Bill Has Lots O' Goodies, And That's The Glitch

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The House was expected to vote its approval last week of the regulatory relief bill for financial institutions, with a host of goodies in there for credit unions. But credit union managers shouldn't get too excited (remember bankruptcy reform?) because the bill still has a long way to go before it is enacted into law.

The first reason is the politics. Though the bill has many banker-friendly provisions, the bankers continue to oppose it on the grounds of what it would do for credit unions. The banking lobby, particularly the powerful American Bankers Association, continues to withhold its support based on the credit union chapter. That chapter would ease the way to voluntary mergers, allow federal credit unions converting to community charters to retain their select groups, allow privately insured credit unions to join the Federal Home Loan Bank System, and transfer authority for setting loan maturities and permissible credit union investments from Congress to NCUA, among other things. Those provisions are enough to invite the bankers' opposition.

House leaders were continuing to work with the ABA last week, but apparently to no avail. A regulatory relief bill for financial institutions is not likely to reach final passage without support of the bankers.

The second reason is the timing. The Senate has yet to introduce its version of a reg relief bill, which Senate leaders have said they will do separately from the House's bill. The Senate Banking Committee would then hold hearings and a formal drafting session on its version. At some time, after the full Senate approves the bill, it would have to be reconciled with the House's version. With the Senate Banking Committee occupied with more weighty matters, like reform of the secondary mortgage market and oversight of Fannie Mae and Freddie Mac, as well as a legislation overseeing the huge mutual funds market, reg relief is low down on the panel's agenda.

If the bill gets dragged along into the late summer or early fall it will collide with the election season, when all kinds of new variables get thrown into the mix. Because of that, one Senate member of the banking committee assured recently that even if a reg relief bills gets passed this year it will be limited in scope.

The prospects for the other credit union reg relief effort, known as the CU Regulatory Improvements Act-or CURIA-are even slimmer, because it offers even more goodies for credit unions, while singling them out from the other financial institutions. Among the extra goodies offered by CURIA are the lifting of the cap on business lending for credit unions and the creation of a risk-based capital system to replace the current system of prompt corrective action, or PCA. The additional items, as well as the creation of a stand-alone bill for credit unions, makes it a target for the bankers and their congressional allies.

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