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House Financial Services Committee considers bill to create CFPA

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                       Your Future. Our Focus. Iowa Banks.




           Iowa Bankers Association                      Volume 28, Issue 21                         October 23, 2009


House Financial Services Committee considers bill to create CFPA
T    he Obama Administration’s proposed
     Consumer Financial Protection
Agency is again the focus of debate in
                                                                                               placed on traditional banks that never
                                                                                               made a subprime loan.

Washington as the House Financial                                                               “Thanks to months of contacts by Iowa
Services Committee began considering the                                                        bankers and others, Financial Services
CFPA bill (H.R. 3126) last week.                                                                Committee leaders have improved
                                                                                                H.R. 3126. Yet, the bill remains
Thanks to the efforts of Iowa banks and                                                         severely flawed,” said Iowa Bankers
bankers across the country, several changes                                                     Association (IBA) President and CEO
have been made to the original proposal                                                         John Sorensen. “This all-powerful new
since it was released in June. Committee                                                        agency would disperse rules with little
Chairman Barney Frank (D-Mass.)                                                                 to no regard for the financial viability
heeded industry concerns by eliminating                               of the institutions they oversee. Once the bill is reported out of
troublesome provisions requiring that banks offer government-         committee, it will be important for Iowa bankers to communicate
designed “plain vanilla” products and that communications with        their concerns to our Congressional delegation.”
consumers be “reasonable.” Other industry concerns that Frank
addressed included:                                                   Chairman Frank has indicated the CFPA legislation will be
ƒ requiring that the CFPA and safety and soundness regulators         folded into the larger regulatory reform bill, which the committee
     coordinate bank exams;                                           is taking up over the next few weeks, before going to the House
ƒ providing a more explicit mandate to focus on the nonbanks          floor. In the Senate, Banking Committee Chairman Christopher
     that were the primary cause of the financial crisis;             Dodd (D-Conn.) is supporting the full CFPA proposal from the
ƒ and providing a less burdensome CFPA funding structure.             Administration, and no committee action is yet scheduled.

Examination Authority                                                 Preemption Debate Continues
Last week, the committee approved an amendment that would             As of Wednesday, Oct. 21, dozens of amendments to the bill were
allow banks with $10 billion or less in assets to be examined by      pending, including one by Reps. Mel Watt (D-N.C.) and Dennis
their primary regulator for compliance with CFPA rules, rather        Moore (D-Kan.) that would address the preemption issue. The
than by CFPA examiners. The bank regulators also would have           Watt-Moore amendment appears to be an improvement over
primary enforcement authority. However, all banks would still be      the language in the original bill that would eliminate all federal
subject to rules issued by the CFPA, and the new agency would         preemption in the consumer area for national banks and savings
have back-up exam authority. The banking industry has advocated       associations.
that all banks’ prudential regulators should have examination
and supervision authority for both safety and soundness and           The preemption issue was also the focus of a news briefing in
consumer protection.                                                  Des Moines last week featuring U.S. Secretary of Agriculture
                                                                      Tom Vilsack, Iowa Attorney General Tom Miller and leaders of
The banking industry believes Chairman Frank’s draft addresses        AARP who urged Congress not to strip state enforcement from
many issues, but there are serious concerns about the bill’s impact   the proposed CFPA.
on preemption of state and local laws; the vast, unchecked power
of the new agency; and the regulatory burden that would be                   continued on page 4 — see “Regulatory Reform”

                             Page 3                                      Page 3                                      Page 8
                             Register for IBA’s                          Don’t miss the                              Employers see
                             2010 Mid-Winter                             IBA’s Legislative                           results using
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                             Conference                                  in your area                                Career Center




                                                                                                                            ASSOCIATION
    Guest Column


A unique perspective on health-care reform
By Clifford d. Gold                                                      include medical underwriting to sift out people with previous or
                                                                         current medical problems, so-called “pre-existing conditions,” or
President, Cliff’s Edge Strategies LLC                                   those who have a history of incurring large medical expenses. As
                                                                         long as all insurers must accept these individuals, thus leveling the

