The Mother of All Mandates

April 10, 2013 at 8:08 am 3 comments

Good luck and Godspeed to the credit union witnesses including Melrose Credit Union’s General Counsel Mitch Riever at today’s Congressional hearing on mandate relief for credit unions.  God knows there’s enough regulatory burden to be shed and even talking about doing something about it is better than nothing.

But how do you explain to Congress that the biggest regulatory burden credit unions face is Congress.  Specifically, a political system which is hell-bent on treating credit unions like for-profit banks when it comes to imposing mandates, but at the same time is all too willing to cut special deals for banks including the sainted community banks with which we ostensibly have so much in common.

The latest example of the uneven playing field on which credit unions find themselves comes in the form of a report by the Special Inspector General for the Troubled Asset Relief Program (TARP).  TARP was the emergency line of credit Congress passed to give banks loans to get through the financial crisis they created.  Credit unions were not eligible for TARP funds, but, to be fair, we were only able to fund the continuing obligations resulting from the bad investments of the Corporates with the support of the Treasury.  Last I checked, not only were credit unions dutifully paying an assessment to pay back that loan, they weren’t getting government money to do so.

As you may remember, Congress passed legislation authorizing community banks with $10 billion or less in assets to get front money from TARP in return for making loans to small businesses.  The idea makes sense in theory.  With the support of the Obama Administration, community banks with $10 billion or less in assets would make government subsidized loans to small businesses.  But a funny thing happened on the way to the loan fund.  Most of the eligible community banks took the money and didn’t increase small business lending, but instead used it to pay off TARP funds they had taken from the federal government in the first place.  I would say this is robbing Peter to pay Paul, but there was nothing in the law that made this shell game unlawful.

Eligible community banks did have to submit a lending plan as part of their application.  However, according to the IG’s report there was a lack of coordination between the Treasury and the other regulators, meaning that no one followed through on whether these plans were being implemented.  The bottom line in all this is that 132 of the 137 former TARP banks remaining in the SBLF “have not effectively increased small business lending because they used approximately 80% of the funds they received to repay TARP.”

As I have said before, life’s not fair, get over it.  And it shouldn’t be a shock to anyone that despite the vitally important efforts of credit unions, banks have more political influence in Washington than we do.  But I am getting increasingly tired of having Congress, and for that matter Legislators, extol the virtues of credit unions while doing absolutely nothing to help us help our members.  Talk is cheap, let’s see some action.

Entry filed under: Advocacy, General, Political, Regulatory. Tags: , , , .

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3 Comments Add your own

  • 1. Anonymous  |  April 10, 2013 at 9:30 am

    Talk has been cheap for a long long time. They take our money as fast as they can get it, that’s why the shell game works so good.

  • 2. Darryl  |  May 22, 2013 at 5:42 am

    You really can’t honestly compare the two. Other factors that are looked at include your debt-to-income ratio and Poor Credit Loans For Homes-to-value ratio. Sometimes poor credit loans for homess are made on a non-recourse basis, the lawsuit settlement poor credit loans for homes in a timely manner and then be able to afford about $30, 000 in equity Isas, 7, 000 in taxpayer guarantees. These are however some of the most awaited and exciting times in the life of a young person.

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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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