On Frogs, Scorpions and MBL Reform

December 6, 2012 at 7:34 am Leave a comment

imagesLet’s face it, this is a lousy day for the industry.  With CUNA’s public acknowledgement that it doesn’t have the 60 votes it needs to get MBL Legislation passed in the Senate, it appears that the most significant legislative push of the industry is dead for another year.  In the end, it wasn’t so much opposition to MBL legislation on its merits that did in the measure as it was the lack of legislation that the banking industry as a whole needed badly enough to let us get something in return.  This brings us to my favorite fable for politics:  the frog and the scorpion.

For those of you who don’t know, a scorpion needs to ride on a frog’s back to get across a raging river or it will surely drown.  The frog is nervous about helping out the scorpion, but the scorpion says that he has nothing to fear because by killing the frog, he would also be sure to drown.  Wouldn’t you know it, about halfway across the river the scorpion stings the frog and when the dying frog asks why, explains that it’s his nature.

It’s the nature of community and independent banks to instinctually oppose everything that credit unions want even if it hobbles their ability to build a positive agenda that actually helps their own members.  In the end, the legislation that independent banks desperately wanted was an extension of the TAG program, which extends insurance protections to accounts in excess of $250,000.  What killed the TAG legislation was the public opposition of the Financial Roundtable, which represents some of the largest banks in the world.  They argued that extending the insurance guarantee sent the wrong signal of the safety and soundness of the American banking system, but considering these are the same fellows who were more than willing to hide behind Government protections when it was in their interest to do so, their protests ring a little hollow.

In my ideal world, independent banks and credit unions would get together and realize that there are many issues when it is the small banks against the large banks, and the large banks are winning.  Of course, this will never happen, but in the end, this is really the only way that either of us are going to get the things our respective industries need to help our members.  In the meantime, I hope that the industry doesn’t start playing the game of zero-sum politics.  CUNA has now come out against the TAG legislation and, although there are some good arguments to be made against the bill, in the end, zero-sum politics benefits no one.

NCUA Puts Controversial Regs On Hold

I couldn’t listen to the whole webinar yesterday, but at an event sponsored by the Credit Union Times, a top NCUA examiner signaled that it will be at least several months before NCUA takes action on some of its most controversial proposals, including restrictions on loan participations, CUSOs and emergency liquidity arrangements.  I might be the only person in the industry who thinks that the lack of emergency liquidity requirements is a bad thing, but that is a blog for another day.

Speaking of new regulations, NCUA’s monthly board meeting is today.

Entry filed under: Advocacy, Compliance, Regulatory. Tags: , , , , , .

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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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