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Filed on September 22, 2009, published the first business day after.
- Matz interview: Mid-Nov. is target for new corp CU proposal
- CUNA to Congress: Ease crunch through increased MBLs
- NCUA adds corporate CU liquidity item to agenda
- Flood insurance Qs-and-As okay with tweaks, says CUNA
- Fryzel says in-house consumer protection moves forward
- NCUA closes Comunidades FCU, accounts assumed
- Inside Washington
- Kennebec bank conversion vote concludes
- IT budgets lower, but payment systems spending up
- Hampel to L.A. Times: CUs lending to small biz
- L.A. journal notes consumers’ ‘flight to quality’
- Rosenthal named to N.Y. Fed advisory council
- Ohio CUs reverse trend in mortgage, auto loans
- Texas city’s CUs have strong presence
- Expect card issuers to cut paper statements
- Bayh named league Outstanding Hoosier Legislator
- Buffalo/Niagara CUs receive kudos from lawmakers
- CU System briefs
- Fed likely to avoid upsetting the apple cart
- Census data show recession-driven changes
- Market News
- News of the Competition
- Don’t let college textbooks break the bank
- OPSS Council offers branch strategies white paper
- TruHome Solutions cuts mortgage origination fees
- Diebold security dealers get new monitoring program
Matz interview: Mid-Nov. is target for new corp CU proposal
WASHINGTON (9/23/09)--The National Credit Union Administration (NCUA) continues to develop new rules for corporate credit unions, and the board is looking to release a proposed version of these new rules by its mid-November board meeting, new NCUA Chairman Deborah Matz told News Now.
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| Deborah Matz |
The corporate credit union situation is one of the dominant issues currently facing credit unions, and in an interview with News Now , Matz said that the NCUA also has its eye on the impact that the overall worldwide financial crisis is having on credit unions.
While some past NCUA chairs have thought that the "best way to regulate was to end regulation or to modify them to provide extraordinary amounts of flexibility" to regulated credit unions, Matz believes that regulations serve a purpose, adding that she would look to propose new regulations and amend existing regulations to best ensure the safety and soundness of credit unions. However, regulations should not be excessive, according to Matz, who said that her "intent is not to over-regulate, but to have focused regulation" that protects credit union members.
Communication, which Matz says can always be improved, is also a high priority for Matz, who plans to continue to hold town hall meetings with credit union officials on a yearly basis to gather input "directly from credit union staff and officers."
Regarding member business lending, Matz said that while she is an advocate of credit unions lending to member businesses, such practices can be risky and should be "done properly." Matz opposes a statutory limit on MBL, saying that any such limit that could be imposed on credit unions is a regulatory issue and should be determined by the NCUA, "not Congress."
However, whether or not credit unions should be permitted to raise alternative sources of capital should be determined by Congress, and a resource group led by board member Hyland is developing an alternative capital proposal to submit to Congress. Matz also advised credit unions to be mindful of the concentrations of mortgages or indirect loans that they keep on their books.
Matz also hopes to propose a division of consumer protection within the NCUA in 2010, whether or not the Consumer Financial Protection Agency is established in the near future. "I want NCUA to be recognized as the best regulator for consumers and that goes hand in hand with credit unions being recognized as the best financial institution for consumers," Matz said.
The change in board composition resulting from the addition of Matz, who is a Democrat, will not impact the way that the NCUA governs the credit union system, Matz added.
A significant item that has been added to the regulatory agenda is the Credit Card Accountability, Responsibility and Disclosure (CARD) Act, and Matz said that while she has instructed NCUA examiners to provide some leeway to credit unions as they adapt to the new rules presented by the CARD Act, Credit unions will still have to comply "unless the law is changed." The NCUA does not expect all credit unions to comply instantly with the new rules, but "they will have to have a business plan, they will have to allocate resources, and they will have to take steps to comply, and we'll be examining for that," Matz said. The NCUA examiners are meant to be an ally of credit unions, and are tasked with helping credit unions avoid "serious problems" in the future.
CUNA to Congress: Ease crunch through increased MBLs
WASHINGTON (9/23/09)—As Congress addresses financial regulatory restructuring, it embraces the perfect opportunity to help America's small businesses increase access to needed capital by allowing credit unions to make more small business loans to their members, Credit Union National Association (CUNA) Chief Economist Bill Hampel will tell a House committee today.
Testifying before the House Small Business Committee at its hearing entitled "The Impact of Financial Regulatory Restructuring on Small Businesses and Community Lenders," Hampel will urge enactment of legislation that will "restore credit unions' ability to serve the lending needs of their business-owning members." Watch News Now Thursday for hearing coverage.
