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Filed on November 4, 2009, published the first business day after.
- CUNA urges different treatment of CU capital investments in corporates
- CU-backed candidates win Virginia, California contests
- NCUA kicks off 2009 CDRLF program
- CUNA covers Reg Z at CU eBoot camp
- Inside Washington
- CU cards addressed in Wall St. Journal, broadcasts
- Safeguard vs. fraud in new economy, CUs warned
- CUNA spotlighted in Obama Wisc. news coverage
- L.A. CUs help promote news bank development districts
- CU president, suspect in embezzlement, commits suicide
- Bankrate highlights CUs’ rates in video
- Wright-Patt offers private student loans
- ‘Ode to Rusty Jeep’ wins ‘I Hate My Car’ contest
- Single mom is $10,000 financial makeover winner
- CU System briefs
- Market News
- Fed rate action impacts CUs
- News of the Competition
- Agility Recovery Solutions offers free H1N1 webinar
- SW Corporate paper addresses remote deposit
- Diebold reports 3Q financials
CUNA urges different treatment of CU capital investments in corporates
WASHINGTON (11/5/09)--Credit unions should not have been required to write down their capital in U.S. Central CU and Western Corporate CU (Wescorp) based only on estimates of future losses, Credit Union National Association (CUNA) President/CEO Dan Mica emphasized in a letter to National Credit Union Administration (NCUA) Chairman Debbie Matz on the eve of a meeting where this issue will be discussed.
"We urge the board to reverse this decision and allow credit unions that had capital investments into these corporates to retain the ability to recover at least some of their capital, in the event the actual losses relating to asset-backed securities are not as large as NCUA has estimated they will be," Mica wrote.
"As we have stated, the central issue is that it is unfair to require credit unions to write down their capital in these corporates on the basis of estimates of their future losses, with absolutely no possibility of future recovery should those estimates turn out to be inaccurate," Mica noted.
The CUNA leader made these points as the NCUA board prepares to hold a meeting today with corporate credit unions on the capital extinguishment issue. CUNA will be among those attending the meeting.
Mica told Matz that CUNA disagrees with NCUA's Letter No. 09-CU-10, which says NCUA corporate rules require the depletion of corporate capital. He also took issue with those at NCUA who have indicated Generally Accepted Accounting Principles dictate depletion of capital in Wescorp and U.S. Central. "We do not agree, and neither do the accounting practitioners and experts we consulted on this matter," he added.
NCUA has several options it can pursue to address the unfair treatment of corporate capital, CUNA said. These could include:
- Refraining from depleting all capital. NCUA has this authority, CUNA contends, and it would mean some capital could be recovered if all of the losses do not materialize;
- "Freezing" rather than deplete capital accounts and allow corporates to operate with negative retained earnings under certain conditions;
- Precluding the use of new capital to cover legacy losses at corporates; and
- Using the Corporate Stabilization Fund to help manage the corporates' losses as they are realized.
Mica concluded by urging the NCUA following today's meeting to "expeditiously reconsider and rescind" its decision on capital depletion.
CU-backed candidates win Virginia, California contests
WASHINGTON (11/5/09)--Credit union leagues nationwide took part in Tuesday's elections, and credit union-backed candidates have gained two prominent positions.
New Congressman John Garamendi, who was supported by the California Credit Union League and the Credit Union National Association (CUNA)'s federal political action committee, the Credit Union Legislative Action Council (CULAC), will serve California's 10th Congressional District, which spans Contra Costa, Solano and Alameda counties in Northern California.
Garamendi defeated Republican challenger David Harmer by earning 53% of the total vote. Garamendi, who has also served as lieutenant governor and state insurance commissioner, became the Democratic nominee earlier this year when he won a California special primary. Former representative Ellen Tauscher (D-Calif) vacated the congressional seat to take a position in the State Department.
Commenting on the result, CUNA Political Director Trey Hawkins said that Garamendi "has been a strong friend to credit unions on the state level, and we look forward to continuing to work with him in Congress."
The Virginia Credit Union League publicly backed incoming Virginia Governor Bob McDonnell (R), who soundly defeated Democratic challenger Creigh Deeds by 17 points on Tuesday.
CULAC and the league earlier this year also supported Judy Chu (D-Calif.), who won a special election for the House seat from the 32nd district.
NCUA kicks off 2009 CDRLF program
ALEXANDRIA, Va. (11/5/09)--The National Credit Union Administration (NCUA) on Wednesday announced that it has opened the 2009 edition of its Community Development Revolving Loan Fund (CDRLF) program.
