News Now Archive

Filed on September 23, 2009, published the first business day after.

• CUNA to Congress: Allow CUs to survive, thrive under new regs
• Frank intros new CFPA provisions
• CU exec tells of strength, outreach in Hill forum on capital access
• NCUA bans 12 from financial institution work
• Inside Washington
• Seek CU input, WOCCU urges G-20 nations
• AP: Consumers’ new money mindset includes CUs
• Missouri, Oklahoma CUs attend first joint convention
• CUNA Mutual on CIO, InfoWeek top tech lists
• Ten ‘no budget’ ideas for ICU Day
• Indiana league elects table officers
• Illinois CUs active during legislative recesses
• CU System briefs
• Market News
• News of the Competition
• Fed's actions increase pressure on CU margins
• Mobile banking sparks shared-branch CUs’ interest
• First Data developing card security at POS

CUNA to Congress: Allow CUs to survive, thrive under new regs

WASHINGTON (9/24/09)--Reiterating that credit unions did not contribute to the financial crisis, Credit Union National Association (CUNA) Chief Economist Bill Hampel called on the assembled legislators to "ensure that the credit union model is not eroded as a result of the misappropriation of bank regulations to credit union operations."

CUNA Chief Economist Bill Hampel urges a House panel that consumer protection regulation should be "consolidated and streamlined" so it does not add to the regulatory burden of "those that have been regulated and performed well, such as credit unions." (CUNA Photo)

Speaking during a House Committee on Small Business hearing on "The Impact of Financial Regulatory Restructuring on Small Businesses," committee chair Rep. Nydia Velázquez (D-N.Y.) said that some of the proposed financial regulatory changes could substantially alter the business models of both community banks and credit unions.

Hampel in prepared remarks addressed one such potential change that has been laid out by legislators, saying that the creation of a separate consumer protection examiner outside of the National Credit Union Administration (NCUA) would "distract credit unions from their mission and divert resources away from serving their members." While CUNA generally supports the concept of consumer protection, Hampel in his remarks called for consumer protection regulation to be "consolidated and streamlined" so as not to add to "the regulatory burden of those that have been regulated and performed well, such as credit unions."

Speaking during the tommittee hearing, Rep. Nydia Velázquez (D-N.Y.) said that the needs of small businesses must be considered as Congress crafts its regulatory response to the conditions that created the financial crisis. (CUNA Photo)

The NCUA is reportedly developing its own division of consumer protection which will come into effect whether or not Congress elects to create its own Consumer Financial Protection Agency, as has been proposed.

Hampel also encouraged the legislators to retain the NCUA as the sole regulator and enforcer for credit unions, saying that maintaining that regulatory independence "extends beyond both philosophical and structural issues."

While credit unions themselves cannot solve all of the current economic problems, they can be part of the solution, and Hampel urged the assembled legislators to enact legislation that would "restore credit unions' ability to serve the lending needs of their business-owning members" by "eliminating or expanding the limit on credit union member business lending." Such a move would allow credit unions to ease the credit crunch for some members while generating the portfolios needed "to support compliance with NCUA's regulatory requirements," he added. CUNA, according to Hampel, would also work with regulators to "facilitate underwriting practices and standards" to ensure that safety and soundness concerns remain at the forefront of member business lending activities.

Frank intros new CFPA provisions

WASHINGTON (9/24/09)--Rep. Barney Frank (D-Mass.) this week promised to propose revised legislation that would eliminate language that would require financial institutions to offer so-called "plain vanilla" financial products and prevent the proposed Consumer Financial Protection Agency from approving or changing the business plans of a financial institution under the agency's oversight.

H.R. 3216, the Consumer Financial Protection Agency (CFPA) Act, which would seek to protect consumers of financial products through the creation of a powerful independent agency with extensive rulemaking, oversight, and enforcement tools, was introduced by the Obama administration earlier this year.

While Frank's legislative changes, which have been circulated via a discussion draft, would still allow the CFPA to require financial institutions to provide improved disclosures to their consumers. However, non-financial businesses, including merchants, retailers, and other non-finance-related businesses would not come under the authority of the CFPA.

Depository institutions would have the option of "simultaneous federal safety and soundness and consumer compliance examinations" to help minimize regulatory burdens born by financial institutions, and financial institutions that "receive contradictory or supervisory determinations" from the CFPA or other supervisors would be given an outlet to directly challenge any assessed deficiencies that are spotted by regulators.

