Posts filed under ‘Political’

Banker Hypocrisy At Its Worst

Image result for bankerI love bankers and banker lobbyists. Some of my best friends are banker lobbyists but the display of hypocrisy that will no doubt be on display at the State Capitol in the coming days is a ritual of which I am tiring.

Assembly bill 6949-B has been put on the Assembly’s debate list, which means that it can be debated and voted on notwithstanding the objections of opponents. The bill would allow localities to participate in Banking Development Districts with credit unions. For more than two decades the BDD program has allowed localities in need of banking services to jointly apply with interested financial institutions for designation as a BDD. In return for opening up a branch in the area, the financial institution receives incentives including low-interest deposits from the comptroller. Despite these incentives, banks have been less than enthusiastic in embracing the program and last year the Governor proposed extending it to credit unions. Nevertheless, the word on the street is that banking lobbyist were scurrying around legislative offices yesterday with memos in opposition to this bill. Don’t get me wrong, I’m not the slightest bit surprised but at some point enough is enough.

I haven’t seen this year’s version but I’m sure it’s the same old song, maybe with a slightly different tune. Credit unions don’t pay taxes – they do, just not corporate taxes – because they are after all not for profit corporations. That’s right, credit unions pay a host of taxes like any other employer in New York State.

I love the fact that bankers become so concerned about tax policy as soon as credit unions enter the conversation. Today’s Wall Street Journal is pointing out that some of the nation’s largest banks, including Wells Fargo, which has done so much to earn the public’s trust over the last couple of years, are among the big winners of the so-called tax reform. I would love to know how much of this tax windfall – $2.5 billion and counting – is going to be returned to consumers in the form of cheaper products and more compliance services, but I’m not holding my breath for an answer.

But having heard the same old arguments for almost two decades now, first in the legislature as a staffer and now as a member of the Credit Union Association, there’s only so much time we should be wasting on responding to tired old arguments. BDD districts should be extended to credit unions because they are potentially innovative economic development tools that help people in areas in need of investment. What I’ve always liked most about the program is that it reflects a three-way consensus between local, financial and state stake holders about the best way to bring needed financial services to an area in need.

In my last blog, I talked about the Lower East Side People’s Federal Credit Union. Even though it was started precisely to serve the areas that banks have historically shied away from serving, it cannot participate in this program. Why? Because the banking industry is increasingly devoid of a positive legislative agenda and instead is obsessed with zero-sum politics in which if credit unions lose, they win, consumers be damned. In fact, if anyone reading this blog today is approached by a banking lobbyist explaining why this bill should be opposed, please ask that lobbyist what positive, constructive proposals the banking community has to make financial services better for New York State consumers?

Of course, the banking lobbyists are just doing their job. It’s time for legislators to stop hiding behind their increasingly hollow rhetoric and do what’s right for the New York State consumer.

 

April 18, 2018 at 9:06 am 1 comment

Another CU Pioneer Stepping Aside

Linda Levy is about to become a key part of credit union history, at least for New York State institutions. As the New York Times reported in a profile over the weekend, she’s retiring as CEO from the credit union she started in 1982. In direct response to a lack of banking services in certain parts of the Lower East Side in Manhattan.

Today the credit union is $54 million assets and hasn’t lost one bit of its fighting spirit. It recently filed its own lawsuit, since dismissed, contending that President Trump acted illegally in appointing Mick Mulvaney as the acting head of the CFPB. It actively aided and encouraged the Occupy Wall Street movement, even though it meant losing a $5,000 donation from Goldman Sachs.

Her most important accomplishment though is the simple existence of the credit union. It was created in direct response to Manufacturers Hanover bank’s decision to close down a branch. The credit union was created to fill the void. The example it set provided a model for New York state to follow when it implemented the Banking Development District program which provides incentives to banks to set up branches in areas in need of banking services. Ironically, as a credit union, Lower East Side is not eligible to participate in the program, an oversight which continues to be a black mark on New York State’s banking development policies to this day.

Let’s face it, the environment in which credit unions are operating is changing. Increasingly, we seem to be living in a go big or go home environment, in which any credit union with less than $500 million in assets is struggling to grow.

It is also fair to say that not all credit unions think that supporting the CFPB or movements such as Occupy Wall Street are in the long-term interest of consumers. But let’s not ever lose sight of the fact that even as credit unions grow, they owe their existence to institutions from all across the state and country that were started to help the little guy. Today that little guy is still not all that attractive a customer for the largest banks that now dominate the financial landscape.

