The More Things Change ... : Guest Opinion
It's presidential election season again, which means that with the predictability of a Lindsay Lohan arrest we are once again being told that we are on the eve of the election to end all elections. The political equivalent of the Thrilla in Manila; Voldemort vs. Harry Potter; the decisive battle between good and evil that will shape the country's destiny for a generation to come.
In reality, elections are rarely decisive and in this moment of our history the country is on the political road to nowhere. I can't say with certainty who's going to win the presidency, control the Senate or how many seats the Republicans will lose in the House of Representatives. But, unless there is a political earthquake in the next several weeks, I can guarantee you that Republicans and Democrats are going to have to compromise to get anything done in an environment where a sharply divided electorate sees any compromise as treason.
So where does this leave credit unions? No matter who wins, Congress is unlikely to be significantly more hospitable to our concerns than it has been for more than 10 years. Does this mean we take our ball and go home? No, on the contrary, in the regulatory arena, the courts and even Congress issues will be addressed and attitudes formed that will impact the movement’s ability to protect its members and grow in a changing financial environment.
The regulatory arena is the area impacting credit unions that will be most affected by the election results. Can you imagine how different Romney's choice to head the CFPB would be? Richard Cordray personifies a behavioral approach to regulation that believes that the American public can be nudged to reach the right decision with just the right disclosures. A Republican appointee wouldn't be so quick to impose additional regulations on financial institutions. This is true despite the fact that, unless President Romney nominates Ken Jennings as the CFPB director, I doubt the Republicans will find anyone to match Cordray's Jeopardy-ready acumen.
But no matter who is elected next year, Dodd-Frank and its mortgage provisions will take effect and will not be repealed. And let's not forget that the CFPB will continue to have enough independence to propose regulations regardless of who is in charge.
All this means that, no matter who wins, the courts will be the ultimate arbiter of the limits of regulatory power. You are already seeing this debate play out in the Court of Appeals for the D.C. Circuit, which has struck down regulations promulgated by the Securities and Exchange Commission even though they were mandated by Dodd-Frank. You can bet that the regulatory proposals you were reading today from the CFPB will be fodder for tomorrow's case before that same court.
In addition, courts are being asked to consider whether Congress has the right to give people the right to sue even when they aren't actually harmed by a law's violation. The potential implications of this legal debate are huge. Many of those obnoxious ATM signage lawsuits that credit unions across the country are dealing with can go forward because federal law authorizes them even when the person bringing the suit is not harmed by the lack of an ATM sign.
As for changing attitudes, no matter who wins the election , credit unions have to realize now, more than ever, that community banks are not their friends but their enemies. I know many credit union people come from the community bank industry or have great relationships with the community bank down the street. But community banks are the ace in the hole of the banking lobbying effort. There is not a state or federal legislator who would not be willing to do more for credit unions but for the fact that they are afraid it would harm the sainted community bank. Unless credit unions drive home the fact that they are the last of the true local lenders, then our ability to see any of the significant reforms we need will be further hampered.
One legislative issue that will have to be dealt with in the coming years no matter who is in office is what to do about Fannie Mae and Freddie Mac.
The American public is more, not less, dependent on the bankrupt Fannie and Freddie than it was before the financial crisis. Sooner or later there has to be an honest debate about the role of government in advancing the dream of homeownership and whether that role ultimately helps or distorts the American economy. Does government involvement hurt credit unions by driving down mortgage rates to artificially low levels or aid them by assuring that they have access to the secondary market? I don’t know the answer, but Congress’s decision will impact credit unions for years to come. Given our relative success in weathering the Great Recession, our perspective and concerns must be part of the discussion.
Henry Meier is associate general counsel at the Credit Union Association of New York.
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