As Prepared for Delivery on May 9, 2024
Thank you, Pablo, Alexis, Cathie, and the Inclusiv network for the invitation, and everyone who worked behind the scenes to make this conference happen.
And of course, thank you all for being here and for the work you do in your communities every day.
I am honored to be here at the 50th Anniversary conference. I have enjoyed speaking with so many people dedicated to the credit union movement and hearing directly from you about the challenges facing credit unions and their communities, as well as their many successes.
As many of you know, prior to joining the NCUA Board, I handled banking and credit union issues for the majority staff of the U.S. Senate Banking, Housing, and Urban Affairs Committee. Before that, I was an attorney at the FDIC for nearly ten years. During my career, the aftermath of the 2008 financial crisis, the COVID-19 pandemic, and the spring 2023 bank failures left a lasting impression on me. These experiences showed me firsthand the importance of safety and soundness and consumer protection, and the vital role that small and community-based financial institutions play in our economy.
My work at NCUA is guided not only by a commitment to a safe and sound financial system of cooperative credit, but also one that ensures all communities benefit from fair, affordable, and accessible products and services. That is why it is imperative that all credit unions are reaching under resourced and marginalized communities, and small, low-income, CDFI, and minority depository institutions can stay competitive and continue to provide those critical services.
We know that many communities have limited access to safe and affordable financial services. The number of banking deserts is increasing. Home ownership is out of reach for most Americans – just 15 percent of homes for sale are affordable for a typical U.S. household.
Many rural communities have fewer resources after years of disinvestment and face higher levels of persistent poverty. Black and Hispanic families have about one million dollars less wealth, on average, than white families, and racial disparities in lending still exist today across income levels.
Data show that non-MDI banks reject Black and Brown borrowers at a rate that is two times that of their White counterparts, even when they have the same credit profile.
Twenty-five percent Black applicants from families making $100,000 or more a year had their credit applications denied or approved for less in 2022, compared with 10 percent of White households in the same bracket.
For Asian applicants with annual incomes below $50,000, 16 percent were denied a mortgage, compared with 11 percent of White applicants in that income bracket. This pattern continues across income levels, with high-income Asian applicants being 50 percent more likely to have their mortgage application denied than White applicants.
As a country, we have a lot of work to do to address these geographic, racial, and socio-economic disparities, and credit unions, especially MDIs and CDFIs, play an important role in closing the gap. I am encouraged by the many examples of credit unions doing this important work, including many that are here this week.
On Tuesday, I had the lovely opportunity of joining a unique site visit hosted by the Lower East Side People’s Federal Credit Union. I was personally touched to learn how the residents of the Lower East Side banded together to enrich their own neighborhood with restaurants, gardens, and food co-ops when traditional lenders retreated.
This was all made possible with the help of the Lower East Side People’s Federal Credit Union.
Additionally, several other credit unions in New York City, including the Neighborhood Trust Federal Credit Union, Urban Upbound, and USAlliance currently accept IDNYC, a municipal ID card that New York City started issuing in 2014. It is available to all residents of New York City, including people from some of the most vulnerable communities, such as those who are unhoused, justice-impacted individuals, immigrants, and others who may have difficulty obtaining a government-issued photo ID. Many of these credit unions are MDIs.
I am proud that one of my first official actions as a Board member was voting to approve the NCUA’s recently updated policy on preserving minority depository institutions (MDIs). The NCUA has work to do to ensure we are preserving the character of these institutions, providing technical assistance and support, encouraging new ones to form, and importantly making sure they are not merged out of existence.
So far, we have increased staff hours allocated to MDIs under the Small Credit Union and MDI Support Program, adjusted its examination processes to recognize the distinctive business model of MDI credit unions, and hosted an MDI Awareness Month and an MDI Symposium.
And I am encouraged that MDIs continued to perform well and in 2022, MDIs reported $42.2 billion in loans outstanding, an $8 billion increase from the previous year. However, we need to continue to spell out what preserving MDIs looks like in practice and it is one of my top priorities as a board member.
Lastly, it is important to think about how closing the racial wealth gap intersects with climate change. Our economists found that roughly one in four of all federally insured credit unions are in communities classified as having a relatively high or very high risk of experiencing negative effects due to natural hazards. Specifically:
- 25 percent of credit unions located in communities at relatively high or very high risk of experiencing adverse outcomes from natural hazards accounted for 34 percent of system-wide assets, or approximately $750 billion, at the end of 2021.
- Minority depository institutions face a substantially higher risk than the credit union system as a whole.
- Credit unions most at risk of negative outcomes due to natural hazards tend to be in coastal areas, particularly in California, Texas, and Florida. These three states account for 11 percent of credit unions located in communities with an elevated risk and 22 percent of credit union assets.
The NCUA has been looking at the impact of weather-related events on credit unions and I am encouraged to see credit unions across the country start to address the issue. There is always more work to be done, and I look forward to working with you and learning from your experiences on how to build a more inclusive and resilient economy. Thank you.
Now, I would like to introduce our esteemed panel.