Bucking a recent Supreme Court ruling, the House Banking Committee voted Thursday to let occupation-based credit unions serve an unlimited number of small companies.
The committee, which adopted the bill on a voice vote, decided to block credit unions from adding to their fields of membership only those companies with more than 3,000 employees.
Under pressure from banks, lawmakers agreed to subject credit unions to bank-like regulations, including community reinvestment requirements and prompt corrective action.
But the banking industry, which has complained that these restrictions are too weak, was nevertheless upset by the vote.
"The outcome seems to have been largely predetermined," said Edward L. Yingling, chief lobbyist for the American Bankers Association. "We are extremely disappointed by the actions of the committee."
"We will continue to express our reservations about the unbridled expansion of bank-like credit unions," said Robert R. Davis, director of government relations at America's Community Bankers.
Credit union trade groups had announced Thursday morning that they would back the bill, which was spearheaded by committee chairman Jim Leach, R- Iowa, and Rep. John J. LaFalce, D-N.Y.
Although the consensus was fragile at times, "all in all, it came out as a package we can support," said Daniel A. Mica, president of the Credit Union National Association, said after the vote.
Rep. Leach said he was satisfied with the final product. "The final vote was basically unanimous," he said. "What you saw today was a carefully balanced product."
Credit union backing is particularly important for Republican leaders if they decide to link this bill with the controversial financial reform bill set to go to the floor next week. If the securities and insurance industries, which support the reform bill, were lined up with the credit unions, they could outweigh banking industry opposition to both bills.
Reps. Leach and LaFalce worked to preserve that compromise during the voting process, discouraging troublesome amendments at the outset and mediating quarrels between committee members.
The two worked out a compromise over a plan by Rep. Richard Baker, R- La., to impose stricter limits on commercial lending by credit unions.
Their deal would freeze for one year current National Credit Union Administration rules that cap business loans to one borrower at 15% of reserves or $75,000. The NCUA would be required to study whether its commercial lending rules should be changed. The compromise was approved 27- 25.
Rep. Baker also sparred with Rep. Bernard Sanders, I-Vt., over the size of new employee groups from outside the common bond. Rep. Sanders wanted to raise it to 7,500 to protect credit unions, and Rep. Baker wanted to reduce it to 1,000 to help banks. But Reps. Leach and LaFalce persuaded them to withdraw the amendments.
The committee defeated 32-22 an amendment by Rep. Bill McCollum, R-Fla., that would have removed the community reinvestment requirements from the bill. "This will be no substantive burden on the great majority of credit unions," said Rep. Barney Frank, D-Mass.
Separately Thursday, members of the Senate Banking Committee pledged to pass their own credit union legislation soon.
At a hearing, committee chairman Alfonse M. D'Amato said he would push for a bill that would ensure that no existing credit union members would lose their accounts. "We don't need panic and pandemonium to spread," he said. "Credit unions have served the little guy well and they have my total support."
Worried that the courts will force credit unions to divest some members or employer groups, Sen. D'Amato and other Banking Committee members sent a letter Tuesday to U.S. District Judge Thomas P. Jackson, who is responsible for implementing the Supreme Court's decision. They urged him not to take any drastic action until Congress has passed legislation.
But several committee members said at the hearing they were still trying to decide whether occupation-based credit unions should be allowed to recruit new members from all existing multiple employer groups.
"By allowing credit unions to continue recruiting potentially eligible members, the legislation could go way, way, way too far," said Sen. Phil Gramm, R-Tex.
Treasury Department officials, however, urged lawmakers to permit credit unions to keep adding new members from their existing employer groups.
If occupation-based institutions are blocked from recruiting members from existing groups, they simply will switch to community or state charters, said Richard C. Carnell, assistant secretary for financial institutions.
