SEPTEMBER 20, 2013
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Two Paths Leading to Success
There's more than one way to get members involved in the "Don't Tax My Credit Union!" campaign. Read on to learn more about the divergent strategies used by two Georgia credit unions, both of which have been successful.

  Congress Continues Towards Housing Finance Reform
Senate Finance Committee members said they hope to produce a housing finance reform bill by year's end, while the House Financial Services Committee chairman has also said he wants to see such legislation moved along.

  Credit Unions on the Hill
Representatives of a number of Georgia credit unions traveled to Washington, D.C., for Hike the Hill, speaking to legislators in support of the "Don't Tax My Credit Union!" message and promote credit union values.

  Sharing Support
Georgia United Credit Union representatives presented U.S. Rep. Hank Johnson with postcards from members urging support for retaining the credit union tax exemption. Of the more than 32,800 postcards collected to date, many were from residents of his 4th Congressional District.

  NCUA Will Propose Stress Testing Rule
National Credit Union Administration Chairman Debbie Matz announced that NCUA is drafting a requirement for annual stress tests at credit unions with assets of more than $10 billion; a proposed rule is expected by the end of the year.

  Now That’s a Pleasant Surprise!
The Federal Reserve decided not to cut back on its program of buying billions of dollars' worth of Treasury securities and mortgage-backed securities, a move greeted with record highs on Wall Street.

  News Flash to Banks: CUs Are Different Due to Structure
The American Bankers Association launched an ad campaign differentiating between large and small credit unions, missing the point that all credit unions, regardless of size, are cooperatives with the same basic mission.

  It’s a New Day
The Atlanta Journal-Constitution reported that the wave of home foreclosures in metro Atlanta and across Georgia is subsiding, with the number of new foreclosure notices decreasing month by month.

  Positive Trend: Mortgage Fraud Declines
The Georgia Department of Banking and Finance reported that mortgage fraud in Georgia is continuing to decline, thanks to the efforts of regulators, law enforcement agencies, the mortgage industry and others.

  Surprising Indicator of Improving Economy:
Uptick in Overdraft

A quarterly study found that overdraft revenue was up slightly in the second quarter of 2013; the CEO of the research firm that produced the study said the increase was a result of higher overdraft fees combined with lower volume.

  Rise Up (Not the Falcons, Consumer Spending!)
The Atlanta Business Chronicle, citing a Georgia Credit Union Affiliates report, said consumer spending in Georgia is on the rise, fueled by a rebounding housing market and strong job growth.

  Five Year Check-Up: Big Banks Are Bigger
Five years after the collapse of Lehman Brothers, U.S. Sen. Elizabeth Warren called for reinstatement of the Glass-Steagall Act, which limited the size and scope of banks, but was repealed during the Clinton administration.

  Alternative Avenues with Payments
The Atlanta Business Chronicle reported that Atlanta-based payment processor BitPay Inc. had reached a milestone of more than 10,000 online merchants using its service to accept payments in the online currency called bitcoins.

  They Don’t Want Your Money
CNN Money reported that banks in other countries have been telling U.S. customers to take their money elsewhere, so the banks won't have to deal with a complicated new tax law due to take effect next year.

  To Be, or Not to Be
The Wall Street Journal reported in its blog that the Federal Reserve, Congress and large financial institutions, in response to some institutions' moving into businesses they were once barred from, are considering what exactly a bank is.

Two waysTwo Paths Leading to Success

When Congress returned to D.C. the week of September 9th, they were welcomed by a barrage of credit union Twitter, Facebook, and email messages in round two of “Twitter Tuesday,” asking them to Don’t Tax My Credit Union. Here in Georgia over 16 credit unions jumped into the social media campaign, with Rep. David Scott (D-13) tweeting his support of the tax exemption in response to a post by Delta Community CU (see related hike article for more support from Rep. Scott). This social media push enhanced the continual stream of messages to Congress asking them to support credit unions; as of September 17th there have been over 73,000 messages sent by Georgia credit union advocates in this call to action. Please click here for a breakdown by credit union. And, this message was reinforced in person this week by Georgia credit union leaders who traveled to D.C. to speak out on the issue with Congress (see related article below).