The CDRLF is administered by the NCUA's Office of Small Credit Union Initiatives and the funds are used for such things as improved financial services for members and stimulating community economic development through financial education programs, free tax preparation and asset-building services, and improved credit union operations.
The application period began on Nov. 4 and will end on Dec. 30. Credit unions that will be awarded funds will be notified on March 1.
In statements accompanying the release, NCUA Chairman Debbie Matz encouraged "low income-designated federal and state-chartered credit unions that have received NCUA concurrence to apply" for CDRLF funds. "I can't think of a more opportune time to assist your members and at the same time support your community," Matz added.
Eligible credit unions may apply for as much as $300,000 in funding from the CDRLF, which has $3 million in funds available for credit unions.
The House in July approved $1.25 million in CDRLF funding for the 2010 fiscal year as part of the General Government Appropriations Bill. The NCUA in May of this year had requested $1 million in funding for the CDRLF for 2010.
CUNA covers Reg Z at CU eBoot camp
WASHINGTON (11/5/09)--Individuals looking to gain a more thorough understanding of the Federal Reserve Board's recent amendments to open-end credit rules under Regulation Z can improve their knowledge on the issue through the Credit Union National Association's (CUNA) Z eBoot Camp eSchool.
The comprehensive training program, which begins on Nov. 19, will cover the basics of Regulation Z and provide an in-depth look at how recent changes will affect credit unions.
The proposed changes would affect disclosures for credit cards and other credit plans, and are intended to resolve uncertainties and make other technical changes to the rule, although they are not intended to change the level of protection.
CUNA's eSchool will be divided into five separate 90-minute webinars which can be attended for $219 per class. The sessions, which will take place at 3 pm, will begin with a class on Regulation Z consumer lending basics on Nov. 19. CUNA will follow up with classes on Regulation Z mortgage lending basics on Dec. 3 and a class on account opening and credit card disclosures on Dec. 10. Finally, CUNA will cover advertising, change in terms notices, and multi-featured open-end loan programs on Dec. 17 and requirements for periodic statements on Jan. 7.
The sessions will also be archived for attendees that cannot view the courses at the scheduled time.
To register for the courses, use the resource link.
Inside Washington
- WASHINGTON (11/5/09)--The Federal Deposit Insurance Corp. (FDIC) issued a financial institution letter regarding the way FDIC administers its statutory restrictions on the deposit interest rates paid by banks that are less than well-capitalized. A final rule, effective Jan. 1, redefines the national rate as an average of rates paid by all insured depository institutions and branches for which data are available. Once the rule takes effect, an institution that believes it is operating in a high-rate area can use the rates in its market area only if it seeks and receives a determination from the FDIC that it is operating in a high-rate area. The FDIC said it would issue another letter explaining how banks can request such a determination. During the interim period ending Jan. 1, institutions can use national rates and rate caps on the FDIC's website ...
- WASHINGTON (11/5/09)--Debate in the House Financial Services Committee on a bill that would create a systemic risk regulator was expected to begin Wednesday. Several issues regarding the bill need to be addressed, according to financial observers (American Banker Nov. 4). Issues include whether the Federal Reserve Board should have powers over other regulators, how to create a resolution fund to handle systemically important firms, and how high a proposed risk retention requirement for securitizations should be set. The debate will likely be contentious, said Mark Calabria, director of financial regulations studies at the Cato Institute. Rep. Barney Frank (D-Mass.), House committee chairman, said he doesn't expect a final vote on the bill for at least one week due to amendments. The 379-page bill would designate the Fed as systemic regulator, combine the Office of Thrift Supervision and the Comptroller of the Currency, create a resolution process to help systemic institutions and create an interagency council to help the Fed advise the institutions. The Credit Union National Association sent a letter Tuesday to House Financial Services Committee Chairman Barney Frank (D-Mass.) and ranking member Spencer Bachus (R-Ala.), asking that credit unions not be entangled in the legislation because they do not pose any systemic risk to the financial system ...
- WASHINGTON (11/5/09)--If Federal Reserve Board Chairman Ben Bernanke's plan to stop purchasing mortgage-backed securities (MBS) fails, he will likely face pressures from Congress to extend credit programs for consumers and small business programs, and maintain support for housing, financial observers said (American Banker Nov. 4). If Bernanke is pressured by Congress to carry out these tasks, it would undermine the Fed's ability to control independent money policy. Bernanke has already been pressured to help car companies and extend more credit to the commercial real estate market. William Poole, former president of the Federal Reserve Bank of St. Louis, said Congress may ask the Fed to invent a new program when a sector has difficulties, The Fed is the biggest purchaser of securities from Fannie Mae and Freddie Mac, and Bernanke hopes to stop purchasing the MBSs by March. The Fed has maintained that the securities have helped to stabilize the housing market ...
