Posts filed under ‘Political’

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

What The Postal Service Could Learn From Google

Even as the world was struggling to survive several hours yesterday untethered to social media, the postal system was making a big splash with news of a small pilot program which could be the first step in reintroducing postal banking. While the post office was dabbling with banking, Google was quietly announcing that it was pulling the plug on its plan announced two years ago to work with banks and credit unions to provide google bank accounts. The two announcements have more in common than you might think. The announcements also contain important warnings for the credit union industry as it tries to navigate an uncertain future.

An article in the American Prospect reported that four postal branches in Washington D.C, Baltimore, Falls Church, Virginia, and the Bronx, NY were now allowing individuals to convert business or payroll checks of $500 or less onto a single-use gift card for a $5.95 purchase fee. The announcement was lauded by, among others, New York Senator Kirsten Gillibrand, a prominent supporter of postal banking.

It’s easy to dismiss the proposal. After all, it’s somewhat laughable to think that a business which cannot cost-effectively provide its core service to the American public, even though it has enjoyed a virtual monopoly for much of the country’s existence, will find its niche in cost effectively providing banking services.

This is where Google comes in. Your faithful blogger continues to believe that today’s Fintechs are tomorrow’s banks but in pulling the plug on its banking project Google discovered what many other Fintech wunderkinds have also discovered; providing cost-effective consumer financial services in a heavily regulated, highly competitive financial system is not easy. It takes a level of skill and knowledge that you don’t learn simply by attending business school or delivering the mail.

Just as Fintechs think they can easily handle the banking part of things, there are those, predominantly in the progressive wing of the Democratic party, who think that banking is as easy as setting up a branch and allowing individuals with no training as tellers to cost effectively provide banking services in a way which protects union jobs.

Common sense and history tells you that this is simply not the case. Postal banking is not a radical new concept but an idea that has been seriously debated since the 1800’s. In fact, between 1911 and 1966 Americans could open up postal banking accounts and at its height an estimated 10% of deposits were held in the postal system. But, as banking options became more widely available, and federal insurance stabilized the banking system, the system was put out of its misery by President Johnson in 1966. While I don’t think we have much to fear from postal banking, I do think that the industry has to recognize that proposals such as these are the result of frustration among some policy makers that the financial system has not done enough to help people of modest means. We must do a better job of telling our story and making sure our elected officials realize that the way to increase financial inclusion is not to get the government more involved in banking but to allow credit unions to provide more services to a larger group of people.

October 5, 2021 at 9:35 am Leave a comment

Key Week for CUs and Congress

This may be the week when we find out if the Democrats’ spending plan will come to fruition or is destined to be the legislative equivalent of Novak Djokovic’s attempt to achieve the Grand Slam: a historic undertaking which crashed and burned.  Either way, the outcome could have important practical implications for your credit union.

For weeks now the Democrats have been touting the benefits of a $3.5 trillion spending plan and a closely related $1.5 trillion package of infrastructure upgrades. Telling people how you plan to spend money is the fun part of legislating; explaining to constituents whom among them is going to pay for the spending spree is quite another matter. Massachusetts Congressman Richard Neal, who chairs the Ways and Means committee was refreshingly honest in explaining over the weekend that he was reluctant to get too specific about paying for the proposals before getting a sense of what legislation could pass. House Democrats only have a three seat majority and he certainly does not want to be the person who makes vulnerable Democrats support controversial legislation which does not become law. This task became even more complicated when Senator Joe Manchin of West Virginia doubled down on his opposition to the size of the Democrat spending plan.

Nevertheless, several papers are reporting this morning that the Congressman has released a four page outline of legislation to pay for the plan so we are likely to see more specifics in the coming days.

According to CUNA, one proposal under consideration would help the IRS collect more taxes by imposing increased reporting requirements on financial institutions. Specifically, the IRS form 1099-INT would be expanded to include a report on the gross inflows and outflows of accounts and increase scrutiny of cash transactions. At this point, nothing has been formally put in writing but the proposal certainly sounds like one that would impose extensive new mandates on credit unions of all shapes and sizes. Imagine how much fun it would be parsing through proposed regulations in this area. Stay tuned.

Another budget issue under review this week involves increased funding for community development financial institutions.

David Baumann is reporting that today the House Financial Services Committee will be marking up legislation that would provide $10 billion to CDFIs to build or preserve more than one hundred and seventy thousand affordable homes.

September 13, 2021 at 9:34 am Leave a comment

SC Rules that New York’s Eviction Moratorium Goes Too Far

The Supreme Court on Thursday granted emergency relief to landlords challenging a New York State statute barring them from commencing eviction proceedings against tenants who certify that they are suffering a financial hardship as a result of COVID-19. Although the law in question was set to expire on August 31st, the Court’s decision could have important implications if and when the state chooses to take similar steps in the coming weeks or in response to a future economic downturn.

Part A of Chapter 381 of the laws of 2020 provided that individuals could avoid foreclosures by indicating that they were being harmed by the pandemic. A separate section of the bill which the Supreme Court’s decision did not address extended similar protections to homeowners facing foreclosure. In blocking New York State from enforcing this bill against landlords the court technically did not issue a decision on the merits of the case, but by granting the emergency order a majority of the court signaled that New York’s law was illegal. There was even a dissenting opinion.

