Snow, Ice & Unintended Consequences In D.C.

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Aaaah, GAC time again. That must mean a snowstorm or even hail. Or maybe one of the 10 plagues?

So many of the 13 Government Affairs Conferences I've attended have been memorable not only for their politics and rhetoric, but for the lousy weather that comes with it. This year is no different as Washington will be digging out of one of its biggest snowstorms ever, more than two feet of the white fluffy stuff in many areas.

This will make for treacherous going for many who trudge up to Capitol Hill for their annual lobbying pilgrimage. And treachery may be a metaphor for what is happening to the credit union alliance in some venues:

* In Utah, where they are poised to tax credit unions for the first time.

* In Iowa, where the tax fight is just down the road.

* In Missouri, where expansive fields of membership are raising the ire of the bankers.

* In Florida, where the banks are citing a national study purporting to show the competitive advantage enjoyed by credit unions based on the federal tax exemption.

* And here in the nation's capital, where credit unions are about to embark on what may be their most meaningful lobbying initiative yet, including that of HR 1151, the CU Membership Access Act.

This one will involve a broad bill, being hailed as a generic regulatory relief bill for financial institutions. The bill may be considered a "Christmas tree" for all financial institutions, because it has numerous goodies to decorate it, but it appears that credit unions will have the most at stake when the bill comes to a vote. That aspect is driving a debate whether it would be better to separate out the credit union provisions or leave them in as part of an omnibus regulatory relief package.

Among the first issues to be addressed, or redressed, are several provisions in HR 1151 that the credit union lobby wants to fold back. That includes the cap on member business lending, net capital requirements, and limits on select employee groups, or SEGs, as we know them. And that's just for starters.

Credit unions will also ask Congress to give them

* Broad new powers to serve non-members in several ways under the rubric of "serving the underserved."

* Give NCUA wide authority to bypass Congress and set its own rules for credit union investments, loans and investments to CUSOs, and consumer and mortgage lending.

* Give NCUA authority to eliminate the pro-consumer usury ceiling, an anathema to other federally chartered financial institutions. The credit union wish list has made the bill a target for the banking lobby, even as it tries to get its own priorities included in the package.

In fact, the American Bankers Association refused to endorse the bill last year because of its credit union-centric nature, even though it would have rolled back several regulations targeted by the banks.

Some credit union lobbyists don't think it matters what the banks say, citing friends in high places at the head of the Financial Services Committee and its subcommittees.

I say the bankers are still a very powerful lobby and one that should not be taken lightly (see what's going on in the states). Watch for opposition from some in Congress who acted five years ago to pass the emergency HR 1151 which purported to give credit unions new powers (of course it really only codified what NCUA had been doing, illegally, according to the courts, for years). Lawmakers do not go easily to repeal or amend legislation they struggled to construct just a few short years ago.

The credit union movement, itself, may not be ready to mount an all-out national lobbying effort for the sake of this bill, either. Among the things the credit union lobby is asking Congress to undo from HR 1151 are: eliminate the 3,000- member limit on SEGs; allow credit unions converting to community charters to retain their SEGs; remove or raise the 12.25% (of assets) cap on member business loans; raise the minimum net capital requirements; and allow credit unions to count secondary capital among their net capital.

"We need to clean up the mess that was created in HR 1151," said Jonathan Lindley, lobbyist for NASCUS, uttering what other credit union lobbyists would not say publicly.

But when they do, look out for the "T" word. Even though the Republican Congress will be reluctant to consider the credit union tax exemption, look for the bankers to push it to the table. The growing federal budget deficit, just like the expanding deficits in the states, makes this the opportune time to revisit the tax debate.

More than one lawmaker has indicated it may be the price for expanding credit unions powers, again. One thing that HR 1151 taught the credit union movement: when you push hard enough for something, something else has to give.

Watch out for the law of unintended consequences.

The Credit Union Journal encourages feedback from readers. The Journal's Washington Bureau Chief, Ed Robers, can be reached at at (202) 434-0334, or at Or contact The Journal at 888-832-2929, or via fdiekmann

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