All of this timing is hugely important, as Senate and House tax-writing committees work to create their proposals. Already the House Ways and Means Committee has met twice in private on possible proposals since their return (no details yet of what that may entail), and the Senate is anticipated to produce white papers and/or proposed legislation soon. The point of all the activity of credit unions in advance of legislation is to work now to prevent the industry from being one that is left out in tax exemptions. And your help is needed. If Congress has shown us one thing, it can be unpredictable – so it is up to credit unions to speak out for their members and help chart the course for our industry.

But how? Every credit union can make a difference and help protect the services that members rely upon that help them afford life. But what path do you take to get your members involved? There is no one right way to get involved; implement a strategy that works for your credit union and GET INVOLVED. Here are two completely different strategies; two credit unions who have taken different approaches to engaging, both with strong success.

CDC Federal Credit Union
CDC FCU engaged early in the Don’t Tax My CU campaign, with members sending messages to Congress on a consistent basis week after week. They have gotten the word out online through the website and social media, and have utilized postcards in the branches to engage their members in person. Executive Vice President Australia Hoover shared that the credit union wanted “to be deliberate in our show of support for this issue” and the messaging easily helped educate the public to get them involved.

But why was it important for them to get so heavily involved with the campaign? Hoover shared that for the credit union, it was an easy decision to make: “We fundamentally believe in the valuable role that credit unions play in the lives of consumers. Maintaining the tax-exempt status of credit unions would allow us to continue delivering on the promise of being a viable alternative to commercial banks.”

How did they educate their board, staff and members on this issue? Hoover cites the level of engagement with the point that they “have been fortunate to have a very informed and engaged board of directors and membership base." They have taken advantage of all the resources provided (click here) and said it was “extremely helpful in describing the issues and helping us articulate a clear position.” Education on the issue was easy, and the messaging that “was crafted to educate the public allowed us to easily accomplish that.”

What has been their secret to success in generating contacts to Congress? Hoover shared that the consistent level of activity is an output of their culture: “I believe we have a culture that instills the value of membership and ownership for all stakeholders. Our associates are all members of the credit union. Obviously, as member/owners, the importance of being energized and engaged is well understood. Because of this cultural belief that is deep-rooted in our credit union from the board level on down, the level of support and participation for action, such as contacting our elected officials, happens naturally. There really is no secret. The effort starts on day one of a person’s affiliation with CDC FCU.”

Did you experience any negativity or push-back from members?Hoover shared that he is not aware of ANY negative response. Hoover summed up their member support perfectly, sharing that he understands that “individuals have the right to their own beliefs and opinions, which is what makes democracy so powerful. On this issue, I have heard nothing but a tremendous outpouring of support for the preservation of credit unions’ tax exempt status. To me, that makes perfect sense since the members of our credit union get to experience firsthand the benefits that come with their membership, and they are willing to stand up for it.” And stand up for credit unions they have; the members of CDC FCU continually express their support to Congress asking them to Don’t Tax My CU!

Rome Kraft Federal Credit Union
Rome Kraft FCU is a terrific example of how a credit union can make a big impact in a short period of time. CEO Phil Carter shared that with the absence of a web presence for their credit union, it was a challenge to engage members on this very important issue. But Carter found a solution, and generated significant contacts in just three days by utilizing postcards!

But why was it important for them to get involved? Carter summed it up perfectly with, “Why would we NOT get involved?!” This fight is not about large or small credit unions (see related article on some banker activity); it is about all credit unions. Members and all consumers would be negatively impacted if Congress erased the credit union income tax exemption from the tax code.

How did they educate their board, staff and members on this issue? Carter shared that even if your team was not aware of the issue, the information available “made it simple” to bring anyone up to date on what was happening in Congress, and why their involvement on this issue is needed. He “explained what it was, and what we were asking the members to do,” and his team and members engaged!

