WASHINGTON–What is the likelihood of CU priorities really passing the current Congress? For another delay in CECL compliance? How many CUs are likely to disappear over the next five years?
All those issues and many more were covered by NAFCU President Dan Berger in introductory remarks to the association’s Congressional Caucus here.
Here’s a look at the issues touched upon by Berger:
Congress & Legislation
“If you think anything is going to get done in 2020, it’s going to be extremely difficult because they are going to be so focused on the 2020 presidential election, and the House will be investigating President Trump,” said Berger.
The CU Tax Exemption
“If you get contacted by NAFCU or anyone else about a fight over the tax exemption, you have to answer that call. Remember, we have a $21 trillion debt in this country, and as they look for fundraisers you are going to be on the list. Your tax exemption is a rounding error in the federal budget. You have to tell your stories, that you give $17 billion back to your communities every year.”
CRA
“Banks have (the Community Reinvestment Act) because they were caught redlining. It was a punitive move. Senator Elizabeth Warren’s American Housing and Economic Mobility Act, some call it CRA lite, and we oppose it. While CRA is not explicit for credit unions, requirements for underserved areas and community charters statutorily install CRA-like requirements.”
The Banking Industry
“Banks paid $243 billion in fines—and no one went to prison. And it’s tax deductible. So when they talk about your tax exemption, they need to change that loophole.”
Marijuana Banking
“Pot! I never would have guessed in my 30 years as a lobbyist I would be talking about pot. But we now have 11 states where recreational marijuana is permitted, 33 states where medicinal marijuana is permitted. A bill passed allowing hemp, but a bill allowing pot has not. I predict Mitch McConnell is going to have a tough time putting the SAFE Act (allowing pot banking) on the floor, because it’s a tough political vote.”
The SAFE Act (S.1200) was introduced in April 2019 by Sen. Jeff Merkley and has 31 bipartisan cosponsors. No action is currently scheduled.
Fintechs
“We want them under a similar compliance scheme where American consumers are protected. If we have to jump through hoops, they should have to jump through the same hoops.”
Data Privacy & Security
“I think this is the number-one issue for NAFCU in terms of what’s going on out there. It’s about damn time the retailers and merchants are held responsible for their breaches. You have Gramm Leach Bliley, and they should have it too. Until they have a skin in the game this is going to go on,” said Berger, sharing how he recently discovered a skimmer himself on a gas station pump and had to alert the station to it.
GSE Reform
“From an operational standpoint, this could have the biggest impact on our industry. There are some things in the Trump administration white paper we like and some things we don’t like. Housing finance reform is going to be very hard to pass, there are so many stakeholders. To get them all rowing in the same direction is going to be extremely difficult. But there are some things that can be done around the edges, and that’s what we’re going to be looking at.
From our standpoint, the two things we want to focus on is providing credit unions with, number one, guaranteed access to the secondary market. You would be surprised, the big banks want to control the entire mortgage pipeline, because they make money up and down that. Number two, we want fair pricing for your paper. In the old days there were massive volume discounts, and you saw what happened.”
CECL
“We’ve met numerous times with folks from FASB. We have worked to convince them credit unions are a different structure, so they gave us a delay. If you think we can get another delay or an exemption, I don’t think that’s going to occur. My advice is to be prepared to implement CECL.”
State of the Industry
“You guys are doing well, the economy is doing well, but there are some headwinds out there. We are going to be affected by those. There is going to be consolidation in our industry. We are going to lose a credit union every other day. We are going to lose another 1,800 credit unions in the next five years. Typically, it’s the smaller ones, but it’s also occurring in the bigger institutions. And it’s not just us. Just because you’re small doesn’t mean you can’t grow. Get a plan and grow. You have to grow and you have to be there for your members and the American consumer. The rate of growth is still going up; it’s slowing, but still going up. I want every American to be a member of a credit union.”
Yield Curve Inversion
“The recession is coming,” said Berger. “No one has a crystal ball, but most economists expect a recession in 2020.”