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Inside Washington (09/30/2008)
* WASHINGTON (10/1/08)--For the first time in history, the Federal Deposit Insurance Corp. (FDIC) used the systemic risk exception to sell Wachovia’s assets to Citigroup (American Banker Sept. 30). The exception allowed the agency to protect all of Wachovia’s depositors while covering Citi’s cost if Wachovia’s losses on assets were more than $42 billion. The transaction is not expected to cost the FDIC anything--and the agency will receive $12 billion in preferred Citi stock. Citi will absorb $42 billion in losses from Wachovia ... * WASHINGTON (10/1/08)--Three firms--Citigroup Inc., JPMorgan Chase and Co., and Bank of America--are completing deals with three other banking operations in an effort to save them from failure. The firms will become larger after the deals are finished, which sparks concern among some observers. Wachovia’s sale to Citigroup would give Citigroup $2.9 trillion in assets; Washington Mutual’s sale to JPMorgan would give it $2.1 trillion in assets, and BofA’s acquisition of Merrill Lynch would give it $1.9 trillion in assets. The purchases are concentrating the banking system in the hands of fewer people, which creates risk, said Bill Longbrake, former Washington Mutual vice chairman and director at First Financial Northwest (American Banker Sept. 30). Risks could be avoided if the companies are diversified, said Robert Clarke, senior partner at Bracewell and Giuliani. The interest in the companies is also more vested because the government will be less likely to let them fail, added Douglas Lindy, a banking partner in regulatory practice at Allen and Overy ... * WASHINGTON (10/1/08)--A delegation of 18 individuals representing 13 Illinois credit unions spent two days in Washington, D.C., last week hiking Capitol Hill, according to the Illinois Credit Union League. The group’s legislative priorities included support for regulatory relief legislation, opposition to interchange fees and support for retention of credit unions’ tax exempt status. Rep. Jesse Jackson (D-Ill.), center, spoke to and met the group at Credit
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Union House. The group presented him with a plaque for sponsoring regulatory relief legislation. “This bill allows credit unions to better service members from all walks of life with modern, low-cost financial services and also promotes the economic growth and well-being of our communities,” Jackson said. “As financial cooperatives, the mission of credit unions is to serve their members, not to prey on people who are struggling in the current economic environment. [The legislation] keeps the self-help cooperative spirit of credit unions alive in my district and throughout the nation.” Hike the Hill participants also met with Brad McConnell, legislative assistant for financial services in Sen. Dick Durbin’s (D-Ill.) office. McConnell said Durbin was in favor of a provision raising the Central Liquidity Facility’s borrowing cap, which was recently approved in both the House and the Senate. The provision is part of a government funding resolution that awaits the president’s signature. The group also met with National Credit Union Administration (NCUA) Chairman Michael E. Fryzel; his new chief of staff, Sarah Vega; and NCUA board member Gigi Hyland. (Photo provided by the Illinois Credit Union League) ...


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