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Inside Washington (04/07/2009)

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* WASHINGTON (4/8/09)--On Tuesday, The New York Times published an obituary for Ed Callahan, former National Credit Union Administration chair and president/CEO of Patelco CU, San Francisco. Dan Mica, Credit Union National Association president/CEO, was quoted in the article. “Ed Callahan largely shaped the credit union system as we now know it,” Mica said. “Ed Callahan knew that we had to have solid, stable institutions. He knew we needed proper capitalization of the insurance fund, and he tried to minimize unnecessary regulations” ... * WASHINGTON (4/8/09)--Financial observers say that the Federal Deposit Insurance Corp.’s (FDIC) involvement in rescuing the financial sector may be compromising its mission. The FDIC’s borrowing power is set to triple, it has guaranteed $335 billion of debt incurred by banks and holding companies, and it could be given oversight of systemically significant nonbanks (American Banker April 7). The changes could compromise the agency’s independence and dilute its mission to protect deposits, observers said. Rep. Michael Capuano (D-Mass.) said in a March hearing that the FDIC’s role as a purchaser of toxic assets is jeopardizing the fund. However, some FDIC officials say the agency is ready to take on new responsibilities because it has a history of managing troubled assets and has experience from dealing with the savings and loan crisis ... * WASHINGTON (4/8/09)--The U.S. economy is in a state of panic, Federal Reserve Board Gov. Kevin Warsh said in a speech this week. The panic is the result of faulty private practices and flawed public policies. “Panics involve losses of confidence in the financial system, when even sound firms find it difficult to borrow. Panics are threatening to economic well-being. Panics take even less kindly to, and often result from, uncertainty. And panics place a greater burden on the deftness of policy responses than recessions alone,” Warsh said. “Financial stability demands policy stability--and policy preferences must be communicated clearly, credibly, and consistently and backed by concrete action,” he concluded ... * WASHINGTON (4/8/09)--The Treasury this week released additional guidance for potential investors in the securities portion of the Public Private Investment Program. The guidance extends the deadline for applying to the program to April 24. Treasury expects to inform applicants regarding preliminary qualification on or before May 15. Applications should be e-mailed. The program’s goal is to restart the market for legacy securities, allowing banks and other financial institutions to free up capital and stimulate the extension of new credit. It also seeks to maximize the inflow of private capital into the market while protecting taxpayers ...

Mica--Include CUs in Treasury capital assistance for mutuals

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WASHINGTON (4/8/09)--Credit unions should be included in the Treasury’s capital assistance program for mutual financial institutions, the Credit Union National Association (CUNA) said in a letter to Treasury Secretary Timothy Geithner Monday. A recent letter sent to Geithner by Rep. Barney Frank (D-Mass.) and nine members of Congress indicates that the Treasury could begin drafting standards for the program. CUNA President/CEO Dan Mica urged Geithner to work with the National Credit Union Administration (NCUA) to ensure that credit unions can access the capital assistance. NCUA Chairman Michael Fryzel wrote to Geithner on Jan. 27 asking that federally insured credit unions be given access to Troubled Asset Relief Program funds. CUNA wrote former Treasury Secretary Henry Paulson and Interim Assistant Secretary Neel Kashkari with similar concerns. “Since the sending of these letters, credit unions’ need for access to TARP funds has become crystal clear,” Mica wrote. “Credit unions did not contribute to the subprime crisis. But in those areas of the country where housing prices have suffered major declines, and where unemployment has spiked, otherwise healthy credit unions are suffering an erosion of their capital that reduces their ability to make new loans.” Mica invited Geithner to meet with him to discuss assistance and noted that CUNA continues to talk with NCUA and offices on Capitol Hill about these issues. Mica added that there has been "clear congressional intent that smaller, mutually structured institutions such as not-for-profit credit unions be given access to TARP (or Financial Stability Plan) capital programs on terms comparable to those offered to for-profit banks."

NASCUS Tighten regulatory standards for corporates

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ARLINGTON, Va. (4/8/09)--The National Credit Union Administration (NCUA) should enhance supervision, tighten regulatory standards for the corporate system and assess risk problems before addressing structural changes, the National Association of State Credit Union Supervisors (NASCUS) said in a comment letter Friday. NASCUS filed comments regarding NCUA’s Advanced Notice of Proposed Rulemaking on Part 704, Corporate Credit Unions. NASCUS urged NCUA to:
* Resist a rush to judgment on restructuring the corporate credit union system; * Explore if a lack of proper application of regulation and oversight contributed to the current events; * Avoid labeling all credit unions as unsophisticated by unilaterally declaring some activities as too complicated and risky for any credit union; and * Preserve equal opportunity for all corporates to compete so long as they remain safe and sound and retain member support.
NCUA should find what flaws exist in the corporate system and request that the NCUA Office of the Inspector General perform a material loss review, the state regulators’ group said. The agency also should discuss with state regulators how regulatory systems can improve oversight, identify systemic risk factors, and create an examination team of state and federal regulators to concentrate on systemic risk in the corporate system, NASCUS said. NASCUS cautioned against regulation that would unnecessarily or negatively impact safe and sound corporate credit unions that have properly managed their investments and remain fully supported by their members.

NCUA receives 450 comments on ANPR for corporates

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ALEXANDRIA, Va. (4/8/09)--The National Credit Union Administration (NCUA) received 450 comments on its advance notice of proposed rulemaking (ANPR) regarding the corporate credit union system and its regulation. NCUA is evaluating corporates’ role in the credit union system--including their membership, structure, size and services. NCUA also is considering whether to amend Part 704, the corporate credit union regulation, to clarify or revise provisions that include capital, permissible investments, management of credit risk and liquidity, and corporate governance. The initial response to NCUA’s request for comments was positive, according to NCUA Chairman Michael Fryzel. “This process will be a careful and deliberate one, especially given the broad scope and complexity of the issues before us. At the same time, I intend to move forward with all appropriate speed and diligence,” he said. “The corporate situation warrants a new set of rules that will facilitate the creation of a safer, stronger, and more financially viable network of corporate credit unions, and NCUA must take a wide-ranging look at all options and then act decisively.” The Credit Union National Association (CUNA) and the Corporate Credit Union Task Force encouraged credit unions to share their views with NCUA on the issues raised by the ANPR. “We are glad that a number of credit union folks took time to consider these matters and put their comments together; the input can only help the process,” said task force Chair Terry West. “CUNA will be reviewing the comments carefully and continue to talk with NCUA to help ensure the interests of natural person credit unions are foremost as NCUA considers changes to the corporate credit union system.” To see the ANPR and comments, use the link.