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Filed on September 15, 2009, published the first business day after.
- Government lets UBIT filing date pass
- No CRA for CUs, CUNA urges
- Potential fair value changes concern Fed Reserve gov.
- Inside Washington
- Borrowers sue over Huron River real estate deals
- GM expresses appreciation to CUs, outlines plans
- USA Today: Stashing cash? Try high-yield CU account
- Hampel to BizWeek: Why inventory is hard to finance
- Auto lending helps Michigan CUs gain popularity
- Refinancings boost Georgia CUs' loan portfolios
- Series on CUs appears in Arizona biz mag
- Pittsburgh CUs prep for G-20 Summit impact
- Scammers access energy company’s account, client info
- PCUA board approves five policies
- CU System briefs
- Market News
- News of the Competition
- Roth IRA: Convert or not to convert?
- Rochdale Group launches revalidation technology
- NACUSO teams with Pepperdine to build leaders network
Government lets UBIT filing date pass
WASHINGTON (9/16/09)—The government let its 60 days come and go and failed to file an appeal to a federal court judge's July decision that backed a favorable verdict for credit unions in an unrelated business income tax (UBIT) case.
The U.S. Department of Justice had until Sept. 12 to appeal the decision that backed Community First Credit Union in a suit against the Internal Revenue Service seeking refund for UBIT paid on credit life insurance, credit disability insurance and Guaranteed Asset Protection (GAP).
The government's decision to back off the lawsuit could have considerable impact on credit union UBIT issues.
According to attorney Michael M. Conway of Foley & Lardner LLP, in Chicago, who represented Community First, "Now accountants and tax advisors to credit unions have this court decision as ‘substantial authority' that UBIT is not due on income from credit life insurance, credit disability insurance and Guaranteed Asset Protection."
Back on May 14, a jury found in favor of the credit union's refund claim of $54,604, the full amount the credit union sought, plus costs. The Justice Department then asked a trial judge to overturn the jury's verdict, which resulted in a July 14 ruling by U.S. District Judge William Griesbach.
Griesbach said that the government's challenge, which asked the court to "re-weigh the evidence and find that the jury should have preferred its version of the evidence" to the credit union's, was "outside the bounds" of what is allowed under Federal Rule 50. Under Federal Rule 50, courts may "grant judgment as a matter of law when a party has been fully heard on an issue and there is no legally sufficient evidentiary basis for a reasonable jury to find for that party on that issue."
Eric Richard, general counsel of the Credit Union National Association, said Tuesday, "This event—or non event—is important to credit unions and could significant to the future of IRS UBIT opinions."
"After putting enormous Government resources into defending against this ‘test case' and having lost at the trial level, the Government chose not to seek to overturn this decision on appeal," said CUNA General Counsel and Executive Vice President Eric Richard.
"Clearly, the government was unwilling to expose its reasoning to review by the Court of Appeals even though it had an absolute right to obtain this appellate review. Now accountants and tax advisors to credit unions have this court decision as substantial authority that UBIT is not due on credit life insurance, credit disability insurance and GAP."
In another UBIT case, Bellco Credit Union V. U.S. , Judge Christine Arguello asked both parties earlier this month reconsider their requests for a jury trial, which is currently set for Dec. 7.
Bellco, of Grand Junction, Colo., has challenged the IRS assessment of UBIT on income from three of its products, and is seeking a refund of $199,293. The amount reflects what was paid on products such as accidental death and disability insurance (AD&D), credit life and disability insurance, and financial services such as investments in 2000, 2001 and 2003, plus statutory interest.
No CRA for CUs, CUNA urges
WASHINGTON (9/16/09)--The Credit Union National Association (CUNA) has voiced its opposition to H.R. 1479, the Community Reinvestment Act (CRA) Modernization Act of 2009, in a letter sent to House Financial Services Committee Chairman Rep. Barney Frank (D-Mass.) ahead of Wednesday's House hearing.
Rep. Eddie Bernice Johnson (D-Texas), National Community Reinvestment Coalition President/CEO John Taylor, Massachusetts Commissioner of Banks Steven Antonakes, and National Urban League President/CEO Marc Morial will testify during the hearing, along with academics and representatives from various Washington-based interest groups.
H.R. 1479, as currently written, would broaden the reach of CRA requirements to more entities, including credit unions. Under this legislation, credit unions would need regulatory approval to place new branches and would be forced to hold 30-day public comment periods before relocation, mergers, or field of membership expansions could be completed.