S   o much misinformation is being bandied about in the health
    care and health insurance reform discussion that the public
cannot possibly sift through the rhetoric to ascertain the truth.
                                                                         playing field, the insurance industry should herald and embrace
                                                                         this reform. But the rest of us have to understand that bringing
                                                                         these individuals into the insurance system will raise the premium
Reform is needed badly in both systems. But the issue is so critical     rates for everyone else, however marginally. And to keep rates
that the public deserves the truth.                                      from being affected to a great extent, a broad coverage mandate
                                                                         is critical to ensure that the young, healthy people who opt not to
After spending 30 years in the health-insurance business and the         buy insurance today are integrated into the overall system. This is
past a year-and-a-half as a management consultant, I believe I have      a far preferable way for paying for the new people in the insurance
a unique perspective on the debate over reforming the health-care        system than raising taxes on everyone.
system.
                                                                         This brings us to the main point of contention about health-care
So let’s look at some facts, starting with the uninsured. While the      reform: the so-called “public option.” Assuming everyone who can
U.S. Census reports 45–47 million uninsured Americans, the               afford coverage is required to buy it; that everyone who can’t is
facts tell an interesting story. The Census Department admits its        covered by the government; and that the private sector is required
number is likely overstated because it includes about 9 million          to take all eligible applicants, there is no logical reason to inject a
people —about 20 percent—who are not U.S. citizens. None of the          government option into the health-insurance market. Here’s why:
reform proposals purports to cover them, which means the number          First, it would make the government both regulator and competitor,
of Americans who are uninsured is no more than 38 million.               an inherently unfair infiltration into a capitalistic system. The
Of these, more than one-third, about 12–16 million people, are           government program would have too many built-in advantages
currently eligible for Medicaid, the State Child Health Insurance        to foster fair and effective competition. The government programs
Program (S-CHIP) or other government programs, but are not               wouldn’t need to build profit margins into rates and would probably
enrolled. It is a great irony that the same government many people       have lower marketing expenses, such as broker commissions and
want to entrust with a greater role in health care can’t find or sign    promotion costs.
up the people who already qualify for existing comprehensive, low-       It would, however, have to build financial reserves for claims, or
cost, taxpayer-supported coverage. Thus, the true number of citizens     else it would run into the same enormous problem it has today
who are either uninsured or aren’t eligible for existing government      with Medicare, which has billions of dollars in unfunded liabilities.
programs is far smaller than we have been led to believe. And of         Medicare may appear to be a well-run, low-cost system but, when
those who remain, close to 40 percent reside in households making        the unfunded liabilities are taken into consideration, it is financially
more than $75,000 a year and, at least theoretically, have some          insolvent by any regulatory standards. Plus, its rate of cost inflation
financial means to pay for at least high-deductible, catastrophic        mirrors the private sector.
health insurance to protect them from debilitating health-care costs.
These are people who might be termed “uninsured by choice.”              But the main reason the government-sponsored option would have
                                                                         a price advantage over the private sector is because it would pay
This latter group, which also includes many young people who             hospitals, physicians and other health professionals at levels at or
think themselves invulnerable from catastrophic illness, is among        close to Medicare, which pays far less than it costs providers to
the targets of those who want to mandate individual coverage.            provide care. And this problem is worse in Iowa than in almost any
And it makes sense. Like automobile insurance, which is required         state in country.
in most states, every individual who can afford coverage could or
should have the responsibility to buy at least a basic level of health   Today, that under-funding from government is shifted to the private
insurance so the rest of our citizens don’t bear an unfair burden.       sector, accounting for 10 to 15 percent of all private insurance
For the 8–14 million Americans who truly can’t afford even a basic       costs. The major commercial insurance companies in the state pay
level of insurance, our society may indeed be a moral obligation         140 percent or more on average than Medicare to compensate for
to provide it. These people are disenfranchised just as the elderly      government under-funding. The more people who sign up for a
and poor were in the 1960s when the architects of Medicare and           government “public option,” the worse the under-funding problem
Medicaid created these “social” programs as part of President            becomes. And with uncompetitive premium rates, there will be a
Lyndon Johnson’s Great Society.                                          smaller private insurance sector, thus intensifying the cost shift or
                                                                         making the plight of providers even worse.
Indeed, barriers need to be knocked down that preclude those who
can afford private health insurance from getting it. Those barriers              continued on page 5—see “Health-care Reform”
2                                                                                                                                  EXCHANGE
                                                                                                           industry news

Register for IBA’s 2010 Mid-Winter Management Conference
R    egister now for the Iowa Bankers Association’s 27th annual
     Mid-Winter Management Conference. The conference will
take place Jan. 17–19, 2010, at the Sheraton Steamboat Resort            2010 Mid-Winter
in Steamboat Springs, Colo. The conference will feature industry         ManageMent ConferenCe
experts, timely seminar topics and a chance to hit the slopes. With
educational sessions, meetings with your peers and the beauty of
a Colorado winter, what better way to begin a new year?

Speakers include Beau Gamble, senior shareholder of the Davis
Brown Law Firm in Des Moines, whose presentation will
focus on “Mergers & Acquisitions in a Challenging Regulatory
Environment.”

Hal Oswalt, president & CEO of Brintech, will present
“Expanding Opportunities in Non-Interest Income.” As 2010
begins, the banking industry continues to navigate both a             class Steamboat Ski Resort as its backyard, just steps away from
challenging economy and dynamic regulatory environment. This          the chairlift and the Silver Bullet Gondola. Enjoy alpine skiing,
session will focus on overcoming obstacles, maintaining current       snowboarding and telemark skiing in the area’s famous champagne
levels and generating new sources of non-interest income.             powder. Then enjoy a workout in the resort’s fitness center and
                                                                      steam room or relax in the outdoor heated pool or one of seven
Attendees will also have the chance to meet Billy Kidd, a legend of   rooftop hot tubs.
American skiing who earned a silver medal in the 1964 Olympics.
He now spends the winter as Steamboat’s Director of Skiing.           More information and registration materials are included in
                                                                      this week’s Exchange mailing. The registration materials are also
Guests and families are welcome to attend the conference and          available on the IBA Event Calendar at www.iowabankers.com.
enjoy all that Steamboat has to offer. Nestled in the Rocky           For more details, contact the IBA’s Molly Lydon at (800) 532-
Mountains, the Sheraton Steamboat Resort claims the world-            1423 or e-mail mlydon@iowabankers.com.


Don’t miss the IBA Legislative Issues Preview Meeting in your area
P   lan to attend your IBA Group’s annual Legislative Issues
    Preview Meeting hosted by the Iowa Bankers Association in
November. The meetings will take place across the state in each
IBA Group from Nov. 9 through Nov. 23. The meetings provide
an opportunity for IBA members and their state legislators to
learn more about the Association’s legislative agenda prior to the
beginning of the legislative session.

