Posts filed under ‘Political’

The Good The Bad and The Ugly of NYs Legislative Session, part 1

NY’s Legislative Recap, Part 1

On Saturday morning the Assembly gaveled out putting an unofficial end to another New York State legislative session.  With the caveat that the session never really comes to an official end, except for a couple of seconds in January, here is my first look at some of the key developments that will impact your credit union and/or the industry. 

The Political Environment

This was the year of redistricting, which means that an inherently political process becomes even more political.  As a result of a Court of Appeals decision striking down the Congressional and State Senate maps for violating new provisions of the State Constitution, we still don’t know what Congresspersons and State Senators will be running in which districts this November.  Primaries for these seats are now scheduled for August 23rd.  In contrast, we were recently chatting about legislation with an Assemblywoman who was preparing to campaign later that day for her June 28th primary.  Assembly districts were not thrown out.  All this took place as Governor Hochul navigated her first session since taking over for former Governor Cuomo.  She is seeking a full term in November.  Against this backdrop, here are some of the key legislative developments.  Part 2 will be tomorrow.

More Progress on Public Deposits

Municipal Deposits – S670 Sanders

For the first time in decades, a bill which would authorize municipalities to place their deposits in credit unions passed the Senate.  While we will have to get the Senate to repass the bill next year, and get the Assembly to go along, this is more evidence that things are trending in the right direction.  Over the last few years we have passed legislation permitting credit unions to accept public funds as part of their participation in Banking Development Districts and receive subsidies for certain types of small business loans under the Excelsior Linked Deposit program.  Incidentally, all these votes mean that we have a record of who’s with us and who’s against us.

Mortgage Foreclosure and Defense

The legislature continues to aggressively examine New York’s mortgage lending process.  For my money, the most problematic bill that passed this year was S5473-D Sanders / A7737-B Weinstein.  Although the bill is being sold as a means of preventing putative abuses in New York’s foreclosure process, in reality it would create a hyper-technical foreclosure process that will retroactively allow hundreds, if not thousands, of people to gain clear title to houses they cannot afford.  New York already has the longest foreclosure process in the country and this bill would simply make things worse.

If this bill becomes law, credit unions with delinquent mortgage loans may have to dramatically increase their loan loss provisions. The bill has not yet been sent to the Governor and we continue to join with other industry stakeholders in opposing this bill.

As for some good news, the legislature did not pass bill S2143A Kavanagh / A2428A Dinowitz, which would create a private right of action, replete with treble damages, against mortgage servicers who commit even technical violations of Part 419, which is New York’s mortgage servicer regulation.  This bill raises a host of technical and policy issues which we will continue to address in the months ahead. 

State Level Antitrust Legislation

As I discussed in this post, the Legislature seriously considered a measure  S933-A Gianaris / A1812-A Dinowitz which would impose a state level European style antitrust framework.  The new framework would impact all businesses including credit unions.  Among the concerns we have about the bill is that it would make credit unions vulnerable to class action lawsuits for providing services in underserved areas and make any type of merger more expensive and time consuming by duplicating federal law.  This bill passed the Senate but fortunately never gained traction in the Assembly. 

Stay tuned.  My recap will continue tomorrow.

June 8, 2022 at 10:08 am Leave a comment

New York Court Invalidates Congressional and Legislative Districts

In a decision which could have a direct and substantial impact on the political environment in which credit unions operate, not only in New York State but around the country, New York’s highest court invalidated a Congressional map which would have favored Democrats to pick up at least three seats, and a state Senate map which was the first drawn by Senate Democrats since the modern redistricting process started in the 1960s and would have helped them maintain their super-majority

In the decision, the Court of Appeals not only invalidated the new maps but put a special master in charge of developing an alternative.  The Court concluded that there was insufficient time to allow the Legislature to redress the situation.  To put it nicely, the decision scrambles the political timeline.  Currently, primaries are scheduled to take place on June 28th, but with members not knowing precisely what districts they will be running in, it looks like New York is headed for a frenzy of political activity over the summer. 

