WASHINGTON — House Financial Services leadership had good news for credit unions during CUNA Governmental Affairs Conference general sessions, with congressional leaders expressing support for legislative causes that are near and dear to credit unions.
Financial Services Committee Chairman Jeb Hensarling (R-Texas) pledged Feb. 26 during a morning general session that he opposes taxing credit unions.
The conservative House leader said one of the causes of America’s slow recovery is bad public policy, specifically, taxation on small businesses.
“But if I have anything to do with it, there will not be taxation on our credit unions,” Hensarling said, drawing applause from the crowd.
He also discussed three goals he has for the House Financial Services committee: reduce regulatory burden on small, community financial institutions, reform the housing market and challenge the Federal Reserve’s monetary policy.
Hensarling, a vocal critic of the Dodd-Frank Act and Consumer Financial Protection Bureau, said he disagrees with the premise that Dodd-Frank was necessary because regulators lacked the authority to prevent Wall Street from taking outside risks.
“There are very few instances of a lack of regulatory authority leading to the financial crisis,” he said.
Rather, Hensarling blamed the financial meltdown on Federal Reserve monetary policy that lowered rates and “kept money too cheap” and housing policies that “incented financial institutions to lend money to people to buy homes that they could not afford.”
He also criticized the “Orwellian” CFPB and Director Richard Cordray, saying the agency has the “ability to outlaw credit products that could help fulfill the American dream for many of your members.”
“How making consumer credit more expensive and less available, how that has anything to do with advancing consumer interest is beyond me,” he said. Instead, he said competitive, transparent innovative markets that are vigorously policed for fraud is the best way to help consumers.
Rep. Spencer Bachus (R-Ala.), chairman emeritus of the House Financial Services Committee, also drew applause when he said the House “may revisit the Durbin amendment” because restrictions on debit card revenue have affected local institutions, not large financial institutions as intended.
He also said he thinks there will be bipartisan support to remove some parts of the Dodd-Frank Act that apply to small credit unions and banks.
Bachus also spoke extensively on the looming sequestration deadline of March 1, when automatic spending cuts will go into effect.
“No one thought we would be where we are,” Bachus said of Congress’ inability to resolve budget issues before the deadline.
“That’s one thing Democrats and Republicans agreed upon, that this won’t happen. We were told by our leadership this won’t happen. And the president never thought it would happen. We thought it would give us two months to come together and reduce the deficit by $1.4 trillion to $2 trillion. But that’s not happening, and now we’re facing March 1.”
Bachus said cutting discretionary spending, particularly to the country’s infrastructure, was a big mistake. While it’s good news discretionary spending cuts have cut the annual deficit from $1.6 trillion in 2009 to an estimated $800 billion this year, he warned that the country will eventually have to make up postponed infrastructure improvements.
Instead, mandatory spending on entitlement programs, which are driving the country’s long-term debt, should be cut instead.
“The only way we’ve been able to exist and run with the deficits we have is because of the Federal Reserve,” he said. “They get a lot of blame, but they’ve held interest rates very low. That’s allowed us to finance our debt at a much lower cost. But I can tell you it would be an accounting and economic nightmare if interest rates kick up.”
In fact, because so many countries have followed the same monetary policy, Bachus warned that the U.S. could get caught up in currency wars as countries try to devalue their currency. That could lead to trade wars and inflation, he said.