While CUNA and credit unions in general support providing greater financial services to the underserved, CUNA opposes bringing credit unions under the purview of the broadened CRA legislation, saying that the "significant regulatory burdens" imposed on credit unions by this bill would create "unnecessary and possibly harmful" consequences for credit unions.
According to CUNA, credit unions, which have not engaged in redlining nor reduced the amount of credit available to their members, "have done nothing to deserve the regulatory framework that has been rightly imposed on banks for their misdeeds."
The letter also takes issue with a recently released National Community Reinvestment Coalition (NCRC) paper that addresses whether or not credit unions are fulfilling their mission of serving their members.
CUNA recently addressed the NCRC report, which unfavorably compares credit union lending practices to those of banks, dismissing it as a flawed report that should be dismissed by policymakers.
This NCRC paper is expected to be discussed during the hearing, which is scheduled to take place at 10 a.m. today. The letter, which has also been delivered to members of the committee, includes a detailed response laying out what CUNA sees as the "fundamental flaws" in the NCRC report.
To see the CUNA letter in full, and NewsNow's coverage of the NCRC's paper, use the resource links.
Potential fair value changes concern Fed Reserve gov.
WASHINGTON (9/16/09)--Federal Reserve Governor Elizabeth Duke this week expressed concern regarding whether or not financial institutions would be able to adequately comply with a potential new fair value rule, stating that the Federal Reserve has "very little actual experience in fair-valuing liabilities."
Speaking on her own behalf at the American Institute of Certified Public Accountant's conference on Banks and Savings Institutions, Duke said that it is "frustrating" to assess "the viability of individual financial institutions and the financial system as a whole" when the worth of an asset "is based on the nature of its acquisition rather than the way in which it is managed or the way in which its economic value is likely to be realized."
According to Duke, fair value has "relevance" in situations where business models are "predicated on the trading of financial instruments."
Increased use of fair value accounting "could create disincentives for lending to smaller businesses whose credit characteristics are not easily evaluated by the marketplace," Duke added.
Financial Accounting Standards Board Chairman Robert Herz recently disclosed that the agency plans to issue a broad-based exposure draft on fair value accounting around the end of this year.
While Herz has not discussed the exposure draft in great detail, he said that the exposure draft would address fair value accounting rules for all financial instruments, including allowances related to loan loss accounts, adding that the board would provide the industry with the time needed to comment on the proposal once it has been issued. Any changes, if approved, would not go into effect until 2011, Herz added.
The Credit Union National Association will discuss fair value and other matters of concern to credit unions during a Sept. 17 conference call with Chairman Herz.
Inside Washington
- WASHINGTON (9/16/09)--The Financial Crisis Inquiry Commission, which was established by Congress to investigate the causes of the financial crisis, scheduled its first public meeting for Thursday (Dow Jones Sept. 15). Thomas Greene, a lawyer in the California Attorney General's office, will serve as executive director. Greene has been involved with coordinating multi-state, anti-trust remedies against Microsoft Corp. and civil actions against Enron. The 10-member commission will issue a final report to Congress by December 2010 ...
- WASHINGTON (9/16/09)--The future of Fannie Mae and Freddie Mac is still unknown as the first anniversary of the day the federal government took the enterprises into conservatorship passed. Mike Williams, Fannie's CEO, said in a speech marking the first anniversary last week of the conservatorship that his focus is on the housing crisis. At a Thursday press briefing, a Treasury Department official said Fannie and Freddie are "more of next year's business than this year's" (American Banker Sept. 15). The Obama administration has stated it would propose reforms to the enterprises this year ...
- WASHINGTON (9/16/09)--President Barack Obama says job losses are bottoming out and the economy is growing again. However, in an interview with Bloomberg News, he warned against stopping government aid too early because it could stifle recovery plans (Bloomberg.com Sept. 15). Since December 2007, the U.S. has lost 6.9 million jobs. In other news, Obama said he was confident that plans to overhaul financial regulation would pass Congress this year, and said he would overcome bankers' efforts to kill a proposal for a consumer protection agency. Obama also has opposed limiting pay to financial industry executives, despite criticism over the bonuses and high salaries Wall Street is paying. He questioned why the executives' pay would be limited but not that of Silicon Valley entrepreneurs or NFL football players ...
