Posts filed under ‘Political’

Seven Ways COVID-19 Is Impacting Your Operations

Greetings from the state that is number one in COVID-19 cases; as of Sunday afternoon.

There have been an amazing number of developments affecting your credit union over the weakened.  I am emphasizing those that you may not have heard about yet.

New York Delays New Servicing Regulations

I actually have some good news to tell you this morning.  I found out over the weekend that New York’s  Department of Financial Services has issued an emergency regulation putting on hold for an additional 90 days new servicing regulations which many credit unions and mortgage bankers were wondering how they were going to comply with.  In announcing the delay DFS Superintendent, Linda A. Lacewell explained that “the volume and complexity” of the new regulations, especially since they require new programing and disclosure requirements for home equity lines of credit, has led the department to conclude that businesses need more time to comply, particularly at a time when they have to concentrate on the pandemic.

A special shout out to the New York Mortgage Bankers Association, which did a great job alerting stakeholders to the difficulties in complying with this regulation.

State Issues COVID-19 Emergency Relief Order

New York’s Department Of Financial Services issued an order exempting state licensed and state chartered financial institutions including state chartered credit unions from some regulations with which they would normally have to comply.  Most importantly, these institutions can now close and relocate branches and offices without first providing notice to DFS.  In addition, licensed individuals such as mortgage originators can work from home with the understanding that they are still subject to New York’s regulations.  Entities are still expected to inform New York State of any relocations.

Additional Developments…

Also over the weekend, the Governor asked businesses that could do so, to voluntarily shut down and allow their employees to work from home.

Finally, the state has imposed limits on the size of mass gatheringsHere is his first order.  This situation is very fluid and we may see further reductions in the authorized size of mass gatherings.

Fed Gone Wild

Just how low can the Fed go?  The Federal Reserve Open Market Committee announced yesterday that it was slashing the Federal Funds rate to zero (!) and “expects to maintain this target range until it is confident that the economy has weathered recent events…”

When the history of this pandemic is written, it will be marked as the end of a unique period in American history during which the Federal Reserve exercised a decisive impact on the American economy.  In 1987, Alan Greenspan calmed the stock market following its dramatic decline; it was the Fed that helped minimize the impact when the dot-com bubble popped; and Ben Bernanke mitigated the impact of the Great Recession of 2008 by going on a mortgage buying binge.

My how times have changed.  Interest rates are already too low to have much of a stimulus impact and they will have no effect in coxing Americans out of their homes to hoard more toilet paper.

The Fed did take one important step recently.  It announced a massive infusion of funds into the repurchase market.  It also announced it would accept a broader range of securities for these arrangements.

The repurchase market plays an absolutely crucial role in the economy.  It is the mechanism by which the largest of the large financial institutions manage their liquidity on a daily basis by getting short-term loans of cash in return for collateral such as bonds.  The system has had some hiccups over the past year and no one quite knows why.  Stay tuned.

With the Fed out of bullets, it is up to Congress and the President to come together and agree on a stimulus package.  On Saturday, the house took the first step in this legislative dance by passing legislation which extends limited family leave protections to some employees and increasing funding for programs such as SNAP.  The precise impact of this proposal is being debated this morning, with critics already complaining it contains too many loopholes to help most workers.  If, as expected, the Senate passes the bill this week and the President signs it, the real contentious debate gets started.  Both sides are already jockeying for position over what should be included in a larger stimulus package.

March 16, 2020 at 10:38 am Leave a comment

Six Take-Aways From CUNAs GAC

Back from another year at CUNAs GAC. Every year I try to highlight some themes that emerge so here is my list of the six (6) things I learned at this year’s conference:

    1. Get those DORs done. Don’t be surprised to see NCUA taking a tougher approach to your credit union when it comes to following up on Documents Of Resolution. One of the big takeaways from the report of NCUA’s Inspector General about the collapse of the NYC taxi credit unions is that NCUA should have acted more promptly to enforce long standing DORs. Anecdotally I talked to a lot of credit union people and some of them said they are already seeing this trend.
    2. Taxi medallions are an even bigger issue than I thought they were. It would have been impossible to be at the conference the last few days without hearing about taxi medallions. This has not been true over the last few years. Both Chairman Hood and Board Member McWatters defended the agency’s decision to sell the medallions to a private equity firm, just as New York State was beginning to focus on ways to stabilize the medallion market. The big questions that remain are: How much flexibility are the new medallion owners going to extend to troubled borrowers? How much is the sale going to impact the sale price of medallions? And precisely why did NCUA feel that now was the best time to sell off these assets?
    3. Alice Through the Looking Glass and the CFPB. In a presentation to the conference, CFPB director Kathy Kraninger laid out an ambitious agenda on issues ranging from qualified mortgages to payday loans even as her own bureau refuses to defend the constitutionality of its leadership structure in a case pending before the Supreme Court. I’m telling you folks, when it comes to the CFPB, be careful what you ask for. Do you really want to wake up in a world in which the legality of all those mortgage regulations you have been implementing for the last 10 years are in doubt?
    4. I know subordinated debt isn’t the most exciting issue but I continue to believe that it is one of the most important facing the industry. The Association will shortly be coming out with a survey seeking feedback on the pending NCUA proposal which would allow complex credit unions access to secondary capital for purposes of meeting their risk based capital requirements while at the same time codifying guidance making it more difficult for low income credit unions to access subordinated debt. The agency has to see if it can balance these competing concerns in a way that does not exacerbate the differences between big and small credit unions.
    5. The more things change, the more they stay the same. There are so many issues on which there should be a bipartisan consensus but Congress is still unable to get things done. I’m thinking about data security and marijuana banking, in particular. We all know that there is a huge political divide in this country; I wonder how many people realize that this perpetual ideological warfare hurts industries and consumers regardless of what party they belong to.
    6. If there is a better politician in New York than Senator Chuck Schumer, I have not met him.


February 27, 2020 at 9:33 am 1 comment

Gillibrand Proposes Data Protection Agency

Data protection is the legislative equivalent of the weather: everyone talks about it but no one does anything about it. So I was pleased to see that Senator Gillibrand unveiled a bold proposal yesterday to create a Data Protection Agency.

As of ten minutes ago the text of the bill was not yet available online but, according to her press release the DPA’s core responsibilities would be giving Americans greater control of their own data by creating and enforcing data protection rules—ensuring fair competition “within the digital marketplace” and preparing America for the Digital Age by advising Congress on emerging privacy and technical issues. This last proposal is a bit unsettling since I kind of thought that Congress knew we were already in the Digital Age and was reading up about it.

You don’t have to be Nostradamus to figure out that the agency would promulgate a California/European regulatory regime on companies and crackdown on potentially anti-competitive practices of Facebook, Google and Amazon. It would be overseen by a Director serving a five year term.

Now it’s way too early to say whether this is a good or bad idea. But let’s be honest, given the current political divide in Congress, this proposal has as much chance of becoming law any time soon as Donald Trump does of giving up tweeting for Lent. But in the eight years since U.S. Attorney for the Southern District in New York, Preet Bharara, warned of a WWII style cyber-attack against this country, the situation has only gotten worse, not better. We’ve grown so used to the idea of cyber breaches that news that the Chinese government stole personally identifiable information from almost half of America’s citizens is met with a shrug. Anything that wakes us up and gets us talking about taking on data protection issues on a national level is a step in the right direction even if some of the specifics need to be refined.

On that note, enjoy your Presidents’ Day Weekend. I will be back on Tuesday.

February 14, 2020 at 9:09 am Leave a comment

Key Federal and State Proposals Rolled Out

Well, the holiday season is officially over. Judging by the amount of information I want to give you in today’s blog, it’s clear that our policymakers are hitting the ground running. Remember, this is an election year.

Let’s start with some federal guidance.

The NCUA released its annual list of supervisory priorities. Close your eyes and guess what NCUA has listed on their agenda for this year. You got it. The BSA compliance! Listen, I understand that few statutes are as important to properly implement, but if there is a credit union out there that doesn’t understand the importance of BSA and have a grasp of how to comply with it, that credit union has issues that a regulatory guidance can’t help with. What I am surprised by is that Libor is so far down on the list. If I were making the list, my top priorities would be cybersecurity, business continuity, which should be viewed as opposite sides of the same coin, potential liquidity risks- because the ongoing need of the Fed to prop up overnight lending facilities continues to scare the bejeebies out of me, and our good friend CECL, because I don’t think credit unions should in any way be encouraged to ignore implementation issues before it’s too late.

As painful as this is for me to admit, as between my priorities and NCUA’s, it makes sense to follow NCUA’s list.

Supervisory Guidance Issued

A regulation which has flown under the radar has been one finalized by NCUA in September intended to assist credit union supervisory committee audits by providing a more concise framework and explanation for minimum audit requirements. Yesterday, the NCUA issued a guidance complimenting this regulation, which succinctly explains what these minimum obligations are. Anyone involved with the supervisory committee should take a look. I of course have some opinions about this as well, but I still have much to talk about today, and I’m in too good of a mood to get hate mail.

