Posts filed under ‘Political’
New York State’s budget typically does not have a major impact on credit unions. This year is an exception. Among the Governor’s proposals is one authorizing financial institutions to impose transaction holds when they believe that individuals are being victimized by financial exploitation? The bill would have major operational implications for credit unions by giving them substantial new power and responsibility when dealing with suspected financial abuse.
Under the proposal financial institutions would be empowered to impose a transaction hold based on a good faith belief that exploitation of a vulnerable adult; may have occurred, may have been attempted or is being attempted. Interestingly the transaction holds can be placed not only on the vulnerable adults account, but also to accounts of which such person is a beneficiary, including trust and guardian accounts. Within a day of placing a transaction hold, institutions would have to report the transaction hold to Adult Protective Services and to “a law enforcement agency.” A vulnerable adult means an individual who, because of mental and/or physical impairment is potentially unable to manage his or her own resources or protect himself from financial exploitation. The Department of Financial Services would be authorized to develop a certification program, but it does not appear that training would be mandatory.
One of the key questions that I always have when analyzing a proposal like this one is how much protection financial institutions will have? After all a poorly drafted statute, no matter how well intended, could make a credit union subject to litigation for every bad financial decision made by an elderly or disabled individual. The only opinion I will offer about the draft proposal so far is that the liability protections should be strengthened.
The good news is the governor is proposing to shield institutions that impose transaction holds from criminal, civil and administrative liability for all good faith actions, including determinations not to apply a transaction hold on an account. The bad news is this protection only applies where there is a reasonable basis for such a determination. It also does not apply where an employee or financial institution acts recklessly or engages in intentional misconduct in making the determination, or the determination results from a conflict of interest.
As I have explained in previous blogs, the most unequivocal protection from liability that I have seen for credit unions is for the filing of suspicious activity reports. Comparing these protections to what NYS is proposing shows why more work has to be done if the ultimate goal is to create an environment in which institutions are confident that they can protect their vulnerable members without exposing themselves to liability.
This year’s Super Bowl pick
My Bet the Mortgage, Super Bowl pick, which is already recognized as acceptable supplemental capital for complex credit unions is…. Falcons 31 – New England 24. The Falcons use a ball control offense to keep the ball out of Brady’s hands and ultimately score a couple of late touchdowns.
There will be no blog on Monday as I am a celebrant of the new DASB, Day After Super Bowl holiday!
NCUA Details Extended Exam Cycle
In case you missed it, recently NCUA released a letter to credit unions detailing changes to its examination cycle for both federal and federally insured credit unions.
There hasn’t been much good news for state charters recently, let me tell you some. Unless your credit union meets any one of the following criteria you will receive an NCUA evaluation not less than every five years.
- Assets greater than $1 billion;
- Composite NCUA CAMEL code 4 or 5 with assets greater than $50 million; or
- Composite NCUA CAMEL code 3 with assets greater than $250 million
In addition, a working group is being formed to consider ways to further improve the examination process as it relates to state chartered credit unions. Any steps designed to decrease NCUA’s oversight of state charters are welcomed. As readers of this blog will know, yours truly has complained that NCUA has moved so aggressively to oversee the activities of these institutions that it has diminished the value of a state charter.
As for federal credit unions, they will be eligible for extended exam cycles that begin 14 to -20 months after the prior exam completion date. To be eligible for the extended cycle, a federal credit union must have:
- Assets less than $1 billion;
- CAMEL code 1 or 2, in both the composite rating and the management component rating;
- “Well capitalized” under prompt corrective action (PCA) regulations;
- No outstanding documents of resolution (DOR) items related to significant recordkeeping deficiencies; and
- Not operating under a formal or informal enforcement or administrative order, such as a cease and desist order (C&D), letter of understanding and agreement (LUA), preliminary warning letter (PWL), or a PCA directive
New Banking Chairs named
A new session triggers a game of political musical chairs as members jockey to take the helm of key committees. This year is no exception. There are two new faces that credit unions in New York State will be working with more closely over the next two years..
Senator Jessie Hamilton, the newest member of the IDC, representing the 20th Senate District in NYC, has taken the helm of the Senate Banks Committee. He replaces fellow IDC member, Senator Diane Savino, who is moving on be Vice-Chair of the powerful Senate Finance and Code Committees. Savino has been a good friend to credit unions and we wish her the best in her new assignments.
Over on the assembly side, Kenneth P. Zebrowski, was named Chair of the Banks Committee, replacing retired Assemblywomen, Annette Robinson. Zembrowski becomes the first Chairman of the Assembly Banks Committee from outside of the five boroughs in at least twenty years.
