Best Job Skill In D.C? Keeping A Straight Face

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This town is best known as the capital of our government, but it may as well be known as the capital of something else, too: hypocrisy.

It's not as if people here have short memories, it's just that principal has a short life span Inside the Beltway. That's politics.

But the concept of saying one thing and doing another seems to have been brought to new heights by the powerful banking lobby as it seeks to bring down the credit union-favored regulatory relief bill making its way through the House.

It was with great mirth that observers watched and listened while the various banking lobby groups testified last month against the credit unions efforts to increase member business loan (MBL) authority, to expand markets (field of membership), and to extend the ability of credit unions to shield certain income through the tax-exempt credit union structure.

Within minutes those same banking representatives were asking lawmakers to increase their powers to make business loans, to expand their markets through interstate banking, and to increase their ability to shield income from the taxman through so-called Subchapter S tax-exempt banks.

The Subchapter S issue is one of the most laughable money grabs the bankers have ever engaged in. While the number of tax-exempt banks has exploded to more than 1,000 over the past decade through this closely held tax dodge, the bankers continue to fight the credit unions tooth-and-nail on the basis of the credit union tax exemption. Or rather the credit union tax "subsidy," as the bankers put it. Yet, I've have never heard the bankers use the Washington pejorative "subsidy" when referring to their efforts to shield what amounts to billions of dollars in revenues from taxation.

Does The 'S' Stand For 'Subsidy'?

Oh well, I guess one man's exemption is another man's subsidy.

The funniest thing is when you hear the bankers constantly complain to Congress about credit union "advantages" in the marketplace. Yet in more than a decade covering this market I have not seen any banks, except for two that were very similar in structure to credit unions, move to convert to a credit union to take advantage of all those benefits. My take is these people are either stupid, because they know of a good thing and won't avail themselves of all those lucrative opportunities, or they know that what they are saying is false, yet keep saying it anyway. That's the definition of hypocrisy.

The banking lobby united in its opposition to credit union efforts to reduce regulatory burden, with the powerful American Bankers Association going so far as to say it will oppose the regulatory relief bill because of the credit union provisions. That strategy is likely to work in the short-term, especially as the omnibus relief package is not expected to pass this year.

After all, the Senate has shown little enthusiasm for the issue so far. But the bankers' posture, seen as arrogant by many on Capitol Hill, could work to the detriment of the bankers in the longer-run, making them seem as obstructionists, not just hypocrites.

Meantime, while the credit union lobby is gearing up for an extended, multi-year campaign on regulatory relief, there are other alternatives for some of the bill's provisions. Among them are separate bills already moving through Congress that would do some of what the regulatory relief bill would do. That includes authorizing credit unions to provide check-cashing services to non-members within their fields of membership (FOM), allowing privately insured credit unions to join the Federal Home Loan Bank System, and exempting religious-based loans form the limits on member business loans.

Even if those bills are not successful, as is likely, some provisions of the regulatory relief package may still be attached to other bills.

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