With the House under control of the Democrats and the Republicans having a larger majority in the Senate starting in January, the result will unquestionably be total gridlock on legislation – which actually works both for and against credit unions. For example, any legislation to delay the NCUA’s risk-based capital rule or to put in place a commission at the Consumer Financial Protection Bureau won’t get much of a hearing in the Democratic-controlled House. But, on the other hand, any efforts to increase regulatory authority at CFPB or even at NCUA may get more traction in the House under the Democrats but will almost certainly find itself without any real support – and probably automatic opposition – in the GOP-controlled Senate with a larger majority.
However, there is good news as it relates to the credit union tax exemption. Although the industry must certainly stay vigilant in its advocacy on the taxation issue, the results of the 2018 elections make the possibility of a new tax bill getting through Congress in the next two years almost a guaranteed never-gonna-happen. Since a stand-alone credit union taxation bill which raises less than $2 billion a year and could anger over 100 million members will almost never have enough congressional support to pass, the only real way to see credit union taxation get through Congress would be as part of a compromise tax restructuring bill that is extensive and comprehensive, with thousands of give and take provisions. With the current gridlock stemming from each party controlling one half of Congress, the chance of a new tax bill being seriously considered is almost nil – therefore, the chance of credit unions getting rolled into such a bill in the foreseeable future is greatly reduced to the point of becoming almost non-existent.
Another impact from the election that some may consider positive is that an increased Republican majority in the Senate will dramatically increase the likelihood of more Trump nominees to the judiciary being confirmed. This will result in the courts becoming more pro-business in philosophy. If the president wins reelection in 2020 and the GOP holds its Senate majority, it is quite possible that the biggest long-term impact of Trump’s presidency will be on the courts, where small businesses such as credit unions could see a generation of pro-business judges with a philosophical mindset aligned to their own.
When it comes to the Democrats gaining control of the House, incoming Financial Services Chairman Maxine Waters has her supporters and her critics, but she will be both a blessing and a challenge for credit unions, depending on the issue. She has a strong history of supporting credit unions and as a result would likely be favorable to issues relevant to the industry, and would consider well-crafted and solid arguments as to how smaller not-for-profit cooperatives like credit unions should be considered for exemption from what may become some of her more punitive legislation toward the for-profit banking sector. However, it must also be recognized that she has historically been more regulation-oriented, and might put CRA for credit unions on the committee’s agenda for consideration. It would have a tough prospect – if not a totally impossible one – of passing through the GOP-controlled Senate. But credit unions could find themselves having to deal with a CRA fight in the House sometime over the next two years.
One other ramification from the election is that Kathleen Kraninger’s confirmation as the next head of the CFPB is almost certainly a done deal with the Republicans’ increased Senate majority. This will, within itself, make the CFPB a less activist regulator over the next couple of years. Less CFPB activity would be considered by most in the industry to be of potential benefit to credit unions from a regulatory burden point of view, although that is not permanent as the future direction of the CFPB will be on the ballot with each presidential election.
Dennis Dollar is a former NCUA chairman and board member. He is currently principal partner of Dollar Associates, LLC, a Birmingham, Al.-based credit union consulting firm. He can be contacted at