CU cards addressed in Wall St. Journal, broadcasts
MADISON, Wis. (11/5/09)--The Wall Street Journal and several other news outlets recently noted credit union credit cards as an alternative to traditional credit cards offered by large banks that may carry high interest rates or fees.
The Wall Street Journal noted a Pew Safe Cards Project, part of the Pew Charitable Trusts, which compared credit cards of 12 large banks and 12 large credit unions. Pew found that credit unions' rates were lower than banks, and credit unions charged about half of what banks charged in fees (Nov. 4).
The newspaper also featured statistics from the Credit Union National Association, which indicate that about half of credit unions offer credit cards.
KY3 News in Springfield, Mo., also highlighted credit union credit cards in a recent story. Credit unions offer credit cards with low interest rates and annual fees--and that will likely not change anytime soon, the news outlet said.
Susie Kasterke, CU Community CU, Springfield, told KY3 News that the credit union offers credit cards with an introductory 6.9% interest rate and a permanent rate of 9.9%, which is below the industry average.
"We're not trying to make big profit for stockholders," she said. "We're here for members."
A Georgia TV broadcast outlet, WRDW, also ran a story credit union credit cards. The news outlet cited the Pew study, and included comments from Phyllis Cochran, president of Augusta (Ga.) VAH FCU, who said that credit unions have benefited from the high fees that other institutions charge on credit cards. About 10% of the population switched to credit unions from banks over the past two years, she said.
Safeguard vs. fraud in new economy, CUs warned
SAN DIEGO (11/5/09)--The downsides to a struggling economy continue to challenge credit unions working to maintain strong bottom lines while serving their members. But some of those challenges can be greatly minimized through diligent oversight and safeguarding against fraud, says Mark McDuffie, risk manager at CUNA Mutual Group.
McDuffie delivered that message Tuesday to attendees at the 15th Annual CUNA Lending Council Conference, where his overriding theme was how to protect credit unions from fraud in a tough economy. Joining McDuffie in the presentation was Joanne Robinson, vice president of lending at Smart Financial CU in Houston.
Mortgage fraud, loan fraud through employee dishonesty, and indirect lending fraud are the most common frauds, McDuffie said, adding, "Desperate financial times are ripe for new fraud schemes. It's critically important to be aware of these schemes and do what's necessary to prevent them from happening at your credit union."
McDuffie cited bond loss figures reported by CUMIS Insurance Society showing an increase in claims and dollar amounts between 2004 and 2008. Although the highest percentage of claims was due to fraudulent deposits at 48%, they accounted for just 19% of money paid out. Similarly, only 10% of claims were due to employee dishonesty, but they accounted for the greatest percentage--36%--of the monetary bond loss.
"Employee fraud, which is typically loan fraud, is becoming more common as others lose their jobs," McDuffie said. In households where one member loses a job, the employees "almost immediately go into delinquency on their debt. In desperate times, people resort to desperate measures. And if they're working in a credit union and they know how their particular systems work, they look for ways to scam the system for financial gain."
McDuffie told the true story of a loan officer who did a share-secured loan against a number of large accounts held by two elderly credit union members. To accomplish this without immediately calling attention to the transaction, the loan officer used another employee's password--which was also fraudulently obtained--to disperse the funds. The officer then used her own family members' accounts to launder the money, which totaled more than $80,000. The officer and scam were identified when one of the elderly members saw the fraudulent loan on her monthly statement and notified the credit union.
"This is a small one, just the tip of the iceberg," said McDuffie. "There are much more and much larger loan frauds being committed by employees, but many can be prevented or more quickly identified when they occur."
McDuffie urged credit unions to have sufficient controls in place that increase the risk of being detected and, ultimately, discourage employees from taking the risk.
Mortgage fraud also is increasing as a result of current economic conditions and as more homeowners find themselves over-mortgaged and unemployed," said McDuffie.
One common mortgage scam occurs when fraudsters contact homeowners facing foreclosure and identify themselves as "foreclosure specialists" promising the credit-exhausted homeowner to pay off their mortgage and, in some cases, other outstanding bills. The homeowner signs over the property deed to the fraudster, who then obtains a fraudulent release of the lien, sells the property to someone else and absconds with the money. Frequently the homeowners are told they can continue living in their home by renting it from the fraudster. The rent is added to the proceeds of the illegal sale.
