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Conyers bill would force interchange negotiations

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WASHINGTON (6/5/09)--Interchange fees could again be a topic of debate on Capitol Hill after Reps. John Conyers, Jr. (D-Mich.) and Bill Shuster (R-Pa.) on Thursday introduced H.R. 2695, the “Credit Card Fair Fee Act of 2009.” The bill would allow merchants to negotiate credit card transaction fees with financial institutions via an antitrust exemption. Credit unions regulated by the National Credit Union Administration (NCUA) and other financial institutions with less than $1 billion in total assets would be exempted from the terms of the bill. Financial institutions also would not be bound by the terms of outside agreements that they had no part in negotiating. However, the Credit Union National Association (CUNA) still strongly opposes this bill and disputes proponents arguments that the bill would benefit consumers. John Magill, senior vice president of legislative affairs at CUNA, said Thursday, "The fact is that the only group that stands to benefit from this legislation is the merchants, and the large merchants at that. "The payment system is working, and the evidence is that consumers can go into most places of business and use a plastic card to pay for their transaction, if they so choose. "Further proof that the payment system is competitive is that consumers have so many card choices, and merchants have so many credit unions and banks to choose from for acquiring services,” Magill said. He added, “This legislation is a solution in search of a problem." Similar legislation, H.R. 5546, met bipartisan opposition last year, yet narrowly passed the House Judiciary Committee by a 19-16 vote. The bill never received a full vote in Congress. H.R. 2695 is expected to be referred to the House Judiciary Committee soon. While the recently enacted Credit Card Accountability, Responsibility and Disclosure Act of 2009 did not mandate any changes in interchange fees, it did direct the Government Accountability Office to complete a study on the issue. That study should be completed within six months.

CUNA to testify on small business access to capital

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WASHINGTON (6/5/09)—The House Small Business Committee has announced a June 10 hearing to explore the role of the Small Business Administration’s (SBA) financing programs in providing access to capital for small businesses. Additionally, the committee intends to examine better ways to achieve the SBA mission of providing small businesses with an ability to access capital in the current economic environment. The hearing is titled “Laying the Groundwork for Economic Recovery: Expanding Small Business Access to Capital.” Roger Heacock, president/CEO of Black Hills FCU, Rapid City, S.D., is scheduled to testify on behalf of the Credit Union National Association (CUNA). In May 2009, Black Hills FCU received the District Director’s Leadership Award from the South Dakota SBA. The credit union wrote more SBA loans in the state than any other financial institution during 2008—2009 loans for a total of just over $1.6 million, an average of $56,703 per loan. CUNA has worked closely with the SBA to address barriers that credit union involvement. Some credit unions find the SBA fees prohibitive and the application process unnecessarily complex. Also, the current statutory 12.25%-of-assets member business lending cap can deter some credit unions from more extensive involvement in SBA guaranteed lending through such programs as SBA’s 7 (a) and 504.

Inside Washington (06/04/2009)