The meetings will take place:
ƒ Monday, Nov. 9 ............. Burlington (Group 11)
ƒ Tuesday, Nov. 10 ......... Council Bluffs (Group 5)
ƒ Thursday, Nov. 12 ........ Marshalltown (Group 7)
ƒ Monday, Nov. 16 ......... Johnston (Group 6)                        For a detailed agenda with meeting times and locations, refer to
ƒ Tuesday, Nov. 17 ......... Cherokee (Groups 1 & 12)                 this week’s Extras supplement or visit the IBA website at www.
ƒ Wednesday, Nov. 18 ...... Fort Dodge (Group 2)                      iowabankers.com.
                               Mason City (Group 3)
ƒ Thursday, Nov. 19 ......... Coralville (Group 8)                    For more information on the upcoming Legislative Issues Preview
ƒ Monday, Nov. 23 ........... Manchester (Group 4)                    Meetings, contact the IBA’s Senior Vice President of Government
                                                                      Relations Sharon Presnall or IBA Legal Counsel Bob Hartwig at
Topics of discussion will include federal deductibility, state        (800) 532-1423.
budgeting practices, property tax reform, the expansion of credit
union powers, right to work and prevailing wage, among others.
October 23, 2009                                                                                                                     3
     industry news


    iBmC hosts foCus GrouP meetinG

    Members of the Iowa Bankers Mortgage Corporation
    (IBMC) Board of Directors met on Tuesday, Oct. 20 and
    then joined mortgage officers from their institutions for a
    focus group meeting to discuss the significant changes
    challenging the mortgage industry. IBMC President Dan
    Vessely welcomed the group and provided an industry
    update. Other presentations focused on technology,
    regulatory changes, compliance issues and loan servicing/
    modifications. An open forum also provided a chance for
    bankers to share concerns and questions with IBMC staff.




“Regulatory Reform”— continued from page 1                              Sen. Dodd, prompted the ABA and Independent Community
                                                                        Bankers of America (ICBA) to send a letter to the leaders of
“This is the most important consumer protection legislative issue       the Senate and House banking committees expressing strong
of our day,” Attorney General Miller said. “Preserving a proper         opposition to proposals to consolidate the regulatory functions
role for the states is crucial if consumers are going to be protected   of the federal banking agencies into a single entity. While changes
from a repeat of the banking and mortgage abuses we’ve seen in          in the regulatory system are needed, they said, a single federal
recent years.”                                                          banking regulator is not the answer.

Miller argued that states are often in a better position than           “A single regulator is only good when it is right. When wrong,
the federal government to see consumer protection needs and             the outcome could be catastrophic,” ABA and the ICBA said.
regulatory gaps.                                                        They emphasized that the current system of bank supervision,
                                                                        while complex, provides a healthy check against any one regulator
“When we are excluded from enforcement against national                 neglecting its duties.
banks, we can help only citizens who happen to do business with
a state-chartered lender—even if national banks are engaging in         Regulatory consolidation, on the other hand, would undermine
the exact same practice. All consumers should be treated the same       the dual banking system, which has served the nation well.
regardless of how their bank is chartered,” he said.                    Experiences in nations such as Great Britain show that
                                                                        consolidation would put state banks at a disadvantage, leading
Iowa’s banking industry sees the issue differently. In a message        them to shift to a federal charter or leave the market entirely, the
to members of Iowa’s Congressional delegation last week, IBA            trade groups said.
President and CEO John Sorensen reenforced the concerns of
Iowa banks with regard to the impact the CFPA could have on             “Unlike any other country, we have a broad range of small, mid-
the ability of banks to continue to effectively serve Iowans.           size and large banks that meet different market needs,” ABA and
                                                                        the ICBA said. “We believe strongly that this diverse system would
“Almost every policymaker I talk to agrees with the premise             be greatly undermined by the creation of one, large regulatory
that community financial institutions did not contribute to the         agency.”
financial crisis. Yet, the move to add another layer of regulatory
burden to their already significant oversight continues. These          ABA proposal would end “too big to fail”
institutions are already dealing with the double whammy of              On Oct. 29, a House Financial Services Committee hearing will
economic challenges facing their loan customers and the cost to         discuss proposals to resolve institutions that pose a systemic risk.
recapitalize the Deposit Insurance Fund,” Sorensen said.                The Obama administration is expected to release a revised plan
                                                                        on systemic risk and resolution authority that will be discussed
Sorensen added that he has recently received positive feedback          at the hearing. Earlier this month, ABA submitted a systemic
from groups representing Iowa agriculture and commercial real           risk proposal to policymakers that would result in a “controlled”
estate in Iowa. “In both cases, they commended Iowa banks for           bankruptcy of systemically important institutions and an end
their understanding and willingness to help them through the            to “too big to fail.” ABA’s plan meets five important criteria: It
economic downturn. Their only fear was that federal regulators          creates a resolution regime that works in a full-scale financial
may force these banks to act differently.”                              crisis; protects the taxpayer; ends too big to fail; is fair to smaller
                                                                        financial firms in terms of competitiveness and costs; and does
Trade groups oppose creation of a single regulator
                                                                        not impede financial markets.
Meanwhile, proponents to create a single bank regulator, including

4                                                                                                                                 EXCHANGE
                                                                                                                      industry news


IBA leaders support steps to improve Iowa’s budgeting practices
T    he same day Iowa Bankers Association’s Legislative Committee
     and Board were meeting to recommend changes to Iowa’s
budgeting process, the state Revenue Estimating Conference
                                                                               to a seven year moving average that includes a five year look
                                                                               back of actual revenue plus the REC’s December estimate for
                                                                               the current and upcoming fiscal year, and
(REC) was meeting to downgrade Iowa’s available revenue for the             2. Statutory requirement that the use of one-time revenue
current fiscal year by $415 million dollars.                                   cannot be used for ongoing expenses. State Auditor Vaudt
                                                                               has been very critical of this practice by the Legislature and
As a result of the new revenue estimate by the REC, Iowa Gov.                  Governor over the past several years.
Chet Culver announced a 10 percent across-the-board budget
cut. The bulk of the state’s budget goes to fund the school aid             The IBA Legislative Committee and Board took positions on a
formula, so roughly $280 million of the cut will get shifted back           number of other issues which will be discussed at the IBA Fall
to local school districts and or property tax payers.                       Legislative Issues Preview Meetings taking place across the state
                                                                            in November:
Culver indicated he would not raise taxes on Iowans, but because            ƒ Monday, Nov. 9 ............. Burlington (Group 11)
schools districts have property tax levy authority he also called on        ƒ Tuesday, Nov. 10 ......... Council Bluffs (Group 5)
Iowa’s 360 school districts to make budget cuts and use existing            ƒ Thursday, Nov. 12 ........ Marshalltown (Group 7)
cash reserves rather than raise property taxes. According to Culver,        ƒ Monday, Nov. 16 ......... Johnston (Group 6)
local school districts have close to $400 million in cash reserves in       ƒ Tuesday, Nov. 17 ......... Cherokee (Groups 1 & 12)
aggregate although the amount varies significantly from district            ƒ Wednesday, Nov. 18 ...... Fort Dodge (Group 2)
to district.                                                                                               Mason City (Group 3)
                                                                            ƒ Thursday, Nov. 19 ......... Coralville (Group 8)
At its meeting on Oct. 7, the IBA Board and Legislative                     ƒ Monday, Nov. 23 ........... Manchester (Group 4)
Committee voted to support legislation that would help create
incremental solutions to improve Iowa’s budgeting practices. The            A complete schedule is also available in this week’s edition of
recommendations include:                                                    Extras and on the IBA website at www.iowabankers.com.
1. Change how the REC number is set from a future guesstimate