"This is another example of things that happen out of desperation," McDuffie said. "Mortgage fraudsters work fast enough that multiple transactions are occurring simultaneously, making it easier for them to defraud the lending institution."
As fraudsters become more sophisticated, credit unions need to be more vigilant in their prevention and detection procedures, said McDuffie, to avoid becoming the next victim.
CUNA spotlighted in Obama Wisc. news coverage
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 Click to download a pdf version |
Obama's trip to Madison was the first time a president had visited the city while in office since Harry S. Truman, who went to Madison in 1950.
During that visit,Truman helped lay the cornerstone of what was then CUNA's new building in Madison on May 14, 1950. The Journal featured a black-and-white photo of Truman holding the trowels on the front of Wednesday's paper (the photo is at the bottom of the front page). Truman kept one of two trowels used to lay the stone. CUNA kept the other, said the photo caption (Wisconsin State Journal Nov. 4).
While in Madison, Obama spoke at a local middle school about education reform.
L.A. CUs help promote news bank development districts
LOS ANGELES (11/5/09)--Los Angeles credit unions are helping to promote the newly approved Los Angeles City Council measures to establish banking development districts, said the California Credit Union League.
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| Attending a press conference before the Los Angeles City Council approved an ordinance Friday that would create districts for banking development throughout the city were, from left: Carl Stewart, CEO, Water and Power Community CU, Los Angeles; Josh Stehlik, Neighborhood Legal Services, Los Angeles; Oliva Calderon, New America Foundation; Los Angeles City Councilman Richard Alarcón; Forescee Hogan Rowles, Community Financial Resource Center Los Angeles; Lucia Moreno-Linares, Family FCU CEO, Wilmington, Calif.; and Leticia Rodriguez, board member, Pacoima (Calif.) Development FCU. (Photo provided by the California Credit Union League) |
The ordinance, which was proposed in May, would provide property tax relief and expedite land-use approval for credit unions and banks to open branches in underserved areas. It is modeled after a similar measure passed in New York City (News Now Nov. 3).
The ordinance would guarantee municipal deposits for credit unions and banks. The city treasurer also will create a task force to work with department heads and council members to determine how to model the Los Angeles program after the New York City program.
At a Friday press conference before the motion was approved, Carl Stewart, CEO, Water and Power Community CU, Los Angeles, and Lucia Moreno-Linares, CEO, Family Federal CU, Wilmington, Calif., spoke about what the program will mean to those in underserved communities.
"While credit unions operate in many communities in these proposed districts, we hope that this program will educate people about the options that already exist and incentivize financial institutions to do even more in their local neighborhood," Stewart said. "Credit unions look forward to working with the city to bring our communities back on track and look forward to being part of the financial success of our communities as part of the Banking Development District Program."
"I think being ‘at the table' when our city looks at ways to use its considerable influence to encourage delivery of financial services to the undeserved or unbanked is very important but also an exciting opportunity to create partnerships where we as credit unions help draft the language," said Moreno-Linares. "It's a great opportunity to be able to give direct feedback to city officials about why something will or will not work for us."
An estimated 300,000 households in the Los Angeles area are without a checking or savings account. These families rely on expensive alternative financial services, said the league. The Brookings Institution estimates that the average "unbanked" household in Los Angeles pays more than $700 each year to cash checks and use money orders to pay bills.
More than $100 million of income is lost every year by families paying for expensive financial services. The fees translate into more than $54 million in check-cashing fees and $88 million in payday loan fees in Los Angeles every year. In Los Angeles, there are 944 check-cashing outlets and 312 payday lenders, but only 694 bank and credit union branches.
CU president, suspect in embezzlement, commits suicide
WISCONSIN RAPIDS, Wis. (11/5/09)--The former executive of a Wisconsin credit union, who was facing federal embezzlement charges at the credit union, committed suicide.
The body of David K. Henke, 50, former president/CEO of Rapids Municipal CU--which merged into Bull's Eye CU, Wisconsin Rapids, Wis., in December--was found inside his vehicle Monday by sheriff's deputies (The Daily Tribune Nov. 3).
Deputies were looking for Henke after he failed to appear Monday for a plea hearing in U.S. District Court in Madison, Wis. Federal Judge Barbara S. Crabb issued a warrant for his arrest, the newspaper said.