To be absolutely clear, you don’t have to be small to be a true credit union and there are many credit unions that both grow and help in ways that banks do not. After all, increased resources mean more can be done, ranging from helping out small businesses to providing fair, short-term loans. But let’s face it, one of the great challenges and responsibilities of the credit union movement is to retain the spirit and commitment of the Linda Levy’s of the world, even as it competes in an ever-changing and ever more competitive financial environment. It is that spirit, not a Federal tax break, which ultimately sustains the credit union movement.

Are Medallions Tied In With The Cohen Investigation?

Unless you spend your free time in a bomb shelter, a mile under the Earth’s surface somewhere in North Dakota, you know that Federal prosecutors took the unusual and dramatic step last week of obtaining a search warrant for the office of President Trump’s long time lawyer, Michael Cohen. My brother tipped me off to some news stories over the weekend reporting that the search warrants executed last Monday included a request for documents related to Cohen’s ownership of taxi medallion loans. For example, CNN is reporting that “Cohen has held numerous New York City medallions in his portfolio according to records, where the value has been diminished since the onset of Uber and Lyft.” A similar report was made by NPR over the weekend.

Is it only a matter of time before the medallion loans become the subject of cable news rants? Stay tuned.

April 16, 2018 at 9:31 am 1 comment

5 Things You Need To Know About Last Week

Increasingly it seems that there’s no down time for credit union news anymore, which is good if you’re a blogger but bad if you are a blogger who took an Easter break. So here in order of descending importance is a look back at some of the key developments that occurred last week with the understanding that I may expand further on these developments in the coming weeks.

DC Federal Court Strikes Down Key Provisions of NCUA’s Community Membership Rules

I know you’ve already heard about this one but considering that it takes about a week to read the decision, there’s still much more that needs to be said about Am. Bankers Ass’n v. Nat’l Credit Union Admin., No. CV 16-2394 (DLF), 2018 WL 1542049, (D.D.C. Mar. 29, 2018). Suffice it to say, that in its ruling the court held that NCUA overstepped its authority in defining a local community as any portion of a combined statistical area that contains no more than 2.5 million people. The court also ruled that the Board did not act rationally in defining a rural district as an area containing up to one million people. The court put a monkey wrench in many credit union expansion plans. Without getting this decision overturned or at least modified on appeal, community based credit unions will find it increasingly difficult to grow to meet member needs. On the bright side, portions of the rule were upheld and there may be a path forward for credit unions and NCUA, even if this decision is not reversed.

Prodigal Son Returns

When I left for vacation, an eight member democratic faction in the state Senate provided an independent power base at the state Capitol. When I came back, the Independent Democratic Caucus was no more. What’s more, Governor Cuomo was vociferously campaigning for Democrats in two upcoming special elections. The practical impact of this development was seen immediately as Senate Majority Leader John Flanagan replaced Jesse Hamilton as the Chair of the Senate Banks Committee with Long Island Republican Elaine Phillips. Remember, for the Democrats to take control of the Senate, they have to win two upcoming special elections in seats vacated by Democrats and convince Democrat Simcha Felder to caucus with them instead of the Republicans.

State Budget Impact

When the legislator finally got the budget deal done on Saturday, it contained a few provisions that will impact credit unions and their operations. S. 7508-C PART QQQQ creates a revolving loan fund for community development financial institution.

The bill imposed a $2.75 charge on ride sharing vehicles in Manhattan. A charge of $2.50 is imposed on medallion taxis. Why does this matter? Because critics of the approach argue that ride sharing vehicles are much more able to absorb the cost of the fee increase than are their medallion counterparts, making it even more difficult for the medallion industry to remain competitive.

This is the way the plan is described in the Governor’s budget press release: “Enact a $2.75 Surcharge on For-Hire Vehicles: To establish a long-term funding stream for the MTA and to reduce motor vehicle congestion, the FY 2019 Budget enacts a surcharge on for-hire vehicles below 96th Street. The surcharge is $2.75 for for-hire vehicles, $2.50 for yellow cabs, and $0.75 for pooled trips. This funding will go into an MTA “lock box,” and will provide long-term funding to sustain for the Subway Action Plan, outer borough transit improvements, as well as a NYC general transportation account.”