Hampel is among 10 witnesses scheduled over two panels:
- Panel 1: Robert R. Harris, vice chair of the American Institute of Certified Public Accountants; Trevor Loy on behalf of the National Venture Capital Association; David T. Hirschmann for the U.S. Chamber of Commerce; Mike Anderson on behalf of the National Association of Mortgage Brokers; and J. Douglas Robinson on behalf of Property Casualty Insurers Association of America.
- Panel 2: CUNA's Hampel; Austin Roberts on behalf of the American Bankers Association; James D. MacPhee on behalf of Independent Community Bankers of America; Dawn Donovan on behalf of the National Association of Federal Credit Unions; and John Moloney on behalf of Securities Industry and Financial Markets Association.
NCUA adds corporate CU liquidity item to agenda
ALEXANDRIA, Va. (9/23/09)--The National Credit Union Administration (NCUA) on Tuesday added discussion of its Temporary Corporate Credit Union Liquidity Guarantee Program to the agenda for the open portion of its next board meeting, which is scheduled for 10 a.m. on Thursday in Alexandria.
Among the items up for consideration during the open portion of the meeting, which will be the first under new NCUA Chairman Deborah Matz, are the National Credit Union Share Insurance Fund premium and stabilization fund assessment. The NCUA has said that the premium charged to credit unions should only be around .15 percent.
The NCUA's Central Liquidity Fund policies will also be discussed during the meeting, which will be the first under new NCUA Chairman Deborah Matz.
A report on the status of the NCUA's insurance fund is also on the agenda.
Supervisory activities and personnel matters will be discussed during the closed portion of the meeting.
Flood insurance Qs-and-As okay with tweaks, says CUNA
WASHINGTON (9/23/09)--In a comment letter responding to recent changes to federal regulators' questions and answers regarding flood insurance policies, the Credit Union National Association (CUNA) said that some proposed changes to loan participations may "represent an inappropriate shifting of risk" from the original lender to entities that have assumed some control of a property.
CUNA said that it has "no objections" to Q&As addressing replacement cost valuations "for property that will not be restored to its original purpose." CUNA also found no issues with Q&As addressing force-placed insurance.
However, Q&As addressing loan participation set unreasonable standards by forcing lenders that buy a participation interest in a loan on flood zone-based property to be responsible for ensuring that flood insurance requirements are met.
CUNA also opposed shifting risk and responsibility surrounding the validity of flood insurance from loan originators to those who purchase participations in exiting loans.
Use the resource link below to read CUNA's complete remarks.
Fryzel says in-house consumer protection moves forward
ALEXANDRIA, Va. (9/23/09)--Former National Credit Union Administration (NCUA) Chairman and current Board Member Michael Fryzel on Tuesday said that plans to create a division of consumer protection are moving forward within the agency.
Fryzel earlier this year proposed the creation of the consumer protection office, which would consolidate existing consumer protection functions within the NCUA and create a liaison relationship with external groups, including the Obama Administration's proposed Consumer Financial Protection Agency.
In his speech before the National Association of Federal Credit Unions Congressional Caucus, held in Washington, D.C., Fryzel promised "improved regulatory control" from the Board and hinted that discussions of alternative capital for credit unions are ongoing.
Fryzel also encouraged credit unions to work together as the financial crisis eases, saying that all members of the credit union system must "find new ways" of strengthening natural person credit unions, "bolstering" the share insurance fund, and rededicate themselves to "selflessly improving the financial lives" of credit union members.
"While we cannot rest from working on a new corporate structure or maintaining adequate liquidity in our system, I believe we must position ourselves for growth and ensure that this growth is going to best help our members," Fryzel added.
NCUA closes Comunidades FCU, accounts assumed
ALEXANDRIA, Va. (9/23/09)— Water and Power Community CU Union of Los Angeles assumed the majority of the accounts of Comunidades FCU, also of Los Angeles, which was closed Tuesday by federal regulators.
The Water and Power Community Credit Union share assumption, approved by the National Credit Union Administration (NCUA), assures that a majority of Comunidades members continue with uninterrupted credit union service.
The NCUA said it closed Comunidades, a low-income commcredit union, because of a declining financial condition. It had $658,122 in assets and served 1,141 members. It is the sixth federally insured credit union liquidation in 2009.
Water and Power Community CU, a full service institution, has $482.9 million in assets and serves approximately 52,340 members in and around the state of California, according to the NCUA. Its headquarters is located at 1053 W. Sunset Blvd., Los Angeles, California, and it has 6 branch locations and offers online transaction service as well.
