognize that consolidation may be a better option for them. Consolidation is ultimately a member decision, Hunt said. The NCUA will not allow the bridge corporates to be involved in any consolidation discussions while they are under agency control. However, once independent, those corporates may pursue consolidation and bring it before the agency for consideration, Hunt added. Fazio reported that the agency is engaging an outside firm to update the valuation of the legacy asset portfolios, and said that information will be available later in the year. Therefore, for now, the total loss estimate of $14 billion to $16 billion still holds. He also said that actual losses recorded thus far amount to about $2.2 billion. He also suggested that this year’s corporate stabilization assessment could be as high as 20 to 25 basis points (bp) of insured shares, rather than the average assessment of around 9 bp that would be necessary to pay down the corporate stabilization over the remaining 11 years of the plan. However, he pointed out that this was due to cash flow needs, and not to any increase in loss estimates. Future assessments, as a result, would be lower, unless future loss estimates increase. He also said that the NCUA plans to provide regular updates on the portfolios in the future.

NCUA official discusses new examiner training

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WASHINGTON (3/2/11)--A National Credit Union Administration ( NCUA) official noted the agency has hired a “boatload” of new examiners in the last two years and is working to put tools in place to bring them up to speed. Melinda Love, director of the office of examination and insurance at the NCUA, said the agency is creating a nationwide training manual, forming a mentoring program, and creating a matrix that leads to better decision making by new examiners. “We try to bring them up the curve as quickly as possible, but it takes time to build a good examiner,” Love said. Love was answering an inquiry during a panel discussion on examinations during a challenging economic environment at the Credit Union National Association’s (CUNA) Governmental Affairs Conference. She said the agency tracks where it sends examiners, so younger examiners aren’t consistently sent to the same credit union. “We have to step up our game, especially at larger credit unions,” Love said. Other panel members included Thomas Candon, chairman of the National Association of State Credit Union Supervisors and deputy commissioner of the Department of Banking, Insurance, Securities & Health Care Administration in Vermont; Mary Ann Clancy, senior vice president and general counsel for the Massachusetts Credit Union League and Credit Union Association of Rhode Island; and Rod Staatz, president/CEO of SECU CU, Linthicum, Md. Staatz and Clancy are members of the CUNA Supervisory Issues Working Group. Love also said that, coming out a difficult economic cycle, the NCUA is focusing on consistency in the examination process. At the same time, the NCUA is more diligent in asking credit unions to report the ways they identify, measure, monitor, and manage risk, she said. Clancy said the examination process has become more transparent in the past decade with roundtables between credit unions and examiners, and guidance from examiners. “Overall, without question, our examinations have been healthy and they’ve been a positive experience, but if it were a perfect world I wouldn’t be sitting up here,” Clancy said. Staatz described a study done by the CUNA Supervisory Issues Working Group where 200 respondents provided answers to a series of questions on their examination's experiences. Staatz said one in five credit unions was dissatisfied with the examinations. When asked about the use of the supervisory appeals process, 3% said they used it, 76% said they didn’t feel the need to, and 21% didn’t take the time to do it. Staatz and Clancy both stressed that CUNA offers a wealth of examination resources developed in large part by the CUNA Supervisory Issues Work Group with the help of regulatory and legal professionals.

Inside Washington (03/01/2011)

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* ALEXANDRIA, Va. (3/2/11)--Comments must be received by May 2 on the National Credit Union Administration’s proposal to remove credit ratings references from its regulations. The proposal, approved for comment at the agency’s last open board meeting on Feb. 17, and which NCUA board member Gigi Hyland acknowledged was a bear to put on paper, would implement a section of the Dodd-Frank Wall Street Reform Act. The act requires each federal agency to review: any regulation issued by such agency that requires the use of an assessment of the creditworthiness of a security or money market instrument; and any references to or requirements in such regulations regarding credit ratings … * WASHINGTON (3/2/11)--Federal Reserve Bank of Boston President Eric Rosengren, in a speech at Boston University, said there are four myths that brought the country to its economic crisis. They are: the real estate market would not decline, securitization protected mortgage-backed assets, the “originate-to-distribute” model had a protective effect on banks, and investment banks could never be hit with a run on short-term funding. Rosengren promoted better stress tests could serve to challenge those myths and shake up belief in them. He said improved stress testing could help directors and regulators better understand what drives risks, both in individual organizations and in the financial system. (American Banker March 2) … * WASHINGTON (3/2/11)--Financial Services Committee Chairman Spencer Bachus (D-Ala.), leading a hearing on the Obama administration’s report on housing finance Tuesday, said that the “new housing finance system” must be based on private capital and not government support. “A toxic combination of implicit government guarantees, lax underwriting standards, a captive (government-sponsored enterprise) GSE regulator, and misguided housing policies here in Washington has led to $150 billion in losses for the American taxpayer,” Bachus said in his opening statement. U.S. Treasury Secretary Timothy Geithner was the sole witness at the hearing …