What has been their secret to success in generating contacts to Congress? Carter knew how important it was to engage, and when he saw the opportunity to utilize postcards he seized it as the strategy for his credit union. “The postcards were ideal; that was the only way we could be involved.” And his strategy paid off; in just three days of asking members to sign postcards their credit union generated a strong message of support for all credit unions.

Did you experience any negativity or push-back from members? Not only did they not see any negativity, they “did not have one single member even question why we were doing the postcards.” His members illustrate the perfect point that all you have to do is ask them and they will support their credit union. Great point and great job!

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Congress Continues Towards Housing Finance Reform

U.S. CapitolIf there wasn’t enough going on of interest to credit unions in Congress, there is more on the horizon on the topic of housing finance reform. At a hearing on September 12th, Senate Banking Committee leaders said they intend to produce a bipartisan housing finance reform bill by year-end. Panel Chairman Sen. Tim Johnson (D-SD) shared that the committee plans to hold more hearings this fall on proposed changes to the housing finance market. "These hearings will provide a more in-depth analysis of some of the necessary components of reform, with a goal toward marking up a bipartisan bill by the end of the year,” added Ranking Member Sen. Mike Crapo (R-ID). On the House side, the Chairman of the House Financial Services Committee, Rep. Jeb Hensarling (R-TX), has also indicated his desire to move legislation to the floor. There are many variables that could come into play with either the House or the Senate, and of course from the credit union perspective there is concern of any legislation that would eliminate the ability of credit unions to access the secondary mortgage market. Stay tuned!

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Hike the HillCredit Unions on the Hill

This week, several Georgia credit union leaders were in Washington, D.C., September 17th through 19th to speak out for all credit unions at Hike the Hill. The focus of the legislative visits was to talk one-on-one about Tax Reform and reinforce the Don’t Tax My CU message, asking Congress to support the credit union income tax exemption and illustrate how the credit union emphasis is on people, not profits. The group counteracted the bankers’ push to cast doubt on the purpose of the tax exemption (see article below), and that credit unions are member-owned, democratically operated, not-for-profit cooperatives. They shared that this is not a “free ride” for credit unions, as they create direct value in the communities in which they reside and create positive financial options for ALL consumers. These meetings were extremely positive, and during the legislative visit with Rep. David Scott (D-13) he expressed not only his support to the hikers, but that he would contact his colleagues in Congress to help further protect credit unions and the members they serve!

Other issues addressed:

  • Housing Finance Reform: There is concern in the attempts to reform the housing finance market that credit unions will be pushed out, and that Congress needs to ensure that credit unions are able to continue their access to the secondary market in their legislative attempts.
  • Regulatory Burden: The increasing regulatory burden placed on financial institutions is overwhelming, and is a concern for all credit unions. The group stressed not only exam fairness, but regulatory relief measures that will relieve the burdens placed on credit unions.
  • MBL: These advocates also asked for the increase in the member business lending (MBL) cap for credit union members, and for their support of the two bills (S. 968 and H.R. 688) that would raise the cap from 12.25% to 27.5% of assets. And in some cases, the group thanked the legislators for being co-sponsors: Reps. Sanford Bishop (D-2), Hank Johnson (D-4), John Lewis (D-5), and Rob Woodall (R-7).

Thank you to all the credit unions who shared their time at this Hike the Hill: Associated Credit Union, Augusta Metro Federal Credit Union, CGR Credit Union, Coosa Valley Federal Credit Union, Delta Community Credit Union, DOCO Credit Union, Family Savings Federal Credit Union, Fulton Teachers’ Credit Union, GEMC Federal Credit Union, Georgia’s Own Credit Union, Georgia United Credit Union, LGE Community Credit Union, TIC Federal Credit Union, and United 1st Federal Credit Union. Your time and energy speaking to members of Congress is invaluable!

