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Treasury announces first 2010 round of New Markets Tax Credits

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WASHINGTON (4/9/10)--The U.S. Treasury’s Community Development Financial Institutions (CDFI) Fund on Thursday announced that the 2010 round of the New Market Tax Credit (NMTC) program has begun. Credit unions are among those eligible to participate in the NMTC, which seeks to spur the investment of new private sector capital into low-income communities by permitting individual or corporate taxpayers to receive a credit against federal income taxes for making Qualified Equity Investments (QEIs). Those investments must be made in designated Community Development Entities (CDEs). The Treasury's Community Development Financial Institutions (CDFI) Fund allocates the tax credits annually through a competitive application process. “The credit provided to the investor totals 39 percent of the investment in a CDE and is claimed over a seven‐year credit allowance period,” according to the release. In comments accompanying the release, CDFI Fund Director Donna Gambrell said that the NMTC “remains a critical tool” in the CDFI’s “efforts to ensure that economic recovery reaches the hardest-hit communities.” The $5 billion in tax credit authority made available through the NMTC “will help finance small businesses, grocery stores, healthcare centers, charter schools and job-training sites and will help create, save or support local jobs where they are needed most,” Gambrell added. Organizations that have received these credits “have raised $15.8 billion in equity investments” since the program began in 2002, according to the release. Applications for CDE certification must be received by April 26, and applications for the NMTC itself must be received by June 2. For the CDFI Fund release, use the resource link.

WOCCU briefs Hill staff on Afghanistan plan expansion

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WASHINGTON (4/9/10)--The World Council of Credit Unions (WOCCU) is working to expand the number of member-owned Islamic investment and finance cooperatives (IIFC) in Afghanistan, and WOCCU senior vice president Barry Lennon told an audience of congressional staffers on Thursday that he “expects more growth” as word of the financial cooperatives spreads. Afghanistan’s IIFCs, which WOCCU says are growing by 1000 new members each month, held $8 million in total assets at the end of 2009. WOCCU will establish the Afghanistan IIFC Banking Association to oversee those IIFCs and “provide a framework for consolidation.” (See related story: WOCCU expands Islamic CUs in Afghanistan) The U.S. Agency for International Development (USAID) late last year awarded WOCCU $60.5 million to expand financial services in southern and eastern Afghanistan. The IIFCs are, in many cases, the only option for financial services in rural areas of Afghanistan. However, the pending expansion of these IIFCs will bring them to the capital city of Kabul, where several Afghan banks currently operate.

MBL sees grassroots heat during Hill break

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WASHINGTON (4/9/10)--When Congress returns to Washington on Monday, legislation that would lift the current 12.25% asset cap on member business lending (MBL) should be one of many issues up for debate and, possibly, a vote. And while the upcoming seven-week legislative session will undeniably be a busy one, state credit union leagues and independent backers have recently sought support for MBL legislation through district town hall meetings, district office visits, advertising, and pro-MBL editorials in the local press. State credit union leagues have been extremely active as the MBL push nears its conclusion, with the Iowa Credit Union League utilizing its relationship with the office of the U.S. Secretary of Agriculture, Tom Vilsack, to showcase the need for MBL cap increase to help rural areas and encouraging credit union staff to visit district congressional offices. The Iowa League also made the case for an MBL cap increase via print advertisements as well as an editorial in the Des Moines Register. The Michigan Credit Union League, in addition to a Lansing State Journal editorial, will back MBL through an advertisement in the D.C.-based publication Politico, and several other state leagues have actively sought out opportunities to spread the MBL message through their own local news sources. However, the leagues have not been the only ones to publicly back lifting the MBL cap in the press, as San Antonio Express News business columnist David Hendricks spoke up in support of lifting the cap. The leagues, individual credit unions, and, simply, individuals have spoken directly with their representatives. The Arizona credit union league, along with 25 attendees from 6 credit unions throughout the state, met with Ann Kirkpatrick (D-Ariz.), and the Credit Union Association of New Mexico met with Reps. Harry Teague (D) and Martin Heinrich (D) in Albuquerque on March 29. During that meeting, one attendee who was not attending the meeting on behalf of any credit union or organization noted that many small businesses in the area were being turned down by banks, and urged the legislators to lift the MBL cap. Kirkpatrick, Teague and Heinrich are all current supporters of Rep. Paul Kanjorski’s (D-Penn.) bill that would lift the member business lending cap from 12.25% to 25% of assets and exclude loans less than $250,000 from being defined as a "business loan." Similar legislation has also been introduced by Sen. Mark Udall (Colo.). A total of 102 other legislators have currently signed on to support the bill.

