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ICBA Supports Swift Action on Community Bank Proposals
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In a letter to congressional leaders, ICBA urged Congress
to promptly enact financial rescue legislation and expressed support
for language in draft legislation that addresses key community bank
priorities.
"Unless Congress acts quickly, our financial markets and economy
could be seriously harmed," the letter states. "Community
bankers believe this legislation is vitally needed and we urge rapid
action."
ICBA underscored its support for community bank inclusion in the
Troubled Assets Relief Program; an ICBA-crafted tax correction allowing
community banks to deduct GSE preferred share losses from ordinary
income; and strict limitations on the money market mutual fund
guarantee program.
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FDIC Challenges Faulty Deposit
Insurance Report
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In an open letter, the FDIC
challenged a Bloomberg report stating the agency
might need taxpayer funds to recapitalize its Deposit Insurance Fund if
more banks are taken into receivership. The FDIC letter reminds
consumers that the insurance fund is in a strong financial position and
ready to commit to insured depositors.
"The FDIC has all the tools and resources necessary to meet our
commitment to insured depositors, which we view as sacred," FDIC
Public Affairs Director Andrew Gray states. "I do not
foresee...that taxpayers may have to foot the bill for a 'bailout.'"
The letter reiterates that the DIF is continually raising income via
deposit insurance premiums and the agency has a line of credit with the
Treasury Department, which has been used just once. It also reminds
consumers that no depositor has ever lost a penny of insured deposits.
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ICBA Tax Proposal Receives Small Business Support
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The ICBA-led effort to provide fair tax treatment for
community banks with Fannie Mae and Freddie Mac preferred stock
received additional support from the nation's largest small business
organization. In a letter to congressional
leaders, the National Federation of Independent Businesses (NFIB)
called for the inclusion of ICBA's tax proposal to allow community
banks to account for GSE preferred stock as ordinary losses, not
capital losses.
"Our nation's small business owners continue to rely on community
banks to serve their business needs and provide capital for their
business," the letter states. "As Congress continues to work
on this important issue, we urge you to change to the tax treatment of
preferred stock for community banks and protect their ability to lend
to small businesses."
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ICBA Promotes Rescue Initiatives
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ICBA continued advocating on behalf of community banks on
broadcast media outlets. ICBA President and CEO Cam Fine appeared on
NBC affiliate NBC4 in Washington, D.C., to discuss community bank
soundness and ICBA's efforts to address community bank concerns in the
Treasury rescue package.
"Community banks are safe, sound, stable lenders," Fine said.
"Community banks are close to their customers and are conservative
lenders."
ICBA Senior Vice President and Director of Congressional Relations
Steve Verdier, appearing on C-SPAN's Washington Journal, said senior
members of the House Ways and Means and Financial Services committees
and the Senate Finance Committee are interested in ICBA's proposals for
the Treasury plan. He pointed out that the Treasury Department has
already changed its rescue plan to limit money market mutual fund
coverage to amounts held at close of business on Sept. 19.
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Treasury Opens Money Market Guarantee
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The Treasury Department opened its program guaranteeing
the share price of money market mutual funds that pay a fee to
participate. The voluntary program will exist for an initial
three-month term. Afterward the Treasury secretary will review the need
and terms for extending the program up to the close of business on
Sept. 18, 2009. The Treasury also released a "frequently asked
questions" document on the program.
The Temporary Guarantee Program for Money Market Funds provides
coverage for amounts held as of the close of business on Sept. 19,
2008. The Exchange Stabilization Fund, with approximately $50 billion
in assets, is available to guarantee payments.
To participate in the program, money market funds with a net asset
value per share greater than or equal to $0.9975 as of the close of
business on Sept. 19 will pay an up-front fee of 0.01 percent (1 basis
point) for three months of coverage. Funds with net asset values
between $0.995 and $0.9975 will pay a, up-front fee 0.015 percent (1.5
basis points). The guarantee will be triggered if a participating
fund's net asset value falls below $0.995, known as breaking the
buck.
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