|Primary Elections Primer
Did you vote in the Primary Elections? More than 1.6 million Georgians did, and while there are several races that are yet to be decided across the state that are in a runoff... for many candidates the July 31st Primary was the only barrier standing between them and an elected position. However, competition in these races can be seen as either feast or famine. There were races with no competition whatsoever, and on the opposite spectrum races with multiple primary competition and/or general competition. But what do these races encompass? This year, all 14 U.S. Representative seats are up for election (which includes one newly-created district), all 56 state Senate seats, and 180 House seats are up for election.
Credit unions can do one of two things... wait for the results of these elections and see if our supporters return to office, or work to make a difference in their campaigns. And while everyone has their political preferences, the relationships that credit unions have with key legislators are extremely valuable in pursuing legislative initiatives to help credit unions continue to serve their members. Credit unions made a HUGE difference in the 2012 election season already: More than 140 individuals from 15 unique credit unions were directly involved in five Congressional races and four state races, building relationships and supporting credit union supporters. Most recent credit union campaign activity in the weeks leading up to the July 31st primary:
Thank you to these, and all of the credit unions to date that lent a hand in campaign activities. Every candidate supported by all of the credit union individuals has moved forward (one state race is pending; State Sen. Bill Heath (R-Bremen) is currently in a runoff).
The time that these credit union individuals shared made a direct positive impact on the elections (some of which were very close), and helped build even stronger relationships with people who make decisions on the bills that impact our industry. Not convinced that your time or vote can make a difference? Georgia’s Own CU hosted a meet and greet for Senate Banking Chairman Jack Murphy two weeks before the primary... and he won by just 113 votes! For more details on the races and credit union impact please click here.
|What to Expect When Congress Returns
Congress is presently in the midst of a five-week recess and will return in September... after which there will be only a handful of legislative days before the November 6th election. The outcome of the election will greatly influence the amount of work that can be completed before the new Congress is seated in January. If the conditions allow, the lame-duck session has the potential to be massive. Considering only the items that Congress needs to get done before year end, it is easy to see how Congress could fill up the seven weeks between the November election and the close of 2012:
With so much left on the “required” agenda, the conventional wisdom is that November and December will be particularly active in Washington. Of course, the outcome of the elections is going to play a very significant role in whether those on Capitol Hill want to tackle these issues at the end of the year, or let the next Congress (and perhaps next President) deal with the problems. So what should credit unions expect? CUNA and Leagues are preparing for a very active lame-duck session, but no one will know exactly what type of lame duck will unfold until after the election. But where do the credit union priorities in Congress stand?
Member Business Lending
|One Agreement at Hand
Congressional leaders have agreed to adopt a six-month continuing resolution after the August recess that would fund the federal government through next March, Senate Majority Leader Harry Reid (D-Nev.) said on July 31st. The agreement enables lawmakers to avoid a spending fight during what is expected to be a hectic lame-duck session following the November election. The six-month continuing resolution would be prorated at the 2013 spending level set by the Budget Control Act last August. The current fiscal year ends on Sept. 30, and Congress will have eight legislative work days in September to pass the funding measure.
|CFPB Finalizes Remittance Rule Amongst Opposition
The Consumer Financial Protection Bureau, amongst much debate on Capitol Hill in the weeks prior, released its long-anticipated remittance rule on August 7th. The final rule will provide a safe harbor exemption for certain institutions from the requirements of the remittances rule issued previously by the CFPB that implements provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act regarding new consumer disclosures for remittance transfers.
|Unlocking MBL Dollars? NCUA Initiative May Double
Number of Low-Income Credit Unions
More small businesses across America will have greater access to needed capital from federal credit unions through a NCUA initiative to streamline the process for federal credit unions to receive a low-income designation (LICU). NCUA sent letters to 1,003 federal credit unions notifying them of their eligibility for the LICU designation on August 7th, and 35 of those were in Georgia.
NCUA’s initiative was incorporated into a relief and recovery package for drought-stricken states announced at the White House. Of the LICU-eligible institutions, 470 federal credit unions — representing 47 percent of potential new LICUs, 52 percent of potential new assets, and 54 percent of potential new members — are headquartered in states identified by the National Oceanic and Atmospheric Administration as having “extreme” drought conditions.
"With this initiative, we are cutting regulatory red tape and expanding access to capital for small businesses, which should translate into job creation," said NCUA Board Chairman Debbie Matz. "Providing small businesses with the money needed to open their doors, create jobs, or expand operations will help our economy. This action is particularly timely for the 27 states devastated by this summer’s historic drought."
One of the important benefits of the designation is the ability of LICUs to make unlimited member business loans. NCUA projects this initiative could unlock between $250 million and half a billion dollars in new, near-term business lending if all qualified federal credit unions participate. The initiative could double the number of LICUs and increase their member business lending by nearly 75 percent. Rather than waiting for credit unions to complete the required paperwork to become a LICU, NCUA contacted the credit unions alerting them of LICU eligibility. Credit unions receiving letters may now "opt-in" with a simple reply that agrees to the LICU designation.
To qualify as a LICU, a majority of a federal credit union’s membership (50.1%) must meet low-income thresholds based on 2010 Census data. In addition to the exemption from the statutory 12.25 percent statutory cap on member business lending for credit unions, other advantages derived from the LICU designation include:
For more information about the LICU designation initiative, click here.
|You Can Make the Difference
On August 21st, there will be several primary runoff races ranging from federal, to state, to local that will be decided... and voter turnout is expected to be dismal. In just the primary elections held on July 31st, only 31% of the registered voters cast a ballot... with some counties as low as 18% (click here for a county-by-county voter turnout). With some races being decided by just a handful of votes, who shows up to the polls has an enormous impact on each of our lives and our industry.
