It's payback time for federal credit unions.
During last week's CUNA Governmental Affairs Conference (GAC), the meeting fell on the five-year anniversary of the Supreme Court decision upholding a lower court's ruling against NCUA and federal credit unions. That decision not only hushed an enormous ballroom full of optimistic credit unionists confident they would get a victory, it put in motion the extraordinary effort and teamwork that would become the Campaign for Consumer Choice. Key to that campaign was the support of state-chartered credit unions and their trade groups for their federally chartered brethren, even though they didn't have any real skin in the game.
Nevertheless, most state charters were team players and urged their members to write their representatives. They donated money to PACs and media buys and the campaign itself. They joined fellow CEOs and managers of FCUs on Capitol Hill.
Now the question is: With state charters under attack from various tax proposals in a half-dozen states, will the federal charters and their trade groups, particularly NAFCU, return the favor and join the fight?
During the fight leading up to what would be HR 1151, federal charters spoke long and with passion about why everyone was in this together, why credit unions needed to remain a unified "family," and why the threat to federal charters was also a threat to their fellow state charters.
With many federal credit unions either making the switch to state charter or considering making the switch due to court-ordered limitations on growth, the FCUs were vocal proponents of dual chartering, going to lengths to make sure everyone understood it wasn't a duel over chartering.
Now the sword's on the other hand in that duel. In Utah. In Iowa. In California. In New Mexico. State charters that stepped up to the plate on behalf of federals are now wondering if the feds will go to bat for them. During GAC, of the dozen or so CEOs and other leaders I spoke to regarding the question, no one had any answers. "That's an open question," said one person, summing up the response of many. It deserves a firm answer.
While CUNA CEO Dan Mica urged the 3,000 or so in attendance to be aware of the attacks against credit unions in the states, there was no call upon the federal charters by any of the speakers to step up and support the state fights.
Such calls need to be made and made soon, because the emerging fight is in many ways to be more of an uphill, pothole-filled road than the difficult journey to HR 1151. At least in the fight for HR 1151 there was one opponent (the bankers) and the group that needed to be lobbied was in one place- Washington. Knowing they are licked on Capitol Hill, the banks are now pursuing a fiendishly brilliant, three-pronged divide-and-conquer strategy. First, rather than engage credit unions in one big fight they can't win, the banks have launched a half-dozen skirmishes in places like Salt Lake City and Santa Fe and Sacramento, and would like to expand it to every state with a credit union act. That quickly divides credit union resources. After all, there may be a Credit Union House in Washington, but there's not even a studio apartment in most state capitals.
Second, the banks are dividing state and federal charters. And third, the banks are dividing credit unions themselves according to asset size, aiming to cull from the herd just the "large" credit unions that are no longer "true" to credit union operating principles. The bankers aren't naive to the fact some smaller credit unions embrace that latter sentiment.
If the banks get their wingtips in the door of any state legislature, it's going to require the shoulders of many credit unions to push that door shut. There are bankers and ex-bankers who serve as legislators in many states, where regardless of profession part-timers are the rule. As credit unions are learning quickly this legislative season, slipping in a bill in many legislatures is as complicated as tipping the maitre'd for a better table. In Utah, the situation is one in which they ought to change the name to the bankislature.
NAFCU does not have the resources of CUNA, and has long made a sales point of the fact it is a direct membership organization with no state level associations. It can't be expected to organize federal charters in every state. But it can and should be expected to urge its members to remember who helped get them to where they are. And even though credit union politics can be a prickly thing, politics were put aside during HR 1151 and can be again-perhaps NAFCU could offer to organize a steering committee to coordinate responses and share information.
Many of the brightest innovations in credit unions, especially on the regulatory side, have come from state charters and out of state regulators' offices. But who needs a state regulator when there's no one left to regulate?
What's going on in many of the states is like one of those perfect storms that sneak up once a century when no one's looking. To survive, federal charters are going to have to offer a lot more help than warning state charters to "Look out for the rain!" The feds need to be prepared to get wet.
Frank J. Diekmann is editor of The Credit Union Journal. He can be reached at fdiekmann cujournal.com.
