Richard's Rapid Fire - January 4, 2019

Cajun Thoughts: The 116th Congress convened yesterday with both new and returning members being officially sworn in. The CBA Team was spread out meeting with various members including Sen. Carper, Sen. Sinema, Sen. Cramer, Rep. HollingsworthRep. BeattyRep. Meeks, and Rep. Graves. This is one of my favorite days of the year as our democracy once again prevails with a peaceful transition in the U.S. House of Representatives. I still believe little legislation will become law but will certainly be “headline” heavy…GOV’T SHUTDOWN We are now on Day 14 of the partial government shutdown with a lot for impact on the financial lives of federal workers beginning to set in. I am glad to see so many of our banks assisting their customers…PRESIDENT WARREN Yes, it could happen. Get ready for manymore announcements in the very near future. My guess is 25 candidates for the Democrats and 5 candidates for the Republicans…ONE LAST TV SHOW TO WATCH I am told “Panic” on VICE regarding the 2008 financial crisis is very good…DALLAS COWBOYS Saturday, 8:30 PM. BRING IT!...HOME FOR THE HOLIDAYS I spent 7 consecutive days in my hometown of Jennings, LA over the holidays. There are many complaints of gas prices being TOO LOW as the area is highly dependent on the oil and gas industry. Fortnite is everywhere! My nieces and nephews were more interested in “V-Bucks” than actual gifts. The “Game” brought in over $3 Billion in profit and 200 million players in just 2018. All 13 payday lenders are still in business...RESORT VS. OVERDRAFT FEES I recently stayed in a hotel that assessed a $65 per night resort fee. And Congress/media are upset about overdraft fees?



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Senate Banking Committee Assignments Finalized: With the 116th Congress sworn in this week, Republicans will maintain control of the Senate and Democrats will take the House majority. The finalized Senate Banking Committee includes the following members:

Chairman: Sen. Crapo (R-ID)
  • Sen. Shelby (R-AL)
  • Sen. Toomey (R-PA)
  • Sen. T. Scott (R-SC)
  • Sen. Sasse (R-NE)
  • Sen. Cotton (R-AR)
  • Sen. Rounds (R-SD)
  • Sen. Perdue (R-GA)
  • Sen. Tillis (R-NC)
  • Sen. Kennedy (R-LA)
  • Sen. McSally (R-AZ)
  • Sen. Moran (R-KS)
  • Sen. Cramer (R-ND)
Ranking Member: Sen. Brown (D-OH)
  • Sen. Reed (D-RI)
  • Sen. Menendez (D-NJ)
  • Sen. Tester (D-MT)
  • Sen. Warner (D-VA)
  • Sen. Warren (D-MA)
  • Sen. Schatz (D-HI)
  • Sen. Van Hollen (D-MD)
  • Sen. Cortez Masto (D-NV)
  • Sen. Jones (D-AL)
  • Sen. Smith (D-MN)
  • Sen. Sinema (D-AZ)

New Congress, Same Shutdown: Now in its fourteenth day, here is the latest on the ongoing partial government shutdown.


With the Christmas and New Year holidays, the large-scale economic and business impact of the shutdown has been relatively minor. Only one partial pay period has been impacted for the approximately 800,000 furloughed federal employees, but with the holidays over and furloughed workers facing a full pay period with no pay, the impact is expected to spread. The American Federation of Government Employees has filed a lawsuit on behalf of members deemed “essential” and required to continue working despite their agencies being part of the partial shutdown. This means these employees are working without pay, though in past shutdowns, all impacted workers have received back pay. This is not a guarantee, however.


Several financial institutions have started assistance programs for affected workers.


Prudential regulators, including the OCCFDIC and Fed, have an independent funding stream, separate from the continuing resolution being debated by Congress, and the CFPB receives its funding directly from the Fed. Business at these agencies will continue.


Of greatest impact to the banking industry:

  • IRS: Nine out of 10 IRS employees will be furloughed, curtailing enforcement and assistance services. There has been a push to make the IVES system an “essential,” and therefore open, portion of the government, but there has not been a final verdict on this;
  • HUD / FHA: About 95 percent of employees at the Department of Housing and Urban Development will be furloughed, halting fair housing enforcement, issuance of new grants and the Federal Housing Administration would likely see significant delays in loan processing and approvals; and 
  • SBA: At the Small Business Administration, main lending programs would pause, and loan applications and approvals (for guarantee) would queue until federal funding is restored. SBA's disaster response and loan program, however, would not be impacted, and SBA's resource partners would not be impacted. They would continue notwithstanding a shutdown due to way in which they are funded.