Governor Unveils Ambitious List of Financial Services Initiatives

I’m going to go out on a limb here and say that the Governor’s 10th list of legislative priorities for this year’s New York session includes the most comprehensive list of priorities that could impact credit union operations since he was first elected. In addition to the issues he addressed in his State of the State, which included a pointed criticism of banks for not providing services in many of the areas that need them most, his book includes several priorities which we will be scrutinizing once they take legislative form. Among the proposals that caught our eye is one dealing with reporting suspected elder abuse; further strengthening of state law banning unfair and deceptive practices; a state-level crackdown on robo-calls; and enhancing the oversight powers of the Department of Financial Services.

In addition to the issues directly dealing with financial service issues, Cuomo once again called for the legalization of the sale of marijuana for recreational use and even wants to create an institute for the study of hemp and marijuana within the SUNY system. I was chatting with a longtime colleague and lobbyist after the presentation, and he pointed out that one of the reasons you may actually see agreement on this measure is the State’s fiscal deficit. The reality is that the state can plug in estimates of projected tax revenue to help fill the gap.

Believe it or not, there’s even more, but I think you have better things to do with your time than engage in a one-sided conversation with yours truly. That being said, as many of you already know, you can always e-mail me or give me a call if you want to follow up with anything I’ve mentioned.

Have a great day.

January 9, 2020 at 9:36 am Leave a comment

Financial Issues Loom as a New Legislative Session Begins

Good morning!

This is actually one of my favorite days of the year. It is a cross between the first day of school and the first day of spring training for Met fans. So many possibilities, so much hope… so much room for disappointment.

The Governor gives his annual State of the State address today, and given the amount of information that has already been leaked about the presentation, it’s fair to say that financial empowerment is going to be a prominent theme in 2020. Most notably, it appears that Governor Cuomo is going to propose funding the state level CDFI fund. To put this in perspective, more than a decade ago, the legislature enacted a legal framework for a state-level fund to aid in community development financial institutions. Significantly, several credit unions in New York State are CDFIs, but the designation is not limited to traditional financial institutions.

Ever since the framework was created, however, the fund has been nothing more than an outline as it has never actually received funding. Frankly, I have never understood why this is the case, since I’ve never met anyone who opposes the idea. Now, it appears that the Governor’s high level of support at the start of the budget season may actually bring about some action, with $25 million being committed to the fund over a five year period. It is a start.

The Governor’s initiative is part of an effort to “increase access to safe, affordable bank accounts and small-dollar loans in underserved low-income communities across the State.”

Again, this is opening day. We won’t know until the press release gets translated into legislative proposals precisely what will be undertaken or its impact on credit unions.

Meet the New Boss

This is always the time of year when committee memberships get shifted around. One change worth noting is the announcement that Assemblyman Thomas Abinanti of the Westchester area will be the new Banks Chair. He replaces Assemblyman Ken Zebrowski, who has sponsored our municipal deposit legislation in the past. We will of course be reaching out to Assemblyman Zebrowski to discuss the Association’s priorities.

…Speaking of new bosses, Central New York Assemblyman Will Barclay has been named the new leader of the Assembly Republican Conference. The position has waned in recent years as the Assembly is comprised of just 42 Republicans, giving the Assembly Democrats the ability to override vetoes without Republican support. Still, the Minority Leader has a high-profile bully pulpit. In addition, Republicans can delay passage of bills by forcing debate on proposed legislation. In the past, the Assemblyman has been a sharp critic of credit unions.

January 8, 2020 at 9:05 am Leave a comment

CUNA: Scrap the CFPB and Pick Up the Pieces

Now that the Supreme Court has agreed to rule on the constitutionality of the single-director leadership structure at the Consumer Financial Protection Bureau, CUNA has submitted a provocative friend of the court brief. In this brief, CUNA argues that in the event the leadership structure is found to be unconstitutional, the court should invalidate the entire CFPB, but allow Congress six months to address the identified defects.

Just in case your second cup of coffee hasn’t quite kicked in yet, remember that the CFPB is unique among financial regulators in that it is overseen by a single director who can only be removed for cause by the president. Since the CFPB’s budget is not subject to congressional appropriations, the director exercises enormous power in comparison to any other federal regulator. Opponents of the CFPB have seized on this structure to challenge its constitutionality.

Most prominently, the Court of Appeals for the District of Columbia, in a decision by then-Judge Kavanaugh, ruled that the Bureau was in fact unconstitutional. He also ruled that this defect could be remedied by simply interpreting the statute as making the director subject to removal by the president with or without cause. Even though this decision was eventually reversed by the entire Court of Appeals, Kavanaugh’s decision has provided a template for other plaintiffs challenging the CFPB’s authority.

The Supreme Court will be deciding this issue when it hears Seila Law LLC v. CFPB. In its brief, CUNA argues that while it agrees that the Bureau’s structure is unconstitutional, the Kavanaugh solution is not appropriate, as Congress never intended the Bureau to be an extension of executive power. The solution, CUNA argues, should instead be to send this back to Congress to develop a bipartisan oversight board analogous to that of NCUA and other financial regulators. This argument is consistent with the position that the industry has taken in pushing for legislation in this area.