 “Health-care Reform”—continued from page 2                                 proposed legislation. Medicare benefits will not be reduced under
The financial viability of hospitals, clinics and the rest of the health-   any proposals. And no one can guarantee that people will be able to
care system would become tenuous at best.                                   keep their current insurance if there is a government option because
                                                                            employers, the main source of health care to workers, always have
The fear that a government option will ultimately lead to a system          the right to opt out of providing insurance, changing carriers or
where virtually everyone will be covered by the government is real;         (potentially) to convert to the public option.
it may be inevitable. The private insurance sector that does remain
will likely only sell supplemental insurance policies similar to those      It may indeed be time to reform health care, but it must be done
under Medicare. Under the new public health insurance system,               responsibly. Everyone should have a basic level of coverage and
supplements would most likely be developed to cover deductibles,            protection from the potentially catastrophic costs of care. We
co-insurance and/or additional benefits not covered under the               need reform that maintains the balance between government and
“public option.”                                                            privately-funded health care that has delivered a highly-accessible,
                                                                            technologically-advanced system to almost all Americans. Everyone
The “new health care” will most likely be comprised almost                  agrees that care needs to be less variable. It surely has to be of higher
exclusively of government-defined programs: Medicare for the                quality. And it must be far more cost-effective and efficient than it
elderly; Medicaid for the poor; S-CHIP for uninsured children;              is now. But it also must maintain an appropriate balance of public
and the public option for almost everyone else. Medicare, Medicaid          and private health insurance.
and S-CHIP will continue to be funded almost exclusively through
taxes on all of us, while private premiums and new taxes will fund
                                                                            About the author
the public option at a cost of $1 trillion or, almost certainly, more.
                                                                            Cliff Gold spent 30 years as a senior executive at Wellmark, having
Employers will either opt out of the system or, in order to attract
                                                                            served before his retirement in May 2008 as Group Vice President
and keep employees, subsidize some of their employees’ premium
                                                                            of Marketing and Business Strategy, CEO of the Wellmark Health
cost and/ or offer to contribute toward supplemental insurance in
                                                                            Plan of Iowa, Chairman and CEO of First Administrators, Inc.,
order to remain attractive to workers.
                                                                            and Executive Director of The Wellmark Foundation. He is now
The intense rhetoric of the current health-care debate has led to           President and CEO of Cliff’s Edge Strategies, Inc., a management
misinformation on both sides. There are no “death panels” in the            consulting firm.
October 23, 2009                                                                                                                                   5
     industry news


    iBis hosts meetinG with university
    of iowa risk manaGement students

    On Friday, Oct. 2nd, Iowa Bankers Insurance & Services,
    Inc. (IBIS) hosted a group of students from the University
    of Iowa’s Vaughan Institute of Risk Management and
    Insurance. The students participated in a meeting with IBIS
    staff members to learn more about the relationship between
    banking, risk management and insurance and about the
    services of the Iowa Bankers Association and its insurance
    operations. IBIS President Merritt Krause said IBIS was
    pleased to partner with the University of Iowa to provide
    the opportunity to future business leaders.




FDIC hosts first meeting of Community Banking Advisory Committee
A    t the first meeting of the FDIC’s new Advisory Committee
     on Community Banking, discussion focused on the impact
of the financial crisis on community banks. The first meeting of
                                                                      The Advisory Committee was formed to provide the FDIC with
                                                                      advice and recommendations on a broad range of policy issues
                                                                      with particular impact on small community banks throughout
the new committee—which was established by the FDIC Board             the nation, and the local communities they serve.
in May—took place on Oct. 15.
                                                                      The committee is comprised of 14 community bankers from
Other issues addressed included regulatory reform proposals           across the country along with Dr. Timothy Koch, president of the
under consideration by Congress and their effect on community         Graduate School of Banking at Colorado, who is the committee’s
banks, the impact of FDIC supervisory proposals on these banks,       only member from academia. Dr. Koch is professor of finance at
and community banks’ perspectives on funding the FDIC’s               the University of South Carolina’s Moore School of Business and
Deposit Insurance Fund.                                               has served as President of GSBC since 2001 where he also teaches
                                                                      the advanced-level Asset-Liability Management class.
“I was extremely pleased with the robust discussion among our
committee members on issues that are so critical to both the          The committee will meet at least two times a year with Members
FDIC and our nation’s community banks,” said FDIC Chairman            serving a two-year term. More information on the Advisory
Sheila C. Bair. “The committee members voiced a number of             Committee on Community Banking is available online at http://
interesting ideas that they will pursue.”                             www.fdic.gov/communitybanking/index.html.


