Posts tagged ‘Congress’

It’s Back! The Paycheck Protection Program, That Is

The government program everyone loves to hate, and then love again – is back in a third iteration. If everything goes according to plan and the President signs the $900 billion stimulus plan (does it concern anyone that no one seems to know what the exact number is? Then again, when you’re dealing with $900 billion, does a $100 billion here or there matter all that much?) Within 10 days of its enactment, we will be seeing regulations for new, improved, simpler and ultimately much needed rejuvenation of the Paycheck Protection Program. I’ve taken a look at the program, the guts of which you can review in Subtitle B – Community Development Investment on page 358 of this act. Suffice it to say this is not your mother’s PPP – whereas the initial legislative thrust was concerned with keeping people employed at a moment in time when we thought things would be back to normal by next June, the new program greatly expands the expenses for which loans are eligible. For example, eligible businesses can use the money for, among other things, cloud computing services. In addition, a new provision of the law makes businesses eligible for a second loan. Finally, the maximum loan size has been reduced from $10 million to $2 million, and only businesses with 300 or fewer employees are eligible for the loans. 

Now for my soapbox moment. When looking at the value of providing PPP loans, please keep in mind not only the impact on your credit union’s bottom line, but the value to the industry of the prominent participants in this program. In addition, for those of you who can go forward with these loans, please share your stories with your trades. Congress and the public are heavily invested in this program. How they perceive financial institutions engaging consumers will, in my ever so humble opinion, shape the regulations and legislation to come. One other quick note about the legislation – although some of the money is allocated towards education, it falls far short of the funds that states like New York were looking for to help offset pandemic-related costs. Brace yourselves for another unique year as the Legislature continues to operate remotely and budgetary concerns dominate even more than usual. 

On that note, yours truly is signing off until next year. Thanks for reading, with a special shoutout to those of you who took the time to comment on my musings along the way. 

December 22, 2020 at 9:26 am 1 comment

Seven Ways COVID-19 Is Impacting Your Operations

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

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

New York Delays New Servicing Regulations

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

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

State Issues COVID-19 Emergency Relief Order

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

Additional Developments…

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

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

Fed Gone Wild

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

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

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

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

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

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

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

Three Things You Need to Know about What’s Going on in D.C.

Yours truly overslept a little this morning, but having just visited the nation’s capital with a hearty group of New Yorkers, I wanted to get out some thoughts to you on what’s going on at the federal level while it is fresh in my mind.

First, the most practical news you need to know is that, if all goes according to plan, the House of Representatives will pass the SAFE Act later today. This is the bill that would essentially allow financial institutions to provide banking services to marijuana-related businesses in states where it is legal to do so. Of course, it remains to be seen whether the Senate will take up this legislation. For what it’s worth, however, I am cautiously optimistic. Even people opposed to the legalization of marijuana understand that it simply is not safe to make legal businesses carry around millions of dollars in cash because financial institutions cannot legally accept their money. Of course, if the SAFE Act does pass, it will put that much more pressure on the state to develop a framework for the legal sale and distribution of marijuana for recreational purposes.

Point number two, what is going on with data security? Despite the fact that virtually every single industry in this country is losing billions of dollars to cyber theft every year, that almost every financial institution has members who are victimized by hackers, and that the last few years have demonstrated that having a robust cyber infrastructure is a crucial national security issue, no one seems willing or able to come forward with a bill that addresses the issue on the national level. What is going on here? I honestly don’t get it. In the absence of federal action, we will see more action on the state level. This is far from ideal. This is a classic federal problem that needs a federal solution, but if Congress won’t act, someone will have to.

Finally, there is a generational and ideological shift taking place within the Democratic Party. On both the state and federal level, you are seeing established members being primaried, often by younger candidates whose views would have made them unelectable just five years ago. I’m concerned that credit unions aren’t adequately preparing for this decisive shift. Credit unions have for decades fought against the banks to keep their tax exemption, but I’ve said it before, and I’ll say it again. The greatest long-term threat to the credit union industry comes not from pro-bank legislators, but from younger progressives disillusioned by the entire financial system that are skeptical of whether credit unions do enough to help the average consumer.


September 25, 2019 at 9:24 am Leave a comment

How Last Night’s Elections Impacted NY CU’s

Good morning folks. Here are some quick takeaways from last night’s elections.