Inside Washington
- WASHINGTON (9/23/09)--The hangover from the Troubled Asset Relief Program (TARP) will be felt for a long time, even after the TARP money is repaid, according to a former Federal Reserve Board lawyer. Cornelius Hurley said TARP was a "massive injection of taxpayer dollars." It will be hard to recover from that, he added. William Isaac, former Federal Deposit Insurance Corp. chair, said TARP turned the banking system into a "public utility," which will be hard to turn around. Financial observers have criticized TARP, saying that it was a mistake (American Banker Sept. 22). TARP ruined the working relationship between banks and the Treasury, said Robert Clarke, a former comptroller of the currency. The program could have been offered on an optional basis, he added. Alan Blinder, former Fed vice chair, agreed. The program should have been more voluntary, he said. About 37 institutions have repaid more than $70 billion in TARP funds. Of the first nine banks that received money, all but Wells Fargo, Citigroup and Bank of America have repaid their funds. The Treasury expects to receive $50 billion in repayments in the next year ...
- WASHINGTON (9/23/09)--The push continues for legislation that would create a consumer protection agency. Many financial industry lobbyists have argued that the agency would limit access to credit, but the Obama administration is moving forward. House Financial Services Committee Chairman Barney Frank (D-Mass.) is working on the Treasury's draft of the bill to lift concerns about the measure. Rep. Ed Perlmutter (D-Colo.) is concerned about the agency's enforcement powers, while Rep. Melissa Bean (D-Ill.) is arguing for greater federal pre-emption (CongressDailyAM Sept. 22). Frank is expected to clarify in the draft who is included under the bill's scope. He has said he would push for more disclosures on products offered in the marketplace. Frank's goal is to get a pro-consumer bill out of the House so it has room for negotiations with Senate Banking Committee Chair Christopher Dodd (D-Conn.). Dodd has to get Richard Shelby (R-Ala.) to agree on the bill for the Senate to pass it ...
Kennebec bank conversion vote concludes
AUGUSTA, Maine (9/23/09)--The vote on a proposed merger between Kennebec Valley (KV) FCU and Kennebec Savings Bank in Augusta, Maine, has concluded, but official results have not been released.
Last year, KV FCU proposed converting to a bank and then merging with Kennebec Savings Bank. The proposal was approved by KV FCU's board last fall (News Now Aug. 11).
The results of Monday's vote will be known within 10 days, Beverly Beaucage, KV FCU president/CEO told the Morning Sentinel (Sept. 22).
Julie Brawn, leader of KV Members Voting Yes for the Merger, told the Sentinel Tuesday that nobody could tell how members voted.
Lucille Cloutier, a leader of the group KV Members Matter, which opposes the conversion, agreed. "A lot of people have been very passionate about this," she told the paper.
If the merger is approved, it would be the first combination of its kind in Maine. Only 20 similar combinations have taken place nationally, the Sentinel said, citing research from CU Financial Services.
IT budgets lower, but payment systems spending up
NEW YORK (9/23/09)--Many financial institutions have cut their technology budgets, but some are increasing the amount they spend on payment systems, according to a recent study.
About 73% of credit unions and banks are keeping their technology budgets at or below last year's levels, and 72% of their budgets will be lower than this year's, according to an Aite Group study (American Banker Sept. 21).
However, payment system spending is increasing. A study released last week by a community banking trade group indicates 52% of community banks upped their payment system spending projects from 2007 to 2009. About 11% cut back on payment systems spending.
Merchant remote deposit capture, which allows merchants to scan checks for deposit themselves, will increase to 78% by 2011, the study said. It also found that online bill payment has become "ubiquitous." About 99% of the institutions surveyed said they offer online bill pay.
Of those surveyed, 82% said they receive cash letters electronically, and 9% plan to do so next year. Eight percent have no plans to send image cash letters, and 9% have no plans to begin adoption of image receipt by 2011.
Hampel to L.A. Times: CUs lending to small biz
LOS ANGELES (9/23/09)--Credit unions are lending to small businesses, Bill Hampel, Credit Union National Association chief economist, told The Los Angeles Times.
"About one-quarter of the nation's 8,000 credit unions also do business lending," Hampel said. "There is a legal cap on how much credit unions can lend, but loans under $50,000 do not count toward that cap."
Hampel was quoted in a column, "In Box," by Karen Klein on Tuesday. Klein's column was based on a question from a reader: "Are my chances for getting a small business loan improving?"
Klein said large banking institutions are reluctant to lend to small companies, but smaller institutions haven't been affected. If the business is profitable and creditworthy, and "you have a good reason for wanting a loan, your chances are good," Klein added.
L.A. journal notes consumers’ ‘flight to quality’
LOS ANGELES (9/23/09)--Consumers are flocking to non-profit financial institutions, including credit unions because they perceive them as safer than commercial banks.