Henke allegedly embezzled $634,000 from the credit union's accounts from November 1999 to October 2008, the paper said.
Bull's Eye is working with members to replace the money they lost in their accounts, the paper added.
Bankrate highlights CUs’ rates in video
NORTH PALM BEACH, Fla. (11/5/09)--Credit unions offer better deals on credit cards, savings accounts, checking accounts and loans than bigger banks, according to Bankrate.com.
Bankrate noted in a video that credit unions' rates are better on savings and loan products, and encouraged consumers to find a credit union to join.
"Odds are that there's some way you're going to qualify for some type of credit union, and once you do qualify and join you are a member for life even if you change careers or move away," Bankrate said. "A credit union might be a good idea if you borrow or save."
To see the video, use the link.
Wright-Patt offers private student loans
FAIRBORN, Ohio (11/5/09)--Wright-Patt CU has stepped up to assist consumers who are forced to rely on private student loans during the exodus of many traditional lenders from the student-lending market.
According to Linda Stephens, vice president of consumer lending at the Fairborn, Ohio-based credit union, while the government has ensured the continued availability of federal loans, consumers forced to rely on private student loans will feel the biggest pinch.
"The cost of college education has risen dramatically over the last 15 years. This has led to an ever-increasing gap between what scholarships and federal loans cover and the actual cost of attendance," Stephens said.
Wright-Patt in May teamed with Credit Union Student Choice to provide a private education line of credit, which features zero origination fees, lower interest rates, in-school deferred payment, co-signer release and a graduated repayment option.
The product is structured as a line of credit, so students can make multiple draws over the course of their entire college career after completing just one loan application, Stephens said.
"Most important, we control the pricing and retain the ongoing relationship with our member," she said.
Many lenders take advantage of consumers' lack of knowledge about education financing options, she said. Wright-Patt has built a website with information and calculators to help consumers.
‘Ode to Rusty Jeep’ wins ‘I Hate My Car’ contest
BURNSVILLE, Minn. (11/5/09)--US FCU (USFCU) in Burnsville, Minn., and a local Chevrolet, Dodge, Kia dealer launched a "I Hate My Car Contest" in October so car owners could vent their frustration with their vehicle in the hopes of winning a new 2009 Chevy Aveo to replace it.
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| "I Hate My Car" Contest winner Paul Dehn (middle) poses with his new 2009 Chevy Aveo along with dealership owner, Jeff Belzer Sr. (left), and US FCU President/CEO Bill Raker (right). (Photo provided by US FCU) |
The contest was an alternative to the expired "Cash for Clunkers" program--one that extended beyond replacing only those cars considered "clunkers." With almost 600 rants from disgruntled car-owners, it was difficult to choose just one winner, the credit union said. However, a few entries stuck out among the haters, including that of Paul Dehn--the winning entry. Dehn paid tribute to his hated 1994 Jeep Cherokee with a poem titled "Ode to A Rusty Jeep."
After visiting USFCU's Bloomington, Minn., branch, Dehn knew the theme of the contest was perfect for him.
"The manual shifter of my truck had broken off at one point, so I had been using an old aluminum bat that was sawed off at one end in its place," Dehn said. "I entered with no expectation of winning, but thought it was a cool way to share my feelings about my worn-out vehicle."
Dehn won the contest and a new car, US FCU said.
"This is definitely an unexpected, yet welcome blessing for me right now during these difficult economic times," he said. "I never win anything, so this was a wonderful surprise!"
His dog, Kemo-Sabe, a Malamute-Shepard mix mentioned in his entry, came along to check out his owner's new ride. "I would love to let Keno ride in the Aveo, but I would rather keep this one smelling nice and new--without the smell he left in my Jeep," Dehn said.
To view the poem, use the link.
Single mom is $10,000 financial makeover winner
BATON ROUGE, La. (11/5/09)--Earlier this year, Kristi Smith, a single mother of two from Walker, La., was drowning in debt with little savings because of a divorce and undisciplined spending. She took a chance at a fresh start by entering a local financial makeover competition sponsored by E FCU.
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| The winning family of E FCU's Lose to Win: Financial Edition competition received $10,000 after an eight-month competition. The family reduced debt by $22,000 and saved more than $12,000. From left, front row: Kalyn Smith, 7, and Shelby Smith, 9. Back row: Ken Bordelon, E FCU CEO; Anna Lafitte, E FCU collections manager and contest coach; Kristi Smith, Lose to Win winner; and Valerie Jenkins, Consumer Credit Counseling Services counselor and contest coach. (Photo provided by E FCU) |
Eight months later, with the help of a team of financial coaches, Smith turned her finances around and was named the $10,000 grand prize winner of the Baton Rouge-based credit union's Lose to Win: Financial Edition competition.
