The President's Perspective
by Jeff Olson
President/CEO
5/11/2020

Greetings and Happy Monday! 

I sincerely hope that all moms enjoyed Mother’s Day and you were all properly celebrated as best as possible under the current circumstances. 

As you all focus on serving your members and keeping everyone safe, the CUNA league system continues to work with our congressional leaders on many items that will help you do just that – better serve your members’ financial needs under these extraordinary conditions. The credit union system is fully engaged with Congress as they consider CARES 2 and other additional actions in response to the COVID crisis. 

You may have heard me say often say that Washington, D.C. works best under two scenarios; when there is a crisis or when it’s political. Let’s face it, with the passing of the CARES Act and the Stimulus 3.5 the Federal Government is now the largest loan portfolio holder in the country. We had massive federal spending taking place prior to the pandemic and now that the Treasury door appears to be thrown wide open. Even as the House considers further economic packages, we need to really consider how this all is going to impact us as a country, as financial service providers, and as taxpayers. 

Nobel prize-winning economist, Milton Freidman, refers to government spending as taxation. So, as Congress reacts today, it’s only logical to consider how this all will impact us down the road. Eventually, at some point, we will have to pay the piper.  And, for credit unions that could mean a fundamental change in our structure.

Many are under the impression that Government spending stimulates the economy. I have heard some economists even say that. However, let’s keep in mind the government doesn’t produce anything or create resources. They simply redistribute income. They collect income and redistribute it. So, whenever they bail someone out, they also put someone else in trouble.

Let’s break this down to what is currently happening. People are getting more money on unemployment today compared to when they were working. This is especially true in the restaurant and hospitality sectors. When you tax people who work and you pay people who don’t work, why should we be surprised if we get a lot people who don’t want to work? When you redistribute income, you take from someone who has a little more and you give to someone who has a little bit less. Logically, by taking from someone who has a little more, you reduce their incentives to produce and ultimately, they’ll produce less. By giving more to someone who has less, you provide them with an alternative source of income, other than through work, and they too will produce a less or not work at all. 

In my opinion, one of the major problems in Washington, as well as in our state capitals, city and county levels is that politicians and community leaders making the decisions don’t have to bear the consequences of their own actions. They are spending other people’s money. There is no limit to the generosity you can express by spending other people’s money. It’s a debit and credit at the same time. The more you redistribute income; you always reduce total income. It’s math really, it’s not a Republican, Democrat, Conservative, or Progressive ideal. 

Economically, what can Congress do to get the economy going? 

A waiver of the Payroll Tax through the end of the year makes total sense. This will increase employees' take-home income by 7.65 percent and reduce the employer’s expenses by 7.65 percent. This would incentivize companies and employers to retain workers, hire workers, and perhaps even pay them more, or make long term significant investments. By having a deadline of December 31st, there would be a rush to take advantage of this short-lived discount. This action would cover everyone in the economy including employers and workers. With this action, the government would no longer be picking winners and losers, which they often do, and would be implementing a tax cut rather than a spending increase. We’re putting the money in the hands of the workers and employers. So, a payroll tax cut for a limited time would certainly jump-start the economy and get us back to where we were just a few short months ago.  

However, as Congress considers the CARES 2 Package, here is what we know right now: 

  • No complete package is ready to go today.  This may come together early this week.  Regardless, we can anticipate a “ginormous” bill. The banking provisions will likely comprise no more than 10% of the bill. Our two provisions are minuscule relative to the anticipated size and complexity of the overall package.  
  • Representative Sherman introduced a revised version of his MBL Bill with Chairwoman Waters as a co-sponsor. This is a good indication that she is behind the bill being included in the package. Similar legislation could be introduced in the Senate soon – this is important to get on the Senate’s radar screen in general, but also to get Senate Democrats to make this a priority.

Anticipated Next Steps

  • There may be provisions we like and provisions we don’t like that will be included in a bill that is likely to be very partisan. We need the provisions we like to get through the House and then try to influence the process to strip any bad provisions and retain the good provisions.
  • We’re also going to begin focusing on demonstrating support for the MBL provision in the Senate, which is why we are seeking introduction of the bill in the Senate. We hope to have more on that very soon. 
  • Also, on the Senate side, our priority is to support and encourage the passage of the bi-partisan Cramer-Warner Bill. Senator Cramer (R-ND) and Senator Warner (D-VI), introduced S. 3533 “Securing and Enabling Commerce Using Remote and Electronic (Secure) Notarization Act of 2020.” This bipartisan legislation will permit immediate nationwide use of Remote Online Notarizations (RONS), a type of electronic notarization where the notary and signer are in different physical locations.

Open Your Eyes Awareness Campaign to re-launch next week. 

I want to thank everyone that tuned into the Quarterly Dakota Awareness Webinar last week. The credit union consumer consideration campaign has pivoted the Open Your Eyes to a Credit Union awareness initiative to better connect with consumers during the COVID-19-related challenges. To the right is a sample of the tone shift in the creative content that was shared with contributing Dakota credit unions that can be used locally. The campaign is currently conducting consumer focus groups prior to market re-entry to provide additional data on message development. A relaunch goal date has been set for Monday, May 18.

Contact Lori Welder, CUAD Director of Communications, at lwelder@cuad.coop if you would like a link to the recording of last week’s call, or to find out more information regarding the Dakota Awareness Initiative.


Member Survey is still open. How are Dakota credit unions helping members? Please participate in our survey. 

We still need your help. There are many ways credit unions here in the Dakotas provided aid to their members and communities affected by COVID-19. If you have any updates or haven’t provided us with your actions, please take the on-line survey so we can share with lawmakers and our system partners at CUNA. This information will help us develop a message about how your credit union is assisting members, your community, and employees during the crisis. 

Who should do the survey? Everyone! If you have new information or update information on PPP lending or EIDL loans, please provide those details. Many of you were waiting to complete your PPP uploads, so now is a good time to share that information.  

START SURVEY NOW

We realize you may not be able to answer all the questions at this time. Please share any updates with CUAD as circumstances change. If you have any questions about this survey, please contact Jeff Olson, CUAD President-CEO at jolson@cuad.coop.

Have a great week. 
Jeff 

 

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