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Stephen Boyd: THE MONDAY BRIEF – July 17, 2023

Stephen Boyd’s weekly Capitol Hill briefing for Alabama’s business, financial, defense and government affairs executives.


The Schedule…

With just eight legislative days left until the August break, the House of Representatives and the Senate are each back to work this week. The House is scheduled to be in session just 20 days between today and the end of the fiscal year, when several major legislative deadlines loom.

The House returns Monday, and the Rules committee is meeting to prep the House version of the Federal Aviation Administration (FAA) reauthorization, a top priority for the year. The Senate is back Tuesday with plans to take up its version of the National Defense Authorization Act (NDAA), which sets Pentagon priorities and authorizes funding on defense programs and personnel. 


NDAA Update…

Congress has passed the NDAA every year for more than six decades, and there is still optimism that it will do so again in 2023—but, in the words of one House staffer to me, “it may be a wild ride.” I agree. 

Alabama’s Mike Rogers steered the $886 billion bill through the House Committee on Armed Services, achieving an overwhelming bipartisan vote of 57-1. As the bill came to the House floor last week, Members offered hundreds of amendments on a range of Pentagon programs and activities, including a slew of amendments on cultural war issues addressing the Department of Defense’s alleged oversensitivity to discrimination and social injustice in the military, as well as criticism of abortion-related policies at the Department. Democrats balked, and the House narrowly passed the NDAA 219-210. 

The House bill is Dead-on-Arrival in the Senate, which this week will take up its own bill that will probably be silent on many of the controversial issues. The likely daylight between the two bills portends a difficult reconciliation process. We’ll take a closer look once the Senate approves its version.  


Five Questions with…


One benefit of working on Capitol Hill is the opportunity to develop a network of talented people across a range of industries that can help you “get smart” on the latest. So, this week when I started looking at a range of financial policy issues now before Congress, I turned to Grace Newcombe, Vice President of Federal Advocacy and Communications at the League of Southeastern Credit Unions & Affiliates. Grace and her team are very active in Washington, and are a go-to resource for Alabama’s congressional delegation. 


Q: Grace, thanks for doing this. First, let’s talk about the business of marijuana. It’s a timely issue in Alabama. At the risk of oversimplifying, about 38 states allow the medical use of cannabis products and about two-thirds of those also allow some form of recreational use. That’s a huge market. Nonetheless, under federal law marijuana remains illegal. Financial institutions that might otherwise be eager to lend money to growing businesses are wary of running afoul of that law. Enter the SAFE Act, legislation that would protect depository institutions that provide services to cannabis-related businesses. I understand there may be an informal agreement to bring the bill up in the Senate if it attracts enough cosponsors. Where does your organization stand and what do you think happens next?


A: With a growing number of states legalizing some form of marijuana use, it is imperative cannabis businesses have a safe and responsible place to bank. Otherwise, “all cash” businesses can create a public safety issue, as we have unfortunately seen in other states across the country. With state and federal law contradicting one another, credit unions and banks are put into a gray area with little-to-no guidance, leaving an untapped market and a lack of access to financial services. Just recently, a Mississippi bank began targeting cannabis businesses in Alabama to offer them financial services. Instead of allowing money to be sent out of state, lawmakers should work to keep money local and in the communities for which it was intended.

Our members have been especially vocal in their support of the SAFE Banking Act, as it would provide the necessary safeguards to protect financial institutions. Our members have sent more than 300 messages to Congress supporting the passage of SAFE Banking, and we are eager to see more members of the Alabama delegation get behind this much needed solution. With Senator Katie Britt’s leadership on the Banking Committee, Senator Tommy Tuberville’s vocal support of this bill, and Congressmen Mike Rogers and Barry Moore cosponsoring this legislation, Alabama has a significant opportunity to influence the process. We are most appreciative of the leadership and support of these Members.

While Chairman Brown (D-OH) has indicated that advancement of the SAFE Banking Act through the committee process is dependent on Republican cosponsors, the fact this legislation has passed the House seven times in recent years – each in an overwhelmingly bipartisan way – is proof this is a commonsense solution with broad support. Leadership has indicated cannabis banking is a priority for the next two months, which is another example of the level of support. It’s our hope that SAFE Banking advances to the floor without any controversial amendments that would weaken its chances of passing. 


Q: The Senate Banking Committee has been a pretty sleepy place in recent years, but it has showed renewed signs of life. Chairman Brown has been the Democratic leader for a number of years, but Senator Scott (SC) has now taken over as the top Republican. They both have eyes on the 2024 elections—albeit in different ways—so that might explain it. Also, the bank failures put a spotlight on their work. What’s your top legislative priorities before the committee, and how do you forecast the months ahead?


A: With Senators Brown and Scott in very high-profile races, I think the timing of future markups and hearings will be strategically scheduled. While there has been a flutter of activity in recent months due to the mismanagement of various banks, I think committee action will slow down as we get closer to 2024. 

Beyond the upcoming election, recent bank failures have rallied members across the political spectrum around efforts to insure and protect consumers. While we are proud credit unions have remained safe and secure, we are hopeful committee action will provide an opportunity for credit union-backed legislation to be considered. 

What is top of mind for our members in ensuring consumers across the state and country retain access to critical overdraft services and secure payment networks. 

