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Inside Washington (06/01/2010)

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* WASHINGTON (6/2/10)--Lawmakers hope to sign off on the regulatory reform bill before the July 4 recess, but they face a huge task of enacting about 120 required rules and completing mandated reports, said American Banker (June 1). An analysis by Sullivan & Cromwell indicated that more than 250 required and recommended studies and rulemakings are in the Senate bill. Margaret Tahyar, partner at Davis Polk, told the newspaper that she wondered when regulators will find the time to tackle the rules and studies. Tahyar estimated 125 rulemakings under the Senate bill, 45 reports or studies, and 33 rulemakings that agencies are permitted to complete. More than a dozen agencies would be involved, she said. The Senate passed its version of the regulatory reform bill May 20. The Credit Union National Association worked with lawmakers and sought many improvements on behalf of credit unions that were included in the bill: retention of the National Credit Union Administration (NCUA) as the prudential regulator of credit unions; inclusion of language that directs a new Bureau of Consumer Financial Protection to guard against burdening credit unions and other financial institutions with burdensome duplicative regulations by ensuring that outdated, unnecessary, or unduly burdensome regulations are regularly identified and addressed to reduce unwarranted regulatory burdens; and designation that the NCUA examine credit unions with less than $10 billion in total assets for compliance with consumer protection regulations ... * WASHINGTON (6/2/10)--The Federal Reserve has scheduled three small-value auctions of term deposits through its Term Deposit Facility over the next two months. The first auction, June 14, will offer $1 billion of 140-day term deposits. The second auction, June 28, will offer 28-day term deposits. The third auction, July 12, will offer 84-day term deposits. The Fed may schedule up to two more auctions later this summer ...

CUNA Fiduciary duty corp. rules need greater clarity

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WASHINGTON (6/2/10)--The Credit Union National Association (CUNA) in a comment letter asked the National Credit Union Administration (NCUA) to clarify credit union directors’ "existing fiduciary duties” as well as how state corporate laws “apply to federal credit unions on issues not addressed by the Federal Credit Union Act (FCUA) and NCUA regulations.” Doing so “would also protect member rights without having negative operational consequences” and “would be consistent with current NCUA policies as well as the legislative history and judicial interpretation of the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA) provisions on which the proposed rule is premised,” the CUNA letter added. The NCUA earlier this year proposed a significant rewrite of portions of Sections 701, 708a, and 708b of its rules to address the fiduciary duties of federal credit union directors, credit union-to-bank mergers, and charter and insurance conversions. While the NCUA’s proposed prohibition on director indemnification is, according to CUNA, “unnecessary” and could make it more difficult for federal credit unions to “find qualified, volunteer board members,” CUNA wrote in support of “ensuring directors should understand the finances and balance sheet of the credit union they serve.” “However, it should be the credit union board's collective responsibility to ensure this is the case for each board member and not an authority that an examiner could enforce against an individual director,” and credit union boards “should have a written policy that could be reviewed” by examiners, CUNA added. Generally, CUNA “strongly” urged the NCUA “to support greater regulatory relief for credit unions because credit unions continue to face a challenging business and regulatory environment,” adding that the NCUA’s rules, as proposed, “would increase the complexity and lead times of the affected transactions, especially for credit union to credit union mergers.” For the full letter, use the resource link.

FHFA seeks improved GSE funding for underserved communities

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WASHINGTON (6/2/10)--The Federal Housing Finance Agency (FHFA) has published for public comment a proposed rule that would require government-sponsored entities (GSEs) Fannie Mae and Freddie Mac to “serve very low-, low- and moderate-income families” in the “manufactured housing, affordable housing preservation, and rural markets.” The FHFA proposal would require Fannie and Freddie to “take actions to increase the liquidity of mortgage investments and improve the distribution of investment capital available for mortgage financing for underserved markets while adhering to the requirements of conservatorship.” Fannie Mae and Freddie Mac were placed into conservatorship in 2008 in a bid to reduce the uncertainty in the financial markets regarding GSE bonds and mortgage-backed securities. The GSEs would be “required to provide an underserved markets plan” on which those entities would be assessed. The FHFA proposal would create a method for evaluating the GSE’s performance in underserved markets. According to the release, the FHFA would evaluate the GSEs use of new loan products and underwriting guidelines and would judge the extent of their “outreach to qualified loan sellers.” The FHFA would also evaluate the volume of loans purchased by the GSEs and the “amount of investments and grants in projects that assist in meeting the needs of the underserved markets.” For the full FHFA release, use the resource link.

Grassroots interchange opposition strong and growing

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WASHINGTON (6/2/10)--While the halls of Congress have emptied for the week, grassroots credit union advocacy regarding interchange legislation continues this week through both legislator-led town hall meetings and credit union activism on several fronts. One of those fronts is a Credit Union National Association-backed effort to verbally and electronically reach out to representatives, and this communication effort resulted in over 80,000 individual contacts as of Tuesday. CUNA is asking credit union backers to urge their legislators to oppose federal intervention into the current interchange rules. An amendment offered by Sen. Richard Durbin (D-Ill.) which was successfully added to the Senate’s regulatory reform package would direct the Federal Reserve to issue regulations to govern interchange fees charged for debit card transactions. CUNA has recently said that this rule change forces the Fed into the role of a price-fixing body, when interchange fees should be driven by market forces. State credit union leagues have also chipped in to back credit union concerns, and Virginia- and Louisiana-based credit union leagues are among those that have joined state-level small banking associations to publicly oppose federal interchange intervention. Illinois Credit Union League President/CEO Daniel Plauda also publicly opposed the interchange changes, writing in a Springfield Journal op-ed that the “reality” of the proposed interchange legislation is that merchants are attempting to “push costs directly into the pocketbooks of the very people who use [the convenient card payment system] every day.” The interchange amendment will also “destroy the ability of small issuers, such as credit unions,” to provide debit and credit card services to their customers and members. Another opposing voice is some state governments, with The Washington Post on Tuesday reporting that a number of state treasurers are considering contacting federal lawmakers to detail their own concerns that proposed interchange fee limits “could endanger state programs that use prepaid cards to dispense crucial benefits.” As reported in the Post, a total of 47 states distribute some benefits via prepaid cards. The Post article also noted that retailers could potentially turn away customers that use government-provided prepaid cards or force those customers to meet an established minimum purchase amount to avoid using another form of payment.