 Beneficial Owner Q&A Release

Regulations requiring credit unions and banks to identify the beneficial owners of accounts must be complied with by May 11, 2018. Although many credit unions may not deal with the type of sophisticated entities that this regulation is designed to address, you still need policies and procedures in place to know who the beneficial owner of an account is. You should definitely take a look at this Q&A if you haven’t done so already.

State Treasurers Want Cannabis Meeting With Sessions

With confusion continuing to reign regarding the legal status of marijuana proceeds in states that have legalized its use, a group of state treasurers wrote a letter last Thursday to Attorney General Jeff Sessions requesting a meeting with him to discuss this issue. Since withdrawing the Cole Memorandum in November, the AG has imposed radio silence on how financial institutions should deal with this issue.

 

 

April 9, 2018 at 8:59 am Leave a comment

Citibank Is Wrong To Take Stand On Gun Debate

On Saturday, as kids across the country advocated for gun control measures, Citibank became the first major financial institution in the country to announce that it was placing restrictions on gun retailers with whom it does business. In a blog accompanying the announcement, it explained that its new policy will require retailers to refuse to sell firearms to someone who hasn’t passed a background check, restrict the sale of firearms for individuals under 21 years of age, and not sell bump stocks or high-capacity magazines. Citibank has gotten positive reviews for its actions and even seen an uptick in deposits. I’m giving the bank the benefit of the doubt and saying it’s doing the wrong thing for the right reasons. Its decision to coerce gun retailers will make providing needed services more difficult for all financial institutions, including credit unions, while doing little to achieve needed gun control reforms.

First, let me explain where I am coming from. I actually agree with every policy Citibank is supporting and would like to see even more restrictions on gun use in this country. But the job of a credit union or bank is tough enough without taking sides on the hot button issues of the day. How many of the people applauding Citibank’s actions would applaud if Citibank decided that it was not providing banking services to anyone associated with the NFL so long as some of its players boycott the National Anthem? Perhaps Citibank should take a stand on abortion or even merchants who sell cereal loaded with junk.

My point is that the primary purpose of banking is to provide people and businesses with a safe place to put their money and take out loans; not to pass judgment on how they choose to make a living provided what they are doing is legal. Done properly, this is a noble calling. It helps people save their money and provides a ladder for upward mobility. Credit Unions have the especially unique responsibility of assisting people of modest means. But these worthwhile goals don’t give credit unions or any other financial institution a license to pass judgment on how our customers spend their money or grow their businesses provided that they are doing so legally and in a financially sound manner.

By taking a stand on such a high-profile issue, Citibank has opened the door to litmus test banking in which institutions will be pressured, not only to know their customers but to make sure that their customers only engage in activities that would be approved of at a dinner party in the Upper East Side of Manhattan. All financial institutions have just been put on a slippery slope that it will be almost impossible to get off.

Morelle To Run For Slaughter House Seat

Long-serving Democratic Assemblyman Joe Morelle, who represents the Rochester area, was greeted with a standing ovation as he entered the chamber yesterday following news that the second ranking member of the Democratic Leadership Team has announced he is a candidate to fill the vacancy caused by the recent death of Congresswoman Louise Slaughter. Morelle, who has been in the Assembly since 1990, has been the Majority Leader since 2013. A special election has not been called yet but at the very least a primary will have to be held. Either way, the winner will have to stand for reelection this November.

A special election would receive national attention. Slaughter survived a scare when she ran for reelection in 2014 and Republicans could view the 25th Congressional District as they head in to what promises to be a very tough battle to hold onto their majority in Congress.

 

 

March 27, 2018 at 9:15 am 1 comment

Three Things You Need To Know About Today

DC’s budget process is getting more like Albany’s by the day and trust me, in the long run that’s not a good thing. Instead of three men in the room, DC has four.

Last night, the Senate passed a $1.3 trillion omnibus spending bill, with the House expected to follow suit later today. I’m going to go out on a limb and say there is no one in the world who has read all 2,232 pages of the document. §538 of the bill, which you can find on page 240, includes language that bars the Department of Justice from interfering with medical marijuana in states where it is legal. Remember, while this is a help, it still does not address the conditions under which financial institutions are to be given access to the Federal Reserve System. I’ll give you more information on this tomorrow. It also includes a measure to authorize the National Flood Insurance Program through July. Stay tuned.