The CFPA would also be prevented from mandating a so-called "reasonableness standard" that would force financial institutions to assess whether or not a given consumer could understand the full terms of the financial products or services they are taking part in.

Additionally, Frank's proposal would fund the CFPA via the Federal Reserve, which would pay for the CFPA "at a level that reflects amounts the banking agencies currently pay for consumer compliance." Non-banks would also be subject to assessments meant to fund the CFPA. However, financial institutions would not pay for the examination or supervision of non-financial entities.

Frank earlier this year introduced a bill that would enact the Obama CFPA plan, with some changes, including postponing consideration of the merger of the Office of the Comptroller of the Currency (OCC) and the Office of Thrift Supervision (OTS) into a prudential regulator, the National Bank Supervisory (NBS), as proposed in the Obama Administration's original legislation, until a later date.

The House Financial Services Committee, which Frank chairs, could soon mark up CFPA legislation, and Frank recently stated that other comprehensive financial regulatory reform legislation could be completed as soon as October, with a view toward signing it into law by the end of this year.

CU exec tells of strength, outreach in Hill forum on capital access

WASHINGTON (9/24/09)--Municipal Credit Union board member Shirley Jenkins was one of several attendees at a congressional Access to Capital forum organized by Rep. Yvette Clark (D-N.Y.) on Wednesday in Washington.

During the forum, which was organized to explore the impact of the

Municipal CU board member Shirley Jenkins, participating in a congressional Access to Capital forum organized by Rep. Yvette Clark (D-N.Y.), tells attendees of the positive impact of her credit union's outreach efforts. (CUNA Photo)

credit crunch on minority-owned businesses, Jenkins detailed the strength of her credit union when compared to banks.

Jenkins also commented on the assistance that her credit union provides to members that are looking to start their own businesses and told attendees of the positive impact that is created by Municipal CU's community outreach endeavors, which teach financial responsibility to their members and local youth.

The Credit Union National Association has also worked to increase financial literacy among both the young and old through its Personal Finance Initiative.

Other forum participants included Federal Deposit Insurance Corporation Director of Diversity and Economic Opportunity Michael Collins, Operation HOPE's Lance Triggs, and City First Bank of DC CEO Dorothy Bridges.

NCUA bans 12 from financial institution work

ALEXANDRIA, Va.(9/24/09)—Twelve former credit union employees have been banned by the National Credit Union Administration (NCUA) from participating in the business of any federally insured financial institution.

The NCUA released the following information about the prohibition orders and their subjects;

• Chinithia Bills, a former employee of St. Charles Borromeo Church FCU, New York, N.Y., was convicted of bank fraud and sentenced to 37 months in prison, 4 years of supervised probation, and ordered to pay $135,218.96 in restitution.;

• Trena C. Bledsoe, a former employee of Appalachian Community FCU, Kingsport, Tenn., was convicted of embezzlement and making a false oath and account in relation to a bankruptcy case. She was sentenced to 30 months in prison, five years supervised probation, and ordered to pay $105,900 in restitution;

• Ollis Grayson, Jr., a former employee of Dallas Educators CU, Selma, Ala., was convicted of fraud in connection with his employment at Dallas Educators CU and sentenced to six months in prison, five years of supervised release, and ordered to pay $75,743 in restitution;

• Quartus Omar Henderson, former teller at Security CU, Flint, Mich., was convicted of credit union embezzlement;

• Aurelia D. Jennings, a former employee of Piedmont Hospital FCU, Atlanta, was convicted of theft affiliated with the credit union and sentenced to 15 years in prison, with one year served in confinement, a total 14 years probation, and ordered to pay $136,165 in restitution;

• Joanna Lynn McGee, a former employee of TEXDOT-WF CU redit Union, Wichita Falls, Texas, was convicted of embezzlement, aiding and abetting and sentenced to 71 months in prison, 5 years supervised probation, and ordered to pay $2,063,891 in restitution;

• Scott-Alexander L. McKenzie, a former loan officer of Rochdale Co-Op FCU, Jamaica, N.Y., without admitting or denying fault, signed an order prohibiting him from participating in the affairs of any federally insured financial depository institution;