FDIC offers deposit insurance coverage seminars via teleconference
T    he Federal Deposit Insurance Corp. (FDIC)
     is offering free seminars on deposit insurance
coverage. The seminar provides a comprehensive
                                                      Each seminar will begin with a 100-minute audio
                                                      presentation linked to a PowerPoint presentation
                                                      that can be downloaded from the FDIC’s web
overview of the FDIC’s deposit insurance rules,       site at www.fdic.gov. A question-and-answer
including important changes enacted in 2008           period with FDIC deposit insurance coverage
and in 2009.                                          subject matter experts will follow.

The seminars will be offered Wednesday, Nov. 18       Persons wanting to participate in the seminars
and Wednesday, Dec. 9. The seminars are open          must register at least two business days before
to employees and officers of all FDIC-insured         the event. At the conclusion of this process, the
banks and savings associations and are ideal          participant should receive an RSVP e-mail
for bank employees who open deposit account           confirmation, along with the PIN required to
products for their customers as well as employees     join the teleconference. For complete registration
who discuss deposit insurance coverage with           details go to: http://www.fdic.gov/news/news/
their customers.                                      financial/2009/fil09046.html#body.

6                                                                                                                         EXCHANGE
                                                                                                              industry news


Credit unions’ $2 billion tax subsidy often benefits the affluent
New study is the first to connect customer income and relative value of rates CUs offer

T    he nation’s credit unions receive a federal income tax
     exemption amounting to approximately $2.0 billion a year,
a subsidy that benefits affluent customers more often than those
                                                                         Credit unions’ service to modest-income households varies greatly
                                                                        among individual credit unions, Kelly said. The study examined
                                                                        the nation’s nearly 8,000 federally insured credit unions ranging
with average incomes, according to a new study released Oct. 20th       in asset size from less than $1 million to $40 billion from all
by the Prochnow Educational Foundation, the research arm of             geographic locations.
the Graduate School of Banking at the University of Wisconsin-
Madison.                                                                Past studies, including research by the U.S. Government
                                                                        Accountability Office (GAO) in 2006, have also found that credit
Credit unions are non-profit, income tax-exempt cooperatives.           unions lag in serving people of modest means.
Evaluation of the law shows that the sole purpose for the exemption
is a legislatively defined social mission: “to serve people of modest   The Prochnow Educational Foundation research differs in the
means.”                                                                 scope of the project and the information studied. Over two years,
                                                                        Kelly and his researchers examined 2007 data for six categories of
“Credit union leaders often point out that an important benefit         loans and five types of savings accounts, as well as data from the
to members are lower rates on loans and higher rates on savings,”       Federal Reserve’s 2007 Survey of Consumer Finances.
said lead researcher William A. Kelly, Jr. “However, the results
show that any benefits offered do not go to especially modest-          “While there have been numerous political studies on the role and
income households.”                                                     scope of credit unions, the PEF Board discovered that there had
                                                                        not been an academically based research project on how credit
The study segments credit union members into five income                unions have actually used their tax subsidy to serve the needs of
groups and measures the relative dollar value of benefits to those      those individuals with modest means,” said Harry J. Argue, the
members. According to the study:                                        former president and CEO of the Graduate School of Banking
ƒ 61 percent of credit union benefits go to households with             and the Foundation who initiated the research.
    incomes over $95,000;
ƒ 29 percent go to households with incomes of $35,000 to                Iowa Bankers Association President and CEO John Sorensen
    $95,000; and                                                        commented on the significance of the new research.
ƒ 10 percent go to households making less than $35,000.
                                                                        “The Prochnow study adds to the volume of research exposing
“Because taxpayers are subsidizing credit unions, the issue is, are     the credit union industry’s complete disregard for their tax-
credit unions serving modest-income people?” Kelly said. “We            exempt purpose. We’ll continue to urge lawmakers to hold them
found that credit unions as a group benefit the upper end of the        accountable by reducing the tax and regulatory benefits for those
middle-income spectrum much more than the lower end, and that           who stray from their public mission,” said Sorensen, who also
individual institutions vary a great deal among themselves, with        serves as a Trustee of the Graduate School of Banking at the
exemplary to lackluster service to those with modest incomes.”          University of Wisconsin-Madison.

In his policy analysis, Kelly concludes, “Taxpayers would benefit       The complete study is available online at www.gsb.org/research.
from a policy that required credit unions to pay income taxes
as do other businesses, including cooperatives. However, the tax
should include tax credits that could offset the tax and leave the
                                                                           The complete study (“An Economic Policy
full subsidy, depending on how well a credit union carries out its
mission.”                                                                  Analysis of the Tax Subsidy for Credit Unions “
Kelly points out that there is no general tax exemption for                by William A. Kelly, Jr.) is available online at:
cooperatives in the United States. In fact, credit unions and other
financial cooperatives in other countries pay income taxes.                            www.gsb.org/research
Kelly, now a professor of economics and finance at Grinnell
College in Iowa, is a former senior economist for the Credit
Union National Association (CUNA) and the previous director of
Center for Credit Union Research at the University of Wisconsin-
Madison.