Inside Washington (04/08/2010)

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* WASHINGTON (4/9/10)--During a hearing Wednesday before the Financial Crisis Inquiry Commission, former Federal Reserve Board Chairman Alan Greenspan took little blame for the nation’s financial crisis. Instead, he urged banks to hold more capital and require higher collateral (American Banker April 8). More capital and liquidity is the only way to prevent another crisis, Greenspan said. During the hearing, Brooksley Born, panelist and former regulator, asked Greenspan if the Fed failed to meet its responsibilities during the crisis. Greenspan argued the banking system has been undercapitalized for the past 50 years. He also blamed Congress, saying that while some lawmakers criticize him for not creating rules that would curb abusive subprime lending, Congress would have been upset if he had created the rules. Greenspan was the first to testify in a three-day hearing by the commission--which was appointed by Congress to determine the cause of the nation’s financial meltdown. Comptroller of the Currency John Dugan also told the commission that a key factor in the financial crisis was poor credit underwriting, particularly by nonbank lenders that were subject to little or no regulation. “I believe the government should establish minimum, common sense underwriting standards for mortgages that can be effectively applied and enforced for all mortgage lenders, whether they are regulated banks or unregulated mortgage companies,” he said ... * WASHINGTON (4/9/10)--Bank of America Corp. said it will support legislation to create a consumer financial protection agency (CFPA). BoA has remained neutral on the subject until now (American Banker April 8). On Wednesday, the bank said the agency should focus on regulating products--not companies--and cover banks and nonbanks. BoA executives also said states should not impose federal or state standards on national banks. The Credit Union National Association (CUNA), said it could support the creation of a CFPA provided that several concerns are addressed. While CUNA agrees that the CFPA should have complete rulemaking authority on consumer protection issues, the examination, supervision and enforcement of consumer protection should be entrusted to the prudential regulator. Also, the CFPA regulatory structure should not stifle competition or innovation. Credit unions should have the ability to decide what products are appropriate to offer their membership, CUNA said ... * WASHINGTON (4/9/10)--Securities industry advocates say that the Securities and Exchange Commission’s (SEC) proposed risk-retention plan could have unintended consequences, such as driving up rates for consumers (American Banker April 8). However, SEC Chairman Mary Schapiro said Wednesday that securitization led to poor lending practices because it encouraged lenders to shift their risk of loss to investors. SEC’s proposal would require more disclosure of loan-level information such as how losses are divided among investors. Issuers also would be required to wait five business days between filing a prospectus and selling any securities to give investors more time to look at the data. The SEC proposal has a 90-day comment period ...

