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CUNA defends CU tax status Its good policy

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WASHINGTON (9/1/10)--Directly on the heels of an advisory panel’s report on possible tax law revisions, the Credit Union National Association (CUNA) sent a letter to each member of the President’s Economic and Recovery Board (PERAB) to underscore the public-policy value of the federal credit union tax status. The PERAB is an outside advisory panel and is not part of the Obama administration, and its report does not represent recommendations, but rather options to be considered for tax reform. However, CUNA President/CEO Bill Cheney immediately and adamantly defended the credit union tax exemption, explaining that the strong public-policy reasons that first inspired that tax status remain valid today. “It may be the case that not all tax preferences have lived up to expectations, but the credit union tax exemption is one of the highest-yielding investments the federal government has made,” Cheney wrote. CUNA figures show that America’s 92 million credit union members receive substantial benefits in the form of better pricing on services, saving them about $7.5 billion a year. The $7.5 billion savings to consumers is especially significant when measured against the $1.5 billion in lost federal revenue a year that the government says is represented by the credit union tax exemption. “Further, the tax exemption helps to ensure consumers have choices beyond commercial banks in the financial marketplace. It is appropriate to view these results not as an economic distortion,” Cheney said referring to the report’s own language, “but as evidence of sound public policy.” The 118-page PERAB report, released Monday, spent a scant few paragraphs discussing the credit union tax exemption in its Section IV. “Nevertheless,” Cheney declared in his letter to policymakers, “on behalf of credit union members and credit unions, I am compelled to set the record straight on the importance of the public policy justification for the continuation of credit unions’ federal tax exemption. “CUNA will continue our strongest efforts to ensure that policymakers understand the purpose and effects of the credit union tax exemption,” Cheney concluded, offering to meet and discuss points raised in his letter. The letter was sent also to representatives of the U.S. Treasury Department and White House, as well as to congressional leaders and National Credit Union Administration Chairman Debbie Matz.

Inside Washington (08/31/2010)

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* WASHINGTON (9/1/10)--A report by the Department of Housing and Urban Development’s inspector general urged the Federal Housing Administration (FHA) to guide mortgage servicers on how to address an increasing number of senior citizens who are defaulting on their federally insured reverse mortgages. Four servicers are holding 13,000 home equity conversion mortgages where borrowers had defaulted by not paying the real estate taxes and insurance on their homes (American Banker Aug. 31). The loans had a maximum claim amount of more than $2.5 billion, according to the audit, released last week. FHA said it is drafting guidance to instruct servicers to contact borrowers who have defaulted and require specific actions to bring the loan into compliance with the mortgage’s terms, an official said. FHA also said it plans to modify its systems to monitor defaulted home equity conversions ... * WASHINGTON (9/1/10)--Savings and loans are concerned about a potential crackdown as the Office of the Comptroller of the Currency (OCC) and the Federal Reserve Board prepare to oversee thrifts and their holding companies. The thrifts will comply with the same capital standards they’ve had for years, but they also expect to be required to comply with bank-like requirements (American Banker Aug. 31). The Office of Thrift Supervision (OTS) will be dissolved under the enacted regulatory reform bill, but has one more year until it officially closes. Industry representatives expect the Fed and the OCC to crack down on their institutions. Lawrence Kaplan, a lawyer at Paul, Hastings, Janofsky and Walker, told the Banker that the concern is whether the OCC will “kick the tires harder to prove the OTS wasn’t a good regulator.” Tom Barnes, assistant deputy director at the OTS, said the concerns might be triggered by change itself, because people always perceive change differently. Barnes said he was confident “things will be ironed out.” Regarding credit unions, the Credit Union National Association (CUNA) worked diligently during the regulatory reform process to ensure that the National Credit Union Administration remained the prudential regulator for federal credit unions ...

