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Inside Washington (05/06/2009)

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* WASHINGTON (5/7/09)--National Credit Union Administration (NCUA) Chairman Michael Fryzel said the Senate’s 91-5 vote in favor of the agency’s Corporate Credit Union Stabilization Fund and accompanying provisions such as increased borrowing authority was “an unmistakable affirmation by lawmakers that the credit union industry can and will take care of its own problems.” In a statement Fryzel lauded the strong support given to the Stabilization Program by the credit union movement and added, “As the legislation moves to the House, I encourage a similar level of activism by credit union leaders across the country.”… * WASHINGTON (5/7/09)--Any action on H.R. 1728, the Mortgage Reform and Anti-Predatory Lending Act of 2009, will have to wait until today after the House on Wednesday moved to postpone a vote on the bill. The bill, introduced by Reps. Brad Miller (D-N.C.) and Mel Watt (D-N.C.) in late March, would fight against some predatory lending practices and attempt to push the mortgage market toward more conventional fixed rate mortgages … * WASHINGTON (5/7/09)--Federal Reserve Board Chairman Ben Bernanke said Tuesday during testimony to the Joint Economic Committee that the Fed would release more information on how many institutions borrow money from its lending facilities and what kinds of collateral they are using (American Banker May 6). Bernanke’s announcement comes after policymakers complained about the Fed’s cash infusion to markets without congressional input. The Fed chief also told the committee that the central bank is committed to transparency and openness and continues to expand the range of information available on its website as its review of disclosure practices proceeds. Bernanke did not reveal results of banks’ stress tests during the testimony, but said that any bank needing more capital will be able to receive it from stock conversions and private sources--but not from the Treasury ... * WASHINGTON (5/7/09)--Federal regulators were faulted for the failure of Alpha Bank and Trust last October in Alpharetta, Ga., by a watchdog report issued Tuesday. The Federal Deposit Insurance Corp.’s inspector general said regulators should have been worried that the bank was growing beyond its business plan (American Banker May 6). When it failed, Alpha had $334 million in assets after being in business for 29 months. Poor underwriting, a reliance on high-cost funding, concentration on high-risk construction and residential development loans, and few risk management controls caused it to fail ... * WASHINGTON (5/7/09)--Richard Hunt is the new president of the Consumer Bankers Association (CBA), the trade group announced Tuesday. His role will be effective June 1. He succeeds former president Joe Belew, who died in January ... * WASHINGTON (5/7/09)--The public’s attention to stress tests conducted at 19 of the nation’s largest banks may negate the “whole point of stress testing,” according to Jaidev Iyer, a former risk management chief at Citigroup. The results are expected to be released today. Discussion of the tests from the Obama Administration to others could prevent regulators from being candid, said Bradley Sabel, former bank supervisor with the Federal Reserve Bank of New York. There is value to keeping discussions between banks and examiners private, and that fear of a market panic could prevent regulators from telling banks to make significant operational changes, he said. Simon Johnson, former chief economist with the International Monetary Fund, said the tests were a “clever stalling action.” Others, including Kevin T. Jacques, finance professor and former Treasury employee, said the Treasury may have been backed into a corner and felt that if it didn’t release the test results, the public would wonder what it was hiding ...

CUNA seeks comment on SAR confidentiality plan

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WASHINGTON (5/7/09)--The Credit Union National Association (CUNA) has issued a comment call on a proposed rule change that would clarify the scope of confidentiality prohibitions for Suspicious Activity Reports (SARs) and harmonize the current regulations. The changes, proposed by the Financial Crimes Enforcement Network (FinCEN), would also address a prohibition against the disclosure of a SAR by the government, clarify that standards applicable to government SAR disclosures are consistent with the goals of the Banker Secrecy Act (BSA), and incorporate elements of the USA Patriot Act into current safe harbor provisions. FinCEN has also proposed separate guidance addressing the sharing of SARs with some affiliates. Under the proposal, individuals and organizations would be prohibited from disclosing the existence of a SAR target or any information regarding a SAR filing to any person or organization, with, however, limited exceptions. Potential exceptions to this rule include the disclosure of any underlying information that could be discoverable under the Federal Rules of Civil Procedure and any information that should be used to fulfill financial reporting or Bank Secrecy Act (BSA) monitoring needs. The proposal would also prevent financial institutions and their employees from using SAR confidentiality prohibitions to obstruct the investigations of regulators or federal, state or local law enforcement. Among the issues CUNA is asking credit unions to comment on are:
* Whether the terms or provisions used for consistency across financial institutions are inappropriate for any one type of financial institution based on its specific characteristics; * If any important provisions from the existing regulations have been unintentionally or inappropriately eliminated or confused by the proposed regulations; * What additional or alternative methods could be used to strengthen the confidentiality of SARs; and * If some of the regulations should be revised to increase consistency between the various rules.
Financial institutions are required to file a SAR if any insider abuse, money laundering, or other violations of the BSA are discovered or suspected. Comments are due to CUNA by May 22. They are due to FinCEN by June 8. To read CUNA's Comment Call or the SAR report proposal, use the links below.