This was the first redistricting cycle following amendments to the state constitution in which a bi-partisan Independent Redistricting Commission (IRC) was charged with drawing a map to be submitted to the legislature for its approval.  Under the process outlined in the Constitution, the IRC was supposed to make at least two attempts at coming up with a single plan for submission to the legislature.  The IRC deadlocked however, and its only submission to the Legislature was a set of competing maps.  State law now also mandates that maps not be politically gerrymandered. 

The Court of Appeals ruled that the maps approved by the Legislature failed both tests.  “Through the 2014 amendments, the People of this state adopted substantial redistricting reforms aimed at ensuring that the starting point for redistricting legislation would be district lines proffered by a bipartisan commission following significant public participation, thereby ensuring each political party and all interested persons a voice in the composition of those lines. We decline to render the constitutional IRC process inconsequential…”.

While this is a big deal, remember that we won’t know its precise impact until Election Day and New York is still a state with an overwhelming Democratic enrollment edge. 

April 28, 2022 at 9:35 am Leave a comment

Getting Ready For The Legislature’s Stretch Run

Yours truly is back from his Carolina vacation and has caught up with enough e-mail to finally post again.  While there is a lot I want to get off my chest – there is only so much my wife wants to hear about the banking industry during an eight-hour car ride – I think I will start with a description of some of the key legislative and regulatory issues that will be impacting New York state credit unions in the coming weeks. 

Not only is this an election year, but it is an election year following the redrawing of the election map, meaning that the legislature will want to get out of town as quickly as possible, especially with primaries scheduled for June. 

One of the most important issues we are dealing with is a bill that would retroactively impose strict new requirements on lenders foreclosing on property (S5473D Sanders).  As many of our members have already explained to their representatives during our state GAC, as currently drafted, the retroactive application of this bill and the ambiguity regarding the right of lenders and borrowers to negotiate modifications without running out of time to foreclose on property will actually make it more difficult to work with delinquent borrowers.

We are also continuing to advocate for changes to a proposed data portability and privacy bill which does not currently exempt financial institutions (S6701A Thomas / A680B Rosenthal) as well as continuing to express a strong opposition to state level anti-trust legislation (S933A Gianaris) which could negatively impact the ability of credit unions to help provide communities banking services, particularly in underserved areas. 

All this is taking place as New York’s highest court hears an appeal of a case challenging the legality of New York’s redrawn Congressional map which could allow Democrats to pick up four additional seats as they struggle to keep their majority.  Expect a decision to come down shortly.

As for the federal level, there is an interesting article in today’s WSJ reporting that privacy legislation may finally be getting traction in Congress.  This is potentially good news, provided the legislation does not impose additional requirements on credit unions and the legislation preempts state law.  But I still remain skeptical that Congress will be able to get legislation done this year.  Hopefully, I am wrong.

On the regulatory front, we are still waiting to see what will come out of the CFPB’s initiative against so-called “junk fees”.  The president of the American Bankers Association has already taken to publicly accusing the Bureau of going rouge.  My bet is that we are going to be hearing a lot about overdraft fees in the coming months. 

Last, but not least, let’s hope that the NCUA is going to be following up on its reach-out to credit unions by providing additional guidance as credit unions begin to explore the banking issues raised by distributed-ledger technologies and cyber currencies.  On May 11th yours truly will be discussing the state of regulation in this area and how it is going to impact your credit union as part of the Southern Tier’s Spring Chapter Event in Binghamton.  I noticed it’s at an Irish pub, so let’s share a half-and-half as we ruminate on how technology is once again upending the way banking is done.

Full disclosure, my wife and kids won’t be attending.  They already heard enough about how the NCUA needs to move more quickly and provide additional guidance in this area.  It was one of my favorite topics as we drove around North Carolina.

April 27, 2022 at 9:57 am Leave a comment

Do All Financial Institutions Have A Role To Play In Combating Climate Change?