• Jessica Lynn Morgan, a former employee of American 1 FCU, Jackson, Mich., was convicted of theft and sentenced to 365 days in prison, 60 months of supervised release, and ordered to pay $100,570 in restitution;

• Nora Phelps, a former employee of South Jersey FCU, Deptford, N.J. , was convicted of bank fraud and sentenced to serve 33 months in prison, five years of supervised probation, and ordered to pay $342,827 in restitution;

• Lee Woong Song, a former manager of Korean American FCU, Oakland, Calif., has signed an agreement and is prohibited from participating in the affairs of any federally insured depository institution;

• Elsie P. Taylor, a former manager of City of Wilson FCU, Wilson, N.C., was convicted of embezzlement and obtaining property by false pretenses and was sentenced to a suspended sentence of a minimum six months, maximum eight months in prison, placed on supervised probation for 24 months, ordered to complete 100 hours of community service and ordered to pay $795 in fines, court costs and community service fees; and

• Patricia Ann Taylor, a former office manager of Nashville Post Offices FCU, Nashville, Tenn., was convicted of money laundering and bank fraud and ordered to serve 13 months in prison, three years of supervised release, and ordered to pay $269,580 in restitution.

Violation of a prohibition order is a felony offense punishable by imprisonment and a fine of up to $1 million.

Use the resource link below to see these and other NCUA enforcement orders.

Inside Washington

• WASHINGTON (9/24/09)--House Financial Services Committee Chairman Barney Frank (D-Mass.) and Senate Banking Committee Chairman Christopher Dodd (D-Conn.) said they are moving forward with legislation to reform the financial system. Reports that financial reform has stalled are wrong, Frank said. So far, there is agreement among lawmakers on some of the reform's basic components: creating a consumer financial protection agency, enhancing resolution authority, consolidating banking supervision and increasing financial institutions' capital requirements (American Banker Sept. 23). However, Dodd and Frank disagree on whether to consolidate all regulators into one. Frank said he does not in favor the idea, adding that two regulators would not make much difference if an institution failed. He would prefer a "hybrid" approach to managing systemic risk, whereas President Barack Obama has proposed giving the Federal Reserve Board oversight powers, Frank said. He is drafting a bill to create a consumer protection agency. The bill could be released in a couple days ...

• WASHINGTON (9/24/09)--The inspector general of the Federal Deposit Insurance Corp. (FDIC) has released a report regarding the agency's monitoring of IndyMac Bank, which collapsed in July 2008. The report said that until late 2007, FDIC officials consistently concluded that despite IndyMac's high-risk profile, the bank posed an ordinary--or slightly more ordinary--level of risk to the insurance fund based on its CAMEL rating. When FDIC increased its monitoring of the bank, resumed its on-site presence and assessed a higher insurance premium, IndyMac's financial condition was irreparable due to declining real estate values, credit quality problems and the collapse of the secondary market. FDIC, citing favorable composite ratings, did not request that the Office of Thrift Supervision take or pursue its own enforcement action against IndyMac, the report said ...

• WASHINGTON (9/24/09)--The Federal Deposit Insurance Corp. (FDIC) plans to meet Tuesday to discuss a plan that would boost the reserves of the Deposit Insurance Fund. At the end of last quarter, the fund held $10 billion (American Banker Sept. 23). FDIC Chairman Sheila Bair said the agency is looking at several options to boost the fund, instead of giving banks another premium assessment. Many banking trade groups have urged the FDIC not to issue another special assessment ...

• WASHINGTON (9/24/09)--U.S. officials say they're confident that an agreement will be reached at the Group of 20 (G-20) Summit in Pittsburgh on strategies to prevent the problems that triggered the financial crisis (The New York Times Sept. 23). Treasury Secretary Timothy Geithner has been pushing a framework of principles that require financial institutions to build their capital reserves to prevent investment losses and cash shortages. U.S. officials also said they were hopeful they'd reach an agreement with European leaders on executive compensation regulation. French officials have favored putting caps on bonuses for executives--which British and American regulators think is too harsh. Geithner said the goal of the G-20 meeting is to get the countries to agree on what is in their best long-term interest. The goal of the meeting is to make people look forward and at the imbalances and risks "building up," he said. Some financial observers, such as Simon Johnson, senior fellow at the Peterson Institute for International Economics, said the meeting would not carry much weight. The G-20 leaders haven't even set timelines for ending their own countries' emergency economic stimulus measures, Johnson told the Times ...