October 23, 2009                                                                                                                        7
 industry news


IBA to make new Employment Application available in November
T    he Iowa Bankers Association (IBA)
     will soon offer a newly-redesigned
employment application available for
                                               and in an electronic file format (fillable
                                               PDF form). The Applicant Tracking
                                               form has also been revised and will now
                                                                                              The IBA’s Winnie Petersen will be
                                                                                              handling all order requests for the new
                                                                                              employment application. To order, please
human resources or hiring personnel at         be sold together with the Employment           e-mail wpetersen@iowabankers.com or
Iowa banks. The new form—which will be         Application.                                   call (800) 532-1423, ext. 4310 and follow
available by Nov. 2nd—has been updated                                                        the instructions below:
to accommodate current employment law          Pricing of the new Employment                  ƒ If ordering paper forms, please
and has been approved by our employment        Application (including Applicant Tracking            include the number of packs of
attorney.                                      form) is as follows:                                 forms you wish to order (1 pack =
                                                                                                    50 Employment Applications + 50
Some of the main changes to the form            Paper Forms (packs of 50)                           Applicant Tracking forms)
include:                                                                                      ƒ If ordering the electronic file, please
                                                1 - 4 packs       $39.00/pack
ƒ Addition of e-mail address in the                                                                 include your e-mail address and
     “Personal Data” section                    5 - 9 packs       $35.00/pack                       number of employees at your bank.
ƒ “Dates attended” has been removed in          10+ packs         $30.00/pack                       (If you have multiple bank locations,
     the “Education” section                                                                        please include the TOTAL number
ƒ Redesigned “Work History” section             Electronic File (one-time charge based              of employees at all locations). If you
ƒ Addition of foreign language and              on number of employees bank has at                  submit your order prior to Nov. 2nd,
     updated computer software programs         the time of ordering)                               the electronic file will be sent to you
     in the “Skills” section                    Less than 100 employees      $50.00                 on or before Nov. 2nd.
                                                100 – 249 employees          $80.00
The Employment Application will be                                                            Direct questions to the IBA’s Winnie
available in two formats: a printed form        250 – 399 employees          $120.00          Petersen at (800) 532-1423, ext. 4310.
(available for purchase in packs of 50)         400 or more employees        $150.00




Employers see results using Iowa Bankers Career Center
S   ince being launched in February of 2009, the Iowa Bankers
    Career Center has produced results for employers and job
seekers in the banking industry. The new online service provided
                                                                        Per job
                                                                        Views
                                                                                                        Average
                                                                                                         323.19
                                                                                                                     Highest
                                                                                                                       864
                                                                                                                                  Total
                                                                                                                                 27.148
by the Iowa Bankers Association (IBA) is designed to help Iowa          Apply Button Clicks               8.44          44         709
banks streamline their hiring process.                                  Applications                      3.12          18         262
                                                                        Sent in a Job Agent               9.82         22          825
Job activity statistics show that Career Center users are seeing        Sent by E-mail to a Friend        1.51          6          127
results. Since February, 71 registered employers in Iowa have posted
a total of 84 jobs on the Career Center. Each job listing features
                                                                       Both members and non-members can use the Career Center
a job description along with employer information, requirements
                                                                       to reach qualified candidates, though IBA members receive
and a map showing the location of the job opportunity.
                                                                       discounted pricing on job posting packages. Employers can
                                                                       submit job listings online, search for qualified candidates based
Since February, each job posting received an average of 323.18
                                                                       on specific criteria and create an online resume agent to e-mail
views by job-seekers. The highest number of views for a single
                                                                       qualified candidates daily.
job posting was 864. Each job posting also received an average of
3.12 applications. The highest number of applications for a single
                                                                       For job seekers, the Career Center provides a free service to
job posting was 18.
                                                                       qualified candidates wishing to learn more about employers and
                                                                       jobs in the banking industry in Iowa and beyond. Job seekers can
Since February, employers have posted 84 jobs on the Career
                                                                       view available jobs online and even create a search agent to provide
Center and 262 applications have been made to those job
                                                                       e-mail notifications when job postings match their criteria.
listings. Currently, 153 resumes have been posted by individuals
potentially seeking positions. Career Center users are also using
                                                                       The Iowa Bankers Career Center is available online at http://
the system to send job postings to friends via e-mail with the click
                                                                       careercenter.iowabankers.com or visit www.iowabankers.com
of a button.
                                                                       and click on “Career Center” in the Quicklinks menu.
8                                                                                                                              EXCHANGE
                                                                                                      ComPlianCe Corner



Reg. GG — Are you ready for this?
By dodie Bauman, CrCm

Compliance Manager, Iowa Bankers Association



W      e believe the mandatory compliance date for the Unlawful
       Internet Gambling Enforcement Act will soon be here—
Dec. 1, 2009. However, Congress continues to petition the
                                                                      merchant card services, ACH or wire
                                                                      services. The following sample notice
                                                                      is merely a suggestion to satisfy the notice requirement, since no
Treasury and the Federal Reserve Board (FRB) to delay for one         model notice is provided in the regulation.
year the scheduled Dec. 1 implementation of the regulation.
House Financial Services Committee Chair Barney Frank sent                Effective Dec. 1, 2009, [Insert Bank Name] is obligated to
yet another letter on Oct. 1st to the Treasury and FRB expressing         comply with the Unlawful Internet Gambling Enforcement Act
concerns that enforcing the “flawed” rules in two months would            of 2006, which prohibits proceeds of illegal Internet gambling
put “an unreasonable burden on regulators and the financial               from being processed through commercial deposit accounts, or
industry at a time of economic crisis.”                                   via wire transfer, ACH or other funds transmission.
                                                                          You agree that such transactions will not be conducted through
However, until we hear otherwise, we must approach December               your account, and that you will notify the Bank should your
1st under the presumption that compliance with Reg. GG is                 account be used for Internet gambling of any kind. Please be
mandatory as of that date. The final rule is much improved                advised that should the Bank discover your account is being used
from the proposal, but still requires depository institutions,            for such restricted transactions, we may terminate your access to
participants in the ACH and wire networks, and institutions that          certain payment systems and/or close your account.
offer merchant charge and credit card programs to implement
policies and procedures to prevent unlawful Internet gambling         To assist members in their efforts to comply with UIGEA, the IBA
transactions from being processed through commercial customers’       compliance department has drafted and posted to the Compliance
accounts.                                                             page of the IBA website a sample “Unlawful Internet Gambling”
                                                                      policy, found under “Bankers Compliance Resources” at: http://
Fortunately, Reg. GG covers only commercial customers and             www.iowabankers.com/aspx/iba/publications.aspx?snid=125.
transactions in commercial accounts. In addition, the final rule
applies only to “restricted transactions” – those that represent      In addition, the sample “Customer Due Diligence – Risk
betting or wagering conducted via unlawful Internet gambling.         Rating Form,” also available on the IBA website under “Bankers
                                                                      Compliance Resources” as a Bank Secrecy Act document, has
Unlawful Internet gambling is defined, broadly, as placing,           been updated to include several new due diligence questions when
receiving, or otherwise KNOWINGLY transmitting a bet or               opening commercial accounts: a description of business activities,
wager by any means which involves the Internet – and where            the state in which the business is established, types of financial
such bet or wager is unlawful under federal, state or tribal law.     services expected to be used and whether the business engages
In Iowa, that includes nearly every bet or wager that is placed,      in online gambling transactions. (http://www.iowabankers.com/
received or transmitted via the Internet.                             UserDocs/Customer_Due_Diligence_-_Risk_Rating_Form.doc)