New Internet gambling bills unveiled

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WASHINGTON (5/7/09)—Rep. Barney Frank (D-Mass.) is launching a new attempt to revise conditions imposed by a controversial 2006 law that, in part, forces financial institutions to block restricted Internet gambling transactions. Under the 2006 Unlawful Internet Gambling Enforcement Act (UIGEA), financial institutions must establish and implement policies and procedures to identify and block certain online gambling transactions, or rely on those established by the payments system. The Credit Union National Association (CUNA), and many others in the financial services industry, have warned that aspects the 2006 law are difficult, if not impossible, to implement. CUNA has also warned that an increased policing role, as demanded by UGIEA, could interfere with financial institutions' fundamental business to provide financial services to their communities. Frank introduced two bills Wednesday, one of which would delay the implementation of UIGEA rules for a year beyond their current effective date of Dec. 1, 2009. A companion bill, The Internet Gambling Regulation, Consumer Protection, and Enforcement Act of 2009, would establish a federal regulatory and enforcement framework under which Internet gambling operators could obtain licenses authorizing them to accept bets and wagers from individuals in the United States, according to a release from Frank. The Massachusetts Democrat is chairman of the House Financial Services Committee. CUNA Vice President of Legislative Affairs Ryan Donovan said Wednesday that CUNA would strongly support the one-year moratorium for the effective date. He reiterated that while CUNA remains neutral on the issue of whether online gambling should or shouldn’t be legal, the group strongly opposes forcing credit unions being placed in a position to police the activity. He said Frank’s second bill “doesn't put us in the position of enforcing the law.” CUNA's Valerie Moss, director of compliance information, said—from a compliance angle--credit unions should keep an eye on the bills’ progress. “However, they should not postpone moving ahead with compliance efforts at this point in the hope that the UIGEA requirements will be delayed or eliminated. Unfortunately, we can't count on that happening,” she said. Use the resource link below to read details of Frank’s bills and to access background information on UIGEA.

CU stabilization insurance fund mods clear Senate

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WASHINGTON (5/7/09)—The Senate on Wednesday voted 91-5 to approve S. 896, the Helping Families Save Their Homes Act, which now includes provisions to create a temporary Corporate Credit Union Stabilization Fund and permit credit unions to spread the cost of National Credit Union Share Insurance Fund (NCUSIF) replenishment over a longer period of time. The bill next will be sent back to the House to work out differences between the Senate bill and the House version, H.R. 1106. The National Credit Union Administration’s (NCUA) plan for a stabilization fund wasn’t included in the House package; however key members said last week that they would favor acting expeditiously and including the language in a final bill. Credit Union National Association (CUNA) President/CEO Dan Mica said Wednesday that time is of the essence for final passage: “Credit unions are covering the costs related to stabilizing corporate credit unions, and the legislation will allow them to spread this cost out over time rather than in just one lump sum this year.” “Spreading these costs over multiple years means that credit unions can use the funds, that otherwise would have been used to pay the assessment immediately, to make credit available to their members right away – a needed component to help our economy get back on its feet,” Mica said, adding, “We now urge the House to just as quickly take up and adopt the Senate legislation.” Other credit union provisions in S. 896, adopted as an amendment offered by Sens. Christopher Dodd (D-Conn.) and Richard Shelby (R-Ala.), would raise the NCUA’s borrowing authority to $6 billion, from the current ceiling of $100 million. They also would authorize $30 billion in NCUA emergency borrowing authority. Another provision important to credit unions, the bill would extend—for four years—the higher, $250,000 federal share and deposit insurance ceiling due to expire at the end of the year. The Senate vote followed a grassroots call to action by CUNA and the leagues that resulted in an estimated 20,000 contacts from credit unions to Capitol Hill in support of the Senate language mitigating the corporate costs. Though S. 896 contains many legislative changes that are of great importance to credit unions, the bill is mainly aimed at helping homeowners avoid foreclosure by encouraging loan modifications for at risk mortgages. In earlier comments delivered on the Senate floor, Sen. Richard Durbin (D-Ill.) said he was “not giving up” on judicial mortgage modification provisions that were defeated by a six-vote margin late last month. The mortgage provisions, also known as the cramdown amendment, would have allowed bankruptcy judges to modify the terms of existing mortgages.