WASHINGTON – The congressional fog over potential failures of Wall Street giants in the spring of 2009 allowed credit union backers in Congress to quickly pass corporate credit union legislation with no one knowing the full extent of the problems at the corporates, according to the chief sponsor of the bill, longtime credit union champion former Congressman Paul Kanjorski.
Kanjorski, who ascended to a powerful subcommittee in the House before he lost a bid for a 14th two-year term, said his heart still races each time the congressional pager he has yet to relinquish buzzes to signal another vote in the House.
The Pennsylvania Democrat, credit unions’ best friend in Congress, said he and his allies were able to get the corporate bill passed in a lightening-fast one week in May 2009 as the corporate system teetered simply because Congress had much bigger fish to fry and the problems of the corporates were sold by the credit union lobby and NCUA as much less than what they turned out. “I suppose, as close as I was to the credit union movement they didn’t really take me into their confidence,” Kanjorski told Credit Union Journal in an interview Wednesday.
“They [NCUA and the credit union lobby] said they needed somebody to work with them who had the confidence of the Hill,” Kanjorski said. “The benefit I brought to the credit union movement was always that I could generally figure the reality between what we wanted and what we could get done.” He explained that the credit union lobby, which originally told him of projected losses of $1 billion for U.S. Central FCU, later came to him with a much bigger request for $8 billion. The aim was to let credit unions spread out the costs of the corporate failures over seven years. At that time, U.S. Central and WesCorp FCU had recently been taken over by NCUA, and three other corporates were teetering, Members United Corporate FCU, Southwest Corporate FCU and Constitution Corporate FCU.
Congress had approved $700 billion to bail out the banks under the Troubled Asset Relief Program, the year before, but nothing for credit unions. The $8 billion for a corporate credit union restructuring seemed workable, according to Kanjorski.
Eighteen months later, the official NCUA cost estimate is $16 billion, while some experts believe it will run as much as $20 billion. The payback has been stretched to as long as 11 years.
Kanjorski moved quickly on the bill, persuaded by the potential havoc a corporate meltdown could have on the credit union system – even as he was knee-deep in negotiations over what would become the landmark Wall Street bill known as Dodd Frank Financial Reform Act. That bill will forever bear his mark for its controversial too big to fail provision – he calls it the Kanjorski amendment – that creates a government entity to monitor and resolve huge financial failures.
The 74-year-old House member has a long history of supporting credit union bills, starting with his sponsorship of HR 1151, the CU Membership Access Act, then in every Congress since then with bills to relieve regulatory burden, ease member business loan restrictions or reform capital. But it may be the corporate bill, which was introduced in Congress, passed and signed into law a week later, which turns out to be his most lasting legacy.
