Show Me The Money!

July 18, 2018 at 9:23 am Leave a comment

I have some good news this morning. NCUA announced yesterday that, starting next week, federally insured credit unions will begin receiving their share of the $735.7 million dividend payout it is giving to credit unions from the Share Insurance Fund as a result of the quicker than anticipated success the industry had in paying off the debts caused by the failure of the corporates.

In the dark days of 2009 The Treasury essentially gave the industry a line of credit .to cover the cost of maintaining and selling toxic mortgage backed securities purchased by the corporates. In return, NCUA established and Credit unions paid assessments into the Temporary Credit Union Stabilization Fund In 2017 the Board closed down the fund and placed its remaining money in the Insurance Fund.

The industry has much of which to be proud. This dividend is a result of NCUA’s novel and aggressive legal strategy holding the investment banks which underwrote and sold the MBS’s to the corporates as well as the tough choices made by credit unions determined to make sure that they paid their debts.

Under the Federal Credit Union Act federally insured credit unions are required to pay a percentage of their aggregate shares into the Insurance Fund so that the equity ratio does not fall below 1.2%.  it also can not  go above 1.5%.

I remain skeptical that this dividend makes sense since the industry still does not know the final cost of plummeting medallion values which have already brought down several credit unions. But I’ve said it before and I will say it again the industry did itself proud in dealing with the Mortgage Meltdown Crisis.

SALT In The Wound

One of the few things that our political parties have in common these days is a compulsive need to sue over policies they don’t like no matter how tenuous the claim.

So no one should be surprised that New York New Jersey Maryland and Connecticut filed a lawsuit yesterday claiming that it is illegal for the federal government to cap federal tax deductions for state and local taxes at $10,000. No one should hold their breath expecting to see relief from NY’s ludicrous property tax burden anytime soon.

The gist of the complaint is that the cap infringes on the right of states to impose their own taxes. The problem with this argument is, of course, that the 2017 tax overhaul does not prevent these states from imposing all the taxes they want, it simply places a limit on the deductibility of these funds for federal tax purposes.

Incidentally, here is an interesting blog from E.J. McMahon pointing out that there is little evidence that the deductibility cap is impacting real estate in New York so far.

 

Entry filed under: General, Legal Watch, New York State. Tags: , .

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Authored By:

Henry Meier, Esq., Senior Vice President, 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. In addition, although Henry strives to give his readers useful and accurate information on a broad range of subjects, many of which involve legal disputes, his views are not a substitute for legal advise from retained counsel.

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