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The Cheney Report

Good morning,

A Week to Remember: Tax Reform Ignites, Housing Finance Flares, and NCUA Nominee is Heard

If the credit union system needed any more impetus to rally together and fight for the preservation of the credit union tax exemption, we got that and more this past week. Once again, we saw more signs that Congress is serious about tax reform and that all tax preferences are on the table. It is time to Unite for Good and carry our message of Don’t Tax My Credit Union through the halls of Congress.

Yesterday, Senate Finance Committee Chairman Max Baucus (MT) and Ranking Member Orrin Hatch (UT) circulated a “dear colleague” letter to all senators advising them a tax reform markup hearing will be held by October, with a November target for getting the bill onto the Senate floor. Their starting point is that the current tax rate structure be swept clean of all tax preferences (including tax credits, deductions, tax expenditures and more). This is the “blank sheet” approach we had been hearing about on the Hill and those are the exact words Baucus and Hatch used in their letter. It means that the credit union tax exemption would have to find its way back on the sheet. According to the letter, senators will have until July 26th to submit proposals for what tax preference they want to put back on to the sheet.

I can assure you that CUNA and the Leagues will be asking you to contact your senators next month. In fact, we should all be prepared to cover any angle, call every friend, and lift all barriers to get our tax exemption back on that sheet of ‘expenditures’ where it belongs. ‘Don’t tax my credit union’ must echo in the U.S. Capitol.

Bad Blood from Bankers

While the letter certainly put tax reform into focus, there was much more this week on the tax front. Staff members for House Ways and Means Committee leaders – Chairman Dave Camp and Ranking Member Sander Levin (both MI) – were reportedly at work preparing for tax reform field hearings in August around the country – likely the prelude to more committee hearings on the issue. Camp and Levin want to hear directly from Americans about tax reform, signaling a willingness to look at anything and everything in the code.

Congress aside, our unfriendly neighborhood bankers were up to their old tricks this week as they aggressively targeted the exemption. The bankers circulated letters to the White House and congressional tax writers, urging them to support abolishing our tax exemption. As usual, the bankers distorted the facts and stats, and twisted their tired, old arguments together into a hodgepodge of reasons to eliminate the exemption. While baseless, the banker attacks must be dealt with, so we did. We responded to both letters but did something the bankers rarely do—accurately portrayed the facts. Our responses were based in truth, including that benefits from credit unions — $8 billion in 2012 — translate into real money, which stays in consumers’ and small business owners’ pockets, ultimately boosting their communities. We also made it clear that taxing credit unions, and the resulting loss of benefits to consumers and small business owners, just isn’t worth it to solve federal budget issues.

‘Don’t Tax My Credit Union’ Nets 165K Contacts

Some good news from all this talk about tax reform is that CUNA and the Leagues are ready with the tools to mount an aggressive campaign to preserve the tax exemption. We were ahead of the game, so to speak, with the launch of our “Don’t Tax My Credit Union,” national campaign over a month ago. The response has been terrific: More than 170,000 people have visited the Don’t Tax My Credit Union site and 165,000 direct contacts have been made with lawmakers. We are also living in an increasingly “social” world with the proliferation of Twitter and Facebook and some 300,000 people have used those social media channels to voice their support for the Don’t Tax My Credit Union effort.

Housing Finance Reform Gets Legs

A cadre of senators this week took an important, first step forward in proposing housing finance reform – and we like aspects of what we see. The “Housing Finance Reform and Taxpayer Protection Act of 2013,” by Sens. Warner, Corker, Tester, Johanns, Hagan, Heitkamp, Heller and Moran, reflects a number of points that we have stressed – in particular, assuring access to all financial institutions, especially credit unions, to a functioning mortgage market. I was called by Sens. Mark Warner (D-VA) and Bob Corker (R-TN) about the bill this week and thanked them for addressing many of our views. This is the beginning of what will likely be a long process. And, other important housing finance legislation may soon be surfacing on the House side. But we’re ready to work with lawmakers to enact changes that will ensure smaller institutions, such as credit unions, will continue to have fair and affordable access to a vibrant, well-regulated and affordable housing market.

Metsger: ‘Effective’ Not ‘Excessive’ Regulation Needed

Rick Metsger (top), the nominee for the open seat on the NCUA Board, had a good showing Thursday before a confirmation hearing by the Senate Banking Committee. Granted, much of the committee’s attention was paid to others being considered by the committee for various nominations (including Federal Housing Finance Administration and Securities and Exchange Committee nominees). But from my vantage point just a few rows back, he acquitted himself very well in the time he had to respond to senators’ limited questions. His tenure on the board could begin soon; there is a plausible path of his nomination being confirmed by a vote in the Senate next month. Staff and I, along with NWCUA President Troy Stang, had some good opportunities to visit with the nominee before the hearing and during a break.

If confirmed, Metsger – who served as Oregon state senator from 1999 to 2011, where he chaired the Oregon Senate committee that heard all financial institution legislation—would fill the vacant NCUA board seat created when former member Gigi Hyland exited last year. Also in Oregon, he was a member of the board of directors at Portland Teachers CU from 1993 to 2001 and has also been a board member of Financial Beginnings, a nonprofit focused on increasing students’ financial literacy.

“If confirmed, I will add a fresh set of eyes to policies old and new to reflect that diversity [of experience],” Metsger said during the hearing.

He said he believes that the financial crisis has shown that rules for credit unions need to be modernized to be contemporaneous and cited four areas of risk. These include interest rate risks, emergency liquidity risks and risks presented by technology. He also indicated that he wants to minimize regulatory burdens on credit unions.

The next step is for the Senate Banking Committee to vote on his nomination and send it to the full Senate for its consideration.

‘America’s Credit Unions’ take New York by storm

Our annual ‘America’s Credit Union Conference’ gets underway next week in New York – and it’s likely to make an impression on the Big Apple. Not only do we have a great conference planned, with outstanding speakers and top-notch breakout speakers, but credit union representatives are fanning out across the city – meeting with the media, gathering in Times Square (underneath our billboard featuring our “Don’t Tax My Credit Union” video), visiting morning network TV shows, touring local credit unions – and much more. I’ll have more details to report next week. One thing to check out before you get there: We’ve launched a new feature to our “UniteforGood.org site that allows you to share how your credit union is helping support our vision of “Americans Choose Credit Unions as their Best Financial Partner.” Check it out!

Best Regards,

Bill Cheney President & CEO Credit Union National Association