Seek CU input, WOCCU urges G-20 nations

MADISON, Wis. (9/24/09)--As finance ministers from the Group of 20 (G-20) nations prepare for this week's summit in Pittsburgh, World Council of Credit Unions' (WOCCU) leadership hopes the gathering will consider credit unions' point of view more than it has in the past.

Despite success in reaching other international regulatory bodies, WOCCU does not feel the G-20 has effectively used input from the global financial cooperative movement, according to a letter from Pete Crear, WOCCU president/CEO, to the G-20 leaders.

"While we recognized the need for the G-20 governments to act rapidly over the past year, we have been disappointed by the lack of consultation in the process," Crear wrote. "We hope that greater consultation with all parts of the financial sector will occur as the reform process continues."

This week's G-20 Summit in Pittsburgh, a location chosen by President Barack Obama because of the area's strong economic recovery, will review the progress made since the Washington D.C. Summit in November 2008 and London Summit in April. Plans include outlining further actions to assure a sound and sustainable recovery from the global economic crisis.

Crear's letter commented on several areas that will be discussed by summit attendees, the finance ministers and central bank governors of 19 nations and the European Union. WOCCU said it largely applauds and supports the G-20 efforts to date, particularly as they relate to capital adequacy, liquidity needs and executive compensation. The organization hopes that greater distinction will be made between large, complex international banks and retail cooperative financial institutions in designing new guidelines, Crear's letter said.

"We agree that retained earnings should be the cornerstone of capital bases," Crear wrote, "but the rules for non-joint stock firms, such as financial cooperatives, must also recognize the importance of access to additional forms of capital."

Crear urged the G-20 ministers to support improved access to liquidity, clearing and settlement systems for credit unions in both developed and developing countries. Also, financial institution executive compensation should be tied to meeting long-term performance goals in an effort to assure that consumers' well being is not compromised by bankers in pursuit of pay bonuses, he added.

"Finally, as the implementation of regulatory reforms proceeds, we favor a gradual process to allow sufficient time for changes to be communicated," Crear wrote. "This will help organizations and institutions work through the ongoing aftermath of the economic crisis."

The G-20 is an informal forum that promotes discussion among industrial and emerging-market countries on issues related to global economic stability. The G-20 includes Argentina, Australia, Brazil, Canada, China, France, Germany, Great Britain, India, Indonesia, Italy, Japan, Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the U.S. and the European Union. In G-20 countries, financial cooperatives serve 637 million people and have more than $9 trillion in assets.

Resource Links

Letter to G-20

World Council of Credit Unions

AP: Consumers’ new money mindset includes CUs

NEW YORK (9/24/09)--The recent recession has created a new mindset for consumers to take control of their finances, and one way to do that is to join a credit union, according to a Tuesday Associated Press article.

"In ways big and small--from scrutinizing their bills and joining credit unions to scaling back weddings and college plans--people are finding creative ways to deal with the worst recession in a generation," the article said. "In short, there's a quiet revolution taking place in the way people save, borrow and spend that represents a retreat from old habits, and the first steps toward new ones."

The article, "Meltdown gives consumers new money mindset," by Candice Choi and Eileen AJ Connelly, says that because credit is harder to obtain nowadays, people are becoming more creative in locating sources of money.

"Bank loan balances declined by 4.6% for the year ending in June," the article said. "But credit union loan balances rose by 4.5%, according to industry associations. Credit unions--which are nonprofits and weren't as tangled in subprime mortgages--are in better shape to make consumer loans."

For the full article, use the link.

Resource Links

Associated Press article

When Times Are Tough We Can Help lobby brochure

CUNA Research and Statistics

Fundamentals of Personal Finance: Your Survival Guide for Tough Times

Are your Savings Ready for Anything? statement stuffer

We're Here for You drive-up envelope

CUs in the Media

Missouri, Oklahoma CUs attend first joint convention

BRANSON, Mo. (9/24/09)--Missouri and Oklahoma credit unions are meeting in Branson, Mo, this week for a combined Credit Union Convention and Exposition. It is the first time the Missouri Credit Union Association (MCUA) and the Credit Union Association of Oklahoma (CUAO) have held a conference together.