Senator Sessions: I’ll enforce Pot Laws
At his senate confirmation to be the US Attorney General, Alabama Senator Jeff Sessions strongly suggested that he would take a stronger stand against states with legal marijuana businesses then has the current justice department. According to this article , when Sessions was asked if he would continue the Obama Administration’s “don’t ask, don’t tell” policy (my characterization) on illegal drugs, the Senator responded “It’s not so much the attorney general’s job to decide what laws to enforce. We should do our job and enforce laws as effectively as we’re able,” said Sessions, adding that “Congress was entitled to change federal law if it so desired.”
Enjoy your day!
Yours truly is going on vacation starting tomorrow. I’m preparing for my feats of strength. so I wanted to give you a list of things to ponder in the event you need a break from all the merriment.
Your lucky number is… With a big assist from the inimitable Joan Lannon in our compliance department, I can now tell you that tucked away on the New York DFS website is the total number of residential real property mortgages originated in New York in 2015. The number is 212,646. As readers of this blog know, under the zombie property regulations, credit unions will use this number to find out whether they originated or serviced less than 3/10 of 1% of the total loans in the state during the calendar year of 2015. (This equates to 636 mortgages, but please do the calculations for your credit union). If your credit union did less than 636 in 2015, you are exempt from the property maintenance requirements of the regulation. You are not exempt from the obligation to report abandoned property to the state.
Are you ready for global warming? One of the goals of the Biggert-Waters Act was to introduce more private sector involvement into the federal flood insurance system. Comments are due on January 6 on a joint agency proposal which explains when “private flood insurance,’’ will satisfy federal flood insurance requirements. Since it is the lender who will be responsible for deciding if the borrower’s insurance is adequate, this is one to take a look at.
Cyber Security Regulations: A work in progress? Speaking of regulations, New York’s Department of Financial Services is still considering how best to implement its “first in the nation” cybersecurity regulations. Even if you are not from New York or you are a federal charter these are important to you. They will provide a template for other states that decide they can’t wait for the federal government to get its act together on this issue. We may seem some changes proposed, perhaps as early as next week.
UPDATE A friend, neighbor and blog reader just passed along this article indicating that the implementation of the regulation will be delayed.
How much is a pay raise worth? The last time the Legislature got a pay raise Governor Pataki got the legislature to approve charter schools. Everybody wants a pay raise before the end of the 2015-16 legislative Session. So with a week left in the year there is plenty of speculation about what, if anything, will be agreed to that would get legislators back in town next week. Stay tuned.
Eight is enough: Yesterday, both the Association and CUNA filed briefs with the U.S. Supreme Court in the Expressions Hair Design case. The case involves an appeal of a ruling by the Court of Appeals for the Second Circuit upholding Section 518 of the General Business Law. This law makes it illegal for merchants to charge more than the headline price for credit card purchases. Arguments are scheduled for January 10th.
Mama mia! Although some of us apparently believe in the fantasy of Fortress America, reality has a nasty way of intruding. International events impact your credit union’s bottom line. One of the biggest potential obstacles to growth in 2017 could be the Italian banking system, in particular, and the European banking industry, in general. Just a few hours ago the Italian Government approved a bailout of its oldest bank. In a worse-case scenario, Italy’s banking problems spread over Europe as politicians, spooked by the rise of nationalist parties, are unable to agree on a continent-wide response.
I will be back next year with my batteries recharged and one of the most fascinating periods of American history about to start. Until then, I’m signing off. Happy holidays and thanks for reading.
Among the many strange twists and turns that have taken place over the past two weeks, it is easy to overlook the ascendency of New York City as the center of the political universe, but that is exactly what has taken place.
Consider this: in the aftermath of a landslide Republican victory, New York City, which to many social conservatives deserves a place alongside Sodom and Gomorrah, and to many Trumpicans personifies elitist disregard for the little guy, is now home base of the most powerful politicians in America. Think of it, Donald Trump from Queens is going to be the President, Chuck Schumer from Brooklyn is now the defacto leader of the opposition as the leader of the Senate democrats, former NYC Mayor Rudolph Giuliani is rumored to be Trump’s choice as our Nation’s Secretary of State, and transplanted Brooklynite Bernie Sanders is the nation’s leading Socialist turned Democrat. How’s that for New York values, Ted Cruz?