Borrowers sue over Huron River real estate deals
TAMPA, Fla. (9/16/09)--Twenty-eight borrowers from nine states filed a lawsuit Sept. 9 in a U. S. District Court in Tampa, Fla., against Michigan-based Huron River Area CU and several real estate venturers over Florida speculative land deals that contributed to the failures of Huron River, and Norlarco FCU and New Horizons Community FCU.
Also named in the suit is Huron River's liquidating agency, the National Credit Union Administration (NCUA). NCUA assumed control of the credit union in February 2007 and liquidated it the following November. It is in the process of trying to collect on loans made by the credit union in the undeveloped Cape Coral and Lehigh Acres projects in Florida. Those developments went bust when the real estate market bottomed out.
Among the defendants are Russ Whitney and his firm, the Whitney Education Group, which conducts real estate investment seminars throughout the U.S. under the name "Millionaire University" (MU); Michael O. Kane and Gulfstream Realty; United Mortgage; the Construction Loan Co. (CLC) and other partners.
The suit alleges that the defendants worked together in an enterprise to sell, develop, finance, market and manage Florida real estate to and for MU students, who were the targets of the fraud. CLC acted as Huron River's agent for a Florida construction loan program and would close the construction loans and attempt to assign each loan to the credit union. The assignments were allegedly "illegal and void because the plaintiffs were not legal members of Huron River Area CU," according to the complaint filed.
The plaintiffs are from California, Florida, Illinois, Maryland, Massachusetts, Minnesota, Michigan, Tennessee and Texas.
The case is similar to a lawsuit filed by nearly 60 borrowers in a Circuit Court in Florida, now in U.S. District Court in Ft. Myers, Fla. That suit was filed on July 31, 2007, against both Huron and Norlarco. Although the plaintiffs are different, both sets of plaintiffs are represented by the same law firm, Conwell Kirkpatrick of Tampa, Fla., and many of the allegations are identical.
In both cases, plaintiffs alleged violations of the Racketeer Influenced Corrupt Organization (RICO) Act. In July, the Department of Justice, representing NCUA in the case, filed a motion for sanctions against the lawyers and plaintiffs of the earlier lawsuit, asserting that the plaintiffs' RICO claims against Huron River Area CU "had no evidentiary support." No rulings have been made on the sanctions motion.
Plaintiffs in the new lawsuit also present as evidence for their arguments a copy of the NCUA Office of Inspector General's Nov. 26, 2008, Material Loss Review of the Huron River Area CU. The report analyzes why the credit union failed and concludes the credit union:
- Did not exercise due diligence by evaluating the third-party relationship held with its lender, CLC;
- Allowed CLC to concentrate a majority of the credit union's loan portfolio in the speculative Florida real estate construction project;
- Allowed CLC to make construction loans to applicants outside the credit union's approved field of membership;
- Misclassified construction loans and violated NCUA's Member Business Loan limits;
- Did not have adequate liquidity controls in its asset liability management policy; and
- Failed to develop or follow adequate plans to guide the direction of the credit union and the Florida construction loan program.
The report also said management of the credit union was not forthcoming with examiners about the construction loan program and may have ignored warnings regarding the expected decline of housing values, especially those in the Florida market.
In the earlier lawsuit, NCUA presented a D'Oench Doctrine argument--that federal common law and the Federal Credit Union Act bar suits and recoveries of this type against NCUA when it is acting as the liquidating agent of a federally insured credit union.
On Sept. 3, the judge gave the plaintiffs and defendants 11 days to present the status of their mediation efforts from the case filed in 2007. No ruling has been made yet.
In the latest suit, the plaintiff borrowers ask for a jury trial; for the court to declare their loans held by the liquidating agent as illegal and void; and for a judgment that NCUA has no standing to enforce the terms of the loans.
GM expresses appreciation to CUs, outlines plans
LANSING, Mich. (9/16/09)--Management officials at General Motors expressed appreciation for credit unions and their "Invest in America" auto-sales incentive program during a conference call Monday.
Mark LaNeve, vice president of sales and marketing for GM North America, told more than 100 credit unions on the call that "Invest in America" is not just a program GM considered when credit was tight, but a critical partnership for the newly restructured automaker. He outlined GM's plan for moving forward and how credit unions fit into that plan.
CUcorp CEO David Adams also spoke during the call, describing the partnership as a catalyst to how business can be done in today's economic environment. CUcorp is a service corporation of the Michigan Credit Union League.
"This is another positive example of how today's economic climate is creating unprecedented opportunities for credit unions and their members," Adams said.
