Capital Corner: Pleasant Surprises

Provided by John McKechnie

In politics, surprises are rarely good news. But now, as 2024 starts to take shape, unexpected developments on a couple of key issues show potential to help credit unions advance our agenda on Capitol Hill.

What does a “game changer” look like on Capitol Hill? When it comes to the Credit Card Competition Act, (“the Durbin Bill”), a huge merger in the credit card space has the potential to reshuffle the political deck on this stalemated bill.

Capital One’s proposed purchase of Discover, if approved, would alter the credit card landscape by adding a third major option for transactions. That, in turn, deprives Senator Durbin (D-IL) and his allies of their major rationale for the legislation by upending the Visa/Mastercard “duopoly.” Capital One/Discover represents a new market-driven option, and that already may be having an impact on the debate—soon after the announced merger Senator Durbin told reporters he is now “open to changes” in CCCA.

There are no details yet on what those “changes” may be. And in an effort to jump start his stalled legislation, Durbin, chairman of the Senate Judiciary Committee, has scheduled a hearing on CCCA April 9, and is promising to summon the CEOs of both Visa and Mastercard to testify. Durbin is expected to also call a small merchant as a counterpoint to the mega-bank CEOs; the rumor on the Committee is that Durbin “is going to find a Mom and Pop store owner from Peoria” to sit next to the well-heeled credit card representatives as a way to create a “David and Goliath” image during the hearing. In other words, the fight wears on.

Credit unions and our allies continue to press Congress to keep this bad bill bottled up, and if we do our jobs, and continue our vigilance, the Durbin bill will continue to remain on the shelf where it belongs.

A House Hearing on emergency liquidity may have billed as a look at the Fed and Federal Home Loan Banks and how they functioned during last March’s turmoil in the banking sector, but credit unions and NCUA may have been an unexpected beneficiary of the scrutiny.

At a February 15 House Financial Services hearing, several Committee members raised credit union liquidity and NCUA’s Central Liquidity Facility as Congress assesses the overall state of preparedness in case of strains in the Nation’s financial system. Rep. Bill Foster (D-IL), in his opening remarks pointed to how the CLF “levels the playing field…between the larger and smaller institutions. Government lending programs like those operated by the Home Loan Banks and the NCUA’s Central Liquidity Facility are linchpins in the overall federal backstop.”

In response, Ranking Member Maxine Waters (D-CA) stated that she “hopes we can act on NCUA’s bipartisan request to give small credit unions access to emergency liquidity through the Central Liquidity Facility.” Rep. Scott Fitzgerald (R-WI) further accented the importance of credit union liquidity options, “including access to Central Liquidity Facility. It’s essential Congress ensures that the Central Liquidity Facility is up to date and ready to provide efficient and adequate contingent liquidity to the credit union system in the event of liquidity stress.”

DCUC has supported NCUA’s legislative request to revamp CLF and will continue to do so even as the credit union system continues to perform well on the liquidity front. As NCUA Chairman Todd Harper said of the situation, “the best time to fix the roof is when the sun is shining.”