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Sharing support
From left: Kim Wall, Georgia United CU; U.S. Rep. Hank Johnson; Cindy Connelly, GCUA
Sharing Support

On September 16th, Georgia United Credit Union hand-delivered postcards from their members to speak out against taxing credit unions to U.S. Congressman Hank Johnson (D-4). Upon seeing the credit union representatives, Rep. Johnson immediately shared that he has heard from many in his district asking him to “Don’t Tax My Credit Union!” Heard he has, as many of the 32,800 plus messages that Georgia United CU has generated were in his district. He expressed his support and concern of why this issue has become one that is “on the table” for our industry. Keep up the efforts with the campaign, your involvement drives home this all important message to your legislators!

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DollarNCUA Will Propose Stress Testing Rule

NCUA Chairman Debbie Matz announced on September 18th that the agency's Office of National Examinations and Supervision is drafting a requirement for annual stress tests at credit unions with assets exceeding $10 billion. Matz said stress testing would be part of the NCUA's "coordinated approach" to supervision of a changing industry with asset growth concentrated in large credit unions. Stress testing of federally insured credit unions with state charters would be conducted in consultation with the state regulator. The shocks used in the stress testing would be based on scenarios issued annually by the Federal Reserve, with adjustments for differences between banks and credit unions, and the agency is likely to issue the proposed rule for public comment before the end of the year.

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Now That’s a Pleasant Surprise!

The Federal Reserve monetary policymakers' decision not to reduce the purchases of $85 billion a month in Treasury bonds and mortgage-backed securities came as a pleasant surprise to Wall Street investors, with the stock market hitting record highs after their announcement. Most experts had expected the Fed to start dialing back its purchases of Treasury bonds and mortgage-backed securities this month. The Atlanta Business Chronicle reported on September 19th that Federal Reserve Chairman Ben Bernanke said the Fed could still start tapering its bond purchases by the end of this year – but it all depends on where the economy is.

PuppyWhat was the decision? On September 18th the Federal Open Market Committee, the Fed's monetary policymaking body, chose to maintain the level of purchases in its quantitative easing program and to keep the targeted federal funds rate in the 0% to 0.25% range. The FOMC will continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month and longer-term Treasury securities at a pace of $45 billion per month. It also will continue reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction.

What does it mean for credit unions? Mike Schenk, CUNA vice president of economics and statistics, shared that "for credit unions the result will be members that are more confident (at least marginally), housing and autos that are marginally more affordable and by extension marginally higher demand for loans, relative to where we would be if tapering actually started," he said. "The announcement isn't a game-changer but will undoubtedly help to provide needed support."

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News flashNews Flash to Banks: CUs Are Different
Due to Structure

The American Bankers Association (ABA) welcomed Congress back to Washington, D.C., by running print and radio ads targeting the credit union tax exemption the week of September 9th. The ads used their typical argument to divide the credit union industry with a wedge between large and small institutions; missing the point that all credit unions are cooperatives and the structure is what makes them different from the for-profit banking industry. They thanked credit unions that have remained “faithful to their core mission and urge large credit unions to pay income taxes like them.”

News flash to banks: Size is not the differentiator – it is the structure and the mission of all credit unions to try to help people afford life that makes us different from the for profit financial services industry.

In addition, the ABA sent an email urging Congress to ask credit union representatives “tough questions.” The email told lawmakers to ask credit unions whether they should retain their tax subsidy if they no longer focus on low- and moderate-income customers, as their charter mandates. It also asked why credit unions should retain their preferential tax treatment when other cooperatives pay taxes. The ads and email correspondence are part of ABA’s aggressive “It’s Time to Pay” advocacy campaign urging Congress to repeal credit unions’ tax exemption as it considers tax reform.