CUNA forms Corporate CU Next Steps Working Group

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WASHINGTON (4/9/10)--Credit Union National Association (CUNA) Chairman Kris Mecham has appointed 14 members to CUNA’s Corporate Credit Union Next Steps Working Group, CUNA president/CEO Dan Mica announced on Thursday. Following the announcement, Mica said that he looks forward to the recommendations the new group will make to the CUNA board on ways to ensure that natural person credit unions of all sizes continue to have access to key correspondent services including payments, settlement, liquidity and investments. "This working group will provide a comprehensive vision of a reasonable, dependable future for credit union access to these services--one that will not pose undue risk to the credit union system, and which will involve a minimum of cost and service disruption," Mica added. He emphasized that ensuring credit unions have reasonable options for services, preferably from corporates or others within the credit union system that can manage their risks well, is the association's key objective. The working group, which is chaired by Jacksonville, Fla.-based Vystar CU’s CEO Terry West, is comprised of many continuing members of CUNA’s recent Corporate Credit Union Task Force, as well as five new members. The new members are Jim Regan, CEO of Digital CU in Marlborough, Mass., Mark Lau, CEO of Denver Fire Department CU, Gary Parker, CEO of Waco, Texas’s 1st University CU, Dennis Flickinger, president of York, Penn.’s First Capital FCU, and Ohio Credit Union League president Paul Mercer. CUNA Chairman and president/CEO of Salt Lake City’s Deseret First CU Kris Mecham, joins Rich Helber, CEO of Miami, Fla.-based Tropical Financial CU, Tom Dorety, CEO of Tampa, Fla.-based Suncoast Schools FCU, Frank Michael, CEO of Stockton, Calif.’s Allied CU, Jane Watkins, CEO of Richmond, Va.’s Virginia CU, Tennessee Credit Union League president Tom Gaines, GECU CEO Harriet May, and Georgia Credit Union League president Mike Mercer as holdovers from the previous group. While the group will conduct much of its business via teleconference, it is planning to meet in May and should likely have formulated its recommendations by the end of the summer.

2.5 million-asset Conn. CU closed

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ALEXANDRIA, Va. (4/9/10)— Deficiencies in credit administration, lending practices, internal controls and auditing were cited as reasons Connecticut Banking Commissioner Howard F. Pitkin closed a $2.5 million-asset credit union in Bloomfield. The National Credit Union Administration (NCUA) announced Thursday that it accepted appointment as receiver and liquidator of South End Mutual Benefit Association, Inc., a state-chartered credit union that was chartered in 1945, and which served the residents of Hartford County and nearby communities. The credit union served 385 members at the time of its liquidation and the NCUA said its Asset Management and Assistance Center will issue checks within a week to members holding share accounts. Member accounts are insured up to at least $250,000 by the National Credit Union Share Insurance Fund, the federal fund managed by NCUA and backed by the full faith and credit of the United States government. The Connecticut Department of Banking said it took the supervisory action against South End Mutual Benefit Association after discussions with credit union management revealed its difficulty in meeting regulatory requirements and addressing deficiencies. It is the fifth federally insured credit union liquidated in 2010.

Frank schedules hearing on CRA perspectives

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WASHINGTON (4/9/10)—The House Financial Services Committee will take a look at “perspectives and proposals” related to the Community Reinvestment Act (CRA) during an April 15 hearing. The session is scheduled for 10 a.m. (EDT) and a witness list has yet to be announced. In March, during a hearing on community development financial institutions, House Financial Services Committee Chairman Barney Frank (D-Mass.) suggested that he and committee colleague Rep. Maxine Waters (D-Calif.) would soon re-examine and consider expanding the reach of CRA. CRA was enacted in 1977 in response to a practice known as “redlining,” which refers to the failure to lend to lower-income and minority neighborhoods by banks and thrift institutions during the 1960s and early 1970s. The purpose of the law is to ensure that for-profit financial institutions adequately meet the financial service needs of all parts of the communities from which they draw deposits. The Credit Union National Association (CUNA) opposes any effort to include credit unions under CRA requirements. CUNA maintains that by their nature and mission of “people helping people,” credit unions already meet the financial needs of a broad spectrum of people that fall within their fields of membership, and play an active role in community development and growth. By virtue of their membership requirements, credit union products and services are offered within local communities and CRA requirements would add an unnecessary and costly regulatory burden to credit unions that already meet and exceed the intent behind CRA, CUNA says.