Posts tagged ‘Powell’

Five Things You Need To Know As You Start Your Credit Union Day

Usually gleaming anything useful from the congressional testimony of Fed Chairman is about as easy as interpreting hieroglyphics without the use of the Rosetta Stone but yesterday was a glaring exception. Most importantly for credit unions all the major news outlets that I read this morning agreed that Jerome Powell was all but announcing that the Fed will be cutting short-term interest rates soon.

In his testimony he deemphasized the latest encouraging jobs report and made it abundantly clear that the uncertain times we live in are impacting the economy. Specifically, he noted that “crosscurrents have reemerged. These concerns may have contributed to the drop in business confidence in some recent surveys and may have started to show through to incoming data. In our June meeting statement, we indicated that, in light of increased uncertainties about the economic outlook and muted inflation pressures, we would closely monitor the implications of incoming information for the economic outlook and would act as appropriate to sustain the expansion. Many FOMC participants saw that the case for a somewhat more accommodative monetary policy had strengthened. Since then, based on incoming data and other developments, it appears that uncertainties around trade tensions and concerns about the strength of the global economy continue to weigh on the U.S. economic outlook. Inflation pressures remain muted.”

Translation: inflation is in check and while the economy is growing it could use the boost offered by a rate cut which will be particularly beneficial to workers on the lower end of the economic pay scale.

Powell to Trump: Hell no I won’t go

Another incredibly blunt moment of the Chairman’s testimony came in response to a question from House Financial Services Chairman, Maxine Watters who asked him how he would respond if the President was to ask him to resign. Powell has of course been a prime target of the President’s tweet tantrums lately. “My answer would be no,” Powell responded, making it quite clear that any effort to remove him would result in a messy, messy legal dispute.

Powell to Facebook: Not so fast

Powell was also in a targeted mood when it came to throwing cold water on the plans of Facebook and other companies to introduce a crypto currency (See Monday’s blog). According to the American Banker, Powell responded to lawmaker questions on the issue by bluntly opining that the project can’t go forward until regulators are satisfied that the companies have a better feel for the full range of issues ranging from potential money laundering to the creation of a systemically important currency which conceivably could have the potential of dealing a body blow to the entire world’s economy.

Reg CC Update

The NCUA recently provided this notice reminding credit unions, among other things, that the monetary thresholds promulgated under Reg CC have been updated. You might want to make sure that your cooperating system got the message.

A Good Read

Finally, although it’s not directly related to credit union land, here is a great article by Greg Ip of the WSJ delving into one of my favorite issues: is there a skills gap in the American economy?

July 11, 2019 at 9:27 am Leave a comment

So Far So Good On Tax Reform

Image result for paul ryan announces tax reformWith the caveat that this is just Round 1 of a 15 round fight, the tax reform bill unveiled by the House leadership yesterday, gets a lot of things right. In fact, it shows that the Republicans learned from their healthcare mishaps and are determined to actually show that they can come up with sensible ideas.

First, as for the things that most affect credit unions, it’s of course good news to see that the first draft does not include the elimination of the credit union tax exemption. This does not mean that we can put our  guard down as an industry. Remember, that the House is determined to stay within a $1.5 trillion price tag and a tweak in one part of the code means that revenue has to be gained from another.

Second, the plan is reasonable. In contrast to the healthcare debate where Republicans argued for years that Obama Care had to be reformed only to have no idea how to reform it when they got the opportunity to do so, the tax plan is a thoughtful, mainstream Republican piece of legislation that cuts the corporate income tax, maintains higher tax rates for the wealthy and will probably make paying taxes a little simpler for low-income Americans. In fact, I will bet you right now that the tax plan will get some Democratic votes.

The most problematic part of the legislation is that it takes dead aim at high tax states such as New York. It caps at $10,000, the deduction for state and local taxes. It also eliminates the mortgage interest deduction for loans of $500,000 or greater for new home purchases.  It’s not a coincidence that both of these changes will have the biggest impact in big states that didn’t vote for Donald Trump. For example, the median home price in Palo Alto, California is a mere $2,695,000. While the mortgage interest tax deduction remains intact for existing homes, Congressmen from the most impacted areas are already complaining that the Republican tax plan will hurt resale values.

The question at the end of the day is, will the elimination of these exemptions have a discernible impact on home buying activity for your average credit union? And if I lived in a state other than New York, I would ask why the Federal government should be in the business of subsidizing the high tax policies of the Northeast and West Coast?

Washington has lowered the bar pretty low in recent years but from what I’ve seen so far, this is tax reform we can all live with.

Powell Named New Fed Chair

In case you missed it because of all the talk about tax reform, President Trump nominated Jerome Powell to be the next Chairman of the Federal Reserve, replacing Janet Yellen whose term ends early next year. The conventional wisdom is that Powell will continue Yellen’s gradualist approach to raising interest rates while being more open to mandate relief for the largest banks. Remember, that in recent years under Yellen, the Fed has moved aggressively to have the largest institutions develop credible plans for winding down their businesses in the event of bankruptcy (so-called living wills) and also instituted stress tests.

One more personnel note. I forgot to mention that Jeb Hensarling, the Republican Chairman of the House Financial Services Committee announced he’s retiring from Congress. The American Banker is already speculating that he may be filling a regulatory post for the Trump Administration.

This Just In…

One of the first things Powell will have to decide is how quickly to slow down the economy. The labor department just announced that the unemployment rate fell to 4.1% in October, its lowest level since December 2000. Wages rose 4.2%. I’m going to go out on a limb here and say that these numbers guarantee that the Fed will raise interest rates in December.

November 3, 2017 at 9:12 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.

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