DECEMBER 14, 2012
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Happy Holidays!

Creating Influence will resume publication
with the January 11, 2013 issue.

CU Oppose TAG Extension
Credit union advocates in Georgia and across the country urged the U.S. Senate to vote against a bill that would extend unlimited deposit insurance coverage, granted during the financial crisis, for noninterest-bearing transaction accounts.

  Relief in Sight!
The U.S. Senate passed a bill eliminating the requirement that ATMs carry physical notices of potential fees, as well as one protecting the privacy of groups or people giving information to the Consumer Financial Protection Bureau.

  Less Paper, Less Expense, More Sense!
The U.S. House passed legislation eliminating the requirement that credit unions send their members an annual privacy policy notice, instead requiring notification only when a privacy policy has changed.

  And They’re Off! Legislators Ready for the Session
Georgia lawmakers, both veterans and newcomers, attended the Biennial Institute for Georgia Legislators to get up to speed on issues facing the General Assembly when it convenes next year.

  (Foreclosure) Nightmare Before Christmas
The Atlanta Journal-Constitution published an article about a faulty foreclosure that later had to be rescinded by the lenders, insinuating that Georgia's nonjudicial foreclosure process offered inadequate protection to homeowners.

  Where You Made an Impact!
A variety of grassroots activities by credit unions was responsible for influencing a range of legislation in 2012, in addition to helping secure the election or re-election of 14 legislators at the state and federal levels.

  Fed Reserve Actions and CU Net Interest Margins
The Federal Reserve announced that it would keep interest rates low to bolster the economy, an action that is expected to lower net interest margins for credit unions in the coming year.

  Navigating the FHFA Fee Changes
The Credit Union National Association said in a comment letter that the Federal Housing Finance Agency's plan to increase guarantee fees for single-family home mortgages will have a discriminatory effect on credit unions and small lenders.

  Fed Reserve on Too Big to Fail
The Washington Post reported that a Federal Reserve official's public debate on options for ending bailouts to "too big to fail" banks may signal that the issue may be headed back to the forefront in the coming year.

  'Tis the Season to Join a CU!
Well-known consumer advocate Clark Howard encouraged Americans to join credit unions, noting that CU membership is nearing 100 million members and citing the likelihood of higher fees charged by larger banks.

  Round and Round in D.C. – Bankers Tout New Report
A report by the Tax Foundation mentioned revocation of credit unions' tax exemption as one way to raise revenue to help solve the budget crisis, and bankers quickly used the report as part of their message to legislators.

  $1.9 Billion for Money-Laundering
British bank HBSC said it would pay a record $1.9 billion to settle allegations of money-laundering and other charges resulting from investigations by U.S. federal and state authorities into activities by the bank's U.S. arm.

Capitol Christmas treeCU Oppose TAG Extension

Credit union advocates here in Georgia and across the country urged the U.S. Senate to vote “no” on S. 3637. This bill would have extended the Transaction Account Guarantee (TAG) program, and unless it could be married with provisions to increase the credit union member business lending (MBL) cap, it was opposed by credit unions.

The TAG bill would have extended the unlimited deposit insurance coverage granted during the financial crisis for noninterest-bearing transaction accounts. If no action is taken, coverage is set to revert back to $250,000 at the end of this year and the bill was strongly favored by major bank trade associations. On December 11th, by a 76-20 vote, the Senate approved a motion to proceed to consider this TAG legislation. The tally was not considered a strong indicator of the final vote, but in Georgia, U.S. Senator Johnny Isakson voted yes to proceed (Senator Saxby Chambliss was absent from the vote). On December 12th, the bill was defeated in a procedural motion with a vote of 50-42, with both Georgia Senators voting against it. This bill will no longer be considered by the U.S. Senate.

Credit unions have been very actively opposing this legislation, sending letters and placing calls to the U.S. Senate. Its defeat represents a significant setback for the community banking lobby, which has been advocating for the TAG extension.  Monitoring continues to see if there will be any efforts by the banking industry to get TAG bill inserted into legislation before the end of the year (and if it does, credit unions will work to ensure that the MBL legislation is provided the same opportunity). We thank all the credit unions in Georgia who quickly engaged their staff and board this week in defeating this bill. This outcome would not have been possible without the collective credit union efforts!

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Stock marketRelief in Sight!