LaNeve explained that 60% of credit union members who requested a GM authorization code for a discount are purchasing the vehicle. The normal rate is about 15% to 20%, and he expressed satisfaction with the credit unions' statistic. LaNeve also pointed out that 66% of credit union members buying a GM vehicle is either a new GM customer or returning after using another company.
Credit unions had an opportunity to ask questions directly with GM and give senior management an idea of how the program worked from the credit union perspective.
"This meeting was likely the first time that General Motors Corp., the venerable powerhouse in the auto industry, has had a dialogue with some of the largest credit unions in the nation about a partnership," said Adams, adding that CUcorp is committed to being a catalyst for partnership between credit unions and GM.
So far, more than 190,000 vehicles have sold under the "Invest in America" program, with credit unions financing more than 150,000 of the sales. This has resulted in new credit union loans of about $3 billion, said CUcorp.
USA Today: Stashing cash? Try high-yield CU account
NEW YORK (9/16/09)--USA Today Tuesday suggested that consumers look to credit unions as a place to stash their cash.
Consumers are spending less and saving more, but they should put their money in a place where it can earn interest. The article suggested consumers look into rewards checking accounts with interest rates of 4% or higher, which are offered by some credit unions and banks (USA Today Sept. 15).
It also suggested placing emergency funds in a credit union account as opposed to a money market account, which allows consumers to put money they're planning to invest in stocks or mutual funds. The advantage of placing money in a high-yield account is liquidity--which means consumers can withdraw their money at any time without penalty.
"It you're looking for a place to stash your emergency savings, a high-yield bank or credit union account is a better choice," the article said.
USA Today also reminded readers that deposits in credit unions are backed by the National Credit Union Administration up to $250,000.
Hampel to BizWeek: Why inventory is hard to finance
LOS ANGELES (9/16/09)--Inventory financing will be one of the most difficult things to obtain this year, according to the Credit Union National Association's (CUNA) chief economist.
Inventory financing is hard to get because inventory is basically useless, Bill Hampel told BusinessWeek Friday.
"Inventory is, by definition, self-liquidating, extinguishing collateral because if the business does not sell the vast majority of its inventory, it's essentially worthless," Hampel said. "For a lot of business lenders, inventory financing is essentially viewed as unsecured lending."
BusinessWeek's article noted that Josh Lipton, owner of BikeShopHub.com, had received a $32,000 revolving line of credit from Bank of America. BofA cut the line in half this summer.
Lipton said he used the credit during the slow season last fall, but paid it off in full in spring. After he paid off the line of credit, he received a note from Bank of America saying he did not qualify anymore for that large of a credit line.
Auto lending helps Michigan CUs gain popularity
LANSING, Mich. (9/16/09)--Michigan credit unions saw an 8.5% increase in new auto loans during second quarter, says the Michigan Credit Union League, citing data from the National Credit Union Administration.
The increase equals $2.2 billion in auto loan balances as of June 30--a 32% increase in new-vehicle loans over June 2008 (Michigan Monitor Sept. 14).
"More than 200 credit unions statewide have stepped in to fill the void in auto lending," said league President/CEO David Adams. "Credit unions are financially stable, increasing members' savings deposits, and supporting their members and Michigan's auto companies by making the loans that put new and used cars on the road," Adams added.
He cited credit unions' "Invest in America" program, which "has strengthened credit union relationships with auto dealers and shown the importance of buying American."
Used-car loans increased 14% over the period, and small business loans grew about 17%. That momentum continued into the third quarter of 2009, with the state's credit unions increasing their market share of new- and used-car loans from 23% July 31, 2008, to 36% on July 31, 2009. This is the highest market share increase of the 20 most populous states, the league said.
On Tuesday, the Oakland Press featured the statistics and Adams' comments, as well as a comment from Claudia York, CEO of Chief Financial FCU, Pontiac, who noted the increase in business in both new- and used-car loans.
Refinancings boost Georgia CUs' loan portfolios
DULUTH, Ga. (9/16/09)--Georgia credit unions saw a boost in lending, largely due to refinancings, during the first six months of 2009, says an article in The Atlanta Journal-Constitution (Sept. 14).
Credit unions in the state reported $2.1 billion in loans originated during the first half of the year, compared with $2 billion for the first six months of 2008. The number of loans dropped slightly but the average loan size rose.
