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Inside Washington (07/30/2008)

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* WASHINGTON (7/31/08)--The adequacy of the Federal Deposit Insurance Corp.’s (FDIC) insurance fund is being analyzed in the aftermath of the IndyMac bank failure. The failure could eliminate up to 16% of the FDIC’s $53 billion in reserves (American Banker July 30). The failures Friday of First National Bank of Nevada, Reno, and First Heritage Bank, Newport Beach, Calif., could cost the agency 24% of its assets. A typical failure costs 10% to 20%. The FDIC, which has never needed a backstop, has $30 billion in credit with the Treasury Department. Observers said another large failure could deplete the FDIC’s fund, and they expect the agency to raise its premiums to keep reserves healthy. The ratio of reserves to insured deposits was 1.19% at the end of the first quarter, and the agency predicted the ratio would drop to 1.15% after the IndyMac failure. Analysts say the ratio could drop to 1.01%, and banks could pay premiums of 10 to 15 basis points per $100 of domestic deposits ... * WASHINGTON (7/31/08)--Democratic presidential candidate Barack Obama (D-Ill.) spent Tuesday meeting with Federal Reserve Board Chairman Ben Bernanke and Treasury Secretary Henry Paulson on the economy. The day before, he met with a panel of economic experts, including the chairman of Citigroup Inc.’s executive committee, Robert E. Rubin (American Banker July 30). Obama asked Paulson how the department will use its new authority over the government-sponsored enterprises and if it’s prepared to tackle banking industry challenges. Obama is consulting with experts to address problems in the financial sector, and has a good sense of the issues, Rubin said. Obama’s meeting occurred the same day the White House announced that the national deficit would hit $482 billion in the next fiscal year. Prior to his meeting with regulators, the senator spent 10 days in the Middle East and Europe ... * WASHINGTON (7/31/08)--The Securities and Exchange Commission (SEC) did not issue an order extending restrictions on sales in 19 stocks as expected Tuesday night. SEC Chairman Christopher Cox said Tuesday that the agency was examining economic data on the restrictions’ effect, which suggests the restrictions have prevented problems in the market. He said the agency will consider the rules as soon as it has time ... * WASHINGTON (7/31/08)--The U.S. Small Business Administration (SBA) revised its size standards for small businesses in the Heating Oil and Liquefied Petroleum Gas Dealers industries and restored small business eligibility to those firms that may have exceeded their existing size standards due to higher receipts generated by rising oil prices. The SBA also finalized the December 2005 interim final rule that amended monetary-based small business size standards for inflation ... * WASHINGTON (7/31/08)--The Office of the Comptroller of the Currency announced Wednesday that Beth Castro will be its director of community development. She will be responsible for the community affairs department’s research and publications and will manage the agency’s district community affairs officers. She will report to Barry Wides, deputy comptroller for community affairs. Castro previously worked as first vice president at Washington Mutual, where she managed Community Reinvestment Act programs and initiatives, community development outreach and homeownership preservation efforts ...

CUNA urges balance in fair credit card bill

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WASHINGTON (7/31/08)—The Credit Union National Association (CUNA) backs much of H.R. 5244, the Credit Cardholders’ Bill of Rights Act expected to be voted by the House Financial Serivices Committee today, but urges balance in rules to end discriminatory, predatory, deceptive and abusive lending practices to avoid unintended consequences. Prior to the anticipated House vote, CUNA sent a letter to the bill’s chief sponsor, Rep. Carolyn Maloney (D-N.Y.), recognizing that there are legitimate concerns about abusive credit card practices. CUNA applauded efforts to end credit card and lending abuses. However, CUNA reminded that innovations in the financial services sector, such as the credit card, make credit more available, less expensive, and more convenient for consumers. Credit unions and other financial institutions must be able to price their attendant risks appropriately, the CUNA letter noted. In addition to the Maloney bill, in the Senate the chairman of the banking committee, Sen. Christopher Dodd (D-Conn), has introduced similar legislation (S. 3252). Also in the mix, the Federal Reserve Board, the Office of Thrift Supervision and the National Credit Union Administration (NCUA) issued a joint proposal that addresses several of the concerns raised in the legislation. The joint proposed rule is open for public comment until Aug. 4 and CUNA will submit its comments in the near future. It is expected that the agencies will finalize their plan by the end of the year. CUNA recommended to Maloney that “it may be more prudent to let the regulatory process run its course prior to legislating a remedy.” In fact, that may well be what Capitol Hill intends. The July 30 issue of American Banker noted that lawmakers are unlikely to pass card reform this year, but may be meaning the House vote to send regulators a prod to continue work on their proposed crackdown on abusive lending practices. In a related story, on July 23 fourteen House members—all constituents of the House Financial Services Committee—wrote to their committee chairman to request that one of the panel’s subcommittee’s conduct a hearing on the agencies’ joint Unfair or Deceptive Acts or Practices (UDAP) proposal. The letter to Chairman Barney Frank (D-Mass.) noted the Fed has received more than 20,000 comment letters—identified as 30,000 letters by some sources—on the plan. Use the resource link below for CUNA’s provision-by-provision position on H.R. 5244.