In a terse explanation of its decision, the majority explained that New York’s statute violated the “longstanding teaching that no man can be a judge in his own case.” In other words, any future law seeking to block evictions has to give landlords the ability to show that a tenant is not suffering from a financial hardship.

Like I said, although this case dealt specifically with evictions, the same argument could easily be made as applied to New York’s foreclosure ban, also set to expire on August 31st, which provides no mechanism for mortgage holders to contest a homeowner’s financial hardship.

                                                Hochul Transition Picks Up Pace

New York’s Superintendent of the Department of Financial Services announced that she would be resigning on August 24th, the same day the Governor has indicated he will hand over power to Lt. Governor Kathy Hochul. Before becoming the Superintendent, Lacewell served as a top aide to the Governor and remained an active advisor.

As for the Governor-in-waiting, she spent Sunday morning appearing on two Sunday news shows demonstrating, yet again, that in politics a week really is a long time. Virtually overnight, she has catapulted from the lowest profile statewide position in New York State government to a nationally significant politician. 

August 16, 2021 at 9:19 am Leave a comment

Hochul Prepares To Make Her Mark

Yesterday, Lieutenant Governor Kathy Hochul took to the air waves when she held her first press conference. While it’s always dangerous to make predictions, what’s clear is that Hochul’s will not be a caretaker Administration content to keep the seat warm until the next gubernatorial election in 2022.

She used the nationally televised platform to indicate that when she formally takes power, in a little less than two weeks, the native of Western New York will hit the ground running. Expect to see a state-of-the-state style speech shortly after her ascension and some new faces in and around the Executive Chamber.

Even as we anticipate changes, however, the mechanics of government remain unchanged. For credit unions this means that at some point the executive will act on two key credit union priorities passed by the Legislature this year. What I am of course referring to is S191 Sanders / A5459 Darling which allows credit unions to participate in the Excelsior Linked Deposit program and S 1780-C Skoufis / A399-B Rozic, which authorizes the use of Remote Notarization.

To gain further insight on how these changes could impact credit unions, on Friday we will be hosting a discussion with David Weinraub, a seasoned veteran of the Albany political scene and our outside lobbyist.  (register here to join)

Calls Mount To End Asset Purchases

In the wake of an inflation report indicating that the economy is not in danger of overheating, pressure is mounting on the Fed to end its bond buying program which has kept interest rates artificially low since the pandemic put the economy on life support.

In a televised interview yesterday, Robert Kaplan, President of the Federal Reserve Bank of Dallas, called for an aggressive end to the program. If he has his way, at its September meeting the Fed will announce that the program is ending. He wants to see the program wound down over an eight month period. It’s going to be interesting to see how the captains of industry react to this and other similar announcements in the coming days. Again, it’s dangerous to make predictions but don’t be surprised if you see a market correction in the coming weeks. This will actually be a sign that the economy is getting back to normal.

August 12, 2021 at 9:20 am Leave a comment

NY Employers Face Extensive New Mandates Under the HERO Act

The Legislature has passed a bill that would require all employers in New York state to adopt comprehensive workplace policies outlining basic obligations related to combating airborne infectious diseases.  The bill is currently before the Governor. 

The HERO Act (S1034B) requires that all New York employers, regardless of their size, adopt minimum policies which address, among other things employee health screenings; availability of PPE; regular cleaning of office equipment and effective social distancing for employees and customers which includes consideration of flexible work hours and remote services. 

Employers would be prohibited from taking action against employees who raise concerns regarding violations of these policies and could face both legal and regulatory actions for policy violations.  The Commissioner of Health will be responsible for developing model policies which take into account industry specific concerns; presumably this means that policies adopted for banks and credit unions would be different than policies adopted for restaurants, for example.  Your credit union will have the option of either adopting these model policies or developing its own policy that meets the requirements of this legislation.    

A second part of the bill creates a framework for a joint employer-employee workplace safety committee applicable to all employers with ten or more employees.  This committee will be empowered to review and comment on workplace safety concerns.  Selecting this committee won’t be as straightforward as you might think.  Employee members of the committee shall be selected by, and from among, non-supervisory employees. Committees shall be co-chaired by a representative of the employer and non-supervisory employees. 

As drafted, it is not entirely clear when these mandates will take effect.  The bill is effective thirty days after it is signed, but the Health Department will have to develop model policies.  What is clear is that employers will have six months to get the workplace committees up and running. 

Go West Young Man

The Census confirmed what we have all known for a while: people are moving to the mountain west.   This will result in a further diminishment of New York’s political power.  The state is slated to lose a Congressional District.

April 27, 2021 at 9:59 am Leave a comment

A Few Quick Thoughts to Start Your Credit Union Day

CitiBank Settles CARD Act Violation 

My takeaway from the Tampa Bay Buccaneers destruction of the Kansas City Chiefs is that, for all of life’s complexities, we should never lose sight of the basics. With that as my big thought of the day, I want to bring your attention to a recent settlement reached between CitiBank and a group of states for violating the lookback provisions of the CARD Act. As you erstwhile veterans of compliance may recall, the CARD Act was the first major piece of legislation passed by Congress as it scrambled to punish banks as the effects of the mortgage meltdown were coming into focus.

