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NCUA failed to address securities risks before Southwest Corp. conservatorship OIG says

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ALEXANDRIA, Va. (9/29/11)--The National Credit Union Administration’s (NCUA) Office of Corporate Credit Unions (OCCU) failed to identify or address risks caused by Southwest Corporate FCU's exposure to privately issued residential-backed securities before that corporate's conservatorship, the agency's inspector general has found. The agency estimated losses from this corporate failure would total $141 million. The OIG report specifically found that OCCU staff did not “take exception with Southwest’s increasing and significant concentrations of RMBS early on.” The report further noted that the NCUA did not prepare its own full analysis of the credit union’s credit risk, but instead analyzed Southwest management's understanding of its own credit risk. The credit union’s understanding of its own risk was limited by its own “tools and decision processes,” the OIG said. As a result, the agency lacked a full understanding of the corporate’s concentration of RMBS’s or the credit, market and liquidity risks posed by those securities. However, the report did not only fault NCUA examiners. The report found that NCUA regulations “focused on investment ratings and only required corporates to address concentrations of credit risk in their respective policies, leaving it up to each corporate to determine its risk levels/limits.” The OIG said this “loosely worded requirement” limited the OCCU’s ability to mitigate the conditions that led to Southwest’s high concentrations of securities, a move that could have prevented the conservatorship and liquidation of the credit union and reduced the losses to the corporate stabilization fund. For the full OIG report, use the resource link.

Udall backs MBL lift in Denver Post editorial

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WASHINGTON (9/29/11)--Setting a higher credit union member business lending (MBL) cap “is just one way to give businesses the fuel to rev up our economic engine and create permanent job opportunities in Colorado,” Sen. Mark Udall (D-Colo.) said in an editorial published this week in the Denver Post. Udall noted in the editorial that Colorado small-business owners have told him they need “fewer regulations and more access to capital to expand and hire.” He said that his legislation to lift the MBL cap “would responsibly loosen government restrictions on credit unions and help small businesses create more than 100,000 jobs at no cost to taxpayers.” The senator is the author of S. 509, which would increase the MBL cap to 27.5% of assets, up from 12.25%. The Credit Union National Association (CUNA) has estimated that lifting the cap to 27.5% of assets would inject $13 billion in new funds into the economy and create 140,000 new jobs, at no cost to taxpayers. Udall’s bill has a total of 21 co-sponsors. A House version of the MBL legislation, which was introduced by Rep. Ed Royce (R-Calif.), has a total of 80 co-sponsors. A hearing on the House bill is scheduled to take place before the House Financial Services subcommittee on financial institutions and consumer credit at 2 p.m. (ET) on Oct. 12. For more on the House Financial Services Committee's upcoming schedule, see Friday's edition of News Now.

Mortgage-related SARs spike in 2Q FinCEN

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WASHINGTON (9/29/11)--The Financial Crimes Enforcement Network (FinCEN) Monday reported that the number of suspicious activity reports (SAR) involving mortgage loan fraud (MLF) increased between the first and second quarters of 2011, totaling 29,558 at the midpoint of 2011. The 2011 number nearly doubles the total of 15,727 MLF SARs that were filed in the second quarter of 2010. FinCEN in its report noted that the majority of MLF SARs examined in the second quarter “involved mortgages closed during the height of the real estate bubble,” and said the drastic uptick during the second quarter “is directly attributable to mortgage repurchase demands and special filings generated by several institutions.” A total of 81% of MLF SARs filed in the second quarter involved suspicious activities that took place before 2008, and 63% of the SARs filed related to events that took place more than four years ago. FinCEN Director James Freis said financial institutions are “uncovering fraud as they sift through defaulted mortgages," but also noted that FinCEN has also found evidence of ongoing mortgage scams. Debt relief scams were cited in 19% of the SARs filed, and 30% of the SARs filed detailed misrepresentations of income, employment, occupancy, assets and/or liabilities. MLF SARs accounted for 15% of all SARs filed in the second quarter. More than 80% of the mortgage-related reports involved sums under $500,000, and most of the MFL SARs filed came from California or Florida, two of the states that have been hard hit by housing market troubles. For the full FinCEN report, use the resource link.