Smith competed with three other families to see who could reduce debt and increase savings by the greatest percentage from February through September. With the help of financial coaches Anna Lafitte of E FCU and Valerie Jenkins of Consumer Credit Counseling Services (CCCS), Smith and her two children, Shelby and Kalyn, lost more than $22,000 in debt and saved more than $12,000.
The families' journeys were chronicled weekly through online videos and blogs, and during television newscasts on local NBC and Fox affiliates.
All the participating families improved their financial outlook. Combined, the four families made a financial swing of $80,000, with the help of E FCU and CCCS. Here's how they placed:
- Second place--the Ridings family of Gonzalez, La., who reduced debt by more than $10,000 and grew savings by $8,000;
- Third place--The Willis family of Baton Rouge, who reduced debt by more than $9,000 and saved $6,300.
- Fourth place--The Hall family of Zachary, La., who lowered debt by $9,000 and raised savings to nearly $3,000.
CU System briefs
- SANTA ROSA, Calif. (11/5/09)--Redwood CU employees enjoy an ice cream party to celebrate raising $77,894 in the credit union's 2009 United Way campaign. The amount
exceeds its $70,000 goal by more than 10%. "With the challenges of today's economy, I am truly awed by the generosity our employees and officials demonstrated during this year's United Way campaign," said RCU President/CEO Brett Martinez, who also volunteers on the board of United Way of the Wine Country. This year, at the request of United Way, the credit union ran its campaign a month early to act as a pacesetter for other local companies. It raised more than $73,000 for the United Way of the Wine Country, where Redwood is headquartered and has 10 branches, and more than $4,700 for United Way of the Bay Area, where it also has several branches. (Photo provided by Redwood CU) ...
Click for larger view - DALLAS (11/5/09)--Texans CU raised more than $50,000 for the Juvenile Diabetes
Research Foundation's (JDFR) Walk to Cure Diabetes. The walk drew more than 15,000 walkers in three locations and raised $1.5 million to date. Texans CU raised funds by soliciting donations, selling vendor logo space on the Texans T-shirt, selling jeans days and offering raffle prizes such as tickets to Dallas Cowboys, Dallas Stars, and Dallas Mavericks tickets, a meet and greet with ice hockey player Mike Modano and a week of vacation. The photo shows part of the Texans walk team at the start of the walk. (Photo provided by Texans CU) ...
Click for larger view - MEDFORD, Ore. (11/5/09)--Rogue FCU was named the Best Financial Institution in the 2009 Medford Mail Tribune's Readers' Choice Awards. Employee Andrew Staley was voted Best Financial Advisor, and employee Gary Duvall was voted as third Best Financial Advisor. "Putting our community and our members first in every decision we make is very important," said Rogue President/CEO Gene Pelham, noting that Rogue is "fortunate to be a part of such a great community." The credit union has $448 million in assets and more than 46,000 members ...
Market News
MADISON, Wis. (11/5/09)
- For the third consecutive month, the number of announced job cuts dropped in October to 55,679 from 66,404 in September, according to a report by Challenger, Gray and Christmas Inc. The October job cut tally is the lowest level reported by Challenger since March 2008. October's job cuts were one-half the total announced a year earlier. The highest number of cuts last month was in the automotive, electronics and computer industries. The decline in cuts is consonant with other labor market measures, analysts said. However, there is scant evidence that hiring is picking up, they added (Moody's Economy.com Nov. 4). Also, U.S. private sector jobs declined by 203,000 in October, compared with a revised drop of 227,000 in September, according to a report by payroll giant Automatic Data Processing Inc. and consultancy Macroeconomic Advisers (The Wall Street Journal Nov. 4) ...
- For the week ending Oct. 30, the Market Composite Index--a measure of mortgage loan application volume--rose 8.2% on a seasonally adjusted basis from one week earlier, according to the Weekly Mortgage Applications Survey released Wednesday by the Mortgage Bankers Association. The index rose 7.9% on an unadjusted basis compared with the previous week. The Refinance Index rose 14.5% from the prior week, and the seasonally adjusted Purchase Index decreased 1.8% from one week earlier. The unadjusted Purchase Index declined 3% compared with the previous week's and was 3.4% lower than the same week one year ago. For Mortgage Refinance Applications Increase in Latest MBA Weekly Survey, use the link ...