Of course, this raises the very real possibility that Congress won’t be able to reach a consensus on this issue. Remember, the court’s decision is going to be coming out in June in the midst of the most divisive and important election cycle since the Civil War. Furthermore, if Congress hasn’t come up with a plan on how to restructure the GSEs over the past decade, realistically, it won’t be able to deal with this issue swiftly.

So here is the question I ask my faithful readers to ponder in the coming days. Particularly, if you want to get a good debate going over Christmas dinner – would credit unions be better off with the CFPB and all its regulations done away with, or given the amount of resources that have already been committed to implementing and understanding thousands of pages of mortgage rules, would they be better off if the CFPB, with all its defects, remained intact? I for one believe that, for purely practical reasons, Justice Kavanaugh’s solution is the only feasible one.

CFPB Issues Important Guidance on Disclosure of Construction Loans

The entire framework of the TRID disclosure regime is based on the assumption that Dick and Jane go look for a house, sign a contract, get a mortgage, schedule a closing, and move in surrounded by a white picket fence to live happily ever after. In reality, a sizable number of home buyers want to build their house from the ground up. Although construction loans are covered by TRID disclosure requirements, grafting these requirements onto construction loans is, to put it mildly, perplexing.

Consequently, I am glad to announce that, just in time for the holidays, the CFPB has issued not one but two separate guidance’s to aid those of us who have been asked to advise on how best to disclose construction loans consistent with federal law.

I’ll have more to say on this in a future blog, I’m sure you can’t wait. I know I can’t.

December 19, 2019 at 9:17 am Leave a comment

A Thursday Morning Hodgepodge

Believe it or not, Christmas is only a week and a half away. Today’s news has me thinking that a lot of policymakers want to clean off their desks before they take their long winter naps.

NCUA to Consider RBC Compliance Extension

The NCUA Board holds its last meeting of the year today. Among the issues to be discussed is a final rule on risk-based capital. In July, NCUA proposed a second extension of its risk-based capital rule to January 2022. During this time, the NCUA Board will be further analyzing additional changes to the RBC rule, as well as considering the extent to which supplemental capital could be used to satisfy RBC requirements. This further delay is an addition to the NCUA’s earlier decision to raise the threshold level for RBC compliance from $100 million to $500 million. Why doesn’t NCUA just admit that the whole RBC idea was fatally flawed and scrap the whole thing?

CFPB Director Looks Back on First Year in Office

CFPB’s Director Kathy Kraninger used an opportunity before the National Association of Attorneys General to reflect on her first year and comment on some pending big-ticket items. She indicated that while her mind is still open to suggestions, the CFPB is taking a serious look at changing the payday lender regulations finalized in the closing days of the Cordray reign by scrapping the requirement that payday loans be subject to underwriting requirements. Keeping in mind that this is one man’s opinion, for you fans of the Cordray administration, you have to admit that Kraninger has been a refreshing change from the interim oversight of her former boss Mick Mulvaney. Let’s face it; it was always strange to have someone vehemently opposed to a Bureau to be in charge of it. As for us more moderate types, Kraninger has struck the appropriate balance between enforcement, regulation and common sense, which means that she hasn’t ignored the potentially negative impacts of well-intended regulations. I’m sure she is ecstatic to know that I have given her my stamp of approval.

NY Senate Republicans Dropping Like Flies

It was Watergate that condemned New York’s Assembly Republicans to permanent minority status, and it increasingly appears as if the election of Donald Trump will be dagger in the heart of the New York State Senate Republicans, at least if they ever thought they would have a chance of once again being in the majority. As of my last count, we are now up to as many as eight Republicans who have announced they either will not run for reelection or seek other seats. This is an amazing turnaround for an institution which not long ago was the best place for a Republican to be, short of statewide office.

The latest longtime senator to announce his departure is none other than Joe Robach of Rochester. He joins North Country’s Betty Little, Western New York Senator Michael Razenhofer and the Capital Region’s Joe Amedore. In addition, freshman Central New York Senator Bob Antonacci jumped ship and secured a judgeship. Further, Senators Chris Jacobs and Rob Ortt are both running for Congress. Remember folks, this is on top of the fact that the GOP is already down to 23 senators. The recent wave of retirements raises the real possibility that the Senate democrats will join the Assembly democrats in having supermajority control in both chambers. This may not seem like a big deal, but it gives the legislative leaders that much more leverage in negotiating against governors when they know they can override vetoes in a worst-case scenario.

December 12, 2019 at 8:55 am Leave a comment

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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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