Mike Mercer, president/CEO of the Georgia Credit Union Affiliates, said that much of the new business was generated from homeowners refinancing their mortgages. He told the publication the league was "pleasantly surprised that originations have been as good as they have."
The article noted that loan volume growth has slowed, and earnings are down by about 50% across the board, with about one-fourth of the state's 168 credit unions reporting a loss over the period.
Mercer told the newspaper that credit unions' deposit levels have shot up faster than money can be lent out. Credit unions are parking cash in overnight or short-term investment accounts, which earn far less than the 1% to 2% returns paid on the deposits, and that eats into the credit unions' earnings.
Deposits are up about 16% over the same period last year because members are keeping money in their accounts rather than spending or investing.
While credit unions' loans were up, the state's banks loan volume dipped slightly, to $207 billion at the end of June. That compares with $214 billion in June 2008.
Series on CUs appears in Arizona biz mag
PHOENIX (9/16/09)--Arizona Business Magazine this month published a series of six articles, including three profiles, on Arizona credit unions and their employees.
The individuals profiled by the magazine were: Mary Marshall, retired CEO of Alhambra CU, Phoenix; Pat Bodnar, senior vice president of the Arizona Credit Union League; and Robert Ramirez, president/CEO of Vantage West CU, Tucson.
The magazine noted:
- Marshall's commitment to credit unions after a credit union provided needed support to her family when she was growing up;
- Bodnar's enthusiasm for her job at the Arizona league. "I fell in love with credit unions and their philosophy," she told the magazine; and
- Ramirez's promotion to acting chief financial officer after one day on the job. Six months later, he was challenged to turn around the credit union's finances. Three months after that, he fulfilled the task and was promoted to chief financial officer.
Arizona Business Magazine also noted the transformation of the Arizona League throughout the decades, Arizona credit unions' outreach efforts to small businesses, and the league's partnership to help credit unions in Antigua.
To read the full articles, use the link.
Pittsburgh CUs prep for G-20 Summit impact
HARRISBURG, Pa. (9/16/09)--The Pennsylvania Credit Union Association held a conference call Monday with credit unions in the Pittsburgh area to discuss preparations for operations during the Group of 20 (G-20) Summit, which will be held Sept. 24-25 in Pittsburgh.
The G-20 Finance Ministers and Central Bank Governors was established in 1999 to bring together systemically important industrialized and developing economies to discuss key issues in the global economy.
The credit unions shared information and plans. Most of the credit unions are closing or having limited hours during the event.
Sandy Shenk, Pennsylvania Credit Union Service Centers Inc. state coordinator, discussed how shared branching really helps during situations such as the G-20 Summit.
Nine credit unions participated in the call (Life is a Highway Sept. 15):
- A-K Valley FCU, Lower Burrell;
- AT&T Employees Pittsburgh, Pa. FCU;
- Clearview FCU, Moon Township;
- City Co FCU, Pittsburgh;
- Financial Advantage FCU, Homestead;
- Pittsburgh Firefighter's FCU;
- P A T A FCU, Pittsburgh;
- riverset CU, Pittsburgh; and
- Tri-Point FCU, Pittsburgh.
Scammers access energy company’s account, client info
BRUNSWICK, Maine (9/16/09)--Eastern European scammers used a sophisticated e-mail scam to gain access to a Brunswick, Maine, heating fuel company's bank account it uses to allow customers to pay for fuel with electronic funds transfers from their checking accounts. The scam has implications for credit unions.
The breach of Downeast Energy and Building Supply's account cost the company roughly $150,000 and exposed checking account information of hundreds of customers, the company said Monday (MaineBusiness.com Sept. 15).
The scam began with an e-mail to a Downeast employee that claimed to be from the company's bank. An e-mail link that seemed to be from KeyBank took the employee to a bogus website that was identical to the bank's, the publication said.
Once the company's bank-issued user name and password were entered, the information was delivered to the scammers who then used it to steal money from Downeast, MaineBusiness said.
Internet criminals are stepping up their targeting of small- and mid-sized companies because they have less sophisticated security than larger companies, a Federal official told the publication.
About 87% of data breaches could be thwarted with simple-to-intermediate preventive measures, said a Department of Homeland Security official.
Cybercrime has cost the nation nearly $8 billion, U.S. Sen. Susan Collins (R-Maine), ranking member of the Senate Homeland Security and Governmental Affairs Committee, told the committee.
Data relating to more than 130 million credit and debit cards have been stolen from corporations, the publication said.