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* WASHINGTON (6/5/09)--The Obama administration may announce its plan to overhaul the nation’s financial regulatory structure on June 17, according to a Thursday report by Reuters. Attributing the information to a U.S. Treasury Department source and “a source familiar with thinking at the U.S. Treasury Department,” the article stated that the administration will not propose a single, super bank regulator to replace the current system. It is more likely to propose merging the Office of Thrift Supervision and the Office of the Comptroller of the Currency. The article noted that both administration officials and federal lawmakers have indicated they want to have broad legislation regarding financial reform passed this year. The lawmakers and the executive branch have been meeting to craft a proposal, which could place the Federal Reserve Board as a systemic risk monitor and allot the Federal Deposit Insurance Corp. new powers to address large, troubled financial institutions … * WASHINGTON (6/5/09)--Former Federal Reserve Board Chairman Alan Greenspan said there is no escaping the idea that some large financial institutions are “too big to fail.” Addressing the problem has drawbacks, he said (American Banker June 4). At a minimum, the government would have to offset the borrowing cost advantage by imposing a comparable cost--like increasing capital requirements, he said. Another alternative would require nonbanking business to be conducted by partnerships. But then, nonbanks could convert to a bank charter so they could take on risk. Greenspan said he was puzzled that more banks have not formed during the housing crisis because a new bank without toxic assets could generate profit ... * WASHINGTON (6/5/09)--House Small Business Committee Chairman Nydia Velazquez (D-N.Y.) sent a letter Tuesday to Small Business Administration (SBA) Administrator Karen Mills criticizing a program SBA announced last week that would secure financing for auto dealers’ inventories (American Banker June 4). She expressed concerns that the program is risky and would reach only a few businesses. Velazquez’s concerns are surprising, said Jonathan Swain, SBA assistant administrator for communications. The program had strong support from the White House, Congress and auto dealers. Before Mills took office, Sen. Olympia Snowe (R-Maine) and Jeanne Shaheen (D-N.H.) requested that SBA guarantee floor plan loans. Sen. Mary Landrieu (D-La.) also said she supports the program. However, banking industry groups have questioned the plan and said Velazquez raises legitimate concerns ... * WASHINGTON (6/5/09)--Federal Housing Finance Agency (FHFA) Director James Lockhart provided several frameworks for the future of Fannie Mae and Freddie Mac during a meeting with the House Financial Services Committee subcommittee on capital markets Wednesday. He suggested charging premiums for catastrophic reinsurance for the secondary mortgage market. The enterprises also could be used as a catastrophic risk insurer, a provider of subsidies or a liquidity provider of last resort for the mortgage market (American Banker June 4). Nationalization is still a solution, but could create a moral hazard by allowing for risk, he said. The enterprises also could be privatized, remain as they are, or be merged with the Federal Housing Administration, he said. During the meeting, Lockhart also lobbied FHFA for a role to prevent systemic risk. ... * WASHINGTON (6/5/09)--The Federal Deposit Insurance Corp. (FDIC) said Wednesday that development of its Legacy Loans Program will continue but a planned pilot sale of assets by open banks will be postponed. The program would match private and government equity with FDIC-guaranteed debt to let investors buy bad bank assets. FDIC will test the funding mechanism in a sale of receivership assets this summer. The agency said it expects to solicit bids for this sale of receivership assets in July ... * WASHINGTON (6/5/09)--National Credit Union Administration (NCUA) Chairman
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Michael Fryzel toured State Farm FCU in Bloomington, Ill., on May 27. Fryzel met with CEO Tom DeWitt, and members of the board and executive staff to discuss NCUA’s Corporate Stabilization Plan and the economy. From left are: Jacquie Bristow, member services manager; Mike Mailloux, board vice-chair; Steve Gorrie, operations manager; DeWitt; Fryzel; Laura Haas, board chair; Rob Moser, associate vice president of human resources; and Bob Force, financial manager. (Photo provided by the National Credit Union Administration) ...

Redacted PIMCO report posted online

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ALEXANDRIA, Va. (6/5/09)—The National Credit Union Administration has posted online a redacted version of a report prepared by the Pacific Investment Management Company LLC (PIMCO) on behalf of the agency. The redacted report was released in response to requests by the Credit Union National Association (CUNA) and others under the Freedom of Information Act (FOIA). The PIMCO report was the basis, in part, of the NCUA's action to conserve two corporate credit unions, U.S. Central FCU, Lenexa, Kan., and Western Corporate FCU (WesCorp), San Dimas, Calif. PIMCO is a PIMCO is a leading global investment management firm. In March, CUNA followed up two earlier requests for information with a formal FOIA to the NCUA regarding its actions involving corporate credit unions. In April, the NCUA released a summary of the PIMCO analysis of the residential mortgage-backed securities held by corporate credit unions. The summary did not provide a detailed review of PIMCO's analyses or findings, but did give information on the process for valuing the loans on which the mortgage-backed securities are based and information on PIMCO's views and conclusions. Use the resource link below to access the redacted report.

Senate postpones APR cap discussion

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WASHINGTON (6/5/09)--The Senate Judiciary Committee on Thursday postponed its consideration of S. 257, the Consumer Credit Fairness Act, until next week. However, in anticipation of Thursday’s planned discussion, the Credit Union National Association outlined some concerns regarding the legislation in a letter delivered to Sens. Patrick Leahy (D-Vt.) and Jeff Sessions (R-Ala.). Although credit unions are not known for the types of abusive lending practices that this legislation intends to combat, the legislation could have the unintended consequence of forcing “mainstream lenders” to adjust their lending practices. The legislation, which would effectively cap annual percentage rates for loans of all kinds at 19% by amending the current bankruptcy code, could limit the availability of “convenient credit” to consumers and would likely raise the overall cost of credit card access, the CUNA letter said. As currently crafted, the bill would permit consumers that have been driven into debt by so-called "high cost" consumer credit card transactions to transition directly to Chapter 7 "fresh start" bankruptcy proceedings, even if the debtor failed the means test. Under the terms of the bill, a “high cost” loan would mean a loan in which the APR, at any time, exceeds the lesser of 15% plus the yield on 30-year U.S. Treasury securities, or 36%. Dealing with this seemingly shifting interest rate ceiling “would present an impossible compliance burden” for creditors and could limit the bankruptcy courts ability to interpret the law in a uniform matter, CUNA said. CUNA also observed that using the APR ceiling imposed by the Federal Credit Union Act as a basis for the standards in this and other bills or, more generally, as a justification for broadening existing APR caps, may be “confusing” and “misleading.” To see the letter in full, use the resource link.