The Los Angeles Business Journal reported Sept. 14 that Los Angeles County credit unions experienced a jump in their deposits of 4%, or $1.2 billion, in the first half of the year. The data the paper cited were from the California Credit Union League.
Consumers are trying to save more in the tough economy, Daniel Penrod, California league analyst, told the Journal. When the boom first hit, savings wasn't a priority. However, "as the economy turned, people have realized that they can't use their home as an ATM anymore," Penrod added.
Flocking to credit unions is a "flight to quality," he said.
Credit unions' capital ratio has risen to 9.25% in the second quarter, which outpaces the state average of 9.08%. Anything above 7% is considered well-capitalized for credit unions, the paper said.
Rosenthal named to N.Y. Fed advisory council
NEW YORK (9/23/09)--The Federal Reserve Bank of New York has named 11 individuals to serve on its Community Affairs Advisory Council. Among them is Clifford Rosenthal, president/CEO of the National Federation of Community Development Credit Unions.
Rosenthal is the council's only representative currently working directly with credit unions.
The council is an information-sharing group to elicit "ground-level intelligence on conditions and challenges for low- and moderate-income communities," said the New York Fed in a press release. The Fed will use the feedback and information from the council for the Fed's knowledge building and outreach efforts relating to those communities.
"The council is an effective way for us to hear a broad range of perspectives about our communities in a regular and consistent way from local experts," said Kausar Hamdani, vice president and head of the Community Affairs Office at the New York Fed.
Rosenthal noted that the appointment is "an honor," adding, "The creation of this council shows a real commitment by the Federal Reserve Bank of New York to promote mainstream financial services in underserved constituencies. I look forward to working with the rest of the council to assist the bank in developing programs that benefit low- and moderate-income people and communities."
Rosenthal previously served on the Consumer Advisory Council of the Federal Reserve Board from 1989 through 1991.
Other appointees to the community affairs council include Cathie Mahon, executive director of the New York City Department of Consumer Affairs, Office of Financial Empowerrment. She is a former community development credit union practitioner and senior federation staff member.
Ohio CUs reverse trend in mortgage, auto loans
COLUMBUS, Ohio (9/23/09)--The "flight to safety" trend continues in Ohio with 30,000 more Ohioans joining credit unions to take advantage of lower loan rates, better savings rates and fewer fees, reported the Ohio Credit Union League.
The 1.28% increase in members through the first six months of 2009--to 2.66 million--represents the first annual growth in five years for the state's credit unions, said the league Tuesday.
As of June, total shares deposited in Ohio credit unions stood at $16.9 billion--or 18.4% over the previous year. Total assets grew nearly 18.5% during that same period.
"We are seeing growth in membership that we have not seen in some time," said league President Paul Mercer. "Credit unions have done an outstanding job positioning themselves for growth by staying true to their philosophy, offering financial solutions to existing members, and helping new members understand the value of the credit union difference."
Despite a weak housing market and slow auto sales in the second quarter, Ohio credit unions are reversing this trend, showing growth in both lending categories--a 50.2% increase for mortgage originations and an eight-percentage point increase to 8.94% for auto loans over a year earlier.
Year-to-date vehicle sales through June were down 35.1% nationally, while total outstanding auto loans at Ohio credit unions increased by 12%. First mortgage originations for the period totaled $960.5 million at Ohio's credit unions, vs. $639.5 million during the same period in 2008.
Overall loan growth from June 2008 to June 2009 in the state was up nearly 7.5%--almost double credit unions nationwide. Capital growth for Ohio credit unions more than doubled the national credit union average of 0.74%.
The average Ohio credit union has 6,605 members, $49.04 million in assets and $30.25 million in loans. Credit unions employ more than 6,800 Ohioans and contribute nearly $140 million in compensation to employees annually, according to the most recent quarterly financial report.
Texas city’s CUs have strong presence
SAN ANGELO, Texas (9/23/09)--Despite being outnumbered by banks by a three-to-one margin, credit unions in the San Angelo, Texas, area have established and maintained a solid presence in the community despite tough economic times.
Membership in six San Angelo credit unions with open membership totaled 59,542 members as of March, according to National Credit Union Administration figures (San Angelo Standard-Times Sept. 19).
After peaking at 64,570 members in 2003, the number dipped to a recent low of 57,583 in 2007 before rebounding, the newspaper said.
"A credit union is a co-op, like a farmers' co-op," Brett Nikolauk, president of Qualtrust CU, Irving, Texas, told the paper. "A credit union serves people who are like-minded."
Credit unions have weathered the economic turbulence better than banks mostly because they are financially conservative organizations, Dwight Johnston, vice president for economic and market research for Western Corporate FCU, in San Dimas, Calif., told the paper.