PCUA board approves five policies
HARRISBURG, Pa. (9/16/09)--The Pennsylvania Credit Union Association's (PCUA) board of directors Friday approved five policies during its Fall Leadership Conference.
The association reaffirmed its existing policy to fully defend any adverse tax ruling at all costs--at federal, state, or municipal levels--through the courts or the legislature.
The board voted to modify the association's partnership with the Credit Union National Associations (CUNA) to broaden its education programming. PCUA will continue to promote CUNA education products and services where appropriate (Life is a Highway Sept. 15).
The board also voted to continue its iBelong credit union awareness campaign, basing assessments on a three-tier funding option for credit unions that stipulates:
- Less than $20 million in assets--0.10 basis points;
- $20-$50 million in assets--0.40 basis points; and
- Greater than $50 million in assets--0.60 basis points.
This will result in nearly all credit unions seeing a decrease in their iBelong assessments, PCUA said.
The board also approved increased membership fees for all asset categories over $100 million by $1,000 per asset category.
Finally, the board agreed to a one-time free trial membership for non-affiliated credit unions, from Oct. 1 through Jan. 31.
CU System briefs
- HONOLULU (9/16/09)--A credit union has apologized to members after sending letters to them with their account numbers displayed on the envelope. Hawaii State FCU said no harm can be done because the account number wouldn't be enough to access an existing account or open a new one. As a test, a local television station took one member's name, address and account number, and tried to create an online account. But since it didn't have her Social Security number, it couldn't open a new account, said the station. The credit union said that members will not be liable for any unauthorized access to their accounts and advised members to monitor their accounts as a precaution (KITV.com Sept. 14) ...
- ALEXANDRIA, Va. (9/16/09)--More than 225 members of CommonWealth One FCU showed their support Aug. 28 for H.R. 3380, the Promoting Lending to America's Small Business Act. The bill--introduced by Reps. Paul Kanjorski (D-Pa.) and Ed Royce (R-Calif.)--would raise the cap on member business lending (MBL) to 25% of assets from 12.25% and raise the minimum threshold for a loan to be considered an MBL. The credit union's Legislative Awareness Day at each branch informed members about the bill. Staff used the mycuisme.com Website to help members write their congressional representatives. The credit union will absorb the cost of mailing the letters. "It's great to see members come out and show their support for the credit union movement and exercise their roles as a member-owner," said John R. Blair, president/CEO of the $288 million asset credit union ...
- INDIANAPOLIS (9/16/09)--Mildred "Millie" South Cox, 69, former
Indiana Credit Union League vice president of governmental affairs, died in her sleep Friday, according to the league. Cox was a league employee for 26 years, serving in the governmental affairs position from 1986 until retiring in 2003. That year she was recipient of a Sagamore of the Wabash Award from the late Gov. Frank O'Bannon; a special resolution adopted by the Indiana General Assembly honoring her dedication and efforts on behalf of credit unions; a special resolution read into the Congressional Record by her friend, U.S. Rep. Dan Burton; a resolution adopted by Indiana's credit unions at the 2003 League Annual Meeting, and a national credit union award at the Credit Union National Association's (CUNA) Governmental Affairs Conference (GAC) in 2004. The Indiana Credit Union Foundation established the Millie Cox Scholarship Award, which has helped recipients attend the CUNA GAC each year. "Millie was a tireless advocate, leader, and champion of credit unions throughout her career with the league. Her work in national political circles as well as at the Indiana Statehouse had a very positive impact and will continue to benefit credit unions for years to come," said John McKenzie, league president. She is survived by one son, three sisters, and two brothers. A celebration of her life will be today at 2:30 p.m. at Flanner and Buchanan Funeral Center, Washington Park East, Indianapolis. Visitation will start at 1:30 p.m.
- ALBANY, N.Y. (9/16/09)--Alfred J. Mariani, former manager/CEO of
Syracuse University FCU and former national director of the Credit Union National Association (CUNA), died Monday. He joined the credit union movement during the late 1940s, serving as treasurer of both Oneida FCU and Bendix FCU before becoming a field representative for the Syracuse chapter of the Credit Union Association of New York. Mariani served in that position for 14 years, organizing more than 100 credit unions from Binghamton to Massena and nurturing them. He also served as association volunteer; president, director and first vice president of the Syracuse chapter; and director-at-large. Mariani also was a founding member of Members United Corporate FCU and a member of CUNA Mutual's Policyowner's Board. He was the association's first two-term president/chairman and was inducted into the New York Credit Union Hall of Fame in 2008. Mariani is survived by one son, one daughter, two sisters, six grandchildren and three great-grandchildren ...
