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Kanjorski to NCUA symposium Should lift MBL cap

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WASHINGTON (6/10/09)--Saying “I am a member of the credit union family,” longtime credit union champion Rep. Paul Kanjorski (D-Pa.) said he supports lifting the statutory cap on credit union member business lending (MBL). He made the comments Tuesday at the National Credit Union Administration’s (NCUA) symposium highlighting the 75th anniversary of the 1934 Federal Credit Union Act. The symposium was organized by NCUA board member Gigi Hyland, who said its goal is to generate ideas and suggestions on the direction of the credit union movement that she can take back to the NCUA board for further discussion. Credit Union National Association (CUNA) President Dan Mica was among those attending. Rep. Kanjorski said lifting the MBL cap would be a quick way to stimulate the economy with $10 billion in new lending. Credit unions, he added, provide an important and needed service in this area. “Those business limitations must be raised,” he said, provided adequate enforcement is in place as a safeguard. Lifting or eliminating the MBL cap is one of CUNA’s top legislative priorities this year. The congressman also urged the NCUA to pursue its review of the corporate credit union sector, saying there should be fewer than 28 corporates, though he did not indicate how many. He expressed his preference for federal over private deposit insurance. And he reiterated his view that in credit union-to-bank conversions the members’ capital should be channeled to a not-for-profit entity such as another credit union, rather to a small group of insiders. Credit unions’ tax-exempt status is secure, he said, but credit unions must adhere to the core legislative principles that define them as not-for-profit cooperatives, democratically controlled, overseen by volunteer boards, and meeting the financial needs of all consumers, especially those of modest means. With the Obama administration due to unveil its proposal for financial regulatory reform next week, Kanjorski said the derivatives and hedge fund markets must be brought under government supervision, calling them a “silent cancer” that potentially can be disastrous for the economy if left unregulated. In conversation with CUNA’s Dan Mica afterward, he said the rating agencies also should come under closer congressional scrutiny. Kanjorski said that legislators should take a patient approach to any regulatory reform, as adhering to an arbitrary deadline would mean that they “are going to do a superficial patch-up" rather than a comprehensive overhaul of the financial regulatory structure. Hyland’s symposium continues through this morning. Mica commended her for hosting the event. “It is clear Board Member Hyland is committed to broadening the conversation and enhancing the credit union movement for its next 75 years,” he said.

Inside Washington (06/09/2009)