  • Will the last New York state Senate Republican please turn out the lights? It’s taken about a decade longer than it probably should have but New York State had its very own blue wave last night and my guess is you will never see a Senate Republican majority again. According to this morning’s New York Post, Democrats will now be in control of the chamber with at least 40 votes to the Republican’s 23. The margin is so big that any speculation about  Republicans cobbling together a working majority as they have done for the last decade is out the window. This is historic. Except for a brief period in the 1960’s. Senate Republicans controlled the chamber since the end of WWII. Not only do the Democrats have control of the Senate but barring a historic meltdown, Democrats will have complete control of all the levers of power when redrawing of the maps begins in 2020.
  • What this means for credit unions? Frankly any change is good news for credit unions which can make arguments for common sense reforms such as municipal deposits to a fresh set of legislators and staff members. Get ready to go to Albany.
  • Are New York Republican Congressmen an endangered species? Three of the pickups which helped Democrats take control of the House of Representatives came courtesy of New York State. My old boss John Faso lost his Hudson Valley seat after just one term to political newcomer and unabashed progressive, Antonio Delgado. And in two of the biggest surprises of the night – for me anyway – Claudia Tenney has probably lost her reelection bid to Assemblyman Anthony Brindisi but has not conceded and Congressman and former District Attorney Dan Donovan lost his reelection bid to Max Rose. Neither of these were high on the prognosticator hit-list and they show just how divided the nation has become. If there were two districts in New York that would benefit from Donald Trump’s high profile campaigning leading up to the midterms, these two districts would have been at the top of the list.
  • What this means for credit unions? Congresswoman Tenney and her staff had an open door policy when it came to New York credit unions which was all the more useful because she was given a seat on the House Financial Services Committee. We will have to get to know the new members and keep in mind that given their more liberal leanings, they may expect more, not less of credit unions. Time will tell.
  • Marijuana banking will be legalized once and for all. The only unequivocal prediction I will make today is that within the next two years  marijuana banking will be legal as a matter of federal law in those states that choose to legalize it. Last night three states Michigan, Missouri and Utah approved referendums legalizing marijuana use in some form. But the really important thing to keep in mind that all three of these states were states that voted for Trump in 2016. I believe that marijuana legalization is one of the few issues that a progressive Democratic majority in the House and a coalition of state’s rights Conservatives in the Senate will be able to agree on.
  • What this means for credit union? For those of you who are interested in marijuana banking, now is the time to start researching how you’re going to design your compliance programs and ultimately determining whether the costs of providing these services are outweighed by the potential benefits.
  • As for the national level, CUNA and NAFCU better get moving quickly because if anything meaningful is going to be passed it is going to be well before the epic battle for the 2020 Presidency begins.

November 7, 2018 at 8:38 am 2 comments

Reports of CFPB’s Demise have been greatly exaggerated

Last Thursday, Congressional efforts to kill regulations set by the CFPB extending certain protections currently given to debit cards to pre-paid card holders quietly died; the regulations take affect April 2018. Even if you don’t offer pre-paid cards this speaks volumes about the regulatory environment in which we will find ourselves for years to come.

First, a slight digression since I really enjoy this subject. In 1996 Congress passed and Hillary Clinton’s husband signed into law the Congressional Review Act (5 U.S.C. § 801-808). Under this legislation final regulations must be submitted to congress and it has 60 days – excluding certain breaks- to pass a resolution blocking them from taking effect. Since regulators have way too much power, this statue sounds great, but its bark is much worse than its bite. After all, in order for a regulation to be blocked both houses of congress would have to vote to repeal it, and there is always the possibility of a veto.

With Congress and the presidency in Republican hands, the act has become a potent weapon with which to undue many regulations promulgated in the final days of the Obama administration. Since Donald Trump took office in January (yes it has only been 4 months) Reuter’s reports that congress has used the Congressional Review Act to kill 14 pending regulations.

This brings me back to the CFPB’s prepaid card regulation. In early February, Senator Perdue of Georgia introduced a joint resolution to block the regulation. He complained in a press release that “If the CFPB wants to continue to impose rules and regulations that impact every American’s financial well-being, it must answer to the American people.” In the same press release Senator Cotton of Arkansas called the rule “a disaster for consumers attempting to access prepaid cards,” In short, the regulation seemed like precisely the type of CFPB mandate that the free market, anti-regulation congress would quickly make go away. But on Thursday the deadline for repealing this bill came and went.

Consumer groups are right to point to this failure as a strong indication that the CFPB, or at least the regulations it has promulgated to date, are alive and well. After all, if congress doesn’t have the appetite to repeal an esoteric regulation dealing with a specific segment of the consumer finance market, then hopes of forging a bi-partisan consensus on changes to the CFPB seem doomed.

I have a sneaking suspicion we are seeing a reemergence of the same pattern that has made it so difficult for Republicans to “Repeal and Replace” Obamacare. Republicans were unified in their opposition to Obamacare until they had to explain to their constituents that they would lose coverage under the Republican alternative. Now Republicans might be growing skittish over taking on the CFPB if that means repealing consumer protection regulations that consumers like.