Types of transactions covered by the final rule include:              Feel free to use these tools and edit them as needed to fit the bank’s
ƒ ACH credits and debits;                                             products and procedures. As always, before implementing any of
ƒ Incoming wire transfers;                                            these samples, consult your bank’s legal counsel for additional
ƒ Receipts in merchant card programs;                                 guidance.
ƒ Deposits to accounts made by check; and
ƒ For OPERATORS of money transmission services, both                  The final rule can be found at:
    incoming and outgoing transmissions.                              ƒ http://ecfr.gpoaccess.gov/cgi/t/text/text-idx?c=ecfr&sid=1b6
                                                                          b5ba59e0b3d8fe0e8601a7ee06cdf&rgn=div5&view=text&
A notice to existing commercial customers must be delivered prior         node=12:3.0.1.1.14&idno=12
to the effective date of Dec. 1, 2009. In addition, the notice must
be provided to new customers establishing commercial banking
relationships, via deposit agreements and other contracts for

October 23, 2009                                                                                                                          9
 eduCational exPerienCes




 Join your Iowa peers at the annual Iowa Ag Breakfast
         in conjunction with the ABA National Agricultural Bankers Conference

J  oin your fellow Iowa bankers at the 2009 ABA National
   Agricultural Bankers Conference Nov. 15-18 in San Antonio,
Texas. Following tradition, the Iowa Bankers Association will
                                                                       evolution, new river extension, special events, economic impact
                                                                       and fun facts about the River Walk project.
                                                                       The breakfast is $35 per person and will take place at the Grand
again host the annual Iowa Ag Breakfast in conjunction with            Hyatt San Antonio.
the conference. Join your peers on Monday, Nov. 16 from 6:30
to 8:00 a.m. for a hearty breakfast and featured speaker Nancy         For more information or to register online, visit the IBA Event
Hunt, executive director of the Paseo Del Rio Association.             Calendar at www.iowabankers.com. Contact the IBA’s Ann
                                                                       Winkel at (800) 532-1423 with questions.
The Paseo Del Rio Association oversees the promotion and
support of the San Antonio River Walk, which is the No. 1              Go to www.aba.com for more information about the ABA
entertainment destination in Texas. Nancy will share the history,      National Ag Bankers Conference.



Upcoming IBA seminar to focus on BSA/AML compliance
B    SA/AML compliance is its own growth industry. Every new
     year brings changes in legal requirements and regulatory
philosophies. This year ushered in with a major revision of the
                                                                       laundering programs (AMLs); customer identification programs
                                                                       (CIPs); due diligence and enhanced due diligence; currency
                                                                       transaction reporting; and more.
process for recognizing “exempt persons” who are not subject to
currency transaction reporting. It eliminates the need for filing a    The program is designed for personnel who have responsibility
Designation of Exempt Person form in some circumstances and            for maintaining or auditing BSA compliance efforts. The seminar
the filing of biennial renewals as well.                               will be offered on the following dates:
                                                                       ƒ Tuesday, Nov. 3 — Storm Lake
BSA is one of the few regulations where compliance is so critical      ƒ Wednesday, Nov. 4 — West Des Moines
it is classified as a “safety and soundness” issue. The Iowa Bankers   ƒ Thursday, Nov. 5 — Coralville
Association’s Bank Secrecy Act seminar will help banks meet
the requirements of BSA training. seminar will help banks              For more information or to register online, visit the IBA Event
meet the requirements of BSA training. The presentation will           Calendar at www.iowabankers.com. Contact the IBA’s Ann
discuss reviewing and updating your risk assessment; anti-money        Winkel at (800) 532-1423 with questions.




                                                               CheCk out the iBa event Calendar
                                                               The IBA offers a variety of options for training all bank employees. IBA
                                                               offers live seminars, schools and conferences, online and telephone
                                                               seminars, as well as e-learning and online AIB courses. To see a complete
                                                               listing of available training, check out the IBA Event Calendar online
                                                               at www.iowabankers.com. Click on “Event Calendar” in the Quicklinks
                                                               section on the right-hand side of the website. Search for an event or
                                                               training opportunity by area of interest, event type or keyword. Or you
                                                               can scroll through a complete list of events arranged by date. Sign up to
                                                               receive the monthly Education Bulletin e-newsletter by contacting the IBA’s
                                                               Darcy Burnett at (800) 532-1423 or dburnett@iowabankers.com.


10                                                                                                                             EXCHANGE
                                                                                                eduCational exPerienCes

FDIC examiners to present IT Exam & Current Issues Seminar
T    he Iowa Bankers Association’s 2009 IT Exam & Current
     Issues Seminar will inform attendees on how to design
and implement an effective and comprehensive Information
Security Program. The seminar will provide tools to improve the
management of your IT operation and consequently prepare for
an IT examination. The seminar will also provide insight on new
regulatory requirements and recent IT-related risks and threats.
The FDIC will be providing the training during this seminar,
however the topics discussed are applicable to all banks, regardless
of your primary regulator.

