WASHINGTON – The chief banking lobbyists used the growing number of large credit union failures to argue yesterday against expanded powers for credit unions, during a hearing before the House Financial Services Committee on the CU Regulatory Improvements Act, better known as CURIA.
Bradley Rock, a Long Island banker who chairs the American Bankers Association, said three large credit union failures last year tied to far-flung real estate speculation should serve as a caution to members of Congress wanting to expand business lending for credit unions.
The failures, Norlarco CU, Huron River Area FCU and New Horizons Community FCU, "demonstrate the danger of credit unions leaving their core mission and aggressively pursuing business lending outside their markets," said Rock, the CEO of Bank of Smithtown (N.Y.), who has emerged as the leading critic of credit unions.
The ABA Chairman also pointed to multi-million dollar business loans made by a variety of credit unions to suggest that credit unions’ have greater ambitions than to provide more small business loans, as CURIA would help them do.
The ABA’s testimony was titled: "The Need for Credit Unions to Adhere to Their Traditional Missions."
The ABA’s Rock and another banker representing the Independent Community Bankers of America, told lawmakers if credit unions don’t like the regulatory restrictions they should convert to mutual savings banks, and they criticized a CURIA provisions that make it harder to do so.
The banker’s testimony came after the credit union lobby, CUNA, NAFCU and NASCUS, as well as NCUA, testified on behalf of CURIA, which would increase business lending capacity and ease capital standards for credit unions.
The hearing was held by Pennsylvania Democrat Paul Kanjorski, who has become the go-to guy for credit unions in Congress and has been working for the passage of the credit union regulatory relief bill for the past five years. Earlier this week, Kanjorski introduced another regulatory relief bill for credit unions that doesn’t include some of the more controversial items in CURIA.
The credit union effort got a big boost from the Financial Services Committee when Barney Frank, the Massachusetts Democrat who chairs the panel, said he hopes the bill can be finally passed this year. "I am hoping that we’re not just going to be talking about this, but legislating," said Frank.
But several members of the committee expressed misgivings about the bill. Jeb Hensarling, a Republican from Texas, said he is not convinced of the need for some of the proposed reforms. "I’m not persuaded of the need for CURIA yet," said Hensarling.
CURIA would: raise business loan limits for credit unions by 63%; enact a risk-based capital system for credit unions; make it harder for credit unions to convert to mutual savings banks; expand the powers to branch into underserved areas to community chartered credit unions; and let credit unions keep their select employee groups after converting to community charters.
Observers say the best chance for credit unions of getting CURIA is passed is to eventually combine it with a separate regulatory relief bill being debated for bankers, that way Congress can please each of the traditional rivals.