Kaye Edwards, president of San Angelo FCU, observed a trend toward more saving among her credit union's members. While the credit union's assets are growing, loans remain flat, she told the paper. Although the credit union's outlook is positive, she has some concerns about the long-term future, she added.
"Our membership is growing older; the boomers are aging," Edwards told the paper. "A lot of young people are ‘unbanked,' you know, like people are ‘unchurched'--they don't have a financial institution. What we really want to do is show people how financial institutions can help them. We'd like to draw in more young people."
For the full story, use the link.
Expect card issuers to cut paper statements
NEW YORK (9/23/09)--Credit card issuers likely will take steps to eliminate paper statements within the next several years, say several analysts studying the paperless trend. But for now, the issuers are wary of consumer backlash and the card issuers are waiting to see what happens in the telecommunications industry's efforts to go paperless.
Initial steps in eliminating statements could include offering new card products with online-only bill payment and/or charging customers who demand paper statements a fee, according to card advisory firm RK Hammer. It said that mailing paper statements could be seen as an add-on benefit that could be offered free at first, then move into a fee (American Banker Sept. 22).
Aite Group told the publication that card issuers probably wouldn't call the fee a statement fee. Instead, the issuers could bundle it with other customer service fees and features consumers used to get for free.
American Express Co. is testing the idea with corporate credit card customers. In June it began eliminating their monthly paper billing statements. However, it still mails statements to employees of businesses with extenuating circumstances, upon request and with no fee.
United Kingdom-based HSBC Holding PLC's Hong Kong unit announced in August that beginning on Jan. 1, 2011, it would charge its customers $2.60 a year to continue receiving paper statements. However, customers can apply for a fee waiver.
Several major U.S. card issuers said they have no plans to charge customers for paper statements, according to the article. However, many urge customers through mailings and bill-payment websites to switch to paperless.
Wells Fargo & Co. and JPMorgan Chase & Co. have offered in the past incentives to credit card customers to opt out of paper statements.
Bayh named league Outstanding Hoosier Legislator
INDIANAPOLIS (9/23/09)--U.S. Sen. Evan Bayh has been named as the Indiana Credit Union League's Oustanding Hoosier Legislator for 2009.
The award is presented each year during the league's convention to honor a legislator who has gone the extra mile to support Indiana's credit unions and their 2.2 million members.
With Congress in session, Bayh was unable to attend a special luncheon Sept. 11, but his regional director, Andrew Homan, read his letter to the group of more than 150 attending.
"Indiana's credit unions have remained strong and stable institutions even through this difficult economic time," Bayh wrote. "Moreover, credit unions have shown that the most successful financial institutions are those who seek to serve their customers and lend fairly. Indiana's 202 credit unions have proven that they are a reliable source of credit to Hoosier businesses and consumers," he added.
"Evan Bayh has been a longtime credit union friend supporting key legislation like bankruptcy reform and regulatory relief, and voicing his support for credit unions' federal tax exemption," said league President John McKenzie.
"In early 2009, credit unions faced a significant threat as Congress considered changes to bankruptcy law that would have harmed credit unions' ability to make mortgage loans. Sen. Bayh stepped strongly into the debate to lead the efforts in the Senate to try to reach a more targeted approach that would have a significantly less severe impact on credit unions," McKenzie said.
Buffalo/Niagara CUs receive kudos from lawmakers
ALBANY, N.Y. (9/23/09)--More than 40 representatives from 11 credit unions in the Buffalo and Niagara chapters of the Credit Union Association of New York welcomed county, state and federal
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| New York State Sen. George D. Maziarz (R-Niagara) recognized credit unions' 100 years of service at a legislative event in Amherst, N.Y. |
Association Board Chair Alfred Frosolone, CEO of Niagara's Choice FCU, and Board Member Marie Betti, CEO, Western New York FCU, introduced the legislative guests.
State Sen. George D. Maziarz (R-Niagara) talked about how credit unions serve their members well and said there is an essential need for credit unions during difficult economic times. A member of two credit unions, Maziarz presented a proclamation honoring credit unions for 100 years of service to their members and communities. The proclamation also honored Western New York credit unions.
Erie County Comptroller Mark Poloncarz spoke about his four years cleaning up Erie County's finances, creating additional revenue and steadily moving the county toward recovery. He commended credit unions for the important role they play in their communities and the county's overall economy.
Assemblyman Mark Schroeder's (D-Buffalo) office presented proclamations recognizing every credit union in his district. Staff
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| New York Assemblywoman Francine DelMonte (D-Niagara) praised credit unions for helping those in need of financial services, especially in the inner city. Looking on was Alfred Frosolone, CEO of Niagara's Choice FCU and board chair of Credit Union Association of New York. (Photos provided by the Credit Union Association of New York) |
Other legislators attending from the Buffalo/Niagrara districts included: Sen. Michael Ranzenhofer (R), Sen. William T. Stachowski (D), Sen. Dale M. Volker (R), Assemblywoman Jane Corwin (R), Assemblywoman Francine DelMonte (D), Assemblyman Dennis Gabryszak (D), Assemblyman James P. Hayes (R) and Assemblyman Jack Quinn (R).