- Service industries in the U.S. grew at slower-than-anticipated pace in October, signaling that rising unemployment may curtail consumer spending, analysts said. The Institute for Supply Management's (ISM) index of non-manufacturing businesses dropped to 50.6 after rising above the zero-growth 50 mark in September at 50.9. ISM said the survey is generally consistent with its forecast that growth in the nation's gross domestic product will tally about 3% in the fourth quarter. Increased employment may mean consumer spending will grow only with government assistance--an indication that the nascent recovery may lose steam as the government stimulus fades, analysts said (Moody's Economy.com and Bloomberg.com Nov. 4) ...
Fed rate action impacts CUs
WASHINGTON (11/5/09)--Wednesday's decision by the Federal Open Market Committee (FOMC) to stay the course and keep the fed funds target interest rate between 0%-0.25% will maintain a steep yield curve for a while longer, and that will impact credit unions, says a Credit Union National Association (CUNA) economist.
"For those credit unions with strong loan demand, this should increase net interest margins as low-rate short-term deposits are used to fund longer-term higher-rate loans," said Steve Rick, senior economist at CUNA. "The higher net-interest margins should help financial institutions cover loan chargeoffs and earn their way out of the current financial crisis," he said. The FOMC has held the benchmark lending rate close to zero since December, while using asset purchases as its main policy tool. The Fed's last monetary stimulus helped fuel 3.5% growth during the third quarter (Bloomberg.com.
"Credit unions have responded to the historically low short-term market interest rates by slashing their deposit interest rates," Rick told News Now. "The average interest rate paid on credit union regular share accounts was 0.54% in September, down from 0.93% in September of 2008. Money market account interest rates fell to 1% from 2%, while share certificate rates fell from 3% in September 2008 to 2% today.
"Low interest rates on savings have not discouraged credit union members from increasing their deposit balances. During the first nine months of 2009, credit union savings balances rose 8.6%, faster than the 4.8% reported for the similar period last year. This has increased credit union liquidity and credit union investment portfolios," he said.
"This change in the distribution of assets from loans to investments is putting significant downward pressure on asset yields for those credit unions with weak loan demand," Rick said.
In addition to keeping the federal target bank lending funds rate at 0% to 0.25%--as expected--FOMC said the Fed would inject nearly $2 trillion in the economy through purchasing agency mortgage-backed securities (MBS) and agency debt.
In its announcement, the FOMC noted that economic activity has continued to pick up and that conditions in financial markets were roughly unchanged with household spending remaining constrained by ongoing job losses, sluggish income growth, lower housing wealth and tight credit.
"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," the FOMC said after the meeting.
"With substantial resource slack likely to continue to dampen cost pressures and with longer-term inflation expectations stable, the Committee expects that inflation will remain subdued for some time.
The Fed "will continue to employ a wide range of tools to promote economic recovery and to preserve price stability," it said, noting that the target rate is "likely to warrant exceptionally low levels of the federal funds rate for an extended period."
FOMC also announced the Federal Reserve will purchase a total of $1.25 trillion of agency MBS and about $175 billion of agency debt. The amount of the agency debt purchases "is consistent with the recent path of purchases and reflects the limited availability of agency debt," said the FOMC.
It "will gradually slow the pace of its purchases of both agency debt and agency mortgage-backed securities and anticipates that these transactions will be executed by the end of the first quarter of 2010.
"The Committee 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 Federal Reserve is monitoring the size and composition of its balance sheet and will make adjustments to its credit and liquidity programs as warranted," said the announcement.
News of the Competition
MADISON, Wis. (11/5/09)
- Executives at financial services companies do not expect hiring and pay conditions to improve at their firms, despite the improvement in the economy. Roughly 20% of banking executives said their companies will ramp up hiring in the next six months, according to a survey released Tuesday by Grant Thornton LLP--the U.S. arm of Grant Thornton International LLP. However, nearly 25% of executives surveyed expect job cuts. The online survey of 846 chief financial officers and senior comptrollers--conducted Sept. 21 through Oct. 2--included 42 executives at financial institutions who were marginally more pessimistic about job cuts and hiring at their companies than respondents in other industries, analysts said (American Banker Nov. 4) ...