Of course they do, but that’s not the appropriate question that regulators should be asking themselves. The real question is, whether or not financial regulators should mandate if how and when credit unions choose to address these challenges? My answer to this question is that credit unions should be left to address climate change in a way which best reflects a given institutions resources, risk profile, and membership base.  

As luck would have it, I’m not the only one who feels this way. Earlier this week the FDIC released a draft of the principles it expects bankers to consider when addressing climate change issues. Crucially the proposed guidance only applies to institutions that have $100 billion or more in assets (yes, that’s billion with a B, Dr. Evil).

In a statement accompanying the proposal, FDIC chairman Martin J. Gruenberg explains that “all financial institutions, regardless of size, complexity, or business model, are subject to climate-related financial risks.  However, smaller financial institutions, especially community banks, may lack the financial resources and expertise necessary to effectively identify and measure climate-related financial risks.” 

What is true for community banks is certainly true for credit unions. After all, the small handful of institutions that will be subject to the FDIC’s framework, hold more assets then the entire credit union industry. This approach is similar to one taken by NCUA board members Hood and Hampton, who have stressed that at this point, individual credit unions are best positioned to respond to climate change without prodding by regulators. 

What I like so much about the FDIC’s statement is that it underscores that you don’t have to be a climate change denier to recognize that imposing specific requirements on many financial institutions at this time would impose clear burdens without resulting in any clear benefits. Simply put, we are still years away from cost effectively identifying the costs associated with climate change on a micro level and integrating these costs into specific financial products. For example, without access to the most sophisticated computer modeling, can anyone really predict how many thirty-year mortgages are not appropriately priced given the risks posed by climate change in specific geographical areas? Imagine how much Fiserv would charge for adding this on to your core processer?

And even if we had cost effective technology in place, there are some complicated legal and policy tradeoffs that have to be considered. Most importantly there is no shortage of research indicating that the effects of climate change disproportionality impacts low-income communities. What is the best way to address climate change while at the same time ensuring that low-income communities have access to cost effective housing and basic financial services and products?

April Fool’s Day Is No Joke for the Legislature

The legislature was scheduled to have next week off, but those plans were thrown into disarray yesterday.  First, the Governor and the Legislature were unable to agree on a budget before the start of the fiscal year.  Then, in a development with national implications, a state court has invalidated New York’s new congressional maps and state legislative districts on the grounds that they violate the state constitutional amendments passed in 2014 which were designed to prevent gerrymandering.  This case is going to be appealed but it means that efforts to collect petitions and start campaigning in all those newly configured districts are on hold. 

April 1, 2022 at 9:16 am 1 comment

The Single Biggest HMDA Mistake Made By Credit Unions

It’s that time of year again when we not only find out whether there will be six more weeks of winter but we get last second warnings from regulators reminding us that it is time for that yearly ritual of submitting HMDA data to the CFPB.  Based on the calls to the Association’s Compliance Hotline, it is my ever so humble opinion that the biggest mistake many credit unions make is that they comply with HMDA even though they don’t have to.  This is like going to the dentist for the heck of it.

Simply put, your credit union only has to comply with HMDA if ALL of the following criteria apply:

1.    Your credit union’s total assets exceeded $50 million as of December 31, 2021.  Remember, this threshold is annually adjusted and because of inflation, there was a substantial increase of over 4% this year;

2.    Your credit union had a home or branch office in a Metropolitan Statistical Area on December 31, 2021.  This is one of the most common criteria credit unions overlook when deciding whether or not to comply with Regulation C;

3.    Your credit union originated at least one home purchase loan (other than temporary financing such as a construction loan) or refinanced a home purchase loan, secured by a first lien on a one-to-four unit dwelling during 2021; and

4.    Your credit union originated at least 100 covered closed-end mortgage loans in each of the two preceding calendar years (2020 and 2021) or at least 200 covered open-end lines of credit in each of the two preceding calendar years (2020 and 2021).  This is the newest confusing twist brought about by the inclusion of open-end lines of credit as independent triggering criteria for HMDA compliance.   