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SunflowerIt’s a New Day

On September 10th The Atlanta Journal-Constitution (subscription required) reported that it’s a new day with foreclosures, as metro Atlanta’s foreclosure tide continuing to recede. The number of new notices filed in September hit near a 7-year low. This latest report moved one housing industry expert to declare the end of a crisis! A few points:

  • The 3,599 notices filed for September are 1.4 percent lower than in August and 50.5 percent lower than last September.
  • Foreclosure notices have been decreasing since 2010, when 127,140 notices were filed in the 13-county region.
  • So far this year, 41,020 notices have been filed — down 43 percent from the same period in 2012.

The metro area is reflective of an improving market statewide. Overall, Georgia foreclosure activity in August decreased 15 percent from the previous month, and was down 51 percent from a year ago. This is the 14th consecutive month with a year-over-year decrease according to a report from RealtyTrac. Georgia now drops to 11th nationwide in foreclosure rankings.

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PositivePositive Trend: Mortgage Fraud Declines

On September 17th, the Department of Banking and Finance shared that according to the latest figures reflecting through August 2013, mortgage fraud in Georgia continues to decline. “We are extremely pleased to receive confirmation of the continued decline in mortgage fraud in Georgia, a positive trend now spanning ten years,” stated Department of Banking and Finance Commissioner Kevin Hagler. “This positive trend is the culmination of collaborative efforts by this department; the Office of Attorney General; local, state and federal law enforcement authorities and prosecutors; industry leaders, and the grassroots efforts of the Georgia Real Estate Fraud Prevention and Awareness Coalition.”

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Credit cardsSurprising Indicator of Improving Economy:
Uptick in Overdraft

Overdraft revenue increased modestly to an annualized $31.3 billion according to the latest quarterly study on overdrafts by Moebs Services, an economic research firm located in Lake Bluff, IL. The approximately $200 million rise from the first quarter of 2013 still trails year end 2012, which was at $32.0 billion. The increase in overdraft revenue is being likened to an improving economy. “Overdraft volume decreased as consumers reacted to uncertain economic times, so America’s financial institutions reacted by increasing price. The combination of less volume and higher price results in a break-even in net revenue for financial institutions,” says Michael Moebs, economist and CEO at Moebs Services.

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Rise upRise Up (Not the Falcons, Consumer Spending!)

On September 6th the Atlanta Business Chronicle reported on the activity at credit unions statewide, and how things are rising up with the economy. The article cited that consumer spending is up in Georgia, thanks to a rebounding housing market and strong job growth, according to a report by Georgia Credit Union Affiliates. The report, which compiled data from 43 credit unions around the state, indicates that many Georgians are purchasing both new and used vehicles and are also seeking more general loans. Total loan balances were up 2.9 percent and second mortgage loans jumped 4.4 percent in the first half of 2013. Key numbers in the report:

  • New vehicle loans at Georgia credit unions increased 6.8 percent in the first half of 2013
  • Used vehicle loans increased 5.5 percent for the first half of the year
  • Total loan balances were up 2.9 percent in the first half of 2013

"Jobs and housing prices are both key factors in lifting consumer confidence," said Mike Mercer, president and CEO of GCUA. "As we see those conditions return to pre-recession levels, we expect lending at Georgia credit unions to expand as well." In February, GCUA reported that spending in 2012 was up on big-ticket items such as vehicles. Read the complete report here.

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StethoscopeFive Year Check-Up: Big Banks Are Bigger

It has been five years since the collapse of Lehman Brothers and a lot has changed; a number of banks and Wall Street firms have gone away, and there new regulations and guidelines meant to limit risky trading. But to Sen. Elizabeth Warren (D-MA), this five-year anniversary marks the time to renew her call to reinstate the Glass-Steagall Act aimed at limiting the size and scope of banks. Speaking on September 12th at George Washington University Law School, Warren said that the four biggest banks have grown 30 percent since the financial collapse, increasing the “too big to fail” problem that forced the government bailout and hurt the overall economy.

