WASHINGTON—Both NAFCU and CUNA have sent letters to different audiences in Washington, one letter asking that no action take place, another asking that action does occur.
In its letter, NAFCU is urging the the House Financial Services Committee to ensure the Fed does not move forward with an official federal Reserve central bank digital currency. NAFCU's letter was sent ahead of a hearing on the issue.
“We believe the hypothesized benefits of a CBDC are difficult to pinpoint given the lack of specific policy direction in current proposals,” wrote Vice President of Legislative Affairs Brad Thaler. “Many of the design features necessary to achieve certain benefits come with serious tradeoffs that could negatively impact credit unions and pose broader financial stability risks.
“In some cases, those tradeoffs are difficult to anticipate because underlying regulatory policies—such as what balance to strike in terms of protecting consumer privacy, or how to guard against retail deposit substitution—are not yet developed,” added Thaler.
Thaler argued that the Fed offering a CBDC directly to consumers would “constitute a massive expansion of their mission and threaten to erode the financial system.”
Additional Risks
Other risks of a CBDC mentioned in the letter include:
- Complicating existing private- and public-sector payments innovation for financial institutions
- Posing serious privacy concerns, eroding consumer privacy and the auditability of transactions
- Not increasing the transaction speed to cross-border digital payments – as it has been claimed to do
‘Should Not Proceed’
“NAFCU expects that the net costs of a CBDC will exceed the benefits, and that administration of a CBDC will distract from the Federal Reserve’s dual mandate of achieving both stable prices and maximum sustainable employment,” concluded Thaler. “Accordingly, the Federal Reserve should not proceed with further development activities.”
CUNA: Renew Long-Term Reauthorization for NFIP
CUNA, meanwhile, said it strongly supports efforts to pass a long-term reauthorization of the National Flood Insurance Program through 2027.
CUNA expressed its view in a letter to the House Financial Services Subcommittee on Housing, Community Development, and Insurance, which conducted a hearing on reauthorization and reforming the NFIP, including discussion of several pieces of legislation.
“Beyond the necessary long-term reauthorization of the NFIP in the National Flood Insurance Program Reauthorization Act of 2022, CUNA further applauds the committee’s efforts to ensure that the cost of flood insurance premiums is rooted in the actual flooding risk of the property, including the improvement, expansion and modernization of floodplain mapping; the refunding of premiums paid on properties inadvertently included in special flood hazard areas; and the reduction of premiums based on the implementation of flood mitigation steps,” the letter reads.
Additional Points Made
In the letter CUNA noted it also:
- Has reservations about a proposed pilot programs to establish flood insurance premium discounts through means testing, as it could create unintended consequences
- Requests the committee consider expansion of participation in a proposed data exchange program to mortgage originators and servicers regarding secured or intended to be secured by non-first-position liens
- Urges the committee to include a representative on a proposed Federal Flood Insurance Advisory Committee with knowledge of mortgage origination and the housing finance sector. “This language is included in the National Flood Insurance Program Administrative Reform Act of 2022,” CUNA wrote
- Supports a decrease in the cap on annual premium increases to 9% (down from 18% proposed in draft legislation)