A Note from Jeff Olson, CUAD VP of Advocacy & Awareness

If the banks fail to get 60 votes on the motion, their (Bankers) bill does not go to the floor and it essentially dies.  However, if the banks succeed in getting the bill on the floor, it would technically be open to amendment. 

What does that mean for credit unions?  If the bill gets to the floor, the Majority Leader will “fill the Amendment tree,” essentially preventing any Senator from offering an amendment.  If he does not fill the tree, we expect several dozen amendments to be filed, including Senator Udall’s Credit Union Small Business Act - MBL bill.  However, there is no guarantee that any of these amendments will actually be considered.  Credit unions would push for a vote on the MBL amendment under this circumstance, as it provides us a bit of a friendlier environment to stage an up or down vote – but we should be clear, we do not expect to have this opportunity because the amendment tree is likely to be filled.  That’s why it is critical for us to try to defeat the motion to proceed to consideration of the bill:  the path to any package that includes MBLs requires the bankers to realize they cannot get their legislation unless they accept ours.

Therefore, even your credit union isn’t affected by the MBL cap, this is a credit union financial industry issue and it is crucial if we (credit unions) ever want to move any other legislation forward in the future.” 

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The Issue:

Majority Leader Reid filed cloture on the motion to proceed to S. 3637 (the TAG bill).  What this means in English is that the Senate is preparing to take a vote on whether to consider the legislation extending TAG.  This vote will take place at 5:30 PM on Monday.  This gives us just two days to mobilize in opposition to the TAG bill.  We appreciate everyone who has activated grassroots in opposition to this legislation and strongly encourage a continued effort through our Grassroots Action Center.

This vote is subject to a 60 vote threshold. While we continue to receive mixed signals from the Hill with respect to whether the banks have 60 votes to get on the floor, it is very possible they have the votes to take the bill to the floor.  We have been actively encouraging Senators to vote NO on S. 3637.  We need continued grassroots support for these efforts.

As part of our effort to defeat the TAG bill, we are sending the following communication to Senate Legislative Directors and Financial Services Legislative Assistants:

The Transaction Account Guarantee Program (TAG) was created by the Federal Deposit Insurance Corporation (FDIC) to promote stability in banks at the height of the 2008 banking crisis.  The Dodd-Frank Act modified and extended the program with an expiration date of December 31, 2012.  But the crisis is now over and TAG should be allowed to expire. 

On December 4^th, the FDIC released its third quarter “Quarterly Banking Review,” or QBR.  Among its findings regarding the health of the nation’s banks:

Banks made a $37.6 billion profit in the third quarter, $2.3 billion more than the industry’s $35.2 billion profit a year ago.

·         Fifty-seven percent of banks reported higher profits over last year.

·         Bank loan losses were $14.8 billion, 20 percent less than 2011.

·         Loan charge-offs were $22.3 billion, 17 percent less than 2011.

·         Banks that did have net losses fell to 10.5 percent, down from 14.6 percent from 2011.

·         The average return on assets (ROA) rose to 1.06 percent, up from 1.03 percent in 2011.

It looks like banks are doing quite well!  Why do they continue to insist that they need a taxpayer backstop in the form of TAG? 

TAG is a relic of TARP – it has served its purpose and it’s time for it to end.  Vote NO on S. 3637.

Background

During the TARP era, the FDIC used emergency powers to extend unlimited deposit insurance coverage to noninterest bearing accounts at banks.  This was necessary to maintain confidence in the banking sector which was in crisis.  During the Dodd-Frank Act, Congress temporarily authorized the FDIC to continue this coverage, and expanded the program to include credit unions as well through the NCUSIF.  This program, called the Transaction Account Guarantee Program (TAG), expires at the end of the year.

CUNA Position

CUNA opposes the extension of the TAG program because it is risky, unnecessary, has not proven to inspire additional bank business lending and there are better policy options available to Congress, namely the Credit Union Small Business Jobs Act. 

Key Message Points

·         Congress should end bank bailouts and handouts.  Since TAG is no longer necessary, continuing the program is a giveaway to the banks, providing a taxpayer-backed guarantee to over a trillion dollars of large depositor deposits.

·         The banks are flush with liquidity but are not lending.  During the financial crisis, small bank small business lending contracted 15% while credit union small business lending expanded 45%.  This program was not successful in encouraging banks to lend to small businesses.

·         There are better options available to Congress:  small businesses need banks and credit unions to provide access to credit.  If Congress decides to continue to provide taxpayer backed insurance over large deposits, then Congress should also permit experienced, well-managed credit unions to continue to lend to small businesses by enacting S. 2231, the Credit Union Small Business Jobs Act.

Action Needed

We need credit union board members, executive, employees and members to:

·         Email Senators using our Grassroots Action Center .

·         Call Senators at 202-224-3121

 Thank you for your participation in this important Alert.