CU strength in one voice says CUNA chairman

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WASHINGTON (3/2/11)--Credit Union National Association (CUNA) Board Chairman Harriet May told a CUNA Governmental Affairs Conference audience that credit union strength on Capitol Hill comes from presenting a unified message--speaking with one voice--to federal lawmakers on credit union issues. When a divided message comes through, May said, it makes it easy for lawmakers to say, "I'd like to help you but I'm not hearing a consensus." May said that getting legislation through this "divided" Congress will be challenge enough, and that challenge must be tackled with a unified effort and a unified message. May, president/CEO of GECU, El Paso, Texas, even offered a simple
Click to view larger image CUNA Board Chairman Harriet May urged the credit union movement to "speak with one voice" when delivering the credit union message to Capitol Hill. She said that while a united front may be easier to present on issues like interchange fee regulations, the same unity is needed to get legislation through "this divided Congress" on such issues as increased member business lending or supplemental capital. (CUNA Photo)
message--what she called Credit Unions 101--that GAC participants can deliver to their legislators while they are in Washington. "Credit unions are the best way for consumers to conduct their financial business,” May said. “It's as simple as that. And Congress, we and our 92 million members want to be sure it stays that way.” As evidence of what a unified voice can accomplish, May cited the effect of credit unions’ united opposition on the proposed interchange rule. “Key legislators are having buyers’ remorse,” May said. “Influential regulatory officials have cast serious doubts on whether the two-tier system will work. We’re not there yet, but we will continue to press this issue from every possible angle. It’s a challenge, but one made easier by the movement’s unity of purpose and message.” May pointed out how as a national trade association, CUNA has the capacity to work nationwide with state leagues to build consensus and shape the messages that the credit union movement provides to Washington. As an example, she cited the letter CUNA sent to Rep. Darrell Issa (R-Calf.), the new chairman of the House Committee on Government Reform and Oversight, listing rules and regulations that have a negative effect on job growth and efficiency in the credit union system. She acknowledged there are issues, such as business lending and supplemental capital, that don’t touch every credit union, as does the interchange proposal. “I respectfully urge you to take a broader view,” May said. “Those who do need these authorities, it will make them stronger. And that, in turn, makes the movement stronger.” The effect of victories on each of these issues--interchange, small business lending, supplemental capital--as well as others, such as the regulatory burden credit unions face, will build political capital for the future, she said. “We are all in this movement together, for all the right reasons,” May said. “Of many, we are one. One set of shared values. One unified message. One unique industry. The one financial institution that the people of this country can really count on. "Let’s be sure Congress knows it.”

Royce CUs holding the bag on interchange rule

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WASHINGTON (3/2/11)--Speaking before the 2011 Credit Union National
Click to view larger image Speaking to the morning general session Tuesday, Rep. Ed Royce told the CUNA GAC audience that the Federal Reserve Board's proposed interchange feed rule has left small financial institutions “holding the bag.” (CUNA Photo)
Association's Governmental Affair's Conference, Rep. Ed Royce (R-Calif.) said the proposed interchange rule has left small financial institutions “holding the bag.” Royce said Federal Reserve Board Chairman Ben Bernanke has echoed the same concerns as the National Credit Union Administration and the Federal Deposit Insurance Corp.: that the exemption in the proposal for financial institutions under $10 billion in assets is unworkable. “To ensure that small institutions are truly exempt, to ensure that fraud costs are truly accounted for, we have got to slow the process, study the issue and get this right in legislation,” Royce said. “If we fail to do that, then the debit network is going to be weaker and small institutions are going to be at a disadvantage.” Royce also said credit for small businesses is “a way to build our communities.” Business owners in his district have told him they lack access to credit, he said. Introduced by California/Nevada CU League President Diana Dykstra as a “friend of credit unions,” Royce said he will continue to work to expand business lending authority for credit unions. “We have gained a great deal of traction on this issue, and this is just the beginning of our efforts. Sometimes it takes a while to get common sense through the process,” Royce said. Royce railed against the newly formed Consumer Financial Protection Bureau (CFPB), which he called “a massive new government agency” that creates competing sets of regulators. He opined that with the CFPB in place, the government is more likely to dictate the price of financial products, increase the cost of credit and decrease its availability. Also, revisions to the Community Reinvestment Act are “off the table,” according to Royce. He said expansion would be artificial intervention in the housing markets, similar to government-sponsored enterprises that contributed to the financial crisis. Instead, he said, credit unions should focus their efforts on telling legislators how they give back to their communities and talk about legislation that affects their day-to-day operations. “You’re here in force this week,” Royce said. “You’re one of the most engaged groups we see in Washington D.C.” The CUNA GAC wraps up today with credit union visits to Capitol Hill to discuss credit unions' key legislative issues.

Cheney testifies today on Dodd-Frank impact on CUs

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WASHINGTON (3/2/11)--Credit Union National Association (CUNA) President/CEO Bill Cheney is scheduled to testify today before a House Financial Services subcommittee, which is studying the impact of the Dodd-Frank Act on small financial institutions and small businesses. The House financial institutions and consumer credit subcommittee has set three panels of witnesses and representatives from the financial industry and D.C.-based think tanks will also weigh in. The 2,200 pages of the Dodd-Frank financial regulatory reform package, signed into law last year, contains numerous changes to current financial laws, but only about 35 directly impact credit unions. However, Cheney is expected to testify that, for credit unions and their members, the most chilling effect of the Dodd-Frank Act would be the implementation of government controls on interchange fees. He will also detail other statutory restrictions that contribute to the overall regulatory burden of credit unions, or restrict how credit unions may serve their members, such as an arbitrary legislative restriction on credit union member business lending.