For those of you for whom HMDA does apply, in addition to this memo from the NCUA, two guides that I always utilize are the Federal Financial Institutions Examination Council’s “A Guide to HMDA Reporting Getting It Right!”  and the CFPB’s “Small Entity Compliance Guide for Regulation C”.  Remember the deadline is fast approaching.

State Lines Drawn

In a recent blog post, I chatted about some of the changes to the Congressional map being passed by the New York State Legislature this week.  I haven’t had a chance to do a deep dive yet on the state level, but here is an article describing some of the changes in store for the State Senate.  Most importantly, two more Senate seats are created in the City, which will provide a huge buffer for the Democratic majority for decades to come.  

February 3, 2022 at 9:41 am Leave a comment

Why Redistricting Matters To You

As early as tomorrow, the legislature may vote on a bill to reconfigure state legislative and congressional districts in New York in response to population changes that have taken place over the last decade.  Because of New York’s slowing population growth, the Congressional delegation, which is currently comprised of eight Republicans and nineteen Democrats will be reduced by one. 

For political junkies this is the ultimate political blood sport.  But even if you have the good sense to not be addicted to politics, the vote by the Legislature tomorrow will have a profound impact on the environment in which your credit union operates over the next decade.  In fact, more so than other years, New York’s redistricting plan has important federal implications. 

Most importantly, as things currently stand, Democrats hold a ten seat majority in the House of Representatives, with one vacancy.  In other words, every seat is crucial, particularly heading into an election year where the Republicans are poised to make big gains. 

New York is one of the states where the Democrats are best positioned to draw maps to mitigate some of these losses.  This is particularly true since this is the first time in decades that Democrats hold majorities in the Assembly and the Senate and can work with a Democratic Governor.  If press reports are accurate, it appears that the Democrats are going to try and squeeze out three additional seats for their side.

Right now, the 1st District on the east end of Long Island is held by Republican Lee Zeldin, who is running for Governor.  The new district would stretch much farther out into the island giving Democrats an enrollment advantage in a district that went solidly for President Donald Trump in 2020.

The 11th District, based on Staten Island, has been one of the most competitive over the last decade.  But whereas its current center of gravity is the Republican enclave of Staten Island, the new District would encompass much more of Brooklyn which is dominated by Democrats.  It appears that the seat might be set for a rematch between former Democrat Max Rose and current Rep. Nicole Malliotakis who beat Rose in the last election. 

Central New York doesn’t miss out on the fun.  The 22nd Congressional seat, which has also been one of the most highly contested in the nation and is currently held by Republican Claudia Tenney, who reclaimed the seat from Democrat Anthony Brindisi, is in the words of one political analyst, “cannibalized”.  Its remnants strengthen Congressman Anthony Delgado (NY-19) who represents one of the most geographically diverse districts in the state.

Although the federal implications of this round of redistricting are getting most of the attention, it also marks a crucial point for the New York State Legislature.  If you’re wondering how the Republicans were able to hold onto power in the state Senate for decades, even as the Democrat enrollment edge grew, the simple reason is redistricting where the law gives state legislatures even more flexibility in drawing new lines than they have when it comes to creating Congressional districts.  Remember, right now Senate Democrats hold a veto proof majority of 43-20.  It will be interesting to see how the redrawn maps can help Democrats in holding on to that majority.  Recent results from Long Island portend a tough year for suburban Democrats. 

None of these match ups guarantee Democrat victories, but redistricting has its biggest impact in the first round of elections, after maps are redrawn.  Besides, at the very least, the new maps mean that many of you will have a new set of representatives to introduce yourselves to in the coming months.

February 1, 2022 at 10:16 am Leave a comment

Meet the New Boss

Yesterday, the New York State Senate Finance Committee squeezed in time before it begins the annual budget hearings to interview and advance the nomination of Adrienne A. Harris to serve as New York’s first African-American Superintendent of the Department of Financial Services.  With her top academic pedigree, her work as a top aide in the Obama Administration helping coordinate financial service issues, including the implementation of Dodd-Frank, and her work as a General Counsel for Fintech Doma, Inc., she is more than qualified for the job.  In fact, New York is lucky that she wants it.  Although state level nomination hearings are nowhere near as politically charged as their counterparts on the federal level, here is what I think we can gleam from yesterday’s discussion. 

