Bush Win A Plus For Tax-Exemption; CU Friends Win Seats

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The credit union lobby spent millions of dollars on elections the past two years but not a cent on the presidential race.

Yet last week's reelection of President George W. Bush is expected to reap millions of dollars of benefits for the credit union movement by virtue of ensuring the federal tax exemption.

Former NCUA Chairman Dennis Dollar, appointed by President Bush three years ago to head the agency's three-member board, noted the written assurances by the president on the tax exemption and the repeated verbal assurances from top Bush Administration officials, such as Treasury Secretary John Snow and Assistant Treasury Secretary Wayne Abernathy, the tax exemption is safe.

"It would be very difficult for them to backtrack on that, since they've been very public on it," said Dollar last week after Bush's reelection.

"The administration," said NAFCU lobbyist Murray Chanow, "has a policy in support of the credit union tax exemption. The president's position is not going to change, neither is Secretary Snow's."

President Bush's reelection is expected to reap benefits for the credit union movement in other ways, as well. The extension of the Bush term for another four years means that the administrative infrastructure is in place to begin immediately making agency appointments, including that of a third NCUA Board seat. "It normally takes a year or two before a new administration is up to snuff on appointments," said Chanow, noting that such delays were eliminated by last week's electoral victory by the president.

Dollar expects the administration to move soon after its inauguration on nominating a third NCUA Board member, something that has been neglected since Dollar left the agency in April.

A Boost For Johnson

The president's win, insisted Dollar, represented a victory for current NCUA Chairman JoAnn Johnson, appointed to the board by Bush.

"I think Johnson's hand was tremendously strengthened last night; she now knows she will be chairman for some time and she now knows she will be getting another Republican on the board," said Dollar,

On the other hand, Deborah Matz, the Democrat on the NCUA Board, was not seen as so lucky. "Johnson was a big winner, but Matz was a huge loser," said former NCUA Board member Geoff Bacino. "If Kerry wins she probably gets to be chairman for the rest of her term, and probably gets to extend her term. Now, she not only doesn't get to be chairman, but she loses her main sponsor in the Senate, (Tom) Daschle."

With Matz's six-year term on the board expiring next year and Johnson's later on, President Bush will eventually have an opportunity to appoint all three NCUA board members, noted John McKechnie, chief lobbyist for CUNA. "He will have a real chance to make a permanent imprint on the credit union movement for years to come," said McKechnie.

Shaping Credit Unions

The president will also have a chance to shape credit unions in other ways, through the administration's continued emphasis on financial literacy, a major priority of credit unions; its support of bankruptcy reform; and its opposition to the Community Reinvestment Act, making it unlikely there are any attempts to extend CRA to credit unions.

In the Congress, credit unions lost a few friends, but won far more, helping dozens of congressional allies to win reelection and many newcomers enter the Congress.

The biggest departures will be Democratic Senate Minority Leader Tom Daschle of South Dakota, who was targeted for defeat by Republicans for his obstruction of the GOP agenda. Daschle, who was narrowly defeated by former Congressman John Thune, was a major supporter of credit unions, helping push HR 1151, the CU Membership Access Act, quickly to the Senate floor for a vote in 1998, and backing the bankruptcy reform bill.

"Seeing him leave the Senate is a loss of a friend," said NAFCU lobbyist Brad Thaler

"Sen. Daschle," said McKechnie, "had been a friend of credit unions and the (South Dakota) league had been close to him dating all the way back to 1978, when he was in the House."

Daschle is expected to be succeeded as Democratic leader in the Senate by Harry Reid of Nevada, who has less of a record on credit union issues.

Another key credit union loss was the defeat of Illinois Congressman Phil Crane, the longest-serving Republican in the House and a long-time supporter of the tax exemption. Crane, one of six members of the tax-writing House Ways and Means Committee to sign a letter to President Bush earlier this year supporting to tax exemption, was defeated in his bid for a 19th term by Democrat Melissa Beane.

Crane lost despite a last-minute independent cable television advertising campaign underwritten by CUNA at a cost of $80,000 in the final week of the campaign.

CU Supporters Who Lost

Other credit union-supported candidates that went down to defeat last week included: Reps. Max Burns (R-GA), Max Sandlin(D-TX), Nick Lampson (D-TX), and Brad Carson (D-OK), who lost his race for Senate.

But there were far more credit union-backed candidates, mostly because the credit union lobby favors incumbents-who won another record 98.3% of congressional races.

"We think we've helped elect a 109th Congress that has every bit of support for the credit union tax-exempt status as the previous Congress," said McKechnie. "That includes new people coming in and key people in leadership positions. Despite the fact the banks will continue to fight for repeal of the tax exemption, I think we start from a pretty strong position."

Among last week's winners were several credit union champions on the state level.

Pennsylvania State Senator Allyson Schwartz, a Democrat, was co-sponsor of that state's credit union parity bill in 2002.

Another independent ad campaign by CUNA, a direct mailing that cost $78,000 in the campaign's final days, helped lift Schwartz to victory on election day.

Ken Marchant, a Republican state senator form Texas who helped craft last year's credit union modernization bill, was also elected to the House last week with help from CUNA.

In the Senate, the credit union lobby supported several newcomers, such as Colorado Democrat Ken Salazar, Illinois Democrat Barack Obama, and South Carolina Republican Jim DeMint, and helped Alaska Republican Lisa Murkowski win her first election to the upper chamber (she was appointed two years ago by her father, ex-Senator Frank Murkowski, when he was elected governor).

Newcomers To Congress

Other newcomers elected to the House with credit union support were: Randy Kuhl (R-NY), Michael Fitzpatrick (R-PA), Charles Dent (R-PA), Thelma Drake (R-VA), Gwen Moore (D-WI), Connie Mack (R-FL), Emanuel Cleaver (D-MO), Cathy McMorris (D-WA), Russ Carnahan (D-MO), Dan Boren (D-OK), G.K. Butterfield (D-NC), Virginia Foxx (R-NC), Jeff Fortenberry (R-NE), Bobby Jindal (R-LA), Debbie Wasserman-Schultz (D-FL), Geoff Davis (R-KY), David Reichert (R-WA), Jim Costa (D-CA), Al Geen (D-TX), Michael Burgess (R-TX), and Michael McCaul (R-TX).

McKechnie attributed CUNA's support to new candidates to screening by the state credit union leagues. "The leagues have done a really good job in cultivating supporters on the state level and helping to prepare them to go to Congress," he said.

The Texas situation was particularly sticky for the credit union lobby, which was forced by the controversial redistricting to favor some credit union supporters over others. In one of the most closely watched races in the country, four-term Republican Pete Sessions, a major credit union supporter who won this year's endorsement of the Texas CU League, defeated 13-term incumbent Democrat Martin Frost, also a big credit union friend.

'Stay With Your Friends'

Three other incumbent Democrats who were also targeted by the GOP-designed redisticting plan were defeated last week: Nick Lampson, Max Sandlin and Charles Stenholm, all who were credit union supporters. As a result, the GOP, which also claims several major credit union supporters in Texas, won control of the state's 32-seat congressional district with 19 seats.

CUNA which poured more than $200,000 of campaign contributions into 31 of the state's 32 House races, was forced by the redistricting to support Sessions over Frost, though both were strong credit union supporters; and also backed Lampson and Sandlin. "It is important that you stay with your friends, especially when you don't have a relationship with the other candidates," Richard Gose, political director for CUNA, explained.

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