WASHINGTON – More than 1,000 bankers are massing on Capitol Hill today seeking to, among other things, block a vote by Congress on the bill to raise the limit on member business loans for credit unions.
The bankers hope to stop a final vote on the bill—even after Senate Majority Leader Harry Reid last week promised a Senate vote—something the bankers have been able to do now through five straight Congresses and ten years.
“The general sense in Congress is that they’d really rather not vote on it,” said Bruce Whitehurst, president of the Virginia Bankers Association, during this morning’s session of the American Bankers Association’s Government Relations Summit at the Omni Shoreham Hotel.
The powerful banking lobby, represented by both the ABA and the Independent Community Bankers Association, have spent hundreds of thousands of dollars on ads this week on local radio and in the newspapers blanketing Congress and its staff calling on lawmakers to “Stop Credit Union Overreach” and oppose the member business loan bill.
The bankers onslaught comes while more than 4,000 credit union executives and volunteers are also lobbying lawmakers this week for passage of the MBL bill as part of CUNA’s annual government affairs conference. The two groups are meeting simultaneously about a mile apart in the nation's capital.
The bankers labeled as fiction the credit union’s argument that banks are turning away small business loans. “There’s plenty of liquidity in the banking system. That’s a false story,” Samuel Laverack, president of New Hampshire’s Meredith Village Savings Bank, told the Credit Union Journal this morning.
The bankers are insistent that only a few credit unions, 27, are near the 12.25% of assets limit on member business loans, so there is no need to increase the limit to 27%, as credit unions want. “There’s only a handful of credit unions that need it,” said John Barnett, president of BankTrust in Brewton, Ala.
What bothers the bankers the most is the credit union exemption from income taxes. E. David Locke, president of $500 million privately owned McFarland State Bank in suburban Madison, Wis., which competes with three $1 billion credit unions, said he pays 40% of his bank's net income in both state and federal taxes, giving an advantage of 40 bps on loans and deposits to his credit unions competitors, which include Summit CU, Landmark CU and University of Wisconsin CU.
Randy Ferrell, president of The Faquier Bank in Warrenton, Va., said he lost out to nearby credit union giant, Apple FCU, on a $7 million business loan because he couldn’t compete with the lower rate offered by the $1 billion credit union in nearby Fairfax, Va. “They just outpriced us because of their tax advantage,” Ferrell said.
The bankers are insisting to lawmakers that the MBL bill puts the tax exemption on the table, as the banks have been trying to do for years. “This puts the small credit unions in jeopardy because of the tax exemption,” said Christopher Bergstrom, regional president of Cardinal Bank in the Washington suburb of McLean, Va.
The bankers are especially incensed because credit union attendees to this week's CUNA conference will be able to use their federal tax exemption to avoid paying Washington's 14.5% hotel tax, which the ABA estimates will amount to morte than $500,000.
