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New Financial Services Landscape Policy Discussion
Thursday, September 18, 2014 6:05 AM

Yesterday, CUNA hosted a policy discussion forum from the Credit Union House in Washington, DC, concerning the new financial services landscape. They live-streamed the event, which highlighted credit union membership growth, the implications of growth for continued credit union service to members, and overall education on the mission and value of credit unions.

Kevin Cirilli of The Hill interviewed three members of Congress:  Rep. Brad Sherman (D, CA-30), Rep. Denny Heck (D, WA-10), and Rep. Rob Woodall (R, GA-07). The three legislators admitted that banking industry representatives are often pushing them to reconsider the credit union tax status.

Rep. Heck said he has a standard response to banking officials that keep pushing him to re-examine the credit union tax status, paraphrasing economist Walter Heller on supply-side economics:  "To keep coming to us and asking for that, waiting for it to happen, is akin to leaving the landing lights on for Amelia Earhart. Credit unions are not taxed the same as banks as a matter of policy."

CUNA's Bill Hampel followed with a roundtable discussion. On his panel, Steve Pociask of the American Consumer Institute and Dr. Michael Mandel from the Progressive Policy Institute discussed the economic factors impacting credit union growth.

Both were asked about the consequences of overregulation on credit unions, and how overregulation affects recovery from the economic crisis as a whole.

Pociask indicated the 12.25% member business lending cap was a regulation that could be slowing recovery, and he emphasized the importance of credit unions for picking up their small business lending by 38% since the onset of the recession while banks reduced their small business lending by 17% over that same period.

"As banks were dropping their lending to small businesses, credit unions were stepping up and increasing that lending," he said. That's important because "if you look at how the cycle works, 65%-70% of jobs created in the upturn are jobs from small businesses. So it's very important to get capital to them. There's definitely demand for it, but the banks aren't meeting it."

Mandel said the NCUA's risk-based capital proposal was a classic case of regulatory oversight. "It's tightening up regulations just when we need more lending," he said. "We saw this after 2000, with the change in accounting rules, which was an overreaction that imposed a lot of costs, but it didn't stop the next financial crisis. This is the same type of thing, imposing extra costs without doing what needs to be done."

Mandel added that the post-crisis reaction of targeting institutions like credit unions "is going to turn out in retrospect to be a disaster. Because it misses the point about what caused this disaster."

The event was recorded for those who couldn't attend the forum, and should be available for viewing soon.