Lehrer blogs Unfetter MBLs help the country

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WASHINGTON (9/1/10)--The only reason conservatives should get excited about the U.S. Senate’s pending small business lending bill, blogged Eli Lehrer of The Heartland Institute recently, is because it could include a cost-free credit union provision that would really give the economy a shot in the arm. Lehrer is national director of the Center on Finance, Insurance, and Real Estate at The Heartland Institute, which is a conservative policy think tank located in Chicago. In his posting entitled, “For a Better Stimulus: Free the Credit Unions,” Leherer said that an amendment under consideration that would ease the cap on member business lending “deserves consideration both on its own and as a template for bipartisan action to get the economy moving.” Leherer calls the small business bill “well intentioned,” even the proposed $30 billion in federal aid to small banks who are then to lend more to credit-strapped small businesses. But, he says, he sees a problem: “If more government intervention of any sort would have produced a strong, sustained recovery, we’d already be in the middle of one.” But he also sees a solution: “The (MBL) amendment, proffered by Sen. Mark Udall (D-Colo.), however, is a lot better than the bill as a whole.” The amendment would increase the MBL cap to 27.5% of total assets, up from 12.25%. The blogger says the cap should be even higher because it would “interject billions of dollars of new business credit into the economy” and doesn’t “put a single federal dollar at risk.” He also noted, “The cap has no good reason for existing at all.” He warns that banks oppose the bill “because they don’t want the additional competition.” “But,” he says of the MBL cap increase, “it’s good for the economy.” The Heartland Institute is one of 19 diverse business groups that have formed a coalition in support of increased MBL for credit unions. Others members include the National Association of Realtors, National Small Business Association, League of United Latin American Citizens, National Association for the Self-Employed, and the National Association of Manufacturers. Use the resource link to access the article which ran Aug. 30 in the Frum Forum.

Crisis commission looks at too big to fail

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WASHINGTON (9/1/10)--“Too big to fail,” a Washington catch phrase, is also the topic of a two-day public hearing of the Financial Crisis Inquiry Commission (FCIC), which starts today. The complete heading of the session is "Too Big to Fail: Expectations and Impact of Extraordinary Government Intervention and the Role of Systemic Risk in the Financial Crisis." The forum will be webcast live at http://www.FCIC.gov and is part of an ongoing investigation into the financial crisis. The commission, set up in mid-2009, was created to study fraud in the financial system and to determine the cause of the financial crisis. The commission can conduct hearings to examine industry practices, and subpoena regulators and financial institutions for information. Today’s session features two panels of witnesses. Expected to testify on panel one regarding Wachovia Corp. are:
* Scott G. Alvarez, general counsel, Federal Reserve Board; John H. Corston, acting deputy director, Division of Supervision and Consumer Protection, of the Federal Deposit Insurance Corp. (FDIC); and Robert K. Steel, former president/CEO of Wachovia Corporation
And scheduled for panel two to testify about Lehman Bros. are:
* Thomas C. Baxter, Jr., general counsel and executive vice president of the Federal Reserve Bank of New York; Richard S. Fuld Jr., former chairman/CEO of Lehman Bros.; Harvey R. Miller, business finance and restructuring partner for Weil, Gotshal & Manges LLP; and Barry L. Zubrow, chief risk officer for JPMorgan Chase & Co.
Fed Chairman Ben Bernanke and FDIC Chairman Sheila Bair are the sole witnesses on day two of the hearing, which is Thursday. The FCIC is charged with issuing a final report on the nation's financial crisis to the U.S. Congress by December 2010.

Temporary corporate CU guarantee extended

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ALEXANDRIA, Va. (9/1/10)--New investments in participating corporate credit unions made before Dec. 31, and which have maturities of two years or less, will now be fully covered by the National Credit Union Administration’s (NCUA’s) Temporary Corporate Credit Union Share Guarantee Program (TCCUSGP). The agency announced Tuesday that it has extended the expiration date of its TCCUSGP to Dec. 31, 2012 from Sept. 30, 2012, which was itself an extension. The agency has said in earlier statements that the extensions send a “clear signal” to natural person credit unions that investments in corporate credit unions are not only safe, but also meet sound asset-liability management principles by providing for “orderly laddering of these investments.” Twenty-six of the 27 corporates participate in the guarantee program; Iowa Corporate CU is the one outside of the program. The TCCUSGP backs up the National Credit Union Share Insurance Fund's (NCUSIF) coverage of all shares--excluding paid-in-capital and membership capital accounts--at corporate credit unions. Corporate CU Participants in TCCUSGP