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Inside Washington (07/01/2008)

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* WASHINGTON (7/2/08)--Financial institutions have responded to changes proposed by the Financial Crimes Enforcement Network (FinCEN) to broaden exemptions to currency transaction report (CTR) requirements. Bankers have criticized FinCEN’s proposed changes, saying they do not save time or effort in the cumbersome filings. Bank of America files the most CTRs--more than 2 million last year. The bank used FinCEN’s exemptions 3,650 times. (American Banker July 1). The Credit Union National Association recommends that FinCEN should review the $10,000 threshold for filing a CTR and adjust it for inflation and allow financial institutions make a good-faith, case-by-case determination of whether an otherwise eligible member frequently engaged in currency transactions of more than $10,000 when designating a Phase II exemption ... * WASHINGTON (7/2/08)—Information on making home loans to low- and moderate-income households will be the focus next week in two Federal Deposit Insurance Corp. (FDIC) events. Treasury Secretary Henry Paulson, JP Morgan Chase and Co. chief executive James Dimon, and Federal Reserve Board Chairman Ben Bernanke will speak at the forum on mortgage lending. Topics are to include such things as reintroducing standard loan underwriting and pricing in the low-income mortgage market. Also on the agenda, discussion about profitable approaches to lending to low- and moderate-income borrowers, and how community-building can help foster homeownership. (American Banker July 1). The next day, the agency’s advisory committee on economic inclusion is expected to undergo similar discussion. The committee comprises consumer advocates, bankers and federal officials ... * WASHINGTON (7/2/08)--The Federal Reserve Board sent the Department of Housing and Urban Development (HUD) a letter June 13, arguing that the two should consult with each other to revise a rule on mortgage disclosures (American Banker July 1). HUD should align its plan with the Fed’s update of Truth in Lending Act regulations, the letter said. HUD is required by the Real Estate Settlement Procedures Act to update its disclosures ... * WASHINGTON (7/2/08)--Those affected by flooding have increased benefits, including access to loans of up to $14,000 without collateral, and a $500,000 increase in the disaster loan cap to businesses, said Jovita Carranza, acting administrator of the U.S. Small Business Administration, during a tour of Iowa yesterday. The changes were recently signed into law under the Small Business Disaster Response and Loan Improvement Act of the 2008 Farm Bill and were implemented by the SBA this week. The disaster loan cap increased to $2 million from $1.5 million, and the 20% mitigation measure formula has changed from total loan eligibility to total loss eligibility, she said. “Midwest residents whose homes and businesses have been destroyed or damaged by severe flooding will have enhanced support,” she said. “I encourage disaster victims to use resources and counseling to help them through this difficult time” ...

Patelco assumes Cal State 9 Sterlent

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ALEXANDRIA, Va. (7/2/08)—Cal State 9 CU and Sterlent CU, both California state-chartered institutions, were liquidated by the National Credit Union Administration (NCUA) yesterday. Patelco CU of San Francisco purchased assets and assumed most shares of both institutions. The NCUA, as conservator of Cal State 9, put the credit union up for bid in March hoping to negotiate a combination with another credit union. The Region V director said at the time that such a “purchase and assumption” arrangement represented the most financially sound decision for Cal Sate 9 and was in the best interest of its members. The $339 million-asset, Concord.-based Cal State 9 had been placed under the management of the NCUA in conservatorship in November 2007 after suffering setbacks linked to the sinking residential real estate market in the area. The Cal State 9 Credit Union liquidation and purchase and assumption by Patelco had been announced May 22, and was completed with the NCUA action Tuesday. In the case of Sterlent, the Pleasanton credit union reported a net loss of $5.5 million during the first quarter of 2008. Its credit quality issues stemmed from a home equity loan program it implemented in 2003. Its management ended the program in late 2006, according to a release issued by Patelco in May, when that credit union stepped in to help the $100 million-asset Sterlent. Patelco will continue operating branches of both purchased credit union, and member accounts in all involved credit unions are federally insured by the National Credit Union Share Insurance Fund (NCUSIF) up to at least $100,000. Patelco issued the following statement concerning their purchase and assumption arrangements: “We are thrilled to be able to continue providing for the financial needs of both credit unions’ members, and we are looking forward to the many opportunities we have to develop deeper ties in the communities they serve.”