Two blocked from financial institutions work

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ALEXANDRIA, Va. (9/29/11)--The National Credit Union Administration (NCUA) issued two prohibition orders Wednesday blocking former federal credit union employees from participating in the affairs of any federally insured financial institution. The orders involve the following individuals:
* Rebecca Poe, a former employee of N&W POCA Division FCU, Bluefield, W.Va., who was convicted of aiding and abetting bank fraud. Poe was sentenced to 51 months in prison, three years supervised probation and ordered to pay restitution in the amount of $2,406,804; and, * Lori J. Smith, a former employee of MSA Employees FCU, Murrysville, Pa., who pleaded guilty to theft by unlawful taking. Smith was sentenced to five years intermediate punishment with 12 months electronic home monitoring and two years supervised probation, and ordered to pay restitution and join gamblers anonymous.
Violation of a prohibition order is a felony offense punishable by imprisonment and a fine of up to $1 million. Use the resource link to access all NCUA prohibition orders.

Inside Washington (09/28/2011)

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* WASHINGTON (9/29/11)--Nine Minnesota credit union representatives traveled to Washington, D.C., Sept. 20-22 for the Minnesota Credit Union Network’s (MnCUN) annual Hike the Hill event. During the trip, attendees discussed hot topics with Minnesota’s federal legislators, focusing on member business lending (MBL), supplemental capital and credit unions’ role in housing finance reform. Attendees continued to urge endorsement of legislation supporting credit unions in meetings at National Credit Union Administration (NCUA) headquarters with NCUA Chairman Deborah Matz and Board Member Michael Fryzel. The group also shared regulatory concerns with the NCUA officials, focusing on a proposed rule requiring credit union service organizations to file financial statements with the NCUA and the burden it could place on CUSO operations. While in Washington the credit union representatives attended a legislative and regulatory briefing with the Credit Union National Association and visited the offices of all Minnesota’s federal elected officials. Those visits included meetings with Sen. Al Franken (D) and Reps. Keith Ellison (D), Colin Peterson (D), Chip Cravaack (R), and Erik Paulsen (R). Pictured are representatives meeting with Paulsen (left). (Photo provided by Minnesota Credit Union Network.) CUNA and credit unions are pressing Congress to increase credit unions' MBL cap to 27.5% of assets from 12.25%. Doing so would open up more opportunity to offer MBLs, inject $13 billion in loans into the economy and create as many as 140,000 new jobs, with no cost to taxpayers, CUNA said … * WASHINGTON (9/29/11)--Relief for community banks is among the policy priorities outlined by acting Federal Deposit Insurance Corp. (FDIC) Chairman Martin Gruenberg. Addressing to American Banker’s Regulatory Symposium in his first speech as acting chairman, Gruenberg listed three priorities for the FDIC: the implementation of the Dodd-Frank Act, the future of community banks, and economic inclusion and access to mainstream banking services. Gruenberg cited the toll the financial crisis and recession have taken on community banks. Of the 395 FDIC-insured institutions that have failed during the crisis, more than 300 have been community banks. The FDIC will hold a conference early next year on the future of community banking, Gruenberg said. Prior to the conference, FDIC’s research division will trace the evolution of community banks during the past 20 years, including changes in business models and cost structures, and make suggestions for the future. Other issues to be addressed include raising capital, keeping up with technology, attracting qualified personnel, and meeting regulatory obligations. “We are looking at our own risk-management and compliance-supervision practices to see if there are ways to make the process more efficient,” Gruenberg said … * WASHINGTON (9/29/11)--Judith E. Dupre has been appointed executive secretary of the Federal Financial Institutions Examination Council (FFIEC). Dupre’s principal responsibilities will be to manage operations and to coordinate interaction of interagency staff task forces. She most recently served as a senior international adviser with the Federal Deposit Insurance Corp. (FDIC), coordinating international banking activities with a focus on building relationships with foreign bank regulators and deposit insurers. Earlier, she served as a senior program administrator in the FFIEC’s examiner education office …

Condoleezza Rice Woodward and Bernstein to headline at CUNAs 2012 GAC

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WASHINGTON (9/29/11)--Former U.S. Secretary of State Condoleezza Rice and Americas iconic journalistic duo, Bob Woodward and Carl Bernstein, will headline the Credit Union National Associations 2012 Governmental Affairs Conference (GAC), March 18-22 at the Washington Convention Center. Registration and housing lines are now open (use the resource links below). Rice is scheduled to address a Monday, March 19 session of the


As the 66th U.S. secretary of state, Rice was a prominent member of the President George W. Bushs Cabinet. She also served as Bushs national security advisor during his first term as president. She currently teaches Political Economy in the Graduate School of Business at Stanford.

