You couldn't help feeling a little disappointed after the run-up to the congressional hearing on credit union conversions when Rep. Spencer Bachus, the chairman of the subcommittee holding the hearing, declared even before the session that there will be no vote this year, or in this Congress for that matter, on a bill to reform the conversions process.
But, said the Alabama Republican, Congress and particularly the Financial Services Committee, might revisit the issue in the next Congress after lawmakers see how NCUA amends its rules on conversions, as it is expected to in the coming months.
As a result, the banking lobby, which really created the legislative debate over credit union conversions, had to settle for what amounts to a tie with the credit union lobby in this round.
Bachus, who may be the chairman of the full Financial Services Committee in the next Congress, did have some interesting things to say. One issue that attracted his attention is the proposal to require that all votes on credit union conversions have at least 20% of eligible members participating. In the old days, prior to HR 1151, the CU Membership Access Act, a credit union needed a majority of members to vote a conversion, but the new law changed that to a simple majority of voting members. During the hearing it was learned that many credit unions can't even muster 20% of members to vote on a conversion, leaving it to as few as 10% of the members to vote this momentous charter change. Some lawmakers suggested last week this has contributed to an increase in both the number and size of credit union conversions to banks since then.
Probably the biggest winner was freshman lawmaker Patrick McHenry, sponsor of the Credit Union Charter Choice Act, and at 32, the youngest member of Congress. You could forgive the North Carolina Republican for flitting between the two warring interest groups as he chaired a hearing on his bill-an unusual perk for a first-year House member. Freshman like McHenry are generally seldom heard from during congressional hearings, let alone allowed on the top flight of the committee seatings - where only the most senior members of a committee are allowed. Some members can wait years-even decades-before they are afforded a hearing on one of their bills, and even then are not allowed to chair a hearing on the bill.
But McHenry skillfully allayed the fears of the credit union lobby - which opposed him in his ever-so-tight primary in his first election to Congress-while also cultivating the bankers, who helped him draft his bill to ease conversions from credit unions to banks.
McHenry toned down his criticism of NCUA Chairman JoAnn Johnson and acknowledged how cooperative the credit union regulator had been in working with him and his staff on the issue. The freshman lawmaker even singled out NCUA's new congressional liaison, John McKechnie, saying the appointment of the former chief CUNA lobbyist has helped improve NCUA's relationship with Congress, damaged last year during the controversy over two Texas CU conversions.
McHenry also singled out NAFCU's new chief lobbyist, Dan Berger, who helped the North Carolina lawmaker write his bill while working last year for America's Community Bankers, the trade association for mutual savings banks, as contributing to a greater understanding of the debate.
Ironically, the main concern aired by CUs, that conversions to mutual savings banks then to stock-owned corporation tend to enrich a few insiders who are eligible for all kinds of cash and stock benefits not available to rank-and-file members, got little emphasis. This position was given short-shrift by McHenry and the few other lawmakers who said NCUA is too strict in approving credit union conversions.
Pennsylvania's Paul Kanjorski, who has become the credit union champion on Capitol Hill, voiced his concerns that outsiders were feasting on the retained earnings built up over the years, in part because of the tax exemption. Kanjorski wondered if this will lead to some kind of effort to have some of the benefits of the tax exemption, say a portion of the retained earnings, paid back after the conversion of the institution from its not-for-profit status.
