Just about every banker I know, and certainly every bankers’ trade association I know, has been up to his/her/their eyeballs in Paycheck Protection Program matters – loans, guarantees, forgiveness applications and so forth since April.
Four separate pieces of legislation have been passed by this Congress dealing with the subject, followed by several sets of (very confusing) rules and regulations intended to show bankers how to say grace over this unprecedented project.
This effort by Congress, coupled with trying to properly deal with the COVID-19 virus, has been stressful for everyone. For the most part, it’s been an all-consuming effort to get it right for bank customers.
I know our OBA team has worked tirelessly to help banks and consumers as they try to navigate the COVID-related choppy waters and get the nation’s economic engine running again. Adrian (Beverage) has been the man on the ground in leading this effort, and without Jeremy (Cowen) and Megan (McGuire), we who represent the OBA would have stumbled badly right out of the gate.
We might still be flat on our faces without the collective (and exceptional) effort by these three next-generation heroes, all of whom have kept the information flowing. I’m very proud of these guys and what they’ve been able to accomplish working in this unprecedented pressure cooker.
We’ve tried to keep our eyes on the ball since all this began, but it’s not been easy, given some other things that have been and are still going on. Take for example a recently proposed rule put forth by the National Credit Union Administration, the so-called “regulator” of these un-taxed banks that also serves as their chief advocate.
The NCUA has proposed a rule that would allow low-income credit unions to issue subordinated debt and count it towards regulatory capital requirements. A low-income designation from the NCUA means the majority of the credit union’s customers (they call them “members”) meet some low-income thresholds developed by the U.S. Census Bureau.
Once the NCUA pronounces a credit union meets the requirements and designates it as a low-income credit union, certain benefits accrue to the entity:
The statutory cap on member business lending no longer applies to the newly-designated entity.
The entity is now eligible for grants and low-interest loans from the Community Development Revolving Loan Fund.
The entity may accept deposits from anyone, anywhere.
It now has the authority to obtain supplemental capital.
As you might imagine, Oklahoma has more than its fair share of citizens who live below the national poverty line.
As a practical matter, any credit union in Oklahoma is likely to be able to put together a customer base that includes 50.01% of customers who meet the Census Bureau standards of “low-income,” and I’m fairly certain this kind of unbridled expansion is not what Congress intended in the mid-1930s.
Allowing a tax-exempt entity to issue debt to outside investors would obliterate one of the foundational constraints imposed on credit unions by Congress.
It moves credit unions even farther from their original mission of serving communities of small means.
Ultimately this rule would lead to unprecedented and uncontrolled growth of these de-facto banks and make a joke out of the current credit union tax exemption.
We’ve already had one Oklahoma credit union (Tinker Federal) purchase an OBA-member bank, thus taking a tax-paying bank off of the state’s tax rolls. It couldn’t have come at a less-opportune time for our state.
Is it too late to do anything about this proposal? Probably, but the comment deadline isn’t until July 8.
Even if bankers were to launch an offensive, it would likely fall on deaf ears. We know what the NCUA Board should do to these fake credit unions. Even Congress knows what it should do when it comes to the taxation issue.
But Congress is gutless when it comes to taxing credit unions and it won’t lift a finger to correct this transparent fraud.
I tell you about this latest credit union travesty to let you know this war is ongoing and not likely to end soon. But it’s just one of several issues on display, both in Congress and with federal regulators.
Admittedly, it can sometimes be discouraging to try to fend off some of the assaults on your wonderful industry.
But I’m not giving up. Your OBA is not giving up. The ABA and the ICBA are not giving up. And frankly, we need all of the political clout we can muster.
Together we are stronger. We can do this. What about you – are you willing to help us? Let me know.