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Inside Washington (08/08/2011)

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* WASHINGTON (8/9/11)--The Credit Union National Association will monitor the proceedings of a new congressional “supercommittee” charged with recommending a deficit-reduction package. After Standard & Poor’s downgrade of the U.S. government credit rating, the committee will be under pressure to come up with a deficit-reduction package that exceeds the original goal of $1.5 trillion, lawmakers say (The New York TimesAug. 8). Although, the committee has not yet been appointed, it’s mission expanded with the downgrade. Not only must it cut the annual federal budget deficit and slow the growth of federal debit, it must settle uneasy markets and help restore a AAA credit rating for the U.S. In its report on Friday, S&P cited the inability of the two political parties to bridge their gulf on fiscal policy among the reason for removing long-term Treasury debt from its AAA rating. The 12 members of the committee will be appointed Aug. 16 by congressional leaders of the Republican and Democrat parties ... * WASHINGTON (8/9/11)--Federal Reserve international finance director D. Nathan Sheets, an 18-year veteran of the regulator, has announced that he will leave his position. Sheets has served as international finance director for the past four years. His work during that time included representing the Fed at international meetings and meetings with foreign central banks. He has also advised the Federal Open Market Committee on foreign economic and financial developments. Fed Chairman Ben Bernanke praised Sheets for providing “invaluable insight and stellar leadership at a time of great volatility in the world economy.” The Fed said that Deputy International Finance Director Steven Kamin will serve as acting director of the division until a replacement is found ...

SandP drops Fannie Freddie ratings NCUA issues to AA

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WASHINGTON (8/9/11)--Credit rating agency Standard & Poor's on Monday downgraded the credit rating for government-sponsored enterprises Fannie Mae and Freddie Mac, as well as the ratings applied to four National Credit Union Administration-guaranteed debt issues from the corporates. The rating agency specifically downgraded debt issued by two corporate credit unions under the Temporary Corporate Credit Union Share Guarantee Program (TCCUSGP) to AA+ from AAA. S&P said that the downgrades on the TCCUSGP issues "reflect their direct credit support from the U.S. Treasury for timely and ultimate repayment." S&P also cut the U.S. government's credit rating to AA+ Friday, saying that the recently approved deficit reduction plan didn't do enough to re-insert stability in the country's debt situation. Government debts and securities were downgraded. S&P said that the GSE downgrade was tied to Fannie and Freddie’s "direct reliance" on the U.S. government. The GSEs have been held under U.S. government conservatorship since 2008. Another credit rating agency, Fitch Inc., late last month said that Fannie Mae and Freddie Mac will require continued capital injections from the Treasury Department to avoid being unwound. Credit Union National Association (CUNA) Chief Economist Bill Hampel said that the downgrade on U.S. Treasury securities has had no impact on Treasury interest rates, "and as long as that is the case, there would appear to be little if any impact on Fannie, Freddie or other agency debt." Finance industry representatives recently urged the government to transition away from Fannie Mae and Freddie Mac during a Senate subcommittee hearing, but legislation to create a new mortgage finance system is unlikely. However, legislation that would require the director of the Federal Housing Finance Agency to determine which valuable assets held by the GSEs are critical to their mission and to force them to sell or dispose of non-critical assets, has been discussed. That bill, known as the Market Transparency and Taxpayer Protection Act (H.R. 2440), was introduced by Rep. Robert Hurt (R-Va.) and passed out of the House Financial Services subcommittee on capital markets and government GSEs via a voice vote early last month. The subcommittee during that hearing also voted to approve the Fannie Mae and Freddie Mac Transparency Act (H.R. 463); The Fannie Mae and Freddie Mac Taxpayer Payback Act (H.R. 2436); The Housing Trust Fund Elimination Act (H.R. 2441); Cap the GSE Bailout Act (H.R. 2462); Eliminate the GSE Charter During Receivership (H.R. 2439); and The GSE Legal Fee Reduction Act (H.R. 2428). Fannie Mae late last week reported $2.9 billion in losses during the recently ended second quarter of 2011. For prior coverage of S&P’s recent rate cut, use the resource link.

CUNA to NCUA Limit new regs to substantiated problem areas

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WASHINGTON (8/9/11)--The National Credit Union Administration (NCUA) should avoid broad-based regulatory requirements in favor of more targeted actions and should refrain from adding to the burden caused by current credit union regulatory requirements, the Credit Union National Association (CUNA) said in a comment letter. The agency should add new regulations or expand existing regulations “only if there is a well-documented and compelling need to do so,” CUNA added. The comment letter, in response to the NCUA’s 2011 regulatory review, noted that “the cumulative regulatory burden is at an all-time high” due to the activities of the NCUA and Dodd-Frank Act regulations. CUNA’s letter focused on portions of the regulatory review addressing security programs, Bank Secrecy Act (BSA) compliance, and crime reporting, as well as requests for agency action. In the letter, CUNA specifically urged the NCUA to minimize BSA-related compliance burdens by encouraging regulators and legislators to help “minimize the costs and problems institutions encounter to meet BSA requirements and to satisfy examiners.” CUNA also suggested some specific BSA changes that would take Congressional action, such as increasing the dollar threshold for filing currency transaction reports to $20,000 from $10,000. CUNA also suggested increasing the threshold for filing Suspicious Activity Reports to $5,000 and at least doubling triggers for reporting wire transfers and money laundering activities. Credit unions are concerned that some of the work of the NCUA’s Office of Consumer Protection could overlap with the priorities of the Consumer Financial Protection Bureau, CUNA added. The NCUA should also work with the U.S. Treasury Department's Financial Crimes Enforcement Network (FinCEN) to minimize areas where NCUA and FinCEN regulations overlap. CUNA said that it would discuss the office with the NCUA soon. CUNA said it plans to comment on other 2011 NCUA regulatory review items later. The NCUA has also targeted rules addressing records preservation programs, appendices-record retention guidelines, catastrophic-act preparedness guidelines, and post-employment restrictions for some NCUA examiners during its 2011 regulatory review. The NCUA reviews its full regulatory catalogue every three years, and schedules reviews of portions of its regulations on a rotating basis. For the CUNA letter, use the resource link.

Mass. league veteran added to BITS Liaisons Task Force

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WASHINGTON (8/9/11)--John Morawski, Massachusetts Credit Union League chief technology officer, has agreed to join the Credit Union National Association (CUNA) BITS Liaisons Task Force. Morawski is a long-time credit union movement veteran and has worked with the league since 1998. He has performed technology consulting work on behalf of the league by helping credit unions research data processing systems and negotiate technology vendor contracts. He has also conducted on-site Gramm-Leach-Bliley audits and used his skills as a certified ethical hacker to help credit unions address weaknesses in their computer networks. BITS is a financial services trade group that aides growth of electronic financial services for financial institutions and consumers. It represents the 100 largest U.S. financial institutions. The Credit Union National Association (CUNA) takes part in BITS’ committees and working groups related to fraud, regulation, security, and other issues. CUNA is currently participating in BITS’ Fraud Reduction Steering Committee, Security and Risk Assessment Working Group, and Vendor Council. CUNA is the only trade group that is a BITS member. For more on CUNA’s work with BITS, use the resource link.