MCUA President/CEO Rosie Holub and CUAO President/CEO D.J. Morrow Ingram welcomed 170 participants from 65 credit unions and nearly 40 vendors.

Morrow Ingram noted that by combining the events, the states "doubled the valuable networking opportunities."

The conference, which ends today, opened with a panel discussion moderated by Mark Sievewright, Fiserv senior vice president of strategic marketing. Providing perspectives on a variety of issues were National Association of State Credit Union Supervisors President Mary Martha Fortney, Missouri state Rep. Paul LeVota (D-52), and economist Dr. Christopher Thornberg.

Fortney shared what she is hearing from state agencies regarding credit union examinations. "Regulators are seeing a 'back to basics' mentality," she explained. "Due diligence is very important and regulators are also very mindful of the difficult times our credit unions are in."

Speakers addressed what they view as the most critical issues facing credit unions today and steps for the future.

"Credit unions have taken their lumps, but they are not at the center of this economic mess," said Thornberg. "You look great in comparison, and it's an opportunity--don't squander it."

LeVota said it is a "critical time in the credit union movement. It's incumbent on you to use this time to educate your members and lawmakers. Otherwise, the people with the loudest voices--which usually are those who have the most money--will be the ones who are heard."

The event also included a concert with Lee Greenwood and the Bellamy Brothers to raise funds for Homes for Our Troops, a non-profit organization that builds adapted homes for severely injured veterans.

CUNA Mutual on CIO, InfoWeek top tech lists

MADISON, Wis. (9/24/09)--CUNA Mutual Group has been named to the CIO 100 and InformationWeek 500, two technology award rankings that recognize companies for their information technology.

The 22nd annual CIO 100 award program, sponsored by IDG's CIO Magazine, recognizes organizations worldwide for their operational and strategic excellence in information technology.

CUNA Mutual was honored for its Retirement Recordkeeping Web system and fully integrated back-office processing. CUNA Mutual has received the CIO 100 honor four of the past five years.

The InformationWeek 500 is an annual listing of the nation's most innovative users of business technology. CUNA Mutual has been listed at No. 134 in this year's InformationWeek 500, marking the seventh year it has been named to the list and the third time it has been ranked in the top 150.

CUNA Mutual's voice signature technology also was recognized as one of InformationWeek's 2009 technology great ideas.

Resource Links

CUNA Mutual Group

Ten ‘no budget’ ideas for ICU Day

MADISON, Wis. (9/24/09)--If credit unions have no budget for International Credit Union Day (ICU) celebrations on Oct. 15, no problem, says the Credit Union National Association (CUNA).

Joanne Sepich, ICU Day coordinator for CUNA, has 10 ideas for resourceful staffs. They include:

1. Add an ICU Day poster design to your website;

2. Print signs for your branch announcing your plans;

3. Color. Put out crayons and coloring pages to entertain children;

4. Open the door. Valley Oak CU, Three Rivers, Calif., opens doors all day long, giving staff the opportunity to personally thank members;

5. Clean windshields in the drive-up--another idea from Valley Oak CU;

6. Put out Small Change, Big Difference boxes to help credit unions worldwide;

7. Hold a book drive, and donate books to a school or library in need;

8. Cook off. Hold a "best treats" cook-off contest for staff to feed members on Oct. 15;

9. Send a letter to the editor of a local paper; and

10. Dress up for the occasion. Employees at Chemical FCU in Texas dress in attire native to countries around the world.

For more information, use the link.

Resource Links

International CU Day 2009

Indiana league elects table officers

INDIANAPOLIS (9/24/09)--The Indiana Credit Union League board elected table officers at its reorganization meeting Sept. 11 during the league's annual meeting and convention.

Table officers elected are:

• Chairman: Lamoura Munse, Indiana Members CU, Indianapolis;

• Vice chairman: Ron Mazur, Chiphone FCU, Elkhart;

• Board secretary: Lori Dauksas, Members Choice FCU, Bloomington; and

• Treasurer: Frank Gulley, Afena FCU, Marion.

Others serving on the board include:

• Dave Fleming, Partners lst FCU, Fort Wayne;
• Randy Glassburn, Ball State FCU, Muncie;
• Sandy Heller, Northern Indiana FCU, Merrillville;
• George McNichols, Hoosier Hills CU, Bedford; and
• Doug True, FORUM CU, Fishers.

