WASHINGTON — It started off as a single statement on a single page, before growing to 55 pages long and hundreds of pages of supporting materials. That’s how HR 1151, the Credit Union Membership Access Act, was introduced in the U.S. House of Representatives on March 20, 2007.
That’s how things often get started in Congress. But almost as often, simple solutions develop into complicated legislative remedies that require expensive and lengthy efforts to redo them through additional legislation.
That’s when the legislation known as the Credit Union Regulatory Improvements ActCURIAreally got started, 10 years ago, at the birth of HR 1151.
After more than five years, lawmakers finally agreed last week to hold a hearing on CURIA. The House Financial Services Committeerefusing to call it CURIA for fear of igniting a major fight with the bankersscheduled a hearing on March 6 on regulatory relief for CUs. The hearing will focus on three areas where credit unions were hemmed in by HR 1151: minimum capital rules, business loan limits and serving the underserved.
Call it son of HR 1151.
Quick Fix Becomes Long Bill
“At one time the bill was only one page, at the most,” recalled Ohio Congressmen Steve LaTourette, the then-freshman lawmaker who co-sponsored HR 1151. The single page, he remembered, would have overturned the month-old Supreme Court decision barring NCUA’s multiple groups field of membership policy with just one sentence.
Then, as is typical in Congress, various interests starting coming forward and piling on additions to the bill. “Some of the quid pro quo for getting the bill,” is how LaTourette, now in his seventh term, puts it.
First, the Treasury Department came forward with a number of safety and soundness issues that grew into an entire section setting minimum capital standards for credit unions for the first timeso-called prompt corrective action.
Then the bankers, who had won the big Supreme Court fight but were about to see their victory disappear with the bill, came forward with their own priorities. Some of them were dismissed by Congress, such as application of the Community Reinvestment Act for CUs.
But some the bankers won. The major one was a limit on how many business loans credit unions can make, protecting one of the bankers lucrative markets. The bill eventually limited credit unions to making business loans that totaled less than 12.25% of their assets.
Then-Maryland Sen. Paul Sarbanes, who helped shepherd HR 1151 through the Senate, remembers the fights with the bankers. “There were substantial interest against the bill. If they had their way there wouldn’t have been a bill at all,” said Sarbanes, who retired from the Senate in 2006.
There was also a growing and lucrative business of converting credit unions to mutual savings banks. Lobbyists hired by the law firms specializing in conversions succeed in easing the way to such charter switches, getting language into the bill that required only a simply majority of voting members to approve the conversion.
“The problem with HR 1151,” said Pennsylvania Congressman Paul Kanjorski, the other chief sponsor of the bill, “was when we initially introduced it its only function was to save the existence of credit unions and the membership.”
“But it grew into some other things that I thought were onerous,” said the Democratic lawmaker, now chairman of one of a key Financial Services subcommittees.
“They (the credit union lobby) wanted to get it through and come back to fight another day,” said Kanjorski. “CURIA is that day.”
CUNA President Dan Mica, who had been the credit unions’ chief lobbyist for less than a year when the Supreme Court ruling came down, acknowledged that to get the bill passed credit unions had to accept some unwanted conditions.
“Our whole right to continue to exist was being threatened. The price of continuing to exist came with some bad medicine,” said Mica, who insisted the trade-offs were worth it. “I’m convinced that if we didn’t have HR 1151 it would have been the beginning of the end of the credit union movement.”
Right away, the credit union movement was looking at some of the additions to the bill, some of which became more onerous as time went on. One provision required CUs to give up their select employee groups after they converted to community charters. Many credit union executives chafed at the new limits on member business loans, especially because of its origin with the banks. Others became alarmed with the growing number of conversions to mutual savings bank leading to multi-million dollar windfalls by dozens of credit union insiders. Still others were surprised to find out that HR 1151’s express authority to branch into underserved communities did not apply to community charters.
Two Short Years Later...
Within two years, the credit union lobby was trying to gain congressional support to overturn some of the HR 1151 provisions, targeting a regulatory relief bill the House Financial Services Committee was developing for all financial institutions.
Among the provisions being targeted were the member business loan cap and the bar on retaining SEGs after converting to community charter. Later, prompted by an idea developed by NCUA, the credit union lobby targeted an easing on the newly passed minimum capital rules, with enactment of a risk-based capital system for credit unions, like the ones in effect for banks and thrifts.
CURIA Is Born
By 2003, credit unions had succeeded in getting their own version of regulatory relief introduced on a separate bill, they called CURIA. At the same time, they continued to pursue most of the same provisions as part of an overall regulatory relief bill.
After a five-year fight with the financial services industry, Congress eventually agreed to pass a regulatory relief bill in 2006. The problem was it didn’t have any of the major CU provisions that would roll back parts of HR 1151.
“So now, CURIA has 11 things that should have been in the bill (HR 1151), but weren’t,” said Kanjorski.
John McKechnie, who was a CUNA lobbyist during HR 1151 and now is congressional liaison at NCUA, said there was never any question that credit unions would have to go back and ask Congress to address some of these issues again. “This is a process that is constantly moving,” McKechnie said, a point he often explained to credit union executives. “We always knew we would have to come back and fix it.” (c) 2008 The Credit Union Journal and SourceMedia, Inc. All Rights Reserved. http://www.cujournal.com http://www.sourcemedia.com