Housing bill signed quick implementation now expected

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WASHINGTON (7/31/08)—As President George W. Bush signed the Housing and Economic Recovery Act into law, Sen. Christopher Dodd (D-Conn.) professed confidence that the refinancing program meant to ease the country’s mounting mortgage foreclosure problem would be operational by Oct. 1 as intended by the new law. Dodd called the heads of the Federal Reserve Board, Treasury Department, Federal Deposit Insurance Corp. and U.S. Department of Housing and Urban Development (HUD) together Tuesday after A HUD spokesman had doubted the agencies’ ability to meet the October implementation deadline. (American Banker July 30) Dodd said afterwards that HUD Secretary Steven Preston expressed confidence that the rules would be ready on time. Preston said his agency would start July 30 to begin working out details. The article also reported that Preston will ask President Bush to expedite a request to let HUD hire 300 additional staff immediately to facilitate implementing the refinancing program.

Congressional commuters receive Little Guy coins

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Click to view larger imageNearly 4,000 chocolate coins were distribted to Capitol Hill commuters Wednesday morning. The coins urged recipients to visit www.lookoutforthelittleguy.org. (Photo provided by CUNA)
WASHINGTON (7/31/08)--Capitol Hill commuters--especially congressional staff--were greeted Wednesday morning with chocolate coins celebrating the “Little Guy” and his website in the final days before the summer recess. The coins, developed by the Credit Union National Association (CUNA) as part of its “Change the Conversation” program, were emblazoned on one side with the words “Credit Unions are big on people, not profit.” On the other side, the coin stated: “For another treat, visit www.lookoutforthelittleguy.org.” “Our mission in the ‘Change the Conversation’ program is to talk about credit unions in clear, undistorted terms, rather than those used by the banking industry and others,” said CUNA’s Communication Vice President Pat Keefe.
Click to view larger image CUNA staffers and other credit union supporters distributed the coins to commuters on the House and Senate sides of Capitol Hill Wednesday morning. (Photo provided by CUNA)
“For example, we point out that credit unions represent only 6% of the financial services marketplace--compared to the 94% held by the banking industry,” he said. Nearly 4,000 chocolate coins were distributed to Capitol Hill commuters on both the House and Senate sides. Use the resource links below to learn more.

Compliance Know your flood insurance duties

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WASHINGTON (7/30/08)—Farmers, business owners and homeowners in many areas of the country are struggling to recover from massive flooding this year. 2008 has witnessed recent floods in New Mexico and Texas caused by the torrential rains attached to Dolly; floods in Iowa, Indiana, Wisconsin; floods wrecking havoc throughout the Midwest and more. Aptly, the Credit Union National Association’s (CUNA’s) Compliance Challenge this month quizzes credit unions with a question on federal flood insurance requirements. The Challenge reminds credit unions that federal regulators may impose civil money penalties for noncompliance with mandatory flood insurance purchase requirements. Federal law requires such penalties when a lender has exhibited a “pattern or practice” of failing at such things as:
* Requiring the purchase of flood insurance for loans secured by improved real estate located in a special flood hazard area (SFHA); * Placing flood insurance premiums, on applicable loans, in escrow if the credit union requires the escrow of taxes, insurance premiums, fees, or other charges; * Providing the proper notices pertaining to covered loans (e.g., flood hazard determination notice, notification of change in loan servicer); and * Purchasing insurance on the borrower’s behalf when the borrower fails to maintain adequate flood insurance coverage. That practice, known as “force placing” insurance, should occur after notifying a borrower of the deficiency, and giving him or her 45 days to purchase the appropriate coverage.
Credit unions should note, advises the Challenge, that the per-violation and aggregate amounts of civil penalties are adjusted for inflation on a periodic basis. Now, what about civil liability? Use the resource link below to read about that issue, and many more compliance gems, by linking to CUNA’s compliance web page.

iNewsWatchi Special Edition CUs are Safe and Insured

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WASHINGTON (7/31/08)—The Credit Union National Association (CUNA) and the leagues are working on behalf of credit unions to reassure their members about the safety of their deposits in the credit unions system and about the soundness of that system despite today’s upheavals. CUNA this week distributed to each member credit union a special edition of Credit Union NewsWatch that encapsulates the many CUNA resources newly designed to help credit unions and their staffs address the public’s questions and concerns about the safety of their money in trying economic times. The issue features a two-page “Primer on Share Insurance Coverage For Individual Credit Union Members,” as well as a two-page spread on operational questions affecting share insurance coverage, geared toward credit union compliance staff. Also included in the special edition are:
* CUNA, Leagues Help CUs Spread Good News of Safety, Soundness * NCUSIF Strong at Mid-Year, Says NCUA * CUNA, Leagues Get Word Out About CU Soundness
CUNA members may use the resource link below to access the special CUNA resource.