Despite efforts to regulate the payments system and limit access to short term loans, credit unions are committed to helping consumers make the most of their dollar through preserving credit card reward programs and offering lower rates and fees. The Credit Card Competition Act would erode the swift and secure payments system that consumers and retailers have come to enjoy and increase fraud exponentially in the marketplace due to requiring the use of less secure payment networks. With fraud running rampant, lawmakers should instead consider enacting a nationwide data security standard to protect consumer data at every step of the payment process.

Further, credit unions are deeply rooted in their local communities, and many even got their start serving local businesses, schools, military bases, and more. Credit unions are working to advance the Veteran Member Business Loan Act, which would allow credit unions to better serve veteran-owned businesses and provide access to much needed capital. Veterans have cited accessing capital as a top challenge in starting and growing a business, and 60% of veteran-owned businesses report facing a financing shortfall (receiving less financing than requested). As credit unions are limited in lending due to outdated law, our Association is working to modernize the law and provide credit unions a more friendly operating environment that works in the best interest of consumers everywhere. 


Q: A constant struggle of policymaking is finding the right balance between very specific, narrowly tailored policies and those that are more of a “one-size-fits-all” approach. It’s a big country, and people in different states prioritize different things—and broad sectors of a complex economy can include many actors that operate under very different business models. On the other hand, a patchwork quilt of regulations can hinder growth and raise compliance costs. From your perspective, how does the issue of “one-size-fits all” policymaking play out in the financial sector?


A: Something we are constantly trying to point out to regulators is that there is no one-size-fits-all approach and that a $20 million institution in Alabama is much different than a $210 billion institution in California, for example. 

Following the collapse of Silicon Valley Bank, smaller community financial institutions immediately spoke up to see that they were not penalized for the failure of a much larger bank. The failure of a few large banks is not reflective of the operations, membership, or stability of credit unions in Alabama – and before one-size-fits-all legislative proposals could be considered, our members quickly mobilized to ensure lawmakers were aware of the reality back home. With more than 90% of deposits here in Alabama fully insured and members never having lost a penny of insured savings at a federally insured credit union, Alabama’s financial institutions have remained resilient and well capitalized.

To truly set businesses and financial institutions up for success, legislators and regulators should examine the individual complexities and needs of an institution prior to assuming that the experience of one is the experience of all. 


Q: Last week—for the first time in at least a year—I went inside a brick-and-mortar bank to handle a transaction. Honestly, it felt pretty strange. That’s because the FinTech industry now allows so many financial transactions to be conducted remotely. How are emerging FinTech products impacting the relationship between financial institutions and their customers, and what do you see on the horizon for Fintech?


A: Online banking has transformed the traditional banking system tremendously. Nowadays, you can be anywhere in the world and access your accounts, deposit checks, and transfer funds using your phone. Similarly, with FinTechs like Venmo, Cash App, Zelle, and others, the need to go into a credit union or bank or visit an ATM has decreased as you can easily send and receive money using your phone. Unfortunately, without regulation, however, fraud on these platforms has been difficult to control, leaving users vulnerable. With the growing number of these platforms, Congress will need to identify a way to protect users while also preserving the usability of these platforms. 

Regardless of advancements in technology, many Americans still prefer going into their local credit union or bank to manage their finances. As one’s financial data is very private, preserving branches and allowing consumer’s the in-person interaction is key to meeting the needs of Americans.  


Q: The League of Southeastern Credit Unions is very active on Capitol Hill. When you go to Washington, who are you trying to see and what are you trying to accomplish? As a Chief of Staff, I was always interested in the perception our office was creating with constituents. When your members are flying back home after a week of meetings, what are they talking about from the experience? 


A: Our Association represents the more than 300 credit unions in Alabama, Florida, and Georgia, so my list of people to see is rather long! 

Rather than prioritizing just who is on the House Financial Services or Senate Banking Committees, we work to maintain strong relations with the full 55 members in our tri-state footprint. While one would imagine most of the legislation impacting credit unions and banks would flow through Financial Services or Banking, any moving bill can be a method of transportation for another bill, meaning that legislation impacting us can go through any number of committees.

The House just passed the NDAA on Friday in which 1,400 amendments were filed. Several of those would have impacted our members. Working with our Armed Services Committee members, we were successful in defending our position on a number of issues. That’s one reason why I constantly stress to our members the importance of building relationships in every office.

For an association, success can be measured in a number of ways, whether that means gaining cosponsors on a bill, getting a Member to speak out against a bad bill, learning of a Member or staffer who was assisted through a hardship, or identifying ways we can partner to help constituents or the community.

After we host a fly-in, our members are almost always even more energized about the political process and what they can do to make a difference. Forming a new relationship or deepening an existing one is something that we do not take lightly. A handful of votes can make a world of difference in advancing or preventing a proposal.

Further, our members take special note of offices who, despite not being on a committee relevant to our issues, are genuinely concerned and engaged on our issues. As someone who formerly interned on the Hill and worked in the State Capitol, I understand people do not typically contact the government because they want to—they do so because they have to. I have a deep appreciation for offices who prioritize constituency services and dedicate the necessary staff and resources to serving their district.

Stephen E. Boyd is a Partner at Horizons Global Solutions. Previously, he served as a Senate-confirmed Assistant Attorney General at the U.S. Department of Justice, Chief of Staff for Alabama members in both the U.S. Senate and U.S. House of Representatives, and as a Communications Director of the Senate Committee on the Judiciary. He resides in the Washington, D.C. area. Opinions expressed herein are his own. This news report is not intended to influence or persuade. Email Stephen at [email protected].


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