The seminar is intended for bank management—including
security, compliance and operations personnel. The program will
be offered Wednesday, November 4 in Johnston and Thursday,
November 5 in Coralville.                                                ƒ    Considerations for deployment of remote/merchant item
                                                                              capture services.
Topics of discussion include:                                            ƒ    Requirements and best practices for an identity theft
ƒ   How to improve and maintain a risk assessment.                            prevention program (red flags rule).
ƒ   Continuing administration requirements of the Gramm-                 ƒ    Benefits and risks of virtualization/cloud computing.
    Leach-Bliley Act and challenges banks have had implementing          ƒ    Recent trends in IT-related fraud, including recent cases of
    an Information Security Program.                                          ACH Fraud and “war dialing”.
ƒ Business continuity planning, including updated regulatory
    guidance and information on pandemic planning.                       For more information or to register online, visit the IBA Event
ƒ Audit and independent reviews.                                         Calendar at www.iowabankers.com. Contact the IBA’s Ann
ƒ Proper security and controls for EFT operations.                       Winkel at (800) 532-1423 with questions.


                         don’t forGet                                                           in the future
                             BSA Seminar
                     Nov. 3, Nov. 4, Nov. 5                                                2010 IBA Leadership Institute
             Storm Lake, West Des Moines, Coralville                                          February–June 2010



    uPCominG weBinars
    online fraud & identity theft webinar                                Preparing for your next regulatory exam webinar
    october 29 – 1:30 – 3:30 p.m.                                        november 4 – 1:30 – 3:30 p.m.

    This presentation explores recent frauds and provides guidance       This timely webinar breaks down the risk assessment process
    into what your institution should be doing to thwart them. We        and helps you prepare for and manage your next exam. In
    will also review the June 11, 2009, Red Flag FAQ issued by the       today’s environment, examiners are looking for more than the
    agencies and other programs banks have (or should have) that         request items to be waiting for them when they show up for the
    work in conjunction with the Red Flags Program. The FAQ was          on-site fieldwork. They want to find evidence that their banks
    issued to help financial institutions and others comply with the     have implemented risk management programs that stratify bank
    federal regulation on identity theft and discrepancies in changes    operations, identify issues and provide for timely reporting
    of address. The rules require financial institutions and creditors   and remediation mechanisms. If not, you may be subject to
    to develop and implement written Identity Theft Prevention           the examiners’ version of a risk management program. This
    Programs and require issuers of credit and debit cards to assess     presentation will discuss strategies to aid in preparing for and
    the validity of notifications of changes of address.                 managing your next exam.

    It is important to be aware of new threats and risks and adjust      Highlights include: breaking down the risk assessment process;
    your red flags to ensure adequate controls including prevention,     control risk; liquidity risk; concentration risk; trend analysis;
    detection, monitoring, and training.                                 trends in audit cycle frequency; documenting and monitoring
                                                                         remediation plans and more.

                For more details or to register online, visit the IBA’s “Event Calendar” at www.iowabankers.com.

October 23, 2009                                                                                                                             11
          iBa news notesASSOCIATION                                       exChanGe
still time to reGister your Bank’s                                        Published by the Iowa Bankers Association
Get smart aBout Credit day PartiCiPation
        INSURANCE AND SERVICES, INC.                                      8800 NW 62nd Avenue
Banks have until Nov. 6 to register their participation in the            PO Box 6200
seventh annual Get Smart About Credit Day. Banks that make
             MORTGAGE CORPORATION                                         Johnston, Iowa
presentations in their communities and schools any time during            50131-6200
                                                                          (800) 532-1423 FAX (515) 280-4140
October are eligible to receive credit for participating. Register your
                                                                          www.iowabankers.com
bank’s participation at www.abaef.com. Banks who register their
participation will be recognized in the Iowa Bankers Association’s        President & CEO: John K. Sorensen
Exchange newsletter and online at www.iowabankers.com.                    Editor: Allison Lycke
Iowa banks are also welcome to share their efforts with the Iowa          Send comments to editor@iowabankers.com
Bankers Association by sending photos and success stories to
editor@iowabankers.com. The annual financial education event
is sponsored by the American Bankers Association Education
Foundation in partnership with the IBA.
                                                                          2009              Build Contributions
                                                                                                                         Goal
                                                                                                                      -$170,000

                                                                           $148,323                                   -$145,000
Build ContriButions aPProaCh $150,000                                      (as of Oct.15)                             -$125,000
Bankers across the state continue to contribute to BUILD, the
industry political action committee (PAC). Since the Feb. 1 kick-off                                                  -$105,000

of the 2009 BUILD Campaign, Iowa banks have made an effort to                                                         -$85,000

educate their employees and directors on the importance of raising                                                    -$65,000
money for the industry PAC. As of Oct. 15th, BUILD contributions                                                      -$45,000
totaled $148,323. There is still time for IBA members to help
                                                                                                                      -$25,000
BUILD reach its $170,000 goal in 2009. Learn more about
BUILD on the IBA website at www.iowabankers.com under the                                                             -$5,000

“Government Relations” tab.




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                           That’s United Bankers’ Bank… the nation’s first!




                         United Bankers’ Bank | 2832 104th Street | Suite 107 | Urbandale, IA 50322 | Teresa Brown (515) 229-6512
                                www.ubb.com | Member FDIC




AssociAte member spotlight




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      BankersTrust.com                        Tony Fahrenkrog • VP Financial Institutions • 515.245.2922 • tfahrenkrog@bankerstrust.com
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AssociAte member spotlight




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                         is a personalized, prepaid debit card usable for all online billpay, purchase and
                                      ATM transactions where Visa debit cards are accepted.
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