Credit unions talked with the lawmakers about pro-credit union legislation, specifically, pending legislation addressing municipal depository choice, said the New York association.
CU System briefs
- SAN DIEGO (9/23/09)--A former employee of San Diego-based USA FCU's branch at the Yokota (Japan) Air Base has been sentenced to three years in federal prison for bank fraud stemming from the theft of about $1.5 million. Leticia Figuracion, 56, who was in charge of reporting the daily balance at the branch's vault, pleaded guilty to stealing roughly $10,000 a month for years from the vault and lying about the balance. She used the account of a credit union member to wire money to an account in the U.S. and changed the mailing address on the member's account to hide her action. She used some of the money to open a restaurant in Los Angeles and sent money to relatives in the Philippines and the U.S. The incidents occurred from 1992 until September 2008. Figuracion eventually came forward and admitted the crime. She also was ordered to repay $1.5 million to the credit union (The San Diego Union-Tribune Sept. 21) ...
- WEST ALLIS, Wis. (9/23/09)--Senister Smith, 21, has been charged with the Tuesday armed robbery of Guardian CU in West Allis. Smith was apprehended at the credit union after a member tackled him after he allegedly took $8,000 from the tellers during the robbery. The charge says that Smith admitted to robbing the credit union, saying he was having financial problems, was a former member and knew the location well. If convicted, Smith could face up to 40 years in prison. (620WTMJ.com Sept. 22) ...
- SPRINGFIELD, Ill. (9/23/09)--Norma L. Lynn, 74, of Springfield, Ill. died Aug. 21. She was the former president/manager of Sangamo Chapter CU, Springfield. Lynn is survived by a companion, one daughter, one son, two grandchildren and two great-grandchildren (News-Leader Aug. 23) ...
Fed likely to avoid upsetting the apple cart
WASHINGTON (9/23/09)--Economists widely believe the Federal Reserve Board's policymakers will keep interest rates steady between 0% and 0.25% at the conclusion of today's meeting of the Federal Open Market Committee (FOMC).
While investors look for indications of possible tightening in the Fed's policy, the consensus is that no move is imminent in light of the lingering effects on the economy of the recession that began nearly two years ago, according to The Wall Street Journal and MarketWatch (Sept. 22).
The Fed also is expected to say little about how it plans to wind down more than $1 trillion in lending and bailout programs, and likely will refrain from any overly enthusiastic language about the economy's outlook, said CNNMoney.com.
The FOMC aims to balance unemployment and inflation. It typically lowers rates during a recession to boost private sector borrowing and encourage economic activity. It raises rates coming out of a recession to shore up the economy against inflation.
However, the unusual nature of the recession recovery--and the fact that it is not led by consumers--is tenuous. The Fed likely will "keep its finger off the rate-hike button for now," said CNNMoney.com
The FOMC also met Tuesday. Check News Now for an update this afternoon on the Fed's action.
Census data show recession-driven changes
NEW YORK (9/23/09)--The recession has disrupted American life in a number of ways, according to an annual American Community Survey of the U.S. Census data released Tuesday.
The nation's profile in 2008 included more people delaying marriage, delaying home buying, carpooling, and living in overcrowded housing. Fewer people moved residences, and fewer immigrants made their way to America.
Median home values dropped in 2008 and the homeownership rate fell half a point to 66.6%, the lowest since 2002.
People who changed residences fell to 15% from a recent peak of 16% in 2006.
One in four people in Texas (24.1%) lacked health insurance in 2008, the highest rate in the nation. In Massachusetts, one in 20 residents (4.1%) lacked coverage.
The share of people over age 15 who have never married rose to 31% last year from 27% in 2000.
Median household income in 2008 declined nationwide, with income ranging from $37,790, the median for Mississippi, to $70,545, the median for Maryland. Five states--Kansas, Louisiana, New Jersey, New York and Texas--saw an increase in real median household income between 2007 and 2008. That compares with 33 states experiencing an increase the year before.
The median price of an owner-occupied home declined 2% to $197,600 nationally. The median price dropped in 22 states, with the biggest declines in Nevada and California (16%) and Florida (9%). Home values increased in seven states--Texas, Utah, Wyoming, Oregon, Pennsylvania, Tennessee and North Carolina.