- ALBANY, N.Y. (9/16/09)--Richard K. Moore, chairman of Reliant
Community FCU, died Sunday, according to the Credit Union Association of New York. Moore joined the credit union's board in 1985 and served as board chairman from 1986 until his death. Moore was also a member of the credit union's Supervisory Committee and was active in the National Association of Credit Union Chairmen. In 1997, he received the Certified Credit Union Director designation from the Credit Union Executives Society. Moore was inducted into the 2009 New York Credit Union Hall of Fame last month. He is survived by his wife, two sons, five grandchildren and a sister ...
Market News
MADISON, Wis. (9/16/09)
- Wholesale or producer prices--those paid to factories, farmers and other producers--increased steeply by 1.7% in August, following a 0.9% decline in July, according to the Labor Department's Producer Price Index. The rise was the fourth gain in five months. The price increase was twice what was forecast, largely due to rapid inflation among energy products led by gasoline costs, analysts said. Core prices, which exclude food and fuel, rose 0.2%--higher than forecast. Companies will have a difficult time passing higher expenses onto customers until the economic recovery results in sustained gains in business investment and consumer spending, analysts said. Inflation will remain low, economists predict, which will allow the Federal Reserve to keep interest rates close to zero to spark growth, they added (Bloomberg.com and Moody's Economy.com Sept. 15) ...
- Consumer auto purchases spurred sales at U.S. retailers in August by the highest amount in three years, with total sales rising 2.7%. The increase was sparked by the government's "Cash for Clunkers" program, analysts said. August sales rose 1.1%, excluding autos, and 0.6%, excluding gas at stations--which experienced benefits from prices, they added. Department stores, sporting goods and apparel experienced significant gains. Furniture and building supply stores were the sole areas of weakness. Data indicate that back-to-school sales were stronger then originally thought (Moody's Economy.com and Bloomberg.com Sept. 15) ...
- Total business inventories declined 1% in July, as expected, according to a report from the Census Bureau. The month's drop constituted the 11th consecutive monthly inventory decline. July had a slower rate of decline compared with June (-1.4%), which suggests that businesses are making headway in trimming inventories closer to desired levels, analysts said. Retail inventories declined 1%. The I/S (inventory-to-sales) ratio fell to 1.36 from a previous 1.38; the high was 1.48 in January (Moody's Economy.com Sept. 15) ...
News of the Competition
MADISON, Wis. (9/16/09)
- Citigroup Inc. is looking to cut down the U.S. government's 34% stake in the financial firm. Company executives have created plans for a possible multibillion-dollar joint stock sale with the Treasury Department. Under the plan, Citigroup would issue new shares to the public, and the Treasury would sell at least a portion of its Citigroup holdings, said people familiar with the situation. Thus far, Citigroup hasn't held any substantial talks with the government. Citigroup called a Treasury official last weekend to get the ball rolling in attempts to trim the Treasury's investment, said people familiar with the matter. Citigroup said during the call that it plans to raise outside capital to repay any outstanding bailout funds. Treasury reportedly did not object to Citigroup paying back the government as long as it could raise offsetting capital (The Wall Street Journal Sept. 15) ...
- A federal judge has tossed out the Securities and Exchange Commission's (SEC) proposed settlement with Bank of America concerning BofA's disclosure of bonuses paid to Merrill Lynch employees. The ruling by U.S. District Judge Jed Rakoff raises questions about how the agency manages probes of major U.S. companies, analysts said. "The proposed consent judgment in this case suggests a rather cynical relationship between the parties ... And all this is done at the expense, not only of the shareholders, but also the truth," Rakoff said in a statement. By rejecting the SEC deal, the judge implicitly postulated wider-ranging questions about the government's role in taking unprecedented steps to rescue the U.S. financial system, analysts said (The Wall Street Journal Sept. 15) ...
Roth IRA: Convert or not to convert?
NEW YORK (9/16/09)--Are you looking for an opportunity to shelter retirement savings from future tax increases? On Jan. 1, the usual income limitation of $100,000 will be lifted, and tax rules will allow you to spread the conversion taxes you'll owe over two years instead of paying them all in 2011 (The New York Times Sept. 3).
