In 1998, There Was Only One Story That Really Mattered To Credit Unions
Perhaps nothing better summed up 1998's highs and lows than CUNA's Governmental Affairs Conference. Several-thousand credit union representatives meeting at the Washington Hilton, full of confidence that the U.S. Supreme Court would rule in their favor in a case concerning field of membership, sit in stunned silence when it is announced the court has ruled 5-4 against credit unions. Judge Clarence Thomas, who did not ask a question during the hearing, writes majority opinion.
The silence turned to a roar later when House Speaker Newt Gingrich announces he will depart from custom and sign onto HR 1151. Gingrich's support was credited in part to a bid to seek the presidency in 2000.
Some credit union leaders, including former congressman and CUNA CEO Dan Mica, quietly say the Supreme Court loss may be a blessing, as what credit unions really need is a legislative fix to a big problem (bank litigation) from a small matter: what did the authors of the Federal Credit Union Act mean by the word "group." The fight to get the bill passed comes with a price in several provisions tacked onto what was supposed to be a limited bill includes a cap on member business lending (12.5%) and language changing what's necessary to convert a credit union to a bank from a majority of members to a majority of voters. It is believed that language was inserted at the behest of a Washington law firm specializing in such conversions, with support from the banking industry.
In the months leading up to passage of the legislation, this newspaper's pages were packed with related items, including, and in no particular order: * Credit unions headed into the 1998 election year with a then-record $600,000 in PAC funds * A GAO study finds North Carolina's banks (which filed the original FOM litigation) have not suffered as result of CU competition * Texas CUs replace "Stand Tall" campaign with "Credit Unions: the Right Road for Consumer Choice." * The ABA flies in bankers to counteract credit unions in D.C. for CUNA's GAC. * Treasury says it is working on a bill that would eliminate the CLF, increase minimum equity level of the NCUSIF to 1.5% from 1.3%, establish a minimum 6% capital ratio * Research by The Credit Union Journal reveals that banks hold 10-to-1 advantage in political donations * Florida announces 90-day moratorium on switches to state charters * In wake of ruling, a Credit Union Journal survey of state leagues finds numerous credit unions reporting uncertainty from members calling to find out if they will be kicked out of their credit union. Bank groups amend lawsuits to state they will not seek to have members expelled, partly as a PR move * Congress holds hearings on field of membership * Utah league begins collecting testimonials for an ad campaign, while Alaska's CUs collect 79,000 names on petitions supporting HR 1151 * The Washington Post joins The New York Times in editorializing in favor of banks * Virginia bans FCUs from taking on new groups * A May estimate is that CUs will spend $15 million to get legislation passed * CBO issues report saying provisions in HR 1151 would subtract taxable income from other financial institutions of $1.1 billion over 10 years from U.S. treasury * Miss. Sen. Trent Lott tells CUs, "You people are everywhere." * HR 1151 co-sponsors Paul Kanjorski (D-PA) and Steven LaTourette (R-OH) are greeted with standing ovations at nearly every CU event they attend. * The Senate votes 92-6 in favor of bill, overturning Supreme Court ruling. In last-minute flourish, credit unions able to have removed provisions requiring CRA and further restrictions on MBLs. The Senate vote is broadcast on C-Span, and credit unions nationally tune in as The Credit Union Journal's Ed Roberts provides a long on-air analysis. Florida Sen. Connie Mack, standing at the same desk where his grandfather, Sen. Morris Shepard, introduced the Federal CU Act in 1933, votes against the bill * On the day of the Senate debate, two Capitol Police officers are killed by a gunman * Lobbying firm Hill & Knowlton, retained by credit unions at a cost of $75,000 per month, hosts a celebratory reception at its offices in the Watergate building.