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Inside Washington (08/02/2010)

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* WASHINGTON (8/3/10)--The Financial Stability Council, which will be created under the recently enacted regulatory reform bill, has some financial industry representatives wondering if the council itself will be too tough to manage because of competing interests, said American Banker (Aug. 3). Council members will include the heads of nine federal agencies, three state representatives, the heads of the Federal Insurance Office and the Office of Financial Research, and a president-appointed insurance expert. Observers have questioned how regulators will define “systemic risk.” “No one has the faintest idea,” said Peter Wallison, a fellow in financial policy studies at the American Enterprise Institute. When defining risk, the council will need to consider assets, leverage, size, liabilities and interconnectedness, Banker said. The council will present reports to Congress and be subject to audits by the Government Accountability Office ... * WASHINGTON (8/3/10)-- The administration plans to move as quickly as it can to bring clarity to new rules of finance, said Treasury Secretary Timothy Geithnerin a speech at New York University Monday. The administration plans to provide full transparency and disclosure. It will not layer new rules on top of old rules, or risk killing the freedom for innovation that is necessary for economic growth, he added. Also, the administration wants to ensure that it has a more “level playing field” nationally and internationally and brings more order and coordination to the regulatory process. The process is broad and complicated, and will take time, Geithner said. He noted some of the administration’s priorities--including consumer protection and ensuring financial firms have more capital than they did before the financial crisis ... * WASHINGTON (8/3/10)--The Federal Deposit Insurance Corp. (FDIC) Thursday closed on a sale of securities as a part of a securitization backed by about $471.3 million of performing single-family mortgages from 16 failed banks. The pilot program marks the first time the FDIC has sold assets in a securitization in the financial crisis. About $400 million senior certificates were sold at a coupon of 2.184% with an average life span of 3.66 years. As outlined in the FDIC’s proposed Securitization Safe Harbor Rule, the deal incorporates transaction-governance procedures that align compensation of the servicer with resolving problem loans and minimizing losses to the trust ...

NCUA shutters Calif.s Certified FCU

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ALEXANDRIA, Va. (8/3/10)--The 8,850 members of $37.6 million in assets Certified FCU will now be served by Vons Employees FCU after the National Credit Union Administration (NCUA) officially liquidated Certified FCU on Saturday. Certified FCU, which was based in Commerce, Calif., was closed due to it’s declining financial condition, according to the NCUA. Vons is centered in nearby El Monte and holds $332 million in assets from 40,500 members spread throughout the greater Los Angeles area. Vons primarily serves employees of Vons supermarkets. All Certified FCU member accounts will continue to be backed by the National Credit Union Share Insurance Fund, the NCUA added. Certified FCU is the 12th federally insured credit union to be liquidated this year. For the full NCUA announcement, use the resource link.

With House gone focus is on Senate this week

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WASHINGTON (8/3/10)--While the annual summer exodus begins for members of the House this week, the Senate will remain in Washington through Friday. Senators are seemingly stuck, and have shown little desire to move forward on small business job creation legislation. However, the Credit Union National Association (CUNA) continues to advocate for consideration of Sen. Mark Udall’s (D-Colo.) pro-member business lending legislation. Udall’s bill, which has been touted as a possible amendment to stalled small business legislation, would increase credit union business lending authority to 27.5% of total assets, up from the current 12.25% cap. Doing so would create more than 108,000 new jobs and provide small businesses with over $10 billion in funds to reinvest into the flagging economy, according to CUNA estimates. The small business legislation would provide small banks with $30 billion in funds to lend to small businesses. Udall, who backs the small business legislation, recently said that he did so with the understanding that if the Senate was "going to finance $30 billion to increase lending," it would "at the very least" also move to "increase lending without costing taxpayers a dime." There are no credit union-relevant hearings scheduled this week, and the Senate is expected to discuss legislation related to Medicaid and the oil spill, as well as the Supreme Court nomination of Elena Kagan.

CUNA rep GAAP changes would cost CUs thousands

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WASHINGTON (8/3/10)--Speaking during a recent Credit Union National Association (CUNA) audio conference on proposed changes to the Financial Accounting Standards Board’s (FASB'S) Generally Accepted Accounting Principles (GAAP), Mid Minnesota FCU's Pam Finch said that the proposed changes could result in up to $40,000 in additional annual costs for her credit union. Finch, who is the Chief Financial Officer (CFO) of her Baxter, Minn.-based credit union and also serves as CUNA CFO Council chair, said that while much of the increased cost would be related to use of an outside firm to value her credit union's financial instruments, additional costs are likely, such as costs related to increased resources necessary to gather and analyze information. Representatives from FASB and the National Credit Union Administration (NCUA), as well as CUNA Accounting Subcommittee chair and CFO of San Francisco, Calif.'s Patelco CU Scott Waite took part in the audio conference. The proposed changes, as set forth in a FASB exposure draft released in May, would modify GAAP by requiring most financial instruments to be measured at fair value. In addition, the changes would require loan loss reserves to be measured on a forward-looking "expected loss" basis. This differs from the current method, which uses a historical "incurred loss" approach. FASB has informally stated that it would like to have a final rule in place by next summer. Credit unions over $10 million in assets are required to comply with GAAP. CUNA raised general concerns with FASB prior to the issuance of the proposal, and CUNA remains extremely concerned about the proposed changes. CUNA has been working with its accounting subcommittee to identify key problems and frame its message to FASB, and will also be working with the NCUA and other policymakers to ensure credit union concerns are presented to and considered by FASB. While the primary goal of the FASB standards is reportedly to increase transparency for investors, panelists asked how this would benefit credit unions due to the unique, member-owned, credit union model. CUNA regulatory staff said that while FASB has provided a four year deferral of most requirements for entities with under $1 billion in assets, credit unions--regardless of asset size--should provide FASB with their input as soon as possible, either directly or indirectly through CUNA. “It is vital that credit unions speak up during the FASB's comment period for these significant proposed changes,” CUNA Regulatory Counsel Luke Martone added. The comment period for the proposal ends on Sept. 30. CUNA will be meeting with FASB and filing a formal comment letter, and CUNA welcomes input from member credit unions. For an archived version of the audio conference, use the resource link.