March 17, 2020

NAFCU makes additional requests as Congress, FOMC address coronavirus concerns

CapitolNAFCU President and CEO Dan Berger Monday asked President Donald Trump and National Economic Council Director Larry Kudlow to provide credit unions with additional relief and support to better serve members impacted by the coronavirus. Berger's request comes as Congress, the Federal Reserve, and other agencies attempt to slow the spread of virus and address economic concerns.

In the letters to Trump and Kudlow, Berger offered suggestions to provide relief, including:

  • removing or modifying the cap on member business lending;
  • providing capital relief to credit unions;
  • raising the 15-year maturity limit on certain credit union loans;
  • allowing more credit unions to serve underserved communities;
  • modernizing outdate governance provisions in the Federal Credit Union Act;
  • providing emergency funding for the Community Development Financial Institutions Fund and Community Development Revolving Loan Fund; and
  • encouraging financial regulators to provide more relief.

Working with administration officials, the House over the weekend passed an emergency package to provide funding for coronavirus relief measures, such as paid sick leave, free testing, food assistance, unemployment insurance, and more. The Senate remains in session to take up the legislation and Senate Majority Leader Mitch McConnell, R-Ky., has stated that senators on both sides are eager to move quickly.

The House Monday passed a technical corrections bill on the package, and additional relief packages are expected in upcoming weeks.

McConnell has also been in contact with several committees to discuss steps that would specifically assist small businesses. Last week, Small Business Administration (SBA) Administrator Jovita Carranza last week announced the agency would provide disaster assistance loans for small businesses affected by the coronavirus. More information on the SBA disaster assistance can be found here. Sen. Marco Rubio, R-Fla., has also introduced legislation to further help small businesses impacted by the virus through the SBA's 7(a) loan program.

In addition to congressional efforts, the Federal Open Market Committee (FOMC) Sunday, ahead of its meeting that was scheduled to begin tomorrow but has now been canceled, announced a massive stimulus package that:

  • cut the federal funds rate 100 basis points to a range of 0 to 0.25 percent;
  • provided guidance on the duration of those rates;
  • began a new round of quantitative easing;
  • modified the discount window by lowering the primary credit rate by 150 basis points to 0.25 percent and offer 90-day loans from the facility; and
  • eliminated reserve requirements, which effectively means all central bank reserves are now excess reserves.

"[Fed] Chairman [Jerome] Powell stressed in his press conference that these moves are primarily intended to ensure adequate liquidity and well-functioning financial markets, rather than to stimulate demand," NAFCU Chief Economist and Vice President of Research Curt Long explained in a NAFCU Macro Data Flash report. "However, by cutting rates to zero the Fed will hope that to sow the seeds for as early a recovery as possible once the threat of the coronavirus begins to recede…These moves are unlikely to move the needle on economic activity, but such a comprehensive set of measures refocuses attention on Congressional action, which could potentially play a bigger role in addressing household and business uncertainty.

"Even after the worst has passed, it will take some time for the economy to start back up. Credit unions should plan on this zero-rate environment persisting for most of this year," he concluded.

In addition, the association has urged the Fed to remove the transaction limit under Regulation D and can confirm that, due to the Federal Reserve’s announcement that it is eliminating reserve requirements, credit unions now have additional incentives to avoid the monthly transfer limit found in Regulation D.

While Regulation D’s transfer limit has not been eliminated outright, credit unions can work around it by reclassifying share or money market accounts as transaction accounts without incurring new reserve requirements. However, such an election must be consistent with how the credit union reports the accounts on its call reports.

NAFCU has a resource page available on the virus, as well as a new economic brief on its potential impact and a Compliance Blog post from Vice President of Regulatory Compliance Brandy Bruyere that provides FAQs for credit unions related to the coronavirus. The association will continue to work closely with the Trump administration, Congress, and regulators to ensure they are aware of what credit unions are doing to support members during the outbreak and of how they can provide regulatory relief to the industry.