Illinois CUs active during legislative recesses

Credit union representatives from Illinois met with Rep. Bill Foster (D-Ill.) during a summer legislative recess. From left are: Robert Palumbo, CEO, DuPage CU, Naperville; Bill Hicks, board chairman, DuPage CU; Robert Schroeder, CEO, Illinois Community CU; Libby Calderone, CEO, Earthmover CU; and Don Edwards, senior vice president of governmental affairs at the Illinois league.

Rep. Kay Hatcher (R-Ill.) also met with credit union representatives. From left are: Libby Calderone, CEO, Earthmover CU; Robert Schroeder, CEO, Illinois Community CU; and Hatcher. (Photos provided by the Illinois Credit Union League)

NAPERVILLE, Ill. (9/24/09)--Credit union representatives from Illinois visited with U.S. Rep. Bill Foster (D-Ill.) and State Rep. Kay Hatcher (R) in their local districts during recent legislative recesses, according to the Illinois Credit Union League.

Credit unions updated Foster with key legislative and regulatory issues and priorities, including maintaining the independence of the National Credit Union Administration and the National Credit Union Share Insurance Fund, support of increasing the member business lending cap, and opposing to proposals regarding interchange.

Foster serves on the subcommittee on Financial Institutions and Consumer Credit of the House Financial Services Committee. Staff from the Illinois Credit Union League; DuPage CU, Naperville; Earthmover CU, Aurora; and Illinois Community CU, Sycamore, were at the meeting.

During a session with Hatcher, staff from the league, Earthmover CU and Illinois Community CU discussed credit union principles and how credit unions serve everyday consumers.

CU System briefs

• NEWARK, N.J. (9/24/09)--A New York man was sentenced Tuesday to 141 months (nearly 12 years) in prison for stealing Social Security numbers and selling them to an identity theft ring that targeted home equity lines of credit at New Jersey credit unions and banks. Yomi Jagunna, 44, of Queens, pleaded guilty in May to selling 39 of the numbers for $30 each to a group believed to have siphoned at least $2.5 million from dozens of banks and credit unions, including New Jersey credit unions in Basking Ridge, Bridgewater and Toms River. Jagunna was one of eight people charged last year in connection with the ring (The Star Ledger Sept. 22) ...

• PROVIDENCE, R.I. (9/24/09)--A Pawtucket man was sentenced Tuesday to eight years in prison for robbing a bank and the Central Falls branch of Smithfield-based Navigant CU. Anthony Soares, 46, pleaded guilty in June to the Sept. 15, 2008, robbery of the credit union. He also pleaded guilty to robbing a bank in Providence five days later (Associated Press Newswires Sept. 23) ...

• FARMERS BRANCH, Texas (9/24/09)--John Reap, president/CEO of Town North Bank, which is owned by a group of Texas credit unions, has announced his retirement. He had been at the bank for 30 years, the past 15 as CEO. Steve McDonald, who served as executive vice president and chief financial officers of the bank since September 2008, was been appointed as Reap's successor. Town North Bank was purchased by credit unions in 1975 and formed its card processing operation, TNB Card Services, in 1976. Initially focused only on Texas credit unions, it now provides credit and debit card processing for more than 550 credit unions nationwide. Reap was also a charter member of the Texas Credit Union Foundation board of directors as an advisory director, said the Texas Credit Union League (LoneStar Leaguer Sept. 23) ...

Market News

MADISON, Wis. (9/24/09)

• Loan application volume for the week ending Sept. 18 increased 12.8% on a seasonally adjusted basis from one week earlier, according to the Market Composite Index. The index is part of Mortgage Bankers Association's (MBA) Weekly Mortgage Applications Survey. The Refinance Index rose 17.4% from the previous week, and the 30-year fixed-rate mortgage fell below 5% for the first time since mid-May. The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.97% from 5.08%. The seasonally adjusted Purchase Index rose 5.6% from one week earlier, spurred by applications for government-insured loans, MBA said. The Government Purchase Index is at the highest level ever recorded in the survey's history, and the share of purchase applications that were government-insured was 45.7%--the highest share since November 1990. For Mortgage Refinance Applications Increase as Rates Drop in Latest MBA Weekly Survey, use the link ...