Hearings to study capital reserve requirements more

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WASHINGTON (7/2/08)--Treasury Secretary Henry Paulson and Federal Reserve Board Chairman Ben Bernanke will appear at the first of a series of hearings on the policy implications of the transformation of domestic and international financial markets, according to a Capitol Hill announcement. House Financial Services Committee Chairman Barney Frank (D-Mass.) Tuesday issued the release noting that a primary focus of the hearings will the rise of potential systemic risk associated with the dramatic growth in the share of assets held outside the commercial banking system, the complex arrangements that link firms that are regulated differently (or not at all) and the increasing amount of leverage. Specifically, the chairman intends the hearings to examine:
* Current state of the financial regulatory system, both in the United States and abroad, and ways to measure and limit risk without stifling innovations and improve market liquidity and breadth; * The implications of providing investment banks and others access to the discount window: * In light of the collapse of Bear Stearns, proposals to improve the regulatory structure to better assess and mitigate systemic risk to avoid a similar or more serious crisis in the future: * The need for enhanced capital and reserve requirements for financial firms: and * The adequacy of current powers of the Federal Reserve and other regulatory agencies to protect the financial system and the taxpayers.
Ryan Donovan, Credit Union National Association vice president of legislative affairs, said Tuesday, “ We are pleased to see that one of the items on which these hearings will focus is the need for enhanced capital and reserve requirements. “This is an issue that NCUA as well as the credit union movement have been asking Congress to address with respect to credit unions for several years." The committee also plans to invite New York Federal Reserve President Timothy Geithner, Securities and Exchange Commission Chairman Christopher Cox, other federal regulators, academics, economists and market participants to present views at subsequent hearings later in July and continuing in the fall.

Johnson assesses service during NCUA tenure

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ALEXANDRIA, Va. (7/2/08)—In advance of exiting her position at the National Credit Union Administration (NCUA), JoAnn Johnson said that during her tenure as chairman she had the privilege to shape a regulatory regime stringent enough to exact unmatched safety and soundness for credit unions and flexible enough to promote innovation in financial services. Johnson noted that during her chairmanship a number of major issues “caused NCUA to draw upon considerable financial, legal and legislative resources in order to continue responsible stewardship of the credit union industry.” She named the “increased congressional scrutiny of the credit union tax exemption and the agency’s proactive response to it, the troubling emergence of a ‘cottage industry’ devoted to engineering the conversion of member-owned, cooperative credit unions to for-profit banks, and the credit/mortgage crisis” as some of the challenges that made her work exciting personally and professionally. The credit union member, Johnson said, has been the common denominator in the NCUA’s work in these areas and the “central animating principle” that she tried to bring to her regulation of credit unions. “And I take no small measure of satisfaction in noting that the elevation of the member, while simple in the description, is actually a very profound and complex policy achievement that will pay dividends for the credit union industry as it evolves,” the chairman added. Johnson made her remarks in a statement issued Monday as she prepares to leave the NCUA after six years of service, four as chairman of the agency. Last week, the Senate confirmed President George W. Bush’s choice of Michael Fryzel to succeed Johnson. The president has said he intends to designate Fryzel as chairman.

Hood Risk mitigation speakers announced

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ALEXANDRIA, Va. (7/2/08)-- National Credit Union Administration (NCUA) Vice Chairman Rodney Hood released the speakers list for the upcoming Risk Mitigation Summit on August 7. The summit, to be conducted at the Federal Reserve Bank of Chicago, is a free, one-day event highlighting the latest trends in risk management and analysis from both an operational and oversight perspective. Top leaders from both government and industry will address innovative techniques for risk mitigation. Currently slated to speak are:
* John Hope Bryant, founder, chairman, and CEO of Operation Hope, Inc.; * Nathaniel Wuerffel, AVP Enterprise Risk management for the Federal Reserve Bank of Chicago; * Leo Tilman, noted as a credit and interest rate expert; * Donna Gambrell, director of the U.S. Treasury Department’s Community Development Financial Institutions (CDFI) Fund; * Chris Copeland, corporate risk manager, CUNA Mutual Group; and * John Kutchey, director of the division of risk management, NCUA’s Office of Examination and Insurance.
Hood unveiled his speakers list at the Corporate One FCU Enterprise Wide Risk Management (ERM) Conference. Addressing that gathering, Hood said that fully adopting ERM plans is the best strategy for credit unions to prepare for the new risk-based exams. He added, “A key priority of mine as a regulator is to focus on maintaining the safety and soundness of America’s credit unions while encouraging the economic growth and opportunity for their members. Managing risks successfully, not simply avoiding them, is essential in accomplishing this mission.” Use the resource link below to visit the NCUA website for more summit information.