There are good reasons to convert a regular individual retirement account (IRA) to a Roth in January, but it might not be the best strategy for you. Consider the pros and cons.
If you're young, converting to a Roth is a smart money move. It's true that you'll pay ordinary income taxes on the money you convert at your current tax rate, but consider this:
- A Roth IRA allows tax-free growth and tax-free income distributions at age 59 1/2 or older and as long as you have held your Roth account for five years or longer. The younger you are, the longer you have to grow your retirement savings tax free.
- The market's been down, and is slowly climbing. Most likely your account value is at a low. By converting now, you may pay lower taxes than if you wait.
- With looming federal budget deficits as well as Medicare and Social Security obligations, there's a good chance tax rates will increase in the coming years. You'll be better off paying those taxes now rather than later.
- By converting to a Roth, you avoid the traditional IRA requirement to take yearly minimum distributions starting at age 70 1/2. This can leave more for your heirs if you don't use the money yourself.
- A traditional IRA requires you to take withdrawals starting at age 70 ˝, but a Roth IRA does not. The longer you can wait, the more time your money has to accumulate tax-free.
- Under the present tax laws, converting a traditional IRA to a Roth can lower the size of your taxable estate. Think: decades of tax-free growth.
- If you name your spouse as the beneficiary of your Roth, and your spouse foregoes withdrawals after you die, those Roth IRA assets keep compounding untaxed for the rest of your spouse's lifetime. If your spouse could name a child as their beneficiary, the tax-free compounding goes on (Kiplinger.com March 19).
Reasons why converting may not be right for you:
- Young, old, or in between, there's reason to think twice about converting: You will pay taxes now. Do you have enough in savings to cover these taxes? If not, don't convert.
- It will not benefit you to pay for the taxes out of your current IRA. If you're under 59 1/2, you'll have to pay a penalty to take the money out of your IRA. In addition, the amount you take out to cover the taxes will lose the benefit of tax-free compounding.
For more information, read "Switching to Roth May Ease Conversion Taxes" in Plan It: Retire Ready Toolkit.
Rochdale Group launches revalidation technology
OVERLAND PARK, Kan. (9/16/09)--The Rochdale Group announced the availability of e-Revalidation, which is designed to test 100% of a credit union's risk-based loan portfolio.
e-Revalidation delivers comprehensive reviews of credit unions' risk-based lending and pricing models. It also eliminates internal disruptions related to onsite reviews, which frees credit union staff time, and saves money by eliminating customary travel expenses incurred by in-person revalidation engagements.
Credit unions' risk-based-lending and pricing scorecards should be revalidated regularly, according to The Rochdale Group. After a review at the end of the first year of risk-based lending, a revalidation typically is performed every two years.
Philadelphia (Pa.) FCU, which receives more than 10,000 consumer loan applications per year, implemented e-Revalidation. It reviewed 13,953 consumer transactions conducted during a 12-month period. Previously, the credit union had tested a random selection of total loan transactions.
The Rochdale Group, based in Overland Park, Kan., provides services to more than 500 credit union entities nationwide.
NACUSO teams with Pepperdine to build leaders network
NEWPORT BEACH, Calif. (9/16/09)--The National Association of Credit Union Service Organizations (NACUSO) is partnering next month with Pepperdine University to offer a certification program to build a leadership community for credit unions. Registration is now open.
The program, Designing and Implementing Collaboration and Business Networks, is scheduled to include classroom sessions, distant learning sessions and group projects. NACUSO will host two classes a year in October and April. Potential projects include opportunities to work with existing credit union service organizations, develop new leadership community contacts and contribute to developing new credit union business templates.
"This program is more than a seminar or a feel-good flyby on the old ideas about collaboration within our industry," said NACUSO CEO Tom Davis. "This is a program designed to keep the participants engaged with the ideas, their peers, and working businesses that can inspire credit union and CUSO business leaders to find the action in all of this talk about the promise of collaborations and networked marketplaces."
The Class of October 2009 will set the foundation for the program, NACUSO said. The class will aim to develop:
- A plan to market the community and raise the credit union industry's awareness of leaders who have completed the program;
- A plan to aid NACUSO in attracting more participants to the program and raise the industry's awareness of NACUSO's role in encouraging new credit union business models; and
- A process to constantly improve the program and add new resources to support the growing community of graduates.
NACUSO said it expects more than 100 individuals to graduate from the program within a few years.
Copyright © 2009 - Credit Union National Association, Inc.
