DC Deck Reshuffled. What’s Next?
Thursday, June 18, 2020
by John McKechnie, Senior Partner, Total Spectrum
To say that the COVID-19 pandemic, and the nearly two-month shutdown of large swaths of the US economy, has had a profound impact on America would be an understatement. Add to that the ramifications from the George Floyd tragedy, ramifications that physically and emotionally look to change the way the Body Politic functions, and we have a changed landscape in Washington. What should credit unions, and Defense Credit Unions in particular, look for in the coming months?
Here are some of the items we’re keeping our eye on:
CARES 2.0? Congress is taking tentative steps toward another bill aimed at addressing the economic effects of coronavirus.
In March, the Coronavirus Aid, Relief, and Economic Security (CARES) Act became law. This $2 trillion bill created a new Small Business Administration lending effort (the Paycheck Protection Program, or PPP) and placed a slew of restrictions on mortgage lending and mandatory forbearance for borrowers. It also temporarily granted unlimited NCUSIF coverage on non-interest-bearing business accounts and expanded the lending capacity for NCUA’s Central Liquidity Facility (CLF) through December 31. This important backstop has served credit unions well in past financial crises, and Congress wisely decided to increase its ability to lend to credit unions, just in case liquidity strains show up in the credit union system.
The question now is: how much will the Republican Senate want to increase spending in the next round of legislation. Already, the Democratic House passed its next iteration of coronavirus response in late May, a massive $4 trillion aid package. In a disappointment for credit unions, despite a broad-based effort the House Democrats left credit union member business lending relief out of that legislation.
Relatively positive economic news has tempered the Senate’s appetite for more expensive programs. Expect the two chambers to agree on tweaks and reforms to CARES 1.0, but nothing as expansive, or expensive, as what the House approved.
Credit unions can expect an NCUA effort on extending CLF borrowing beyond year-end; the Senate Banking Committee, chaired by Republican Mike Crapo of Idaho, will be a key decider. Hill sources point to July as the time when this bill may be drafted, passed and sent to President Trump for signature.
New focus on affordable housing, poverty programs. Based on conversations with House Democratic congressional staff, it appears that affordable housing issues are going to come to the fore in the aftermath of the George Floyd/ civil unrest situation.
Specifically, the House is planning to intensify its efforts to expand CRA to include more participants and require more financial commitments. Credit unions will need to be on the lookout for credit unions in that conversation, and be prepared with data showing what they are already doing without regulatory mandate.
House Democrats have also begun discussions about reforming or eliminating credit scoring, which are unfair metrics that exacerbate poverty in minority and low-income communities.
NDAA Lease Issue. In what has become a perennial battle, the bank lobby was once again able to persuade the Senate Armed Services Committee to insert language that would give banks free space on military installations. DCUC enlisted its fellow credit union trade associations, NAFCU and CUNA, in an effort to stop this troubling provision from becoming law. The three credit union groups wrote a strongly-worded letter pushing back against the banker grab, citing the large differences between not-for-profit credit unions and for-profit banks.
DCUC President Tony Hernandez sounded a firm tone in response, saying “DCUC is disappointed that Senate Armed Services has chosen to go down a path that has both ill-considered and unnecessary. The military community has benefited from current policy, and we will do everything we can to remind the House, as well as other Senators, that this language should be dropped. Period.”
Banker attacks. Same old same old. In the midst of the changes brought by COVID-19 and the turmoil in the streets, one thing has remained constant: banker attacks on credit unions and their ability to serve consumers.
The latest banker broadside came in response to NCUA’s effort to enhance the ability of credit unions to serve low and moderate-income consumers. In May, NCUA updated its policies to allow military families to be counted in calculations to determine low-income credit union designation. One bank trade association took great offense to this more realistic approach, and circulated an editorial decrying NCUA’s “expansionist agenda to benefit the largest credit unions.” The bankers called upon Congress to stand in the way of broader consumer access, saying NCUA “won’t stand up to the largest and riskiest financial institutions it is charged with overseeing” (a misunderstanding or distortion—the new NCUA policy does not address a credit union’s size, only consumer eligibility).
It is unclear whether this latest manifestation of the banker “divide and conquer” approach will gain traction in the media or on Capitol Hill.
No matter what’s going on in the world, the banker lobby never changes its tune.
Originally published in the June 2020 issue of The ALERT.