Under the CARD Act, if a creditor increases the annual percentage rate applicable to a credit card account based on factors including the credit risk of the card holder, among others, the creditor should review whether such factors have changed at least every six months (15 U.S.C. section 1665c). In 2018, the CFPB reached a settlement with the bank for misapplying its lookback factors. The announcement of the state settlement resolves similar claims brought against the bank by attorneys general, but the bank refused to concede that it had violated state-level consumer protection laws. My takeaway? Given the complexities of Regulation Z, periodically reviewing your lookback procedures is something that should be on your to-do list if it isn’t already.

Is New York the Center of the Political Universe?

No. But it promises to be one of the most highly contested battlegrounds for 2022 as Republicans and Democrats fight for control of the House of Representatives. Yesterday, Democrat Anthony Brindisi conceded defeat, bringing an end to one of the closest congressional races in the state’s history. Incumbent Brindisi was defeated by Claudia Tenney, who previously lost the seat to Brindisi during the 2018 cycle. Tenney is a good friend to many of our credit unions, and she is certainly aware of the key issues having previously served on the House Financial Services Committee. Taking a look at the big picture, with Democrats in charge of both the Assembly and the State Senate, the House of Representatives within striking distance for Republicans, and New York consistently having multiple competitive congressional elections, get ready to see an awful lot of campaign ads in the run-up to 2022.

February 9, 2021 at 9:56 am Leave a comment

Three Cheers for the 20th Amendment!

I’m exercising blogger privilege today, and in honor of the quadrennial transfer of power, I’m dedicating this blog to an issue that has absolutely nothing to do with credit unions. Regardless of where you fall on the political spectrum, what cable news channel you watch, or what radio station you tuned into this morning, I hope we can all agree that the interregnum, the period between election and today, has been one of the wackiest since 1876. Imagine if all this mayhem didn’t end until March 4th, and a lame duck Congress filled with members who had lost re-election were still in charge. This is where the 20th Amendment comes in.

1932 was a particularly momentous year. The Depression was raging on, President Hoover was historically unpopular but doubling down on his economic policies, and internationally, previously democratic countries were beginning to backslide. Fortunately, Congress agreed that it made no sense for the country to continue to suffer during the huge delay between election day and the new administration. By early 1933, 28 states had already ratified the amendment, although it did not take effect until Roosevelt’s second term. As a result of its passage, this year’s Congress was sworn in on January 3rd, and by March 4th, we will be well on our way to seeing how successful the new administration is going to be in charting a new course for the country.

January 20, 2021 at 9:36 am Leave a comment

Three Things to Ponder As You Start Your Credit Union Week

Good morning, folks. Here are some things to keep in mind as you start what promises to be an extremely eventful truncated week. 

Meet the New Boss

With the Supreme Court ruling that the director of the CFPB serves at the pleasure of the President of the United States, President-elect Biden has announced his pick to head the Bureau. Even with the Supreme Court ruling, no one in government has as much power to shape the regulations of the consumer financial sector than will Rohit Chopra.

Judging by the press reports I read over the weekend, there are few regulators who will have as much running room at the start of the Biden presidency as the CFPB. The conventional wisdom is that the CFPB was made “toothless” (New York Times) under the parting director Kathy Kraninger. While this is not true, perception is reality, and the list of top priorities is already emerging. Get ready to work on proposals dealing with overdrafts, student loan disclosures, mortgage forbearances and payday loans. All this will be in addition to a much more aggressive use of regulation through enforcement action. 

NCUA and CFPB Enter Into A MOU

David Baumann of the Credit Union Times reported Friday that the CFPB and the NCUA had agreed upon a Memorandum of Understanding. According to the NCUA, the purpose of this agreement is “to improve coordination between the agencies related to the consumer protection supervision of credit unions over $10 billion dollars in assets.” But we won’t know for sure, at least for a while, as the NCUA is making the CUTimes file a FOIA request to learn the contents of the memo.

Under the Dodd-Frank Act, the Bureau has direct supervision over institutions with $10 billion or more in assets. An institution is subject to this supervision once it reports four consecutive quarters of $10 billion or more in assets. If I was at or near this threshold, I sure as heck would want to know what was in the MOU. After all, institutions have a right to know what’s expected of them; what regulators are overseeing them, and precisely with whom their supervisory information is being shared.

It’s Budget Day at the Capitol!

For New York Legislative geeks, today is like Christmas morning. You finally get to know what surprises are under the Budget tree, and there’s sure to be a few lumps of coal. Many of the big picture items are already being debated, such as online gambling and marijuana banking. And of course, the great wild card in all of this is the extent to which Congress will be able to ease New York’s fiscal woes. Goody gumdrops. 

Merry Christmas, Happy New Year, and enjoy your day.

January 19, 2021 at 9:43 am 1 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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