This is an opportunity for credit unions. Credit unions can make a difference in the upcoming August 21st runoff and every subsequent election by encouraging their members to vote. It’s easy, and can be accomplished by utilizing one or all of the following three steps:
The simple process of encouraging others to vote can build influence for all credit unions.
|State Legislative Group Supporting CU Policies
Provisions backed by credit unions reinforcing support for a dual chartering system with an option to retain private insurance are key provisions of the Banking and Financial Services Policy Directive that the National Conference of State Legislatures (NCSL) is scheduled to adopt this week at its annual meeting in Chicago. Many state legislators, including many key leadership individuals from Georgia, utilize NCSL guidance when crafting legislation.
|International Year of Cooperatives: Bet You Didn’t Know...
Best Western Hotel chain is a co-op! That’s right. Based in Phoenix, Arizona, the Best Western cooperative was founded in 1946 when M.K. Guertin, a California-based hotelier, decided to implement a central reservations system to make it easier to provide lodging for travelers in the motels located along legendary route 66.
One hundred percent of members’ fees are reinvested in services for hoteliers. Best Western is a “voluntary” hotel chain operating as a cooperative, meaning it is neither an integrated chain nor a franchise. Upon joining the Best Western cooperative, each hotelier retains its operational independence and becomes an associate of the chain. As such, Best Western hoteliers are the only beneficiaries of the activities developed by the chain. They contribute between 0.8% and 1.5% of their revenue to the cooperative.
Best Western is a prime example of how resilient the cooperative model has been throughout the economic crises: Its revenues are more than seven times greater than its expenditures! Click here to read more about this cooperative business.
|In the CU Push for Regulatory Relief, This Doesn’t Help
The Washington Post asked the question on August 7th if regulators are doing enough to rein in money laundering, citing that regulators are catching flak for not acting quickly enough to stop banks that helped Iran flout U.S. sanctions. This week, the state of New York said London-based Standard Chartered Bank concealed $250 billion in Iranian transactions, violations that persisted for nearly a decade. A number of international banks, including Lloyds, Barclays and Credit Suisse engaged in similar behaviors, but it took years before regulators put their foot down.
State and federal agencies routinely audit to ensure compliance with anti-money-laundering rules, but critics say enforcement actions have fallen short of serving as a deterrent, with punishments resulting in fines but no jail time. Policing the world’s banking system, others say, is no small task and regulators are doing as much as they can in the face of rampant deception.
Some federal regulators wanted to move slower on Standard Chartered to make sure they had the strongest case possible. The bank said “99.9 percent” of the transactions were legitimate, and about $14 million slipped through the cracks. But that may still be enough to put its ability to operate in the United States in jeopardy. In 2003, the Federal Reserve Bank of New York first raised concerns about the bank’s money-laundering controls after discovering deficiencies. Standard Chartered entered into an agreement with regulators to shore up its controls and conduct an independent audit of its transactions from 2002 to 2004. The bank, with the help of consultant Deloitte & Touche, allegedly omitted critical transactions from its report to regulators, according to an investigation unveiled Monday by Benjamin Lawsky, superintendent of New York’s Department of Financial Services. Deloitte denied any wrongdoing.
|Big Banks Turning on Each Other
The August 5th edition of The New York Times zeroed in on the new financial environment... that major banks, which often band together when facing government scrutiny, are now turning on one another as an international investigation into the manipulation of interest rates gains momentum. With billions of dollars and their reputations on the line, financial institutions have been spreading the blame in recent meetings with authorities, according to government and bank officials with knowledge of the matter. While acknowledging their own wrongdoing, institutions are pointing out actions at other banks that they believe are worse — and in some cases, extend to top executives.
One official involved in the case said that banks are emphasizing that “we’re not as bad as the next guy.” The Swiss bank UBS, which has a history of regulatory run-ins, has shared e-mails, instant messages and other information suggesting it had colluded with traders at Deutsche Bank, HSBC and the Royal Bank of Scotland to manipulate key interest rates, according to court documents and bank employees. In talks with authorities, HSBC is providing its own account of the activities, according to a lawyer briefed on the matter. Citigroup has also detailed rate manipulation with other banks. When the British bank Barclays recently negotiated a settlement with authorities, it highlighted that other European institutions took part in the rate-rigging scheme, said officials close to the case. Like UBS, Barclays has provided information on activities involving HSBC and Deutsche Bank.
Typically, big banks such as these often try to negotiate a common deal to avoid getting singled out for bad behavior, as seen earlier this year when five banks collectively struck a multibillion-dollar agreement with federal authorities to address foreclosure abuses. However, with the rate investigation, institutions are not sharing information or even discussing the case with rivals. In part, they do not want to appear to have close ties with their rivals, since such cozy relationships are part of the government’s inquiry. “There is no information-sharing among banks unlike the past 15 years of federal investigations,” said a lawyer involved in the case.
|And the CU Movement Keeps Growing –
Dutch Entrepreneurs Start Up CUs
Dutch entrepreneurs are fed up with the difficulty of getting bank credit and are planning to set up credit unions to solve the problem, the Dutch paper Financieele Dagblad reported on August 8th. The first Dutch credit union will begin in September under the name Midden-Nederland.
Midden-Nederland was formed when a group of entrepreneurs from Amersfoort and Gooi en Eemland had lunch together and found they shared one frustration: the lack of credit from banks, says the FD. They set up a credit union whose members include a removal company, a pension advice agency and a wine wholesaler, and plans are under way for credit unions run by bakers, motoring organizations and entrepreneurs from Noord-west-Veluwe.