On the evening of December 11th, the U.S. Senate passed the ATM Fee Disclosure bill H.R. 4367 by unanimous consent. This bill will remove the current duplicative requirement under the Electronic Funds Transfer Act that requires ATMs carry a physical disclosure of potential fees on the outside of the machine (in addition to the on-screen fee notice). This removal of the dual requirement is not only regulatory relief, but relief from potential new lawsuits similar to those that have sprung up against credit unions and other financial institutions across the country. This bill has a positive impact on every credit union that owns an ATM! It had become an unfortunate trend that the outside notices on ATMs have been intentionally removed or destroyed, with perpetrators – for personal financial gain – alleging the financial institution was not in compliance with disclosure rules.

The sponsors of the bill, Sen. Mike Johanns (R-NE), Rep. Blaine Luetkemeyer (R-MO) and from Georgia Rep. David Scott (D-13) were instrumental in this significant victory for credit unions. This bill came as a direct result of credit unions seeking regulatory relief, and we thank Rep. Scott for taking the lead.

Another piece of regulatory legislation passed by the Senate on December 11th, H.R. 4014, will ensure groups or individuals that supply information to the Consumer Financial Protection Bureau will not waive their right to privacy protections. The types of privacy improvements contained in the CFPB-addressing portion of the bill have been endorsed by CFPB Director Richard Cordray. The ATM and CFPB bills now await President Barack Obama's signature to become law.

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PaperLess Paper, Less Expense, More Sense!

On December 12th, legislation favored by credit unions to provide an exception for costly annual privacy policy notification requirements (if the policy has not changed since it was last disseminated) passed the House. H.R. 5817, the Eliminate Privacy Notice Confusion Act, would eliminate the requirement under the Gramm-Leach-Bliley Act that credit unions send out annual privacy notices. The bill does away with repetitive notices that are often ignored by consumers, and enhances consumer protection by ensuring that when a consumer receives a privacy notification, it has significance and is not redundant. If the bill becomes law, credit unions would only be required to send out these notices if their privacy policy has changed. The legislation now moves to the Senate where, it is hoped, it will be considered before the end of the year.

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RaceAnd They’re Off! Legislators Ready
for the Session

The Biennial Institute for Georgia Legislators held December 9-11 in Athens was an opportunity to gain insight on what issues of industry interest may arise in 2013. New legislators are quickly educated and assimilated prior to the session, and veteran legislators position themselves for new chairmanship posts at the event. Government Influence Team members utilized this time to meet with freshman and veteran legislators alike to build new relationships, strengthen current relationships, and learn what issues could arise in 2013. From the legislators’ perspective, many utilize this opportunity to learn what is sought legislatively from specific industries, including credit unions.

Looking ahead, the budget will be the dominant focus in the coming year as the state works through additional budget cuts. There was no mention of industry-related bills; however, attempts to move the foreclosure process in Georgia to a judicial system are anticipated. The article below is a perfect example of how legislative issues are “teed up” in the media in the month prior the session.

The Government Influence Team has also recently become aware that there are several other issues of industry interest that will likely arise at the start of the session, ranging from the definition of a secured creditor to notification of lenders in bankruptcy. In addition, discussions are now swirling that depending upon the “Fiscal Cliff” discussions in Washington, D.C., it may dramatically impact the first few weeks of the state session, forcing longer than normal budget meetings. Stay tuned, and Grassroots Liaisons, be sure to watch for next week’s Grassroots Liaisons newsletter for details on what to anticipate in 2013 on the state and federal level!

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Nightmare(Foreclosure) Nightmare Before Christmas

The Atlanta Journal-Constitution published a story on December 2nd of a faulty home foreclosure that Citi Bank and Freddie Mac were later forced to rescind, insinuating this would not have happened if Georgia was a judicial foreclosure state. A judicial foreclosure process would require a judge to review the foreclosure before the bank can take possession of the house. The article quotes consumer watchdog agencies as stating, “there is not adequate oversight to protect homeowners in Georgia.”

There have been consistent attempts in the state Legislature over the past several years to change Georgia’s foreclosure processes to that of a judicial system. Follow the upcoming 2013 state session for more details, and don’t forget all the bills monitored on behalf of credit unions can be accessed at the Georgia credit union legislative tracking site during the state legislative session.

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ImpactWhere You Made an Impact!