Expect state level action on the regulation of Fintechs. Almost all the members who spoke were refreshingly honest in admitting that they are still trying to understand the complexity of issues ranging from crypto-currencies to lending platforms.  Conversely, they all agreed that these trends raise consumer protection and level playing field concerns that New York should not wait for the federal government to address.  This creates a perfect opening for the Superintendent, given her work with a San Francisco based Fintech. 

Get Ready to Hear about Expanded UDAAP Power.  Since the inception of the DFS, there has been a tug of war over precisely how much power the DFS needs to perform its functions, especially when one considers how much authority New York’s AG has to police questionable Wall St. practices (remember Eliot Spitzer?).  Yesterday, the Superintendent made it clear that she will be pushing for the legislature to grant her Department increased powers in this area.  This is something we will have to keep an eye on, particularly since it may come as a surprise to New York State entities that DFS fells it needs more enforcement authority. 

Finally, expect to hear more about cyber security.  New York’s existing cyber security regulations already provide it with a national leadership platform when it comes to this all important issue.  Harris’ extensive federal work in this area will only enhance the state’s credibility when it comes to cyber security.

January 25, 2022 at 8:56 am 1 comment

NCUA, Gov Hochul Outline Key Spending, Supervisory Priorities

When you combine unprecedented spending by the federal government, huge bonuses for the Wall Street crowd and an economy running at inflationary speed resulting in revenue for local governments, what you end up with is an unprecedented opportunity for New York State to devise a budget which incorporates a $5B surplus.  Yesterday the Governor released her proposed spending priorities that provides the framework for budget negotiations over next year’s spending plan. 

New York’s budget process gives a tremendous amount of power to the Governor because it gives the Executive broad discretion to include legislative programs in the budget, provided they are tied to an expenditure of public funds.  In addition, the Legislature can’t simply ignore the Governor’s proposal.  It must either accept it, get the Governor to agree to amend it or override the Governor’s plan which requires a 2/3 vote of the Legislature.  This last scenario hasn’t happened since the waning days of the Pataki administration. 

We will be going through the budget for the next several days, but one proposal that we already want to highlight would increase the ability of Community Development Financial Institutions to participate in the Excelsior Linked Deposit program.  According to the memo accompanying the proposal, the legislation “amends the state finance law to include CDFIs as eligible borrowers under the Excelsior Linked Deposit program and to allow CDFIs to subsequently make loans to small businesses using funds borrowed.” [pg. 104, Part BB of this  bill]

Needless to say, this could provide one more reason for eligible credit unions to consider becoming CDFI’s.  I will keep you posted.

NCUA Outlines Supervisory Priorities

Yesterday, NCUA issued its annual guidance detailing its supervisory priorities for the coming year.  This is a must-read for anyone reading this blog. 

Credit Risk Management tops the list of concerns this year.  This should surprise no one.  Inflation is at a 40 year high, we can expect a series of interest rate hikes and we still have members struggling as a result of the pandemic economy.  Many of these trends are accentuated in New York State.  On the one hand we have members who can afford to buy houses even as housing prices have increased by as much as 20% in some areas.  On the other hand, New York City has an unemployment rate well above the national average.  If your member is a bartender, waiter or hotel worker, they are still struggling.  Make sure you have reasonable policies in place so you can demonstrate to your examiners the steps you are taking to help struggling members while ensuring that your credit union has the resources to withstand sudden changes to the economy. 

On that note, enjoy your day.  Have fun keeping all those balls in the air.

January 19, 2022 at 9:27 am Leave a comment

Does FDIC’s Dysfunction Hold Lessons For The NCUA?

Today I am turning the tables on Dr. Keith Leggett, who retired from blogging about credit union issues for the American Bankers Association in July 2020, to shine a light on recent dysfunction among bank regulators that holds important lessons for the NCUA.