• The number of mass layoffs--those involving at least 50 workers from a single establishment--in August was 2,690 compared with 2,157 in July, according to the Bureau of Labor Statistics. The total number of laid-off workers was 259,307 in August compared with 206,791 in July. All figures are seasonally adjusted. Nearly half of the increase in layoffs was due to job cuts in the manufacturing sector--which is consonant with the increase in manufacturing payroll losses in August, analysts said (Moody's Economy.com Sept. 23) ...

• Economists may need to use new assessment tools to evaluate societal well-being, specifically tools that involve a broader concern for human welfare than just economic growth, according to a new study by Noble prize-winning economists Joseph E. Stiglitz and Amartya Sen. They reason that a good deal of the current economic troubles were engendered by an erroneous assumption by policymakers that--by solely focusing on economic growth-- prosperity for all would optimized. "What you measure effects what you do," Stiglitz said. "If you don't measure the right thing, you don't do the right thing." Most of the world is too exclusively dialed into gross domestic product, when it also should be factoring in considerations such as social costs of joblessness and the impacts of environmental degradation on public health, he added (The New York Times Sept. 23) ...

News of the Competition

MADISON, Wis. (9/24/09)

• Two of the biggest U.S. banks--Bank of America (BofA) and JPMorgan Chase--are revising fee policies in response to criticism from lawmakers about the way the lenders charge account holders. The banks announced plans Tuesday to cut overdraft fees, allow customers to opt out of overdraft protection and to lower or eliminate debit card fees. Federal regulators and lawmakers are pushing to reform excessive charges--many of which consumers are unaware, analysts said. Overdraft fees give the banking industry tens of billions of dollars each year, they added. Starting Oct. 19, BofA said it will permit current customers to halt their ability to spend when their account hits zero. In June, BofA also plans to limit the number of times each year that current customers can overdraw their account when using a debit card for purchases at a store. By the first quarter of next year, Chase intends to change how it processes ATM and debit transactions. Instead of compiling a day's worth of debit card and ATM transactions and then processing the highest amounts first--which causes consumers to overdraw faster and pay more fees--it will credit transactions chronologically (The New York Times and Bloomberg.com Sept. 23) ...

• To meet higher demand for some vehicles, General Motors Corp. (GM) Tuesday said it will call back 2,400 hourly workers to three factories in Indiana, Kansas and Michigan. However, most of the workers will have to move from other states, GM said. The automaker said it intends to operate the plants around the clock on weekdays to make up for lost production when three other plants close this fall. Many GM dealers have been running out of popular models such as the Chevrolet Malibu and Buick Lacrosse during sales engendered by the government's "Cash for Clunkers" vehicle rebate program, analysts said (The New York Times Sept. 23) ...

• Some mid-size U.S. banks have lost their appetite for buying failed financial institutions, reasoning that such acquisitions are time-consuming, costly and not worth the trouble, analysts said. At least one banker said he doubts the Federal Deposit Insurance Corp. can afford to abide by its agreement to share losses with acquirers on failed bank assets (American Banker Sept. 23). However, a substantial number of large and small banks said throughout the recession that they were interested in growing by acquiring failed banks. Many still are committed to that plan, analysts said. In a related matter, the Troubled Asset Relief Program--which pumped $125 billion into the nine largest U.S. financial firms--made it clear the government would not allow any major institutions to fail, analysts said. The "too big to fail" pronouncement about major U.S. financial institutions--once a hot topic of debate--is now an accepted public policy, analysts said.

Fed's actions increase pressure on CU margins

MADISON, Wis. (9/24/09)--Federal Reserve policymakers Wednesday kept the target for federal funds rate set at a range of zero to 0.25%, saying that economic activity has picked up since their August meeting. And that means credit unions will see more downward pressure on their margins, says a Credit Union National Association (CUNA) economist.

"Today's decision by the Federal Reserve will keep downward pressure on credit union net interest margins," said Steve Rick, CUNA senior economist, Wednesday. "Asset yields have been falling faster than funding costs for most credit unions as maturing investments and adjustable-interest-rate loans reprice down to the current extraordinarily low short-term interest rates," he said.

The Federal Open Market Committee (FOMC) said it "continues to anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period. In addition to keeping the rates range, the committee also addressed other actions:

• To provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Fed will purchase $1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt.

