Uncertainty Remains After Election

Anyone seeking certainty following the Nov. 3 election may be a bit disappointed.

Assuredly, we know that Joe Biden was elected the 46th President of the United States. But a great deal else remains murky.

Partisan control of the Senate will not be known until two runoffs are held in Georgia in January. Even then, the margin will be razor thin, so predicting how the Senate will react on any issue will be difficult.

The House will remain in Democratic control, but the partisan divide will be narrowed. Democrats will not be able to lose too many votes for any measure to pass.

At the NCUA, at press time, it remained unclear which party will control the board and who the chairman will be after Biden is sworn in.

And at the CFPB, it is all but guaranteed that Director Kathy Kraninger will be shown the exit and Biden will replace her with a consumer advocate. But who that person will be and the future of agency regulations, which many said have tilted toward business during the Trump Administration, is up in the air.

Now, let’s take a closer look.

Congress

“If the past is prologue, there’s going to be substantial gridlock,” CUNA Chief Advocacy Officer Ryan Donovan said in the days following the election.

And the first meeting of the House Financial Services Committee seemed to confirm Donovan’s prediction, when the two leaders of the committee immediately clashed over the meaning of the election results.

“We are emerging from the dark days of the Trump Administration into the dawn of a new progressive America, where pro-consumer and pro-investor policies will always be first on the agenda,” Committee Chairwoman Maxine Waters (D-Calif.) said as the hearing opened.

Financial Services ranking Republican Patrick McHenry of North Carolina disputed that notion, saying he did not see any mandate for the Left.

“So, while you may have had some successes in the election, I don’t think it’s a wide endorsement of a far-left policy agenda that the chair noted,” McHenry replied. “In fact, what I would note is that in the middle of this pandemic, instead of taking political pot-shots, we should have a serious concerted effort to have a serious conversation in this committee, like we have not had in the midst of this pandemic.”

And he added, “The tone of this hearing does not bode well for the next Congress.”

Waters will keep the committee gavel in the next Congress.

Partisan control of the Senate will depend on two runoff elections in Georgia, scheduled for Jan. 5. But no matter which party controls the Senate, it is extremely likely that there will be a new chairman of the Senate Banking Committee.

If the Republicans maintain control, it is expected that Banking Chairman Mike Crapo of Idaho will choose to assume the chairmanship of the tax-writing Senate Finance Committee. That would leave Sen. Pat Toomey (R-Pa.) as the likely chairman of the Banking Committee. It should be noted that Toomey already has announced he will not be running for reelection when his term expires in 2020.

Credit union lobbyists said Toomey understands the role that credit unions play in the U.S.

“If that hypothetical works out, we’re going to be in a really strong position,” Donovan said.

NAFCU EVP of Government Affairs and General Counsel Carrie Hunt agreed. “We have a strong relationship with Toomey,” she said. “We have a strong relationship with Crapo.”

The transfer also could be important if Congress decides to examine tax expenditures, including the credit union tax exemption, as part of an effort to raise revenue to offset the costs of the coronavirus pandemic.

If that were the case, Crapo’s new committee would take the lead in the Senate and as Banking Committee chairman, Crapo has extensive experience with credit unions.

If the Democrats capture the Senate, Sen. Sherrod Brown of Ohio would assume the chairmanship of the Banking Committee. And he would likely push an agenda quite similar to the one advanced by Waters in the House. But the razor-thin majority would mean he probably would not be able to accomplish many of his legislative goals.

The NCUA

The leadership of the NCUA remains unclear even after the election. At press time, the Senate had not confirmed Trump nominee Kyle Hauptman as a member of the agency board.

If Hauptman is confirmed, Republicans would then control two seats on the board even if, as expected, President-elect Joe Biden designated Democrat Todd Harper as chairman.

If Hauptman is not confirmed by the end of the year, his nomination would expire. That would allow Biden to nominate a Democrat for that seat, giving the Democrats control of the board.

Biden has appointed various teams to examine federal agencies as part of his transition. The team examining the Federal Reserve, Banking and Securities regulators is headed by Gary Gensler, former chairman of the Commodity Futures Trading Commission.

CUNA lobbyists predicted that a reconstituted NCUA board would be highly likely to not delay the agency’s Risk-Based Capital rule any longer. Under Republican control, the board has delayed the controversial rule until 2022, but Harper has said he opposes delaying the rule any further.

The CFPB

In choosing his transition team for the CFPB, Biden telegraphed his intentions to reverse many of the policies of the Trump Administration. Consumer advocates have charged that the Trump Administration CFPB reversed many of the pro-consumer policies of the Obama Administration CFPB, which was led by Richard Corday.

Biden chose Cordray’s former Deputy Director Leandra English as the head of the CFPB team. Also joining that team is Bill Bynum, CEO of Hope Credit Union ($352 million in assets, Jackson, Miss.).

Consumer advocates have said they hope the Biden Administration will reinstate Cordray’s strict payday loan rule. Cordray’s rule, among other things, required that a borrower demonstrate an ability to repay the loan before it is disbursed. The CFPB, under Trump Administration Director Kathleen Kraninger, rescinded that part of the rule.

Consumer groups have said that requirement is essential to help keep borrowers from becoming locked in a cycle of debt.

Bynum has supported reinstating that requirement. Donovan said it is likely that the Biden Administration will re-adopt the rule. He also said it is almost certain that the new administration would reinstate examinations under the Military Lending Act.

Trump Administration officials have said they believe they did not have the authority to conduct such exams, but Democrats have argued that the CFPB does have such authority.

CUNA officials also predicted it is highly likely that the CFPB will begin a new rulemaking process for adoption of a regulation governing overdrafts.

However, CUNA officials said there is no chance that the CFPB will adopt two policies that credit unions have been pushing for several years – a transfer of supervisory authority for large credit unions from the CFPB to the NCUA, and a broad-based agency policy to use its powers to exempt certain financial information from its rules.