You all know about Donald Trump’s rise to power, but the rise of Senator Schumer, while much more traditional, has some very intriguing twists and turns of its own that offer important clues as to how he will lead as Senate Minority Leader.
He started his political career in 1974 as a 23 year-old Assemblyman from Brooklyn with a knack for getting media attention and driving policy. As Newsday pointed out in this 2015 profile, there aren’t many freshmen who can get Assemblymen to agree on anything, but as a freshman he was able to get 39 of them to attend a press conference protesting education cuts. He successfully ran for a congressional seat in 1980. In Congress, he became known not only for his intelligence and attention to district concerns, but for his eagerness for the spotlight. Former Senate Majority Leader Bob Dole once said that the most dangerous place in Washington is the space between Chuck Schumer and a TV camera. In 1998, Schumer knocked off Al D’Amato, no easy task considering that D’Amato himself was a master political operative and also a long serving senator who always put state interests first.
The story gets especially interesting when, in 2000, Hillary Clinton successfully ran for NY’s open US Senate seat. There were more and more press reports speculating that Schumer was frustrated that even thought that he was the senior Senator from New York, next to Clinton his role was diminished.
This speculation came to a head when Schumer pulled off one of the great political power plays in NY history. Fresh off an easy re-election, he openly flirted with the idea of running for Governor. As reported by the New York Times “Top Democrats vigorously campaigned to keep him in Washington, promising him a spot on the powerful Finance Committee and persuading him to lead the Democratic Senatorial Campaign Committee through the midterm elections of 2006.”
This was the key moment in the Rise of Chuck. Nothing gets you friends quicker in politics than helping get someone elected. Plus, he had a close working relationship with Senator Reid who endorsed him as his chosen successor when he announced he was stepping down.
Through it all, the Senator has never lost his enthusiasm for constituent work or his love of the spotlight. His Sunday press conferences are a staple of local news and when my uncle, who had met the Senator while working on neighborhood crime fighting initiatives, retired from the NYPD, the Senator posted a tribute in the Congressional Record. Touches like this still matter. It’s why one former Republican I used to work with called him the best politician in New York.
Why does all this matter? For one thing if I had to come up with a political Moniker for the Senator it would be: “It’s the middle class stupid!” which makes him a natural ally of credit unions as evidenced by his support for MBL reform.
Secondly, no thanks to political or demographic trends, New York City will now be hosting its greatest fight since the Thriller in Manilla. Trump knows how to communicate and doesn’t back down from a fight, neither does Schumer, this should be a darn good show.
Now you know the rest of the story.
The next time someone tells you the more things change, the more they stay the same, remind them about the election of 2016. No one, including Donald Trump, knows precisely what all this means for credit unions, but there are some very intriguing possibilities.
- Mandate relief is a real possibility. One of the most conservative Congresses in history will now have a Republican president. The Democrats only picked up one Senate seat and although the House majority was trimmed, the flame thrower faction will see last night’s results, with some justification, as vindication of their scorched earth approach to governing. Without the threat of a veto, legislation to scale back the CFPB and provide mandate relief to smaller financial institutions may grow legs.
- CFPB will be in the cross hairs. When the United States Court of Appeals for the District of Columbia ruled that the CFPB’s director was an at-will servant of the President, credit unions were disappointed that the Court didn’t go further in invalidating the whole enterprise. Now that case has some real teeth. With anti-regulation Trump coming to town, the Bureau is effectively in limbo. Who do you thing his Director will be?
- What regulators give, they can take away. Expect every single controversial regulation and guidance, ranging from the exempt employee threshold to the accommodation of transgender employees, to get a second look.
Some New Old Faces Go to Washington
By the way, the newly emboldened majority in the House will include former NYS Assembly Republican Minority Leader John Faso (R) and Assemblywoman Caudia Tenney. Former Nassau County Executive Tom Suozzi (D) is back in the game, claiming NY’s third Congressional district. State Senator Adriano Espaillat easily won the seat vacated by the retiring Charlie Rangel.
Senate Republicans Holding On
On the state level, the results are almost as remarkable in their own way but there are still a couple of races in the Senate that are too close to call. As of right now it appears that reports of the demise of a Republican Senate have been greatly exaggerated. Here is the breakdown as reported by the Times Union this morning
Last night’s “results” left the Senate breakdown: 32 Republicans, 23 mainline Democrats, seven members of the Independent Democratic Conference, and one Simcah Felder (a Democrat who conferences with the Republicans).