This year, credit union advocates made a positive impact on widening the scope of legislative influence for the industry. Looking back on 2012, credit unions engaged in a variety of grassroots activities, all of which fit together to grow political power and help protect the financial services 1.9 members rely on in Georgia. It takes all of us working together to make a difference, and credit unions across the state made a big impact with the following during 2012:

  • Over 2,200 call-to-action messages were sent to Congress to urge passage of MBL legislation from 50 credit unions and support organizations (which does not include the current TAG opposition activity).
  • There were 255 people from 27 separate credit unions engaged in the campaigns of 14 different legislators (seven federal level, seven state level) with a 100 percent success record, and a few of these races were decided by the smallest margin of votes. The level of involvement shown by the credit union industry in 2012 is almost triple that of the previous high mark!
  • Hike at Home: 323 individuals from 42 credit unions participated in local in-district Hike at Home meetings, building relationships with 16 different state and federal legislators.
  • Hike the Hill: 32 separate credit unions sent more than 150 advocates to Washington, D.C. to lobby legislators on issues of industry importance (several credit unions sent representatives to all three Hike the Hill events in 2012).
  • Almost 300 credit union executives, board members, and staff received Advocacy Training from the Government Influence Team at various venues throughout the year. A special thank you to both the Greater Atlanta Chapter and the South Georgia Chapter for having Advocacy Training as a meeting topic during 2012.
  • PAC Fundraising: As of the end of November, more than $210,000 had been raised for the PACs from more than 90 credit unions and support organizations. Due to the efforts of these credit unions, so far there are more than 7,500 individuals who contributed to the PACs during the year!

Thank youEach of these individuals shared their time, their energy, and in some cases their money to make the environment in which credit unions operate more secure and successful. Your GCUA Governmental Affairs Team thank you for your grassroots efforts in 2012 and we look forward to working with you in 2013. You are making a positive difference for all credit unions!

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Federal Reserve Chairman Ben Bernanke
Fed Reserve Actions and CU Net Interest Margins

On December 12th The Washington Post reported that the Federal Reserve will take steps to bolster the economy, buying $45 billion in Treasury bonds a month on top of the $40 billion a month in mortgage bonds it is already buying. These steps are an effort to flood markets with money, and reduce interest rates on a wide range of loans intended to stimulate borrowing and economic activity. From a credit union perspective, this means lower net interest margins are anticipated in 2013. And, CUNA economists predict that this could further flatten the treasury yield curve, and credit unions may want to lower their 2013 forecasts for the 10-year treasury interest as the Fed may keep it below 2% for the entire year.

The Fed's monetary policymaking body, the Federal Open Market Committee (FOMC), said that it would keep the federal funds rate at 0% to 0.25% and anticipates that "this exceptionally low range... will be appropriate at least as long as the unemployment rate remains above 6.5%, inflation between one and two years ahead is projected to be no more than a half percentage point above the committee's 2% longer-run goal, and longer-term inflation expectations continue to be well-anchored." That is a departure from its earlier date-based guidance. For instance, in its last meeting, the FOMC said its rates would likely be maintained "through mid-2015." In announcing the change in guidance for the rates, the FOMC said it "views these thresholds as consistent with its earlier date-based guidance."

In determining how long it will maintain a highly accommodative stance of monetary policy, the committee will also consider other information, including additional measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments, the FOMC said in a statement after the meeting. When it decides to begin to remove policy accommodation, "it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2%."

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MazeNavigating the FHFA Fee Changes

The Federal Housing Finance Agency's (FHFA) plan to adjust the guarantee fees that government-sponsored enterprises (GSE) Fannie Mae and Freddie Mac charge for single-family mortgages will have a discriminatory effect on credit unions and other smaller financial institutions, CUNA said in a comment letter. The planned FHFA adjustments would increase the guarantee fees for single-family mortgages in states where GSE costs related to state foreclosure practices are higher than the national average; these states are Connecticut, Florida, Illinois, New Jersey and New York.

The FHFA considered three factors as it developed the guarantee fee methodology. Those factors are:

  • The expected number of days it takes a GSE to foreclose on a home in a particular state;
  • The average per-day carrying cost the GSEs incur in that state; and
  • The expected national average default rate on single-family mortgages acquired by the GSEs.

