How A 2002 Reg Relief Bill Has Its Roots Back In 1998

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Some time later this year the House of Representatives is expected to pass a regulatory relief bill for financial services companies.

Though the bill is not expected to pass the Senate-at least this year-the measure, heavily laden with credit union-backed provisions, is a major testament to how far the credit union lobby has come on Capitol Hill, where it was traditionally considered a second sister to the banks and other powerful lobbying interests.

While all of the major credit union groups can claim credit for helping to shape the bill, no one is more responsible for laying the groundwork and building an early consensus for this multi-year legislative campaign than NAFCU. For it was the federal credit union trade association that dared to begin jawboning congressional leaders on the issues almost before the ink was dry on the 1998 landmark credit union bill HR 1151, the CU Membership Access Act, which set out some of the standards the credit unions are now trying to roll back.

NAFCU's efforts came even before their major counterpart, CUNA, was ready to act, and are seen as pivotal to what may be considered just as important a legislative campaign as the one which mobilized the entire credit union movement just four years ago.

"When I think back to three years ago, when they started shopping their federal charter reform proposals on the Hill, I thought that was pretty bold," said Christopher Kerecman, congressional lobbyist for the California CU League. "It was the first organization to put those issues on the table. You have to start somewhere, and NAFCU did that."

The initial work that NAFCU did to re-open discussions on credit union issues the Congress thought they had ended with passage of HR 1151 cannot be underestimated, even when there was widespread consensus in the credit union movement that it was too soon after the massive legislative campaign to begin a new one.

"What's important to note is there's a long lead time on legislation. You really have to start a couple of years in advance. Then when the freight train comes along you hitch yourself to it," said Jonathan Lindley, a longtime credit union lobbyist now working for NASCUS.

For NAFCU the pressure to begin a new legislative campaign was building, first by opposition to some of the HR 1151 provisions opposed by credit unions, such as the cap on member business loans, and second by the continued flight from federal charters, during which 150 federal credit unions converted to state charter just before and after passage of HR 1151.

The dual pressures prompted NAFCU to convene a focus group at its Virginia offices in late 1999, a little more than a year after implementation of HR 1151 and soon after Fred Becker succeeded long-time CEO Ken Robinson. Included in the focus group were not only representatives of NAFCU credit unions, but of credit unions that had chosen to convert to state charters or to mutual savings banks. The aim was to assess the value of the federal charter, why credit unions had converted, and what could be done to strengthen the federal charter.

"We had consistently been pursuing whatever avenues there were to enhancing the federal charter," said NAFCU's chief lobbyist Bill Donovan.

That meant lobbying NCUA to stretch its regulatory authority in certain areas, like field of membership (FOM), as well as exploring what sort of things Congress would be willing to address.

A few months after that focus group session, the NAFCU board used that information when it outlined a list of nine reforms they would favor for the federal charter. The following month the list was expanded to an even dozen.

Among them were: the ability of federal credit unions to retain select employee groups (SEGs) after converting to community charters; allowing single common bond credit union or multiple common bond credit unions to add low-income communities to FOMs; authorizing NCUA to approve voluntarily mergers without requiring the burdensome evaluation of whether large groups within the existing FOMs can sustain their own credit unions, and eliminating the 12.25% (of assets) MBL cap instituted in HR 1151.

Others included: a "reverse wild card" provision allowing federal charters to do anything state charters can do in their home states; a "once a potential member, always a potential member" rule allowing anybody previously in an FOM to join that credit union; dropping "local" from the requirement for a community charter; requiring an "exit fee" for credit unions converting from NCUSIF to private deposit insurance, and eliminating the requirement that NCUA evaluate whether a group can form its own credit union before allowing it to join an existing credit union's FOM.

Becker then shared the NAFCU board's list with his CUNA counterpart Dan Mica when the two traveled to Europe for the Defense CU Council's annual overseas conference. At the time Mica was reluctant to support a legislative campaign, because of the recent end of the massive credit union campaign culminating in HR 1151 and because CUNA had not yet established a consensus on a legislative initiative. Privately, CUNA lobbyists said NAFCU was jumping the gun on something that would require broad-based support from the credit union movement.

Soon afterwards, CUNA created its study panel, called the Renaissance Commission, which was charged with developing its own priority list for both legislative and regulatory reform. During a public hearings conducted by the Renaissance Commission, NAFCU representatives explained their proposals, some of which were eventually endorsed by the CUNA panel in its final report.

NAFCU, as is its practice, decided not to wait and began shopping its proposals on Capitol Hill, where it would require the support of key lawmakers.

"One of the things that makes NAFCU more effective as an organization is they're more nimble, faster to react," said Kerecman.

Those efforts eventually included meetings with proven credit union champions like Reps. Paul Kanjorski, the Pennsylvania Democrat, and Steve LaTourette, the Republican from Ohio, who headed the HR 1151 efforts, as well as important members of the House Financial Services Committee, which had been renamed from the Banking Committee. Also consulted were John LaFalce of New York, the ranking Democrat on the panel; Spencer Bachus of Alabama, chairman of the panel's subcommittee on Financial Institutions; long-time credit union champion Marcy Kaptur, the Democrat from Ohio; Marge Roukema, the New Jersey Republican in line to chair the financial services committee, and Michael Oxley, the Ohio Republican eventually named chairman of the panel.

On the Senate side, NAFCU lobbyists met with Phil Gramm, the Texas Republican who then chaired the Senate Banking Committee; Paul Sarbanes, the ranking Democrat from Maryland (both Gramm and Sarbanes had been players in HR 1151); as well as Jack Reed of Rhode Island and Michael Enzi of Wyoming, both members of the committee.

"We were trying to sensitize them in Congress and on Capitol Hill," said Donovan. "It was a starting point."

"Initially, they would hope there would be a regulatory fix to the problems. They'd say, 'Go talk to the regulator (NCUA). But eventually they'd say, 'You're probably going to need a legislative fix,' " related Donovan.

NAFCU got a big boost in July 2000 when after a closed-door meeting between its board and then NCUA Chairman Norman D'Amours at the group's annual convention in Honolulu, D'Amours endorsed the group's efforts on several provisions and pledged his support.

Progress, however, slowed soon after as lawmakers became occupied with the looming congressional elections and the ensuing reorganization of the Senate and House. The elections brought a new chairman, Oxley, and some 30 new members to the former banking committee, which was expanded to 73 participants. Soon after he was appointed chairman of the committee, NAFCU began cultivating Oxley and opening him up to the idea of credit union reforms, even before the new chairman initiated his own regulatory relief efforts. "He was very attentive. And we were very encouraged by his response," said Donovan.

Then last summer, Oxley and his staff began the process for a regulatory relief package and invited the major trade groups, like CUNA, NAFCU and the American Bankers Association, as well as all the financial regulators to provide him with a list of recommended provisions for a bill.

Since then, of course, the regulatory relief legislation has become a major priority for CUNA, as well as NASCUS and NCUA, all of whom have contributed to bringing credit unions to the verge of a major legislative success.

Without a companion bill in the Senate, the package is not likely to see final passage this year. Still, Donovan believes some provisions may be able to be included in other legislation, like deposit insurance reform, more likely to be passed this year. Most of the provisions, however, are expected to resurface again next year in the new Congress, with this year's bill used as a mark.

"We realized when we embarked on this path it was going to be a long journey," said Donovan. "NAFCU has not looked back for a second."

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