Credit Union Times: As head of the Joint Economic Committee, can you tell us when is the recovery going to start?
Carolyn Maloney: We hope it's starting now. I just came from C-SPAN, and they announced that the number of jobless claims had gone down. That's a good economic indicator. So I think the economic indicators are going to start turning around. It's about time. We are certainly doing everything we can to help the American economy.
CU Times: As a member of the Financial Services Committee, you've had a front-row seat on the events that caused the current situation we're in. What regulatory fixes would you like to see that will decrease the likelihood of it happening again?
Maloney: Many of the problems were caused by lack of transparency, lack of regulation. There was a whole sense that deregulating and self-regulating was the way to go, and we are now in the worst economic crisis of our time. So I think moderate and fair regulation is good for industry and good for American citizens. We are having a series of hearings on a systemic regulator that would have an umbrella over all institutions though there would be other regulators but there would be one over the entire system.
We also have a problem in that we have huge swathes of the financial services sector that aren't regulated. Credit unions are regulated, and they haven't been part of the problem; they've been part of the solution. But from our hearing [recently] about AIG, we learned about the credit default swaps, which were unregulated, the derivatives that were unregulated and the risky products that were unregulated. This needs to be corrected, but we need to be careful; we need to be deliberative.
CU Times: Which agency should be the systemic regulator? Some say the Fed, others say the Fed does not have a good track record in this area.
Maloney: A lot of people criticize placing it in the Fed because one of its primary focuses is monetary policy, and they feel it might be too much responsibility in addition to their core responsibility of ensuring the safety and soundness of financial institutions, consumer protection and monetary policy. My experience with Chairman Bernanke in terms of consumer protection has been a positive one.
My credit card bill of rights, which credit unions supported parts of, cracked down on some of the most abusive practices by issuers of credit cards. Chairman Bernanke supported it, and it's the only credit card reform that has ever passed either chamber of Congress. Chairman Bernanke put forward a rule that adhered to the principles of my bill, and 56,000 Americans expressed support for the rules, the largest comment response ever. But we want to go forward with my bill even though the rule is in place because these practices-which the Fed has called "unfair, deceptive and anticompetitive"-are going on and we want to stop them sooner. The Federal Reserve has supported the bill.
CU Times: The credit unions have said they like some things but are concerned about others, such as the rules about overdraft protection programs. How do you strike a balance between protecting consumers and allowing card issuers like credit unions to manage risk?
Maloney: When we wrote our bill, we had conversations with all the stakeholders. We had a roundtable where we established principles to be adhered to and one of the results of that is there are no caps on interest and fees. But it cracks down on the most abusive practices such as any-time, any-reason rate increases.
It stops double-cycle billing where they are charging interest on a balance that's already been paid. That's terribly unfair and the bill stops the tricks and traps that caught consumers unaware, such as saying a rate was for a lifetime, and then changing it or changing the due date so consumers were late with their payment.
What is telling about the bill is that some card issuers voluntarily adhered to the principles, such as Citibank and Chase, but then reversed that decision when others in the industry didn't because they didn't want to be at a competitive disadvantage. That's not fair to consumers. But the outrage about credit card abuse is strong.
One of the worst is raising rates for no reason and then making it retroactive, thus making it hard for consumers to pay down their balance.
The bill does allow for a risk analysis and does allow that if someone doesn't pay their balance on time an interest rate can be increased but then a consumer is given 45 days to decide if they want to opt in to the higher rate.
CU Times: Your district has been on the front lines of the economic downturn because many of your constituents work for big financial institutions and large financial services companies like Citigroup are in your district. How do you balance the populist outrage against some of the abuses without stifling Wall Street?
Maloney: I study all aspects and try to be fair to both the institutions and consumers. In the credit card bill, while there are some bills that cap interest rates, mine doesn't. I am a big believer in transparency and choice and letting consumers choose.
On ATMs, for example, when they first became widespread, there were many bills that would have forbidden banks and credit unions from charging a fee for their use. I thought that was too restrictive. If you are providing a service to the community, you should be able to charge for it, but let consumers know the charges and then decide. So I put in a bill that said when you withdraw your money they had to show that there was a fee and a consumer could decide if they want to opt in.
Credit cards are a contract between the issuer and the consumer but the issuer got to make all the decisions and it was very unbalanced.
CU Times: One of the other parts of regulatory restructuring that credit unions are concerned about is ensuring that the NCUA remains an independent agency. You expressed support for that when you spoke at CUNA's conference. What's the likelihood that it will stay that way when the restructuring is done?
Maloney: There have recently been some regulatory improvements, such as making the insurance coverage of up to $250,000 permanent [which passed the House and is pending in the Senate] and the House passed a bill to allow credit unions to provide more services to underserved areas. And the House also passed an amendment allowing for five years to replenish the insurance fund, which I backed. Under the systemic regulator, there will be other regulators and I believe the NCUA will be kept.
Credit unions perform an important service and their tax-exempt status allows them to provide an important service to underserved areas. One of the reasons I am such a strong supporter of credit unions is that I represented Greenpoint, Brooklyn where the Polish and Slavic Federal Credit Union became the major community center. I also represented at one time East Harlem and the South Bronx, and during the 80s many of the banks closed and redlined, and the credit unions stayed and provided the services. I was deeply grateful; everyone deserves to have access to financial products and services.
CU Times: Rep. Eddie Bernice Johnson introduced a bill to expand the reach of the Community Reinvestment Act to include other financial service providers, including credit unions. What are your thoughts about the bill?
Maloney: CRA has been a very successful program. Any proposed changes will be thoroughly reviewed. We'll have hearings on it I'm sure. It will be deliberated and debated and as a member of that committee I would like to reserve judgment until the hearings take place.