Don’t get me wrong. The pre-paid card rule has its defects. And, with or without changes to the CFPB’s structure, we will eventually have a CFPB director appointed by President Trump. Unfortunately however, needed regulatory changes may not be as a dramatic or come as quickly as we would like to see.

May 17, 2017 at 10:19 am Leave a comment

What’s Next For Fannie, Freddie and Credit Unions?

US Auto Industry Bailout In Jeopardy After Senate Votes It DownAs the pace begins to pick up in Congressional efforts to re-examine the tax code, credit unions are understandably nervous about even the whiff of legislation to do away with their tax exemption.  But another issue, on which they need to be ready to mobilize, is reform of the housing market.

According to today’s Wall Street Journal, a bipartisan group of Senators led by Tennessee Republican Bob Corker and Virginia Democrat Mark Warner is working on a proposal that would replace Fannie and Freddie with an entity that would act as a public guarantor of mortgage-backed securities.  I’ve commented in other posts about similar proposals that have been made by housing specialists.  The basic idea is that instead of having Fannie and Freddie buying mortgages from credit unions and banks, which they then package as securities, a public guarantee corporation would insure mortgage-backed securities against default in return for those securities meeting baseline underwriting standards.  It would not be in the business of buying mortgages.  Advocates of this approach argue that it would get the GSEs with their now explicit government backing out of the business of buying mortgages and competing against the private sector for securitization.  In addition, by guaranteeing mortgage-backed securities against default, the legislation would take its aim at one of the primary culprits behind the Great Recession.

Now for the bad news.  Credit unions need a secondary market in which to sell their mortgages.  Therefore, it is absolutely crucial that whatever structure ultimately is proposed by Senators includes a mechanism for mandating that securitizers not be able to discriminate in deciding what mortgages to buy.  This brings me to a second idea.  According to the same article in today’s journal, a second group of Senators led by Rhode Island’s Jack Reed, is floating a proposal that would reform Fannie and Freddie but not do away with them completely.  Whatever proposal is ultimately put out there by the Senate will have to overcome the opposition of House Republicans who honestly believe that but for Fannie and Freddie there would not have been a housing crisis.

I’ve learned my lesson over the almost two years that I have been writing this blog, and I am giving up predicting if and when Congress will ever take up housing reform.  But, if press reports are accurate, the process is finally moving forward, albeit at a snail’s pace.  I would like to see more of a discussion within the industry about what type of Fannie/Freddy world best protects the interest of credit unions and their members.

It was nice to see you all at the Sagamore.  Now get back to work!

June 17, 2013 at 7:23 am 1 comment

D.C. Hits New Low

imagesCA2E0P0ENational politics has hit a new dysfunctional low as Senators and Representatives scramble to varnish their conservative bona fides by disinviting Richard Cordray from Senate Hearings about the Consumer Finance Protection Bureau.  That’s right, even though the CFPB has a statutory obligation to report to Congress, Congressman Jeb Hensarling, Chairman of the House Financial Services Committee, is refusing to invite Cordray to Congressional Hearings reviewing CFPB activities.  In addition, Senate Republicans are criticizing Democrats for continuing to allow Cordray to testify at hearings.  The argument is that because a federal appeals court in Washington ruled that the President acted unconstitutionally in making recess appointments to the National Labor Relations Board, the recess appointment of Mr. Cordray is also invalid.  The right thing to do is apparently to pretend that he doesn’t exist.

Why is this a new low in politics?  Because Washington is no longer about getting legislation passed but about vilifying the other side and even more perniciously questioning the legitimacy of those with whom you disagree.  If you still want to pretend that President Obama wasn’t elected, well there’s always Internet sites ready to tell you that he’s actually a foreign-born carpet-bagger with a doctored birth certificate to boot.

When the local judge or town board member who has been serving in your community for years comes knocking at your door for your vote this November, no need to politely listen to his arguments for his re-election, simply ask what party he belongs to and if you share this party, offer your support.  If you don’t, politely slam the door in his face.

Want to pretend that Congress didn’t create the CFPB?  Point to a court case about the NLRB and then criticize the Bureau’s Director for carrying out the responsibilities of its director.  Public policy becomes so much easier when we simply ignore the other side of the argument.

Our political system is breaking down in this country.  Not because there is anything wrong with our country’s governing structure, which I still believe is one of the most brilliant creations in the history of mankind, but because the American public, aided and abetted by talk radio, the Internet and  cable “news” networks, is increasingly punishing politicians who understand that the purpose of politics is to try to come to a consensus on difficult issues on which reasonable people disagree.  It’s perfectly acceptable for members of the House Financial Services Committee to question Director Cordray about the impact that the court’s ruling has on his ability to lead the Bureau.  It’s quite another to say that the law is so clear that Mr. Cordray is somehow an illegitimate representative of a Bureau that Congress voted to create in the first place.