Additional impacts to the banking industry are discussed below: 

  • Home Mortgages: The processing of home mortgages was delayed during the last shutdown because of the IRS' role in verifying borrowers' incomes and some agencies, like the Federal Housing Administration, guaranteeing loans.
  • Small Business Loans: Similarly, delays in the IRS processing paperwork resulted in a decrease in loan approval rates.
  • Flood Insurance: Congress did pass a six month extension of the National Flood Insurance Program last week before funding expired, but the Federal Emergency Management Agency notified insurance agents they would not be able to sell or renew new policies. Federal bank regulatory agencies issued a statement reminding banks, savings associations, and Farm Credit System institutions that they can continue to make loans during periods when the National Flood Insurance Program (NFIP) administered by the Federal Emergency Management Agency (FEMA) is unavailable. The attached guidance issued in 2010 is generally applicable whenever the NFIP is unavailable. As explained in the guidance, lenders may continue to make loans subject to the federal flood insurance statutes without flood insurance during a period when the NFIP is not available. However, lenders must continue to make flood determinations, provide timely, complete, and accurate notices to borrowers, and comply with other parts of the flood insurance regulations. In addition, lenders must evaluate safety and soundness and legal risks and prudently manage those risks during the lapse period.
  • Government Employee Pay: Government employees at the affected departments will be deemed "essential" or "non-essential" at the President’s discretion. Essential employees must report to work and will receive pay, but no government employees are paid during shutdowns. Congress, however, has always voted to reinstate pay retroactively after shutdowns. Non-essential pay is not guaranteed but has been the practice.  

Congressional Update: Speaker Nancy Pelosi (D-CA) said the House will pass a funding bill to reopen the government for the remainder of the fiscal year and a separate bill for the Department of Homeland Security through March to allow more time for negotiations on immigrations. The standalone Homeland legislation will not include funding for President Donald Trump’s border wall. The White House has said this approach would be a non-starter and the Senate Majority Leader Mitch McConnell (R-KY) stated the Senate will not vote on any legislation the President will not sign.  


OCC Names Jonathan Gould No. 2: Former Chief Counsel for the Senate Banking Committee Jonathan Gould will be taking over as Senior Deputy Comptroller and Chief Counsel at the Office of the Comptroller of the Currency. In this role, Gould will manage all things legal at the OCC, from bank regulation to counseling Comptroller Otting and other senior agency officials. Learn more here.




Student Loan Debt in 2018: If it were a bank, the Federal Government would be the FIFTH largest due to federal student loans - now at $1.4 Trillion. According to Hart Research’s 2018 client polls, 65 percent of college students worry about the cost of college and student loan debt very or somewhat often. It's time to right-size federal student lending to safeguard borrowers and taxpayers alike.


Banks issuing private student loans conduct responsible underwriting and provide plain-language disclosure forms before the loan is made. CBA supports a Know-Before-You-Owe disclosure for federal student loan borrowers to empower them with the information necessary to make sound financial decisions and prevent over-borrowing. Federal loans account for about 92 percent of all outstanding student loan debt and federal student loan debt has more than doubled since 2009 (increasing 66 percent since 2011, the year the CFPB opened its doors).


CBA’s Education Funding Committee – comprised of every national bank in the student lending space making about two-thirds of all private education loans – serves as the primary industry voice for for-profit student loan lenders. CBA believes there is a role for the federal government in the student lending market, but there are critical differences between private loans – which have a more than 95 percent repayment rate – and the double-digit default and delinquency rate of federal loans, which are often serviced by private non-bank companies.


Any conversation about student lending has to start with the facts. CBA’s student loan / student debt fact sheet is available here and my recent op-ed is available here.


Colleen Canny to Lead Santander Retail: With almost 30 years of experience at JPMorgan ChaseColleen Canny is set to lead Santander Bank’s $74.2 billion-asset retail network. Canny will oversee more than 600 branches and 4,100 employees across the eight-state territory. Prior to her appointment at Santander, Canny was managing director and regional director of consumer banking and wealth management in Illinois and Wisconsin. Congratulations, Colleen!




People Still Use Banks & Cash: A really fascinating, interesting and disappointing article all in one. The modern consumer’s appetite for digital services across all platforms has never been greater. New technologies entering the mainstream in financial services have the potential to level the playing field for banks competing with larger institutionsbut banks and cash remain on top. According to a Fed report in November, “Cash continues to be the most frequently used payment instrument, representing 30 percent of all transactions and 55 percent of transactions under $10.” More here.






CBA State of the Week: Our State of the Week is CALIFORNIA, where more than half of all Californians banks with a CBA member! CBA members in California hold $1768 Billion in total assets, employ 252,000 people, provide $35.1 Billion in small business loans and serve 21.4 Million customers. California is also home to CBA member-banks: CIT, Bank of the West, MUFG Union Bank, Rabobank N.A. & Wells Fargo. Check out our state by state numbers here