The Glass-Steagall Act was repealed during the Clinton administration, and her bill to reinstate it is co-sponsored by Sens. John McCain (R-AZ), Maria Cantwell (D-WA), and Angus King (I-ME). During her speech she blamed “intense pressure” from the financial services industry for preventing regulators from writing 60 percent of the rules required under the Dodd-Frank legislation.” On the same topic, Fortune ran an article highlighting the five-year anniversary on September 13th, detailing that after the financial crisis big banks are bigger than they were five years ago.

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CoinsAlternative Avenues with Payments

On September 16th the Atlanta Business Chronicle reported that BitPay Inc., an Atlanta-based payment processor, reached a milestone of more than 10,000 approved merchants in 164 countries using its service to accept bitcoin payments. The company reported that about 50 percent of the merchants are in North America, and that e-commerce merchants account for more than 90 percent of the business. In August, BitPay processed more than 10,000 merchant transactions worth more than $6.4 million. Year-to-date more than $34 million worth of bitcoins have been spent on goods and services through merchants using BitPay’s platform.

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Piggy bankThey Don’t Want Your Money

CNN Money reported on September 15th that banks around the world have been telling their U.S. customers to take their money elsewhere as they try to avoid having to comply with a new tax law due to take effect next year. The U.S. Foreign Account Tax Compliance Act, which requires businesses to report all assets held by Americans, aims to recoup the hundreds of billions the U.S. says it loses each year from tax evasion. But it's also leading global banks big and small to dump U.S. customers rather than wrestle with the complicated law. "U.S. citizens living abroad are really having a hard time with their banks," said Gerard Laures, a partner in the financial services tax division at KPMG.

Proper compliance – which means reporting everything from basic savings accounts, pension funds, investments, and more – could easily cost institutions millions each year, he estimated. And penalties are severe; businesses face a 30% tax on U.S.-sourced income if they fail to comply. "Many banks have taken the decision to tell U.S. customers to go away," Laures said.

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HamletTo Be, or Not to Be

In The Wall Street Journal’s September 16th blog, they discussed the question of what a bank is — or should be. It shared that the Federal Reserve, Congress and some of the world’s largest financial institutions are about to tackle the existential issue of what a bank is. The narrow version of the debate is whether J.P. Morgan Chase & Co., Goldman Sachs Group Inc. and Morgan Stanley should continue to own, store and transport commodities such as oil, copper and electricity. But its ramifications reach into a cornerstone of modern U.S. financial architecture: the separation of finance and commerce. Decisions taken in coming weeks should determine the boundaries of what banks can and can’t do, as well as affecting other participants in the economy ranging from brewers to Coke drinkers.

As often happens, we got to this point through accidents of history and unintended consequences. The Gramm-Leach-Bliley Act of 1999 allows banks to trade physical commodities, subject to Fed approval. But it is unclear on whether they can store and transport materials. Either way, the rules didn’t apply to investment banks such as Goldman and Morgan Stanley, thus allowing them to keep and expand their warehousing and commodity-transportation units. The current problems stem from the financial crisis. Five years ago this week, Goldman and Morgan Stanley were transformed from securities firms into bank-holding companies amid fears over their stability. At the same time, J.P. Morgan gained warehousing and electricity assets from the takeover of Bears Stearns Cos. and the purchase of units of Royal Bank of Scotland Group. All of a sudden, three “banks” were active in markets most rivals had been banned from. The debate is gaining urgency because of a rule stating that newly minted banks like Goldman and Morgan Stanley have five years to sell businesses not permitted under the law.

To add fuel to the fire, there are accusations from aluminum users such as MillerCoors LLC and The Coca-Cola Company that warehouses controlled by banks have been hoarding metal, pushing up the cost of cans and short-changing consumers. Those criticisms have caught the attention of the U.S. Senate, which has held hearings and is expected to call for more. Opponents point to the pitfalls arising from having financial groups involved in these activities — from the risk that a Deepwater Horizon-style disaster may endanger a bank’s existence, to concerns over price manipulation and consumer protection. The blog states that what regulators should really do is to set a precedent and draw a line where finance ends and commerce begins. To be or not to be a bank? That is the question.

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