Market News
MADISON, Wis. (9/23/09)
- The recession is causing consumers across all income levels to re-evaluate their spending and take on cost-saving strategies, according to a new survey commissioned by IBM. Those surveyed said the new habits will endure, even after the economy has recovered. Because of the down economy, 72% of respondents said they made "significant spending cuts." The most-impacted consumers are those making $45,000 per year or less. However, 59% of respondents earning $100,000 or more said they also cut back. The most common steps taken to save money include shopping at more stores to obtain the best deal (49%) and switching grocery stores (39%), the survey said. While 83% of respondents said price is a major factor, 72% said quality also is a prime consideration (The New York Times Sept. 22) ...
- Marking the third consecutive monthly gain, U.S. home prices rose 0.3% in July from June. The increase is due to the tax credit for first-time home buyers, which sparked demand and helped stabilize the housing market, analysts said. For the 12 months ended in July, the U.S. house price index dropped 4.2%, the Federal Housing Finance Agency said Tuesday. July's increase was short of the 0.5% gain predicted by 12 analysts in a Bloomberg survey. Even with the July gain, the index remains 4.2% below last year's levels and down 10.5% from its peak in April 2007. The index is derived from loans owned or guaranteed by government-sponsored mortgage finance companies Fannie Mae and Freddie Mac. Because it excludes the most expensive homes and some subprime loans that have gone into foreclosure, the index dropped less than other housing market measurements, analysts said (Bloomberg.com and The New York Times Sept. 22) ...
- An accounting procedure known as "deferred tax assets" could harm banks' bottom lines and force them to raise capital, analysts said (American Banker Sept. 22). When banks are operating profitably, deferred tax assets accrued in the past will offset current income and act as a tax deduction. As long as banks have pretax profits--and therefore taxes--to reduce, banks can use deferred tax assets to mitigate their taxes in future quarters. As banks' reserves and write-downs ballooned, so have their deferred assets, analysts said. In the future, if banks do not start minting money, accounting for deferred assets could delay or reduce profits and erode already shaky capital levels, they added ...
- Fannie Mae is concerned that loans provided to homeowners for energy-efficiency improvement programs in roughly 10 states could cause problems. Fannie fears that if homeowners fall behind on loan payments for energy-savers such as solar panels, the debt could become more important to the homeowner than their mortgage lien. Last week, the government-sponsored enterprise said it is developing underwriting requirements for homeowners who have taken out these loans. Fannie also told loan servicers to prepare to advance the overdue amount on energy loans to municipalities--just as they would normally do with unpaid property taxes. Servicers that maintain borrowers' escrow accounts to pay for property taxes and insurance premiums should do the same for energy-loan payments, Fannie added (American Banker Sept. 22) ...
News of the Competition
MADISON, Wis. (9/23/09)
- The General Accounting Office (GAO)--the research arm of Congress--said Monday that the financial condition of American International Group (AIG) has stabilized. However, it is uncertain whether the insurance behemoth would ever be able to repay the federal government, the GAO said. AIG's $192 billion bailout package has stopped the company's rapid nosedive and has led to improvements in its insurance business. AIG's ability to retool and survive over the long run depends on "market conditions and continued government support," the GAO concluded (The New York Times Sept. 22) ...
- Bank of America Corp. (BofA)--the largest U.S. bank by asset size--said it will pay $425 million to the federal government to nullify an unused guarantee of Merrill Lynch & Co.'s assets and cut BofA's dependence on federal support after two bailouts. "We are a stronger company than we were even two months ago," said BofA CEO Kenneth Lewis. BofA's payment would end a conflict about what the bank owes the U.S. for the bank's promise to help take on losses on $118 billion of holdings--mainly at Merrill Lynch, analysts said. The government's guarantee helped clinch BofA's takeover of Merrill Lynch after after fourth-quarter losses exceeded $15 billion. The agreement was announced in January, but it was never signed. BofA resisted paying, and is trying to convince federal regulators that it is financially fit enough to repay billions in federal aid, said people familiar with the bank's plans (Bloomberg.com, The Wall Street Journal, and The New York Times, Sept. 22). In a separate matter, BofA--with two million of its customers using its mobile banking application--has become the No. 1 provider of mobile banking services, capturing 35% of the market for U.S. consumers, according to data gathered by ComScore Inc.--a market research company (CardLine via American Banker Sept. 22) ...
- Under the gun to fill a $9 billion hole in their balance sheets, many insurers have scaled back their sales and raised prices of life insurance. This is similar to banks' cut backs on lending and higher service fees to bolster their cash reserves, analysts said. Bad real estate investments have led to the depletion of insurers' capital, analysts said. Insurers also are placing increased emphasis on risk factors such as obesity and high blood pressure--which is another way to increase insurance prices, said industry executives and advisors. These moves, combined with consumer reticence to spend on "nonessential purchases," have led to a 23% decline in life-insurance sales during the first half of 2009--the worst six-month decline in almost 70 years, according to a trade group's figures (The Wall Street Journal Sept. 22) ...