The reality is that this type of poisonous dogmatic politics makes it  increasingly difficult for organizations like credit unions to get a fair hearing in Washington.  The more legislating isn’t about grappling with issues such as member business lending and financial reform, the less people who actually have legitimate needs to be addressed by government have a chance of making sure that government actually helps them.  As long as people think that the vindication of their viewpoint is only one more election away, our country will be unable to grapple with the serious problems that need to be addressed.  Something tells me that there are certain leaders in China chuckling about what they’re seeing.

April 24, 2013 at 8:04 am 4 comments

The Mother of All Mandates

Good luck and Godspeed to the credit union witnesses including Melrose Credit Union’s General Counsel Mitch Riever at today’s Congressional hearing on mandate relief for credit unions.  God knows there’s enough regulatory burden to be shed and even talking about doing something about it is better than nothing.

But how do you explain to Congress that the biggest regulatory burden credit unions face is Congress.  Specifically, a political system which is hell-bent on treating credit unions like for-profit banks when it comes to imposing mandates, but at the same time is all too willing to cut special deals for banks including the sainted community banks with which we ostensibly have so much in common.

The latest example of the uneven playing field on which credit unions find themselves comes in the form of a report by the Special Inspector General for the Troubled Asset Relief Program (TARP).  TARP was the emergency line of credit Congress passed to give banks loans to get through the financial crisis they created.  Credit unions were not eligible for TARP funds, but, to be fair, we were only able to fund the continuing obligations resulting from the bad investments of the Corporates with the support of the Treasury.  Last I checked, not only were credit unions dutifully paying an assessment to pay back that loan, they weren’t getting government money to do so.

As you may remember, Congress passed legislation authorizing community banks with $10 billion or less in assets to get front money from TARP in return for making loans to small businesses.  The idea makes sense in theory.  With the support of the Obama Administration, community banks with $10 billion or less in assets would make government subsidized loans to small businesses.  But a funny thing happened on the way to the loan fund.  Most of the eligible community banks took the money and didn’t increase small business lending, but instead used it to pay off TARP funds they had taken from the federal government in the first place.  I would say this is robbing Peter to pay Paul, but there was nothing in the law that made this shell game unlawful.

Eligible community banks did have to submit a lending plan as part of their application.  However, according to the IG’s report there was a lack of coordination between the Treasury and the other regulators, meaning that no one followed through on whether these plans were being implemented.  The bottom line in all this is that 132 of the 137 former TARP banks remaining in the SBLF “have not effectively increased small business lending because they used approximately 80% of the funds they received to repay TARP.”

As I have said before, life’s not fair, get over it.  And it shouldn’t be a shock to anyone that despite the vitally important efforts of credit unions, banks have more political influence in Washington than we do.  But I am getting increasingly tired of having Congress, and for that matter Legislators, extol the virtues of credit unions while doing absolutely nothing to help us help our members.  Talk is cheap, let’s see some action.

April 10, 2013 at 8:08 am 3 comments

Is small business being choked by big banks?

It may be a new year, but just like Tony Romo can’t beat the Giants in a big game, events continue to show the economic harm being done by keeping credit unions from extending business loans free of the fear that they will run up against the artificial cap.

The single biggest argument that the banking industry makes against increasing the MBL cap is that business does not need the help of credit unions.  Banks are more than willing to help out small businesses, they argue, and if credit unions really want to join the party, all they have to do is change their tax exempt status.  But the bankers might have a tough time explaining an article in this morning’s Los Angeles Times, which reports that Bank of America is hurting small businesses across California by demanding that small business customers pay off their credit line balances all at once or agree to onerous new lending terms.  As explained by one Californian, who called up the bank in exasperation, “dude, you’re calling a guy who is barely surviving.”

Although Bank of America always seems willing to provide an example of why credit unions are so important, its actions are not unique.  The paper reports that many banks have already tightened lending standards to small businesses.  This is consistent with a recent post by Rohit Arora, a leading expert on small business, who argues that 2011 saw an increasing number of small businesses turn to alternative sources of financing, including credit unions, as banks squeezed the lending spigot.

In 2011, credit unions did a great job in getting out the message to the American consumer that we are a different kind of lender and that there is an alternative to commercial banking.  Hopefully, in 2012, Congress will get the same message.

January 3, 2012 at 6:53 am Leave a comment

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.

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

Join 785 other followers