What the election means for credit unions.

November 8, 2012 at 8:11 am Leave a comment

Now that the elections are over, it’s time to get back to governing, at least for the week or two before the cable news networks start speculating as to who is positioning themselves for a possible Presidential run in 2016.  The best thing about American politics is becoming one of its most overlooked facts:  the system is not designed to create dramatic changes but to make them difficult.  This means that many of the same issues that were around before the election still have to be grappled with and that each of the elected officials, be they a Congressman or the President, can point to their election mandate to justify their position.  That being said, there has to be movement on key issues if only because the clock is literally running out.

Fiscal Cliff

Everyone knows about the fiscal cliff, which is the combination of tax increases and automatic spending cuts scheduled to take effect on January 1st unless Congress and the President can come up with a compromise on a deficit reduction package.  Well before the election, Obama advisors were publicly saying that the pressures of the fiscal cliff would be the best leverage they have to get Republicans to the table so the gamesmanship is already starting.  Wall Street tanked yesterday, in part because of fears that the President’s victory made it more likely that we will go over the fiscal cliff.  I think this is nonsense.  House Speaker Boehner signaled his openess to revenue enhancements so the debate might come down to when is a tax increase a tax increase.  For all the disagreement in the campaign, if you listen closely, both sides thought there was merit to the idea of closing loopholes.  No one is seriously talking about ending the credit union tax exemption, but credit unions have to keep an eye on the negotiations so that whatever grand bargain does emerge doesn’t destroy the industry in the process.

MBL Reform

The lame duck session also provides the last best hope for credit unions to get MBL reform.  The Senate leadership is committed to getting us a vote and the need to increase the lending cap is as strong as ever as Congress looks for cost-effective ways of spurring economic growth.  All we are asking Congress to do is make it easier for us to lend to small businesses.

The CFPB is here to stay

To those of you with dreams of waking up one morning to find that the CFPB was just a bad dream. . .dream on.  President Obama isn’t about to sign legislation doing away with the Bureau even if such legislation could be seriously considered in a Senate that is going to include Elizabeth Warren.  However, Mitt Romney actually provided a good example of the kind of reform we could reasonably push for.  During one of the Presidential debates he pointed out that uncertainty over what was going to constitute a qualified mortgage was making financial institutions more reluctant to give mortgages.  Regulatory advocacy is not as exciting as legislative advocacy, but to the extent we can show how regulations and the processes that create them can be modified to make them easier to implement, we may be able to actually gain some traction.  No one should want a repeat of a Dodd-Frank like deluge of proposals that make it impossible for compliance officers to read the new regulations, let alone implement them in a timely manner.

The Courts

One of the most important legal battles that will be coming to a head over the next few years involves the extent to which administrative agencies properly exercised their power in implementing Dodd-Frank regulations.  For instance, federal courts in D.C. have already struck down regulations promulgated by the SEC because the Commission didn’t have sufficient data to justify the conclusions it reached in promulgating regulations that shareholders get a non-binding vote on executive pay.  Sooner or later, the Supreme Court will decide how much power Congress is authorized to give to regulators and this is certainly an issue in which credit unions have a stake.

Housing Reform

What to do with Fannie and Freddie is the 800 pound gorilla in the room.  Even though they are technically bankrupt, the American housing market is more dependent on these taxpayer bailed out entities than ever before.  The big question facing credit unions and the country as a whole is are we better off keeping the old system in place or should we use this opportunity to push for reforms such as advocating for government oversight of the quality of mortgages packaged into mortgage-backed securities.

Demographics is destiny

Governor Romney lost the election because he did not get enough Hispanic or African American votes.  The most important fact to come out of this year’s election is that Hispanics, African Americans and young people are willing to stay involved in the electoral process for more than one election cycle if the right issues are on the table.  The demographics of America are changing and if it is impacting America’s elections, it is certain to impact our financial systems.  Is your credit union ready to deal with a new generation of more ethnically diverse borrowers who are used to having everything they need at their fingertips?  Credit unions that ignore this question will find themselves with about as much to do someday as Mitt Romney has today.

Entry filed under: Advocacy, Compliance, Legal Watch, Political, Regulatory. Tags: , , , , , .

The Morning After Credit Unions Under Attack

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Authored By:

Henry Meier, Esq., General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association.

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