Don’t let college textbooks break the bank
CHICAGO (9/23/09)--If you're a college student who's still reluctant to part with the $200 for that new chemistry textbook, don't make a last-minute run to the campus bookstore just yet: There are ways to get the textbooks you need at a lower cost--or even for free (chicagotribune.com Sept. 4).
It can take more time to explore other options than a single trip to the bookstore might, but the extra effort can translate into hundreds of dollars saved at the end of the school year.
Consider these alternatives to braving the bookstore:
- Try your campus library. Many professors make copies of their required textbooks available on reserve at campus libraries--meaning you can check the book out for a short period of time, usually a few hours. Check with your professor to see if they have placed items on reserve. If there is only one copy on reserve, try visiting the library at non-peak hours to ensure that the book won't be checked out by someone else.
- Consider renting. New services like Chegg.com rent textbooks to students for much less than it costs to buy them--usually 50% of the list price or less per semester (usnews.com Sept. 2). Students return the rented textbooks by mail when they are finished using them.
- Look for on-campus book swaps. Many university student groups organize textbook swap events at the beginning of each semester. Watch your campus e-mail account for notifications of these kinds of events (many groups will send out mass e-mails to student lists prior to the swap date) or check with your student organization office to see if any swaps are planned. Some websites also facilitate textbook swapping--try TextbookRevolt.com or Bookins.com for an online option if no campus events are available.
- Buy international. International versions of textbooks often cost much less than U.S. editions, and they usually contain the same content. Check with online booksellers to compare prices of international editions. However, make sure the international edition is actually the same as the U.S. edition before you buy; read textbook descriptions carefully and consult user reviews and comments when available.
For more information, read "Study Finds Turning to Digital Textbooks May Be More Costly" in Money Mix: Launch Your Life.
OPSS Council offers branch strategies white paper
MADISON, Wis. (9/23/09)--Branch building will continue soon, but it will be tempered by economic realities and lack the aggressive posture of the past, according to "Branch Strategies," a new white paper just released by the CUNA Operations, Sales & Service (OpSS) Council.
The paper discusses different branch strategies that credit unions should consider when expanding. It includes case studies from credit unions such as Coastal FCU, Raleigh, N.C., which uses a remote teller system, and REALTORS FCU, an online-only credit union.
The paper also notes credit union grocery store branches and their advantages: guaranteed foot traffic, lower costs and extended hours. However, grocery store branches don't have drive-up windows, and credit unions will not have much control over their lease or building. Grocery store branches also may not generate high loan volumes, the paper said.
Employees at grocery store and traditional branches are evolving. Aside from being cross-trained in opening accounts, taking loan applications and other orders, employees must be relationship builders, the paper added.
"In a fast-moving and sometimes unforgiving culture, the credit union setting can be a comfortable oasis where the member can expect an environment of warmth and trust," the paper said. "Credit union employees need to go the extra mile to develop this setting. For some members who live alone, this may be their only human contact or conversation for the day."
For more information, use the links.
TruHome Solutions cuts mortgage origination fees
LENEXA, Kan. (9/23/09)--TruHome Solutions announced a 20 basis-point or 20% savings off its mortgage origination fee dollar amount, effective for all loans funded in September and October for client credit unions.
A $150,000 mortgage origination will save a credit union $300. For one client credit union with multiple loans, the savings could equal as much as $80,000 for a two-month period, the company said.
TruHome decided to offer the price reduction after experiencing an increase in 2009 volume.
"Purchasing volume has been steadily improving as the economy begins to rebound, and TruHome considers itself well-positioned to capture that additional business opportunity," said Keith Varney, TruHome chief operations officer.
TruHome, based in Lenexa, Kan., is a credit union service organization specializing in mortgage origination, servicing and underwriting.
Diebold security dealers get new monitoring program
NORTH CANTON, Ohio (9/23/09)--ATM manufacturer Diebold announced that it is offering the Diebold Advanced Dealer Program, which will allow approved dealers to use advanced monitoring services without adding infrastructure or staff.
Authorized dealers can use Diebold's Site Sentry Remote Video Monitoring, Remote Video Storage, managed access control and energy management. They also can access Diebold's DVR health check, weather detection notification, police permit management and alarm monitoring.
Dealers will not have to sell their accounts to Diebold to participate. Monitoring solutions will be delivered through Diebold's monitoring centers in Uniontown, Ohio, and Honolulu. Dealers can apply through Diebold's Online Dealer Center.
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