Another 2012 GAC highlight will be a presentation by Woodward and Bernstein as they reunite on stage to mark the 40th anniversary of their first Watergate-scandal headline and share the stories behind their newspaper work and books, and offer a personal tour of politics and Washington. They also will address GAC participants on March 19.

CUNA's GAC is the credit union movement's premier political event and its largest national conference, each year providing more than 4,000 credit union executives and board members an opportunity to hear influential leaders from the U.S. Congress, the administration and the federal regulatory agencies.

Capitol Hill visits, in which GAC attendees meet face-to-face with their members of Congress and staff to discuss issues that concern the credit union movement, will take place the afternoon of Wednesday, March 21, and the morning of Thursday, March 22.

"This years GAC theme, Powerful Cause, Positive Effect, sums up precisely what the Governmental Affairs Conference is all about," said Bill Cheney, president/CEO of CUNA. "Our powerful cause, backed by 93 million working Americans who rely on credit unions every day, needs representation in Washington.

"At the GAC, credit union leaders from around the country will have the opportunity to meet one-on-one with their members of Congress and effect positive change for the credit union movement. We need the support of every credit union leader in the movement to accomplish our political goals in the year ahead, to champion the credit union issues of today and usher in a brighter future for credit unions tomorrow."

Recognized as the key conference to attend for political impact, credit union networking and industry updates, the GAC also offers a wide array of educational breakout sessions, the industry's largest exhibitor showcase, guest/family programs to tour Washington's sights, and special entertainment including an opening concert and the closing Gala Reception and Dance. Additional speakers and session topics will be announced in the weeks to come.

For more information and to register use the resource link below or go to

CUNA Shelby bill could cut reg burden for CUs

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WASHINGTON (9/29/11)--The Financial Regulatory Responsibility Act of 2011 (S. 1615), introduced by Sen. Richard Shelby (R-Ala.), “could prove to be beneficial to credit unions if enacted,” Credit Union National Association (CUNA) Senior Vice President for Legislative Affairs Ryan Donovan said Wednesday. Donovan reiterated that reducing regulatory burden for credit unions is a top CUNA priority and added that the Shelby bill proposes significant changes to the rulemaking process. However, Donovan noted, the long-term prospects of the bill are uncertain. The bill would require the National Credit Union Administration, the Consumer Financial Protection Bureau, and other federal financial regulators to report the economic impact of the rules, including their effects on growth and net job creation, before those rules could become law (News Now Sept. 28) The legislation would substantially revise the Administrative Procedure Act to require agencies to consider the costs and benefits of new rules and other actions and to conduct public hearings for most rules that the Office of Management and Budget determines would have an industry impact of $1 billion or more. Shelby in a release said the legislation would hold financial regulators “accountable for rigorous, consistent economic analysis on every new rule they propose” and would require them to provide “clear justification for the rules.” Shelby also said the bill also “improves the transparency and accountability of the regulatory process and reduces the burdens of existing regulations.” “CUNA is going to keep a close eye on this bill in the coming months,” Donovan said. The bill is co-sponsored by Shelby’s fellow Senate Banking Committee Republicans, Sens. Bob Corker (Tenn.), Michael Crapo (Idaho), Jim DeMint (S.C.), Mike Johanns (Neb.), Mark Kirk (Ill.), Jerry Moran (Kan.), Patrick Toomey (Pa.), David Vitter (La.) and Roger Wicker (Miss.). Shelby has requested that the Senate Banking Committee conduct a hearing on the bill, but that hearing has not yet been scheduled.