CDFI launches 2010 fin. ed. and counseling pilot

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WASHINGTON (6/2/10)--The U.S. Treasury’s Community Development Financial Institutions (CDFI) Fund on Tuesday announced that the 2010 round of it’s Financial Education and Counseling (FEC) Pilot Program, which awards funds to organizations that provide financial education services to potential homebuyers, has begun. Educational services, for the purposes of the FEC Program, may be activities that increase the financial knowledge and decision-making capabilities of homebuyers and assist them in developing budgets, increasing their savings, reducing their debt, financing or planning for major purchases, and generally improving financial stability. In a release, CDFI Fund Director Donna Gambrell said that the FEC program’s educational initiatives “continue to be vital tools for economic development, especially when they benefit prospective homebuyers in distressed communities.” Congress appropriated $4.15 million in funding for the 2010 edition of the FEC program, which was established last year. Of that $4.15 million, $3.15 million will be made available to organizations located in Hawaii. The remaining $1 million will be granted to a number of organizations that applied for funds during 2009 but were not helped due to the large number of applications received. Applications for the 2010 round must be received by July 8. For the CDFI release, and application materials, use the resource link.

CUNA brings interchange message to Treasury

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WASHINGTON (6/2/10)—Assistant U.S. Treasury Secretary for Financial Institutions Michael Barr listened to the Credit Union National Association (CUNA) delineate credit union concerns regarding pending interchange legislation, in a private meeting Monday. During the meeting, CUNA President/CEO Dan Mica also hand-delivered a letter for U.S. Treasury Secretary Timothy Geithner urging him to protect credit unions from becoming collateral damage as a result of interchange provisions included in the Senate’s regulatory restructuring legislation, which is pending consideration by a House and Senate Conference Committee. The pending interchange amendment would require government intervention in what is now a free-market process—setting the rate of interchange fees merchants pay for the benefits associated with electronic payments. In the meeting with Barr and letter to Geithner, Mica underscored to the Treasury that the interchange provisions are the “most serious threat” currently facing credit unions. Mica, with senior CUNA staff, told the Treasury officials that CUNA believes the Sen. Richard Durbin (D-Ill), who drafted the interchange language, had and has no intention of harming credit unions. “Indeed he instructed his staff to try to work with the Illinois Credit Union League and CUNA to improve the legislation,” Mica noted. However, the CUNA chief added, “While we worked to the very last minute on this, we were not able to achieve sufficient improvements to make the language workable for credit unions.” “(W)e cannot sit by and let credit unions and their members suffer unintended consequences that will result in direct and substantial reductions in credit unions’ net worth--at the very time every reasonable policy maker is encouraging financial institutions to maintain and build ample capital,” Mica said. CUNA also used the opportunity of the meeting and letter to thank Treasury for the Obama administration’s efforts to support an increased member business lending (MBL) cap for credit unions, and for the department’s work to help craft legislation to accomplish that objective. In an important development last week, Treasury said it "could support proposals to increase credit union (MBL) provided safety and soundness concerns are addressed." The department forwarded legislative language to Capitol Hill, which it had worked out with key credit union supporters in Congress, such as Sens. Mark Udall (D-Colo.) and Charles Schumer (D-N.Y.) and Rep. Paul Kanjorski (D-Pa.), as well as the National Credit Union Administration. CUNA also weighed in throughout the development of the provisions to push for the most advantageous language possible. Use the resource link below to access CUNA interchange resource materials.

Mica rallies CUs on interchange issues video

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WASHINGTON (6/2/10)—Credit Union National Association (CUNA) President/CEO Dan Mica continues to urge credit unions to act now and to act in numbers to fight the adoption of interchange amendments to a final financial regulatory reform package. In a new video produced Monday, Mica issues an urgent call for credit union action against an amendment in the Senate reform package that would direct the Federal Reserve to issue regulations to govern interchange fees charged for debit card transactions. The House version of the bill has no interchange amendment and CUNA is fighting to keep it out of a final bill. Mica warns that the fight against the interchange provision is a tremendous uphill battle. But he adds that the modification in interchange rules would be very costly to credit unions without any mitigating benefits to consumers. “The chances of getting this done are not good,” Mica says candidly. But, he strongly urges, “We have no choice, no choice, but to let Congress know how strongly we are opposed the interchange amendment.” Mica urges credit unions to:
* Use the Memorial Day District Work Break to contact federal lawmakers in their home districts; * Light up the phones in lawmakers’ offices with calls in opposition to the interchange provisions; * Send emails in opposition; * Join CUNA in Washington June 8-9 for a national Hike the Hill.
Use the link below to view the video call to action and to access resources on the interchange issue.