WASHINGTON – The credit union lobby knows it is taking a big political gamble by waging a new campaign to defeat the just-completed bank reform bill on the basis of an amendment that would set price controls on debit card interchange, but the hope is it will have few lasting effects in a town where today’s political enemies are often tomorrow’s allies.
“There are no recriminations going forward,” outgoing CUNA President Dan Mica told Credit Union Journal Friday, of the potential that the newly established credit union opposition to the landmark bill will harm credit unions’ relationships with the Democrat leaders in the House and Senate who pushed the bank bill to conclusions last week.
The formal credit union lobby – CUNA and NAFCU – pulled their support for the bill and called on all credit union executives to contact their members of Congress to urge a “no” vote on final passage after leaders agreed last week to include the interchange amendment.
“Our board voted to oppose the bill,” said Mica, who is retiring from CUNA next week. “We negotiated as hard as we could; we got as much as we could, but it wasn’t changed enough.”
But Mica, who spent four terms in Congress before going to CUNA 14 years ago, said he expects little fallout from the newly established credit union opposition – even as the bill is widely expected to be voted into passage this week. “That’s politics,” he said. “In Washington there’s always another day, there’s always another battle.”
“I’ve always said in Washington, it’s the issue. Your best friend today is your enemy tomorrow,” said Fred Becker, president of NAFCU, which, along with CUNA, found itself partnering with the American Bankers Association and the Independent Community Bankers Association in the unsuccessful effort to defeat the interchange amendment.
Both leaders expressed confidence their opposition to the bill favored by key congressional leaders will have no lasting impact on the credit union lobby.
Among the leaders favoring the bill was Illinois Sen. Richard Durbin, the second most-powerful Democratic senator who authored the interchange amendment and who expressed his distaste for the approach by CUNA in an angry letter to Mica early in the fight. But Mica said he believes Durbin, a long-time credit union supporter, will continue to be an ally. “I will tell you this, Dick Durbin considers himself and has been for 25 to 30 years, a friend of the credit union system,” said Mica.
NAFCU’s Becker cited the practicality of Washington lobbying. “It would be silly to hold a grudge,” he said. “There may be some time when he needs out help...That’s the way Washington works.”
Meantime, congressional staffers were working over the weekend on several “tweaks” to the interchange amendment aimed at minimizing its potential impact on credit unions and community banks. Among those are provisions that would broaden the Federal Reserve’s ability to consider costs associated with issuing debit cards when determining a reasonable interchange fee; certain anti-discrimination language that would bar retailers from favoring cards issued by big banks that come under the Fed’s price controls directly; and the requirement for the Fed to conduct a study of the interchange amendment’s impact on credit unions and community banks.
The mammoth bank bill – almost 2,000 pages long – contains several other provisions that will directly affect credit unions.
It will create a consumer financial protection bureau inside the Fed which will set rules for financial products. The final bill, however, will exempt credit unions under $10 billion from being examined by the new bureau, leaving that to their existing regulators at NCUA or the states.
It will make permanent the increase in federal deposit insurance coverage under the National CU Share Insurance Fund and the FDIC to $250,000 per account.
It will set new “skin-in-the-game” rules on the sale of mortgages on the secondary market, requiring all mortgage originators to retain at least 5% of the mortgages they sell.
It will require certain generic financial derivatives, such as interest rate swaps and options, held by several corporate credit unions and a handful of natural person credit unions, be traded over exchanges and clearinghouses to provide transparency.
The bill also will set a new watchdog for so-called too-big-to-fail financial institutions; create new rules for Wall Street rating agencies; and separate the most risky financial derivatives trading operations from federally insured financial institutions.