If everything holds, with Felder, the GOP would have an outright majority of 33 members. “
The Democrats hold a slight lead in a Long Island race that is headed for a recount. The key point is that, even though the IDC has grown, it has done so at the expense of the Senate Democrat caucus. Furthermore, it’s possible that the Republicans will be in the majority without the IDC’s help.
Last week I highlighted financial issues in the Republican platform and with the Democrats set to kick off their reality TV show called the National Convention, today here are some of the intriguing tidbits in their platform.
If you just arrived from another planet, you would think that post offices, not credit unions or community banks, are the key counterweight to a banking industry run amok. The financial service offerings of post offices were mentioned in two separate parts of the party’s platform. In one section the Democrats want to help save the Post Office by, among other things, allowing them to offer basic financial services such as check cashing.
In another section dedicated to reigning in Wall Street and fixing our financial system, the platform explains that “Democrats believe that we need to give Americans affordable banking options, including by empowering the United States Postal Service to facilitate the delivery of basic banking services.”
Now, there are some who believe that expanding the authority of Post Offices is a win-win for the American taxpayer. They argue that since all communities have a post office, by allowing the service to provide banking services, perhaps including small dollar alternatives to pay-day loans, all Americans would be assured access. They also argue that the Postal Service has to be preserved even as it is made increasingly anachronistic by technology. Either way, it looks as if credit unions will be competing for political oxygen not only against banks, but the mailman.
Other highlights of the Democratic platform include: calling for an updated version of Glass-Steagall and “breaking up” too big to fail financial institutions that pose a systemic risk to our economy. Democrats implicitly called for the preservation of an active public role in housing. For instance, they support preservation of the 30 year fixed mortgage, “modernizing credit scoring, expanding access to housing counseling, defending and strengthening the Fair Housing Act and ensuring that regulators have a clear direction” and authority to enforce rules effectively.
Finally, while Republicans support major reform of the CFPB, Democrats view defending its current structure as an important means of defending the housing rights of Americans in general and minority communities in particular.
High Priced Mortgage Loan Appraisal Exemption Clarified
Pursuant to the Dodd-Frank Act, special appraisal requirements are mandated for higher-priced mortgage loans. Starting in January of 2014, the banking agencies, including the NCUA, exempted mortgage loans of $25,000 or less from these requirements. Regulations have been introduced to clarify the method by which this threshold is adjusted for inflation.
Party platforms are little more than vehicles to pander to a party’s most ardent supporters and provide little guidance as to what a presidential candidates would do if elected. This is particularly true in a year in which the Republican party has been Trumped. Nevertheless, they provide good guideposts of where our politics is headed. Here is a look at the Republican’s 2016 platform. I’ll do the same for the Democrats next week. A quick note to the Republicans: You have a lot of credit union supporters. Joint references to community banks AND credit unions would be nice to see.
The proposal that has gotten the most attention in the financial press this morning is the Republican call, apparently at Trump’s urging, to reinstate the Glass-Steagall Act of 1933 which put up a firewall between investment and consumer banking until it was repealed in 1999 at the urging of the Clinton administration. It means that both the Trump Wing of the Republican Party-whatever that is-and the Sandernista’s on the Left of the Democrats both firmly believe that not enough has been done to reign in banking excesses in the aftermath of the Great Recession. They are correct.
This is shrewd politics and good policy. Its good politics because it gives Trump a wedge issue with which to further alienate Sanders supporters from Hilary Clinton. As Trump’s campaign manager explained in a press conference yesterday “We believe that the Obama-Clinton years have passed legislation that has been favorable to the big banks, which is one of the reasons why you see all of the Wall Street money going to her.”
Good Policy? One of the biggest reactions I get from this blog is when I point out that any true free market conservative should be in favor of breaking up the big banks. If a bank is too big to fail than it is too big. The guarantee of a government bailout is an indirect subsidy to the largest banks that isn’t extended to community banks or credit unions.
Among the other highlights:
–It calls for scaling back the federal role in the housing market coupled with “clear and prudent underwriting standards and guidelines on predatory lending and acceptable lending practices.” Interestingly, it doesn’t call for the elimination of Fannie and Freddie but says that the “utility” of both should be “reconsidered” as part of housing reform.
–The platform complains that over the last century too much power has been handed to bureaucrats. It calls on Congress “to begin reclaiming its constitutional powers from the bureaucratic state by requiring that major new federal regulations be approved by Congress before they can take effect.”
–Not surprisingly, it colorfully describes the Dodd-Frank Act as the “ the Democrats’ legislative Godzilla,” that “ is crushing small and community banks and other lenders.”