CU voices will be heard on Hill Perlmutter

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WASHINGTON (3/2/11)--Rep. Ed Perlmutter encouraged credit unions to fight proposed new interchange fees rules, but he stressed revising them won’t be easy. Addressing the Tuesday morning general session of the Credit Union
Click to view larger image Noting that there was no debate in the U.S. Congress on interchange fee issues prior to their inclusion in a major reform bill late last year, Rep. Ed Perlmutter (D-Colo.) told credit union representatives attending CUNA's 2011 GAC that he backs the idea of delaying implementation. He said credit union voices "will be heard" on the important issue. (CUNA Photo)
National Association’s (CUNA) Governmental Affairs Conference, Perlmutter said credit unions should continue to expect tough opposition from interest groups on the other side of the issue. “There are sympathetic stories on the other side, too,” Perlmutter said of some small merchants who come to Capitol Hill to complain about the free-market system of interchange fees. “You have to recognize this. This is what politics is all about.” But, he encouraged his credit union audience, “Your words will carry a lot of weight as you speak to members of Congress this week.” The Colorado Democrat said the best option for credit unions is to lobby for a delay of the implementation date. He said repeal at this time does not seem likely. "It’s going to be difficult," but credit unions do have influence on this issue, Perlmutter added. Perlmutter also thanked credit unions for their service to their communities and members: “You serve them both well.”

Stivers backs MBL increase to help economy

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WASHINGTON (3/2/11)--Rep. Steve Stivers (R-Ohio) said the nation’s economic problems will be solved a lot faster if the government gets out of the way and allows credit unions to do their job. He said the small business sector can be more effective in easing unemployment if given the opportunity. Stivers added that the U.S. Congress can help speed up growth of this sector by broadening credit union authority to make small business loans to members. Stivers was addressing the Credit Union National Association’s (CUNA) Governmental Affairs Conference (GAC), which concludes tomorrow. Also at the CUNA GAC, CUNA Vice President of Legislative Affairs Ryan Donovan said that CUNA expects that both the House and Senate will see introduction of new legislation to increase the MBL cap “very soon.” CUNA supports efforts to increase the MBL cap to 27.5%, a change
Click to view larger image Rep. Steve Stivers (R-Ohio) said the Federal Reserve Board must "step back and give careful study" to its proposed rules to implement the interchange fee rules carried in the Dodd-Frank Act. (CUNA Photo)
that CUNA has noted would bring $10 billion of new capital to small business in the first year, and add more than 100,000 jobs. CUNA will work in 2011 to get such a provision attached to any congressional legislation intended to stimulate the economy or job growth, Donovan said. Bills that were still pending final action when the final session of the 111th Congress adjourned last year, as was MBL legislation in the House and Senate, need to be reintroduced in the new 112th Congress. On another topic, Stivers, a member of the House Financial Services Committee, also questioned proposed efforts to reform financial regulation. “Only in the federal government can you bring in new people to replace those who have not done their jobs, and still keep the old people around,” he told the Tuesday session of CUNA’s GAC conference. He also said that current proposals to revise interchange fees needed to be revised “in a thoughtful way.”

FinCEN BSA rule reorganization effective now

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WASHINGTON (3/2/11)--As expected,the Financial Crimes Enforcement Network’s (FinCEN) streamlined reorganization of its Bank Secrecy Act (BSA) rules became effective March 1. As part of the reorganization, FinCEN transferred its BSA regulations into a new Chapter X of Title 31 of the Code of Federal Regulations (CFR). The reorganization split the regulations "into general and industry-specific parts, ensuring that a financial institution can identify its obligations under the BSA in a more organized and understandable manner." However, FinCEN has emphasized that it "has not made any substantive changes to the BSA rules." For more on the reorganization, use the resource link below.

Huffington and Matalin give perspective on politics

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WASHINGTON (3/2/11)--Arianna Huffington and Mary Matalin come from opposite ends of the political spectrum but they agreed more than disagreed during a joint appearance Tuesday before the Credit Union National Association’s Governmental Affairs Conference here. Huffington is co-founder and editor-in-chief of The Huffington Post, and Matalin is a political contributor for CNN. In response to questions, both said President Barak Obama misjudged the mandate of his lop-sided presidential victory in 2008. “The president miscalculated about the death of the right and did not respond to the need for jobs,” said Huffington, the liberal commentator. Matalin, a conservative pundit, said voters were “largely satisfied with health care…but Obama thought he would translate his popularity into policy.” Matalin and Huffington became dear friends, they said, when their teenage daughters developed a friendship. Both stressed during the GAC appearance the need for the nation to return to the ideals of the country’s founding fathers.