When President-elect Joe Biden is inaugurated on Jan. 20, Democrats will have something in Washington they haven’t had for a decade – a majority in the House and Senate, and the presidency.
That’s likely to have a significant impact on credit union issues.
Democrats only have a narrow margin – a 50-50 split between the two parties, with Vice President-elect Kamala Harris expected to serve as the tie-breaker – but, “the big difference in control of the Senate is who controls the ability to bring matters onto the Senate floor and who controls the agenda of the committees, and that’s pretty consequential power,” said Ryan Donovan, chief advocacy officer at the Credit Union National Association.
That means legislation that passed the House may be more likely to get consideration in the Senate than in recent years, as was the case with the HEROES Act and other packages that came forward during the last Congress.
Along with confirmation hearings and possible impeachment proceedings, lawmakers’ focus in the early weeks of a Biden presidency is likely to be on providing additional coronavirus relief. But the massive government spending seen since the start of the pandemic could also force Congress to search for places to save money or bring in additional revenue. The good news for credit unions is that’s not likely to come at the cost of the industry’s tax exemption.
“When the dust settles, policymakers are going to be looking for ways to make up some of our debt and potentially are going to look to roll back some of the Trump tax cuts,” said Carrie Hunt, executive vice president and general counsel at the National Association of Federally-Insured Credit Unions. “I don’t necessarily think that the credit union tax exemption is at risk at this point in time, but any time you open up the tax code you have to protect that.”
The industry may face a tougher challenge at the state level, where lawmakers may reexamine their states' tax exemptions in order to fill budget gaps, particularly if there are laws on the books that require a balanced budget. While
From a legislative perspective, the new Congress could tackle multiple issues that have been credit union priorities for several years but have stalled in the legislature. That includes a federal data security standard, due in part to renewed emphasis on the issue following the Solar Winds breach and its national security implications. While the topic has had some level of bipartisan support over the years, “it hasn’t been able to get over the line, so perhaps a unified government helps us get there,” said Donovan.
Democrats may also look to revive legislation related to consumer oversight, noted Brian Turner, CEO of Meridian Economics. While that may not have a direct impact on most credit unions, it could hit some larger shops, particularly those that deal in areas such as business lending and investment banking, he said.
At the National Credit Union Administration, board member Todd Harper is widely expected to be elevated to the chairmanship once Biden takes office, and Harper has long advocated to bolster the industry’s role in consumer protections. So even if some legislative action on the issue doen’t touch credit unions, there could be regulatory moves that do.
Pot banking could also show up on the congressional agenda. The issue passed the House of Representatives twice in the last Congress, and with Democrats holding both chambers – and likely
Katrina Skinner, an attorney with Burns Levinson in Colorado and former president and CEO of Safe Harbor Services, noted late last year that data from the Financial Crimes Enforcement Network showed no increase in the number of institutions banking legal pot shops in 2020, but more and more states continue to legalize it at various levels, which could put pressure on Congress to act.
“We’ve seen more and more…not necessarily endorsement [from lawmakers and regulators] but acceptance in how examiners at the state and federal level say they want to work with institutions that do this,” she said. “It’s not taboo anymore – it’s not if you’re going to do it but how.”
Democrats holding the levers of power will also mean Biden’s nominees could have an easier path to a hearing and, potentially, confirmation. That won’t have much initial impact at NCUA – a Republican seat on the board won’t open up until 2023 – but there could be changes in the agency’s relationship with lawmakers. Sherrod Brown is likely to emphasize safety and soundness issues and “will most likely see additional protections for consumers as it relates to loan restructuring and service changes,” said Michael Fryzel, an attorney and former NCUA board member.
Brown has also been a
One of the biggest questions in the months ahead is whether Biden’s push for national unity after four years of Trump will be effective, and Congress could be a test case for that.
“I do think we will see the rise of the moderate and more power to those senators and representatives that have the potential to move to one side of the aisle or the other,” said Hunt. “For the last four years we didn’t really see much of that because there wasn’t that much incentive for moderates to take risks and take chances because then they were alienating their parties because of this extreme divisiveness. Now, because of this Democratic sweep, I think we’re going to see some more party switching than we have in previous times.”
That could be good news for an industry built on the concept of collaboration and finding common ground.
“It’s a really low bar, given what we’ve seen over the past decade or so, but it wouldn’t surprise me if Congress gets a little bit more done in 2021 than it has in previous years,” said Donovan.
This story was updated at 9:33 A.M. on Jan. 13, 2021.