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* WASHINGTON (6/10/09)--Though a Treasury Department announcement that 10 of the largest U.S. financial institutions participating in the Capital Purchase Program have met the requirements for repayment, financial industry observers argue that regulators’ confidence in capital infusions to stabilize banks could be too optimistic. Treasury has notified the institutions that they can complete the repayment process, and if the funds are repaid, Treasury will receive $68 billion (American Banker June 9). There are still bad assets on some institutions’ balance sheets, critics say. The asset problem was there before the Troubled Asset Relief Program (TARP) and it will be there after TARP is gone, according to Karen Shaw Petrou, Federal Financial Analytics Inc. managing director. Douglas Elliott, a Brookings Institution fellow, said the government shouldn’t be overly optimistic, because there is much the industry doesn’t know yet. Lawrence White, finance professor at New York University, said if troubled assets don’t “come around,” there will be another TARP program ... * WASHINGTON (6/10/09)--Many financial institutions have not yet created an effective process or system to measure and manage risk, according to a Global Risk Management Survey by Deloitte and Touche LLP. Only about one-third of institutions have implemented enterprise risk management (ERM) solutions. Another one-third said they are establishing ERM, while 18% said they are planning to create ERM. “Most institutions have an unfinished agenda when it comes to the development of sophisticated risk-management capabilities, enabling an integrated, enterprise wide approach to managing the varied and dynamic risks they face. Financial institutions that can understand risk holistically--managing the full range of risks they confront--can strategically use risk-taking as a means to strengthen their competitive position and create value. Deloitte surveyed 130 financial institutions worldwide ... * WASHINGTON (6/10/09)--The 10 banking organizations required to bolster their capital buffers have all submitted capital plans that, if implemented, would provide sufficient capital to meet the required buffer, the Federal Reserve Board said Monday. The Fed said it would work with the institutions to ensure their plans are implemented quickly and effectively. Earlier this year, federal regulators deployed stress tests at 19 of the nation’s largest institutions. Results of the tests were released last month ... * WASHINGTON (6/10/09)--The U.S. Supreme Court is delaying the sale of Chrysler to Fiat because it is considering whether to hear the objections of three Indiana state funds and consumer groups (The New York Times June 9). The delay could be resolved by Thursday, but if the court decides to hear an appeal that lasts several weeks or months, Chrysler could be put at risk of going out of business, the Times said. Legal experts noted that the delay should not be interpreted as a sign of the court’s intentions. The delay comes after President Barack Obama said he would work to implement a quick bankruptcy process for Chrysler. A lawyer for Chrysler argued in a recent filing that the auto manufacturer loses $100 million per day while in bankruptcy. Under the Fiat deal, Chrysler would have a union retiree trust owning 55%; Fiat would own a 20% share that could increase to 35%; and the U.S. and Canadian governments would hold the minority stakes. Fiat can exit the deal with Chrysler if it is not complete by Monday ... * WASHINGTON (6/10/09)--National Credit Union Administration (NCUA) Chairman Michael E. Fryzel commended New Jersey Credit Union League members for being proactive in serving their members, and enthusiastic and skillful in working with congressional legislators, during a speech to the league June 4 in Township, N.J. “The credit union industry and NCUA have been through a difficult and challenging 10 months,” Fryzel said. “Despite unprecedented upheavals during what some are calling the most difficult year in the first century of the credit union industry, the record we have established is unarguably positive. In short, despite tremendous stresses on both the corporate and natural person credit union parts of the industry, we were able to make “business as usual” the word of the day. And for that, I believe we all deserve credit.” Fryzel also commended New Jersey credit unions for their proactive efforts involving chartering new credit unions, student loan participation and seeking a new state law that would allow credit unions to accept government deposits ... * WASHINGTON (6/10/09)--Twenty-two credit union leaders from Michigan and four representatives from the Michigan Credit Union League visited Capitol Hill last week to meet with lawmakers (Michigan Monitor June 8). “Legislators were thankful for the benefits of the Invest in America program in assisting our domestic automakers and the ongoing efforts of credit unions to serve their local communities,” said MCUL Executive Vice President Patrick La Pine. “As many lawmakers and their staff have heard the stories of struggling small businesses in their districts, we made sure they understood the advantage of lifting the member business lending cap.” In addition to visiting all 17 members of the Michigan congressional delegation, the group met with National Credit Union Administration (NCUA) Executive Director David Marquis about NCUA’s corporate stabilization plan. From left are: La Pine; Melinda Bouie of Oakland County CU; Scott Pauly, Onaway CU CEO; and Jeff Noe, Co-op Services CU executive vice president. (Photo provided by the Michigan Credit Union League) ...

Prez may appoint future IGs for NCUA other regulators

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WASHINGTON (6/10/09)--The National Credit Union Administration’s (NCUA) office of the inspector general could become a presidential appointment after the House passed H.R. 885, the Improved Financial and Commodity Markets Oversight and Accountability Act, by a voice vote. The bill also would elevate the inspectors general of the Commodity Futures Trading Commission, the Board of Governors of the Federal Reserve, the Pension Benefit Guaranty Corporation, and the Securities and Exchange Commission to the level of presidential appointment. In a release, Rep. John Larson (D-Conn.) said that the bill, if enacted, would give inspectors general the tools they need and, overall, would fight against some of the same types of regulatory failures that have led to the weakened state of the current economy. “Simply stated--independent watchdogs ensure better performance from government agencies,” Larson added in a statement delivered on the House floor. NCUA board member Gigi Hyland told News Now that while the board has no official position on the potential legislation, current NCUA Inspector General William DeSarno has joined other inspectors general in voicing opposition to the bill. The bill will now move on to the Senate.