Fed Raises Interest Rates

With Gerome Powell at the helm for the first time as Chairman, the Federal Reserve’s Open Market Committee confirmed expectations by announcing that it was going to raise the federal funds rate by 1-1/2 to 1-3/4%.

Remember, the debate is between those who feel that the greatest risk the economy is inflation caused by the tax cuts and those who feel that for all its strengths the economy still has room to grow. I’ve been reading the Financial Press this morning and the most important news to come out of the meeting is the indication that Powell is in the first camp. At least for now. This means that the Fed will be aggressively raising interest rates in the coming year.

Mark Zuckerberg To The World: It Is What It Is

I’ll have more about this tomorrow but the more I read about the Facebook data breach – yes, it is a data breach – and watch it’s lackluster and bungled response, the more I realize that it’s time to get an adult in the room. For almost two decades now, we have been genuflecting at the altar of tech valley wunderkinds, the boy geniuses who could do no wrong. But how confident can we be in the leadership of the most powerful company in the world if it’s leader responds to crisis by doing the CEO equivalent of locking himself in his dorm room and pulling a couple of all-nighters? Facebook’s problems will impact credit unions of all shapes and sizes.

March 22, 2018 at 9:30 am Leave a comment

Commonsense Reform Bill Passes Senate

One of the best ways to judge a piece of legislation is by who opposes it. If opponents on both sides of an issue are dissatisfied, then that usually means that it is a moderate piece of common sense with broad support. By that measure, S2155 which passed the Senate yesterday with 67 votes – neither of which was cast by a New York senator – is exactly what the doctor ordered.

To its critics on the left who see any amendment to Dodd-Frank as a giveaway to the big banks, the bill turns its back on the lessons of the Great Recession. To its critics on the right, the bill doesn’t go far enough to take the chains off the banks that make the economy grow.

Both sides have a point and that means we’re on the right path. The bill is nothing more or less than a collection of sensibly targeted measures that will help small to medium sized credit unions and banks from some of Dodd-Frank’s mandates. To critics on the left, the part of the bill that has gotten the most attention in recent days is that it would raise the exemption threshold for some HMDA reporting requirements to institutions that make 500 or more mortgages a year. But the reality is that small institutions are not the ones responsible for the type of discrimination that HMDA is designed to monitor for. Plus, the inordinate amount of new reporting requirements really do impose a regulatory burden on small institutions.

As for the argument that this is a giveaway to the big banks, I’m shocked that this is the best they can do. The largest of the large guys are still subject to enhanced capital oversight, the oversight of the CFPB, and are still considered systemically important. As a matter of fact, I’m shocked that this is the best they can do in this environment.

Maybe it’s because I’m so desperate as an American to see the system working. This is nowhere near the type of radical reform that I think the system still needs but let’s not underestimate the value and importance of a bipartisan effort to help out credit unions community banks. It gives me hope that maybe, just maybe, the system isn’t dead yet. Let’s hope commonsense prevails in the House.

 

 

 

March 15, 2018 at 8:45 am Leave a comment

Two Bills Worth Knowing About

Bloomberg news is highlighting two bills passed by Congress yesterday that I think are worth knowing about.

First there is H.R. 1457. This bill would set a national standard for financial institutions, including credit unions that want to accept online account applications. The bill establishes a national standard for the acceptance of scanned driver’s license or identification card when individuals are applying for a banking product or to open an account. I actually thought that the acceptance of scanned personally identifiable information was no longer an issue but according to Bloomberg there are still some state laws that stand in the way of fully optimizing online account opening.

The second bill has absolutely nothing to do with credit unions but speaks volumes about how much the banking industry has evolved since the expansion of interstate banking. H.R. 1426 would create a new type of financial institution called a Covered Savings Association. These entities would be allowed to exercise many of the same powers of a nationally chartered bank without having to go through the formal charter conversion process.

Why is this bill more important than it seems? Go back a generation ago and there were fierce jurisdictional battles between community banks and savings associations on one side and national banks on the other. In fact, this tension was helpful to credit unions since it meant that banks had something to do other than think of ways of hurting our industry. Times have changed. We are fast approaching the point when credit unions and national banks are the only two financial charters left standing.

January 30, 2018 at 9:00 am Leave a comment

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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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