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Week ahead: Banks on the base, Fed report and more

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Lawmakers are back in Washington this week, so credit unions have about three weeks before the August recess to move key legislation.

The House Rules Committee will consider the National Defense Authorization Act this week. At issue is a provision that would grant banks access to the same no-cost land leases on military installations that credit unions currently enjoy. While an earlier version of the legislation passed the House without granting banks a pathway onto bases, the Senate recently passed a version of the bill that kept that clause intact.

The House Financial Services Committee will be busy this week, considering as many as 20 different bills. The panel also will hold a hearing Wednesday examining proposals to improve environmental, social and governance disclosures. The House is also expected to consider H.R. 3050, the Expanding Investment in Small Businesses Act of 2019.

As the House attempts to negotiate billions worth of humanitarian aid for the southern border, the clock is already ticking for the next potential government shutdown. Congress must determine spending levels and pass 12 funding bills before Oct. 1 in order to keep the government fully operational. During previous shutdowns, including one at the end of last year which stretched well into 2019, credit unions have offered relief programs such as zero-interest loans, penalty-free certificate withdrawals and other strategies to help consumers dealing with work stoppages as a result of the shutdown.

Federal Reserve Chairman Jerome Powell will speak before lawmakers Wednesday and Thursday as he delivers the Fed's semiannual Monetary Policy Report before the House Financial Services and Senate Banking committees, respectively. Powell’s remarks could provide clues on whether financial infusions should expect any changes in interest rate policy from the Fed for the remainder of the year.

The Fed's decision will impact credit unions’ deposit strategies and could lead institutions to start paying more for deposits. If a credit union doesn't keep its rates consistently competitive, their deposits very well may vanish. One way CUs have attempted to do this is by running special rates on certificates, though the number of CUs offering prize-linked savings as a deposit-gathering strategy continues to rise.

A new study from the Credit Union National Association finds savings growth rising at a faster pace than lending. CUNA’s Credit Union Estimate report for May notes a 0.6% increase in loans while savings growth was up 1.3%, the fastest one-month gain since May 2008, according to Mike Schenk, chief economist at the trade group. The loan growth rate is the weakest one-month figure the industry has seen since May 2011.

“The unusual thing about this development is that usually by the second quarter, loan growth is strong and savings growth is weak and we’re seeing the opposite phenomenon here,” said Schenk. He added that the data reveals developments “roughly consistent with a very slow economy and a retrenchment in the consumer sector.”

“So we’re very concerned about that,” he said during a press call on Monday.

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