The chief congressional champion of alternative capital options for credit unions said last week he won't back off his legislative efforts, even after a report by the respected Government Accountability Office doubting the need for secondary capital. "I'm going to push forward with it," Rep. Brad Sherman (D-CA) told The Credit Union Journal after speaking to NAFCU's Congressional Caucus.
But Sherman said the short-term prospects are not good for initiatives that would give credit unions access to secondary capital and allow them to count it as net worth under NCUA's minimum capital, or prompt corrective action, rules.
Sherman said a strong case can be made for alternative capital for credit unions. "I don't know how to make an argument that would foreclose the option of getting alternative capital," he stated. "Alternative capital won't change the structure of credit unions and it is an acceptable avenue for all other cooperatives."
Sherman's remarks come two weeks after the GAO issued a report finding there is no 'compelling need' for secondary capital among credit unions. "Nothing ever happens in Washington without the obligatory government report saying you shouldn't do it," he said.
The more realistic opportunity is for Congress to amend the current system of PCA to make it risk-based, something NCUA has endorsed. "Risk-based capital will happen a lot sooner than secondary capital," said Sherman.
The California Democrat, who hopes to join the tax-writing House Ways and Means Committee in the next Congress, also downplayed plans to review the credit union tax exemption. He noted that the committee plans to review the validity of the tax exemption of a number of non-profits, including hospitals and credit unions to determine whether they are continuing to abide by their non-profit missions. "Not a bad thing," he said of the overall review.
He predicted that any attempts to repeal the credit union tax exemption are doomed to fail because, among other things, of the negligible revenue it would raise, an estimated $1 billion a year in a $2.2 trillion federal budget. "It's too little revenue," to attract much support, he said. And those numbers could be significantly reduced further with proper tax accounting, added the Congressman, a tax attorney, by profession.
Sherman also said he plans to reintroduce a bill next year that would allow credit unions to provide check cashing and wire transfers to non-members within their fields of members. A similar bill was introduced in this Congress by Rep. Doug Ose (R-CA), who is retiring at the end of the year.