- A U.S. bankruptcy judge set a Dec. 8 hearing to fast-track the approval of CIT Group's Inc.'s financial reorganization. Judge Allen Gropper said Tuesday in a Manhattan bankruptcy court that he is trying to help the large commercial lender emerge from bankruptcy by the end of the year. A quick reorganization is essential for CIT to retain the majority of its customers and remain a strong supporter of its banking unit, which did not file for bankruptcy protection, analysts said. Also affected by the proceedings will be several hundreds of thousands small- and mid-sized businesses--such as operators of Dunkin' Donuts stores--that are dependent on CIT for financing, analysts added. Small businesses employ roughly half the U.S. labor force (Reuters Nov. 3) ...
- The Treasury Department announced plans to sell a record $81 billion in its quarterly auctions of long-term debt next week. The Treasury also said it replaced its inflation-protected 20-year bond with a reintroduced 30-year security. The agency will auction $40 billion in three-year notes on Monday, $25 billion in 10-year notes on Tuesday, and $16 billion in 30-year bonds on Thursday. The government will conduct another year of debt sales, ranging from $1.5 trillion to $2 trillion because the U.S. is headed for a second straight year of budget deficits, analysts said. "Treasury debt managers will continue to remain aggressive in managing financing needs while minimizing potential market implications," the Treasury said in a statement Wednesday (Blooomberg.com Nov. 4) ...
Agility Recovery Solutions offers free H1N1 webinar
CHARLOTTE, N.C. (11/5/09)--Agility Recovery Solutions is offering a free webinar for credit unions to help them prepare for a potential pandemic of H1N1, also known as swine flu.
The webinar will take place Nov. 18. at 2 p.m. EST. Dr. William Lang, former associate chief medical officer at the Department of Homeland Security, will provide attendees with steps they can take to prepare for a possible pandemic.
President Barack Obama has declared H1N1, a national emergency. The Center for Disease Control reports flu activity is widespread in 46 states, Agility said in a release.
Agility is a CUNA Strategic Service provider.
SW Corporate paper addresses remote deposit
PLANO, Texas (11/5/09)--Remote deposit has benefited credit unions because of operational efficiencies and cost reductions, according to a new white paper from Southwest Corporate in Plano, Texas.
The paper, "Five Years Later: A Perspective on Check 21 and the Remote Deposit Industry," explores the changes that have taken place in the remote deposit industry and their effect on credit unions.
Remote deposit was made possible after the Check Clearing for the 21st Century Act, Check 21, became effective in 2004. Check 21 authorized financial institutions to create a legal equivalent, or substitute check, printed from electronic images of the original check. As a result, financial institutions can exchange images of checks with other financial institutions without physically transporting the checks.
The paper notes efforts by early credit union adopters of remote deposit. For instance, Digital FCU, Marlborough, Md., enrolled 3,000 users in the first week and saw figures surge to 16,000 users in the first five months of using remote deposit, the paper said.
Southwest Corporate offers credit unions Branch Capture and Teller Capture. Brad Ganey, Southwest Corporate senior vice president of payment services, encouraged credit unions to do their homework when choosing remote deposit products.
"It's important that 11th-hour decisions are not made in a vacuum," he said. "We've seen decisions made too quickly because the Fed was closing the site nearest to the credit union, or a service provider told the credit union it was not going to service paper anymore.
"Credit unions need to talk strategically about how a product fits into their long-term plan. Is this a product that offers the ability to attach other applications to it in the future or will it have to be thrown away later? Can the credit union use the same channel to deploy multiple applications?" Ganey said.
The paper concluded that the future will further push remote deposit toward credit unions and members.
"Many benefits are available to credit unions that perform their due diligence and launch them with proper planning and appropriate safeguards," the paper said. "The industry has come a long way in five years, and evidence suggests the next five will evolve just as quickly."
Diebold reports 3Q financials
NORTH CANTON, Ohio (11/5/09)--ATM manufacturer Diebold reported its third quarter income from continuing operations at $24.5 million, or 37 cents per share--down 49% from third quarter 2008.
Third quarter revenue was $645.2 million, which is 26% less than third quarter 2008. Nine-month year-to-date 2009 income from continuing operations attributable to Diebold, net of tax, was $65.2 million, or 98 cents per share. That is a drop of 28% from the same period last year. Nine-month year-to-date 2009 revenue totaled $1.99 million, down 13% from 2008.
Non-generally accepted accounting principles (GAAP) earnings per share from continuing operations attributable to Diebold, net of tax, in the third quarter 2009 were 39 cents, down 67% from third quarter 2008. Nine-month year-to-date 2009 non-GAAP earnings per share accounted $1.36, a decrease of 40% from the same period in 2008.
All results from operations reported, including prior periods, reflect Premier Election Solutions as a discontinued operation.
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