• It will gradually slow the pace of these purchases to promote a smooth transition in markets. The committee expects the purchases to be executed by the end of the first quarter of 2010.

• As previously announced, the Fed's purchases of $300 billion of Treasury securities will be completed by the end of October.

"The large supply of new Treasury bonds being dumped on the market--$30 billion per week--is putting upward pressure on longer-term interest rates. This has created the steepest yield curve since 2004," Rick told News Now.

"Historically, steep yield curves are good for credit union net interest margins because it makes the business of buying short-term deposits at low rates and lending them out longer-term at higher interest rates more lucrative. Of course this works only if you're lending the funds longer term," he said.

"With credit union loan growth on pace to reach only 4% this year, the slowest pace since 1992, most of the new funds coming in are being placed in short-term low-rate investments," Rick said.

"As the Federal Reserve policymakers noted in their statement, household spending remains constrained and faces many headwinds. Until those headwinds become tailwinds, credit union loan portfolios will post small gains and earnings will see continued downward pressure," he concluded.

In a statement after its meeting, the committee noted it "will continue to evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets. The Fed is monitoring the size and composition of its balance sheet and will make adjustments to its credit and liquidity programs as warranted."

FOMC also noted that financial markets have improved and activity in the housing sector has increased. "Household spending seems to be stabilizing, but remains constrained by ongoing job losses, sluggish income growth, lower housing wealth and tight credit," it said. It also noted that businesses are cutting back on fixed investment and staffing at a slower pace and continue to make progress in inventory/sales ratios.

"Although economic activity is likely to remain weak for a time, the committee anticipates that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will support a strengthening of economic growth and a gradual return to higher levels of resource utilization in a context of price stability," said the FOMC.

It also said it expected inflation "to remain subdued for some time."

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Daily Financial Rates

Mobile banking sparks shared-branch CUs’ interest

ST. PETERSBURG, Fla., and SAN DIMAS, Calif. (9/24/09)--More than half of credit unions that have signed up for mobile banking with Financial Service Centers Cooperative (FSCC) and PSCU Financial Services have chosen to integrate the solution through FSCC's Shared Branching Network.

Another 20% of FSCC credit unions are showing interest in the mobile solution, they said. The interest is growing because of the integrated technologies at both FSCC and PSCU Financial Services.

The platform appeals to consumers of all ages--especially young adults, said David J. Serlo, PSCU Financial Services president. The mobile banking solution can be downloaded in multiple formats, including Wireless Application Protocol and a downloadable application--Applet.

The tool features real-time, on-demand access to checking, savings, credit card and other account information.

FSCC is a credit union Shared Branching Network that provides more than 6,000 full-service deposit-taking locations in the U.S. and overseas. PSCU Financial Services is a credit union service organization that serves more than 1,300 financial institutions nationwide.

First Data developing card security at POS

ATLANTA and BEDFORD, Mass. (9/24/09)--First Data, a provider of electronic commerce and payment processing services, and RSA, the Security Division of EMC have partnered to provide a new service--First Data Secure Transaction Management (SM).

With SM, merchants can secure payment card data and remove the data from their environment while allowing access when needed. SM is designed to reduce the cost and complexity of complying with the Payment Card Industry Data Security Standard (PCI DSS), the companies said in a release.

Payment card data is encrypted when it is captured by the merchant's existing point-of-sale application and remains encrypted until it is delivered to First Data. The card number is replaced by a "token" value that cannot be linked back to the original card data, but otherwise behaves like a card number.

"The increasing need for data protection and the growing complexity of PCI DSS compliance are driving merchants to evolve their business strategies for securing customers' sensitive information," said Robert Vamosi, security/risk and fraud analyst for Javelin Strategy & Research. "Organizations that can employ a layered approach to data security, one that capitalizes on the inherent advantages of encryption, tokenization and other technologies, will be well-positioned to protect card data and reduce the scope of PCI compliance."

"To comply with the PCI DSS and reduce risk, organizations need security controls built into their infrastructure, and not bolted on," said Art Coviello, executive vice president, EMC Corp. and president, RSA. "Rather than addressing security risks by deploying disparate point controls throughout their infrastructure, First Data Secure Transaction Management provides organizations with a simplified and scalable solution that helps radically reduce management complexity and costs."