Other factors should be considered, such as the number of foreclosures over a set period of time, and how factors beyond the control of lenders or consumers (such as state law provisions on foreclosures or judicial review of foreclosure proceedings) affect the processing of foreclosures. The FHFA was encouraged to work with lenders of all types and sizes, including credit unions, to reform the secondary market and to promote the housing market recovery.

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Fed Reserve on Too Big to Fail

On December 4th The Washington Post reported one of the most influential policymakers at the Federal Reserve, Daniel Tarullo, publicly debated options for ending bailouts of big banks considered too big to fail, signaling the contentious issue may move to the forefront in the coming year. The proposals attempt to limit the risks the nation’s largest banks can pose to the financial system – and ultimately taxpayers – if the banks collapse. Policymakers have been emboldened by public outrage over the continued growth of megabanks. Critics also note that although the program that bailed out the nation’s banks during the 2008 financial crisis has all but ended, the ensuing Dodd-Frank financial reform law did not definitively ban the government from future bailouts.

Too big to failThe strategies for mitigating the risk these massive firms pose to the financial system span the ideological spectrum, from regulators who want to break up large banks outright to lawmakers pressing for caps on the banks’ activities. In his December 4th speech at the Brookings Institution, Tarullo, head of bank supervision at the Fed, stopped short of calling for permanently abolishing government backstops for banks. But he laid out policies to contain the problem, some of which would require fresh legislation. “The policy aim has got to be to confine the problem substantially more than it was in the years running up to the crisis,” he said. “That seems to inexorably call for a set of complementary policy measures” to Dodd-Frank.

Provisions in Dodd-Frank — including orderly liquidation and requirements to keep more money in reserves — limit safety nets or place restrictions on large bank activity. Implementation of these statutes has been slow going as regulators and bankers battle over the fine points. Tarullo said strides have been made toward enacting many provisions, but he encouraged additional steps to address the complexities of reform. One such step would be requiring large financial firms to set aside more money that could be tapped in the event of its failure. The FDIC and the Fed are in discussions to flesh out this proposal, according to people close to the matter who were not authorized to speak publicly. Regulators can do this without additional legislation because of new powers granted through Dodd-Frank.

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Snowman'Tis the Season to Join a CU!

In a recent announcement, consumer advocate giant Clark Howard encouraged Americans to join credit unions. He cites data from a recent survey that reports soon, credit union membership will reach 100 million Americans. “If you have never thought about joining a credit union... get to it,” Howard says. “The larger a bank you’re with, the more likely they are to steadily boost the fees that you have to pay to be their customer.”

Click here to hear Howard’s entire message.

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Capitol domeRound and Round in D.C. – Bankers Tout
New Report

With the ever-troubling budget discussions happening in Washington, D.C., we must always be aware of possible threats to the credit union tax exemption. A report released on December 5th from the Washington, D.C.-based Tax Foundation mentioned eliminating credit unions’ tax-exempt status (as well as the tax-exempt option for rural electric co-ops, nonprofit hospitals and some insurance companies) as one of the options lawmakers should consider if they decide to make new revenues part of the effort to solve the current budget crisis. The report ranked the 15 options on a scale of least harmful to most harmful, with the elimination of the credit union tax exemption option listed in the middle of the pack.

Not surprisingly, the banking industry quickly jumped on that report to use it as ammunition with the usual “they don’t pay taxes” comments to legislators. This issue drives home an important point for all credit unions: Credit union advocates must be persistent in their communication and relationship building with legislators to educate them on the credit union difference!

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Money-laundering$1.9 Billion for Money-Laundering

On December 10th British banking giant HSBC announced it will pay a record $1.9 billion to settle allegations resulting from a broad international money-laundering investigation by U.S. federal and state authorities. The settlement would end probes focused on accusations that HSBC's U.S. arm transferred billions of dollars through its U.S. arm for Mexican drug cartels and Iran, which is under international financial sanctions. The settlement, formally known as a deferred prosecution agreement, means HSBC can avoid criminal money-laundering and other charges – which could have been a financial death sentence for the bank.

A U.S. law enforcement official said HSBC will forfeit $1.25 billion and pay $655 million in civil penalties. The forfeiture of $1.3 billion is a record amount involving a bank. Under the deferred prosecution agreement, HSBC will be accused of violating the Bank Secrecy Act and the Trading with the Enemy Act. Read the Treasury press release.  Read HSBC’s press release.

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