The FDIC is overseen by a five-member Board including, Chairman Jelena McWilliams, Martin J. Gruenberg, Michael J. Hsu, and Rohit Chopra; there is also one vacancy.  Currently three of its members are democratic appointees, including Mr. Chopra who serves on the Board by virtue of being the CFPB’s Director.  Ms. McWilliams is a Trump appointee who is serving out a five year term as Chairman.  By tradition, the Chairman has always set the agency’s agenda. That tradition is now under attack.

This past Thursday, Mr. Chopra announced that the FDIC was considering regulations to strengthen oversight of consumer protections as part of bank merger approvals. The problem is that FDIC Chairman McWilliams did not agree to put this item on the agenda.

The resulting kerfuffle has now gotten the attention of the regulated. State banking associations across the country, including the New York Bankers Association, have written a letter to the FDIC in which they explained that

Multi-member boards and commissions are designed to bring together different points of view. Policies certainly change over time. That is understood and expected. But collegiality and a shared responsibility for maintaining market stability historically have overcome the forces that push and pull at non-independent agencies, allowing for gradual change.” 

If all this sounds familiar to you, it is because NCUA Board members Rodney Hood and Kyle Hauptman have implicitly advanced similar arguments in placing items opposed by Chairman Harper on NCUA’s agenda.

Now the regular blog has ended and yours truly is going to jump on his high horse and go outside his lane a bit. When it comes to both the FDIC and NCUA, good arguments can be made that the majorities have the authority to take the steps they have taken. But what we are seeing is yet another example of a partisan divide that is so severe that the extremes on both sides are willing to overlook common sense norms in pursuit of their respective agendas. Democracy doesn’t work simply because people follow the law. It is also essential that both sides are willing to adhere to basic traditions that effectively fill in the blanks on the issues that laws don’t address.

Common sense tells you that agencies can’t function unless their directors has control over the direction the agencies choose to go and are kept in check by their fellow board members. In other words, what is taking place at the FDIC and to a lesser extent the NCUA is another example of how democratic norms are fraying. In the short term, this dysfunction helps one side advance proposals that would otherwise not see the light of day. But in the long term, dysfunctional government is in no one’s interest.

December 14, 2021 at 10:45 am Leave a comment

Should the Government be subsidizing Million Dollar Homes?

The reason why I’m asking this question is because Fannie Mae and Freddie Mac will begin buying mortgages for as much as $1M starting next year, according to the Wall Street Journal.  Even though a million dollars doesn’t buy what it used to, the increased dollar amount not only will help your credit union help your members but will also, in my ever so humble opinion, touch off an election year debate about the role that government should play in housing finance. 

First, let’s start with the facts.  Fannie and Freddie purchase mortgage loans within Conforming Loan Limits (CLL).  Under the Housing and Economic Recovery Act (HERA), the CLL is adjusted each year based on changes in the average U.S. home price.  According to the journal, the baseline CLL will jump from $548,250 to $650,000.  The real eye popping number is that the conforming loan limit for high cost areas will jump from $822,375 to approximately $1,000,000.  The official announcement is expected November 30th

The sharp rise in the CLL underscores just how profoundly the pandemic has impacted the economy in so many unexpected ways.  Nationwide, the median single family home price rose 16% in the 3rd Quarter to more the $363,000.  We haven’t seen a comparable rise since 1968.  The rise in home prices has been fueled by a rush to the suburbs since remote work is now commonplace, combined with a shortage of homes to purchase.  It’s classic supply and demand. 

But I can’t help but think that more than a few of our elected representatives who live outside of Californian and New York will view a $1M home price as something the government should not be subsidizing.  Remember, it wasn’t all that long ago that a Republican controlled Congress, capped the federal deduction for state and local taxes, and it is a Democratically controlled Congress that has struggled to repeal this change.  Even though a million dollars is not what it used to be—one calculator I just consulted says that you need over $3.3M to have the same buying power that a million dollars would have given you in 1980—there is something about a million dollars which doesn’t sound middle class.  Let the demagoguery begin.

November 17, 2021 at 10:13 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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