Tensions Rise Between Federal, State CU Lobbies

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The friction between federally chartered and state credit unions and the lobbying groups that represent them has rarely been greater over the past decade.

The conflict has been festering over the past five years as almost 200 credit unions have fled the federal charter in exchange for state charters. Most of them cited the more permissive field of membership (FOM) rules afforded state charters, especially since HR 1151, which set a 3,000 limit on all select groups for federal charters. But others have cited a closer relationship with local regulators or greater powers elsewhere, such as with investments.

Despite the fact the flight from federal charter has slowed recently to a trickle (more credit unions actually converted from state to federal charters through the first nine months of the year), tensions have heightened. These tensions were on display during the congressional debate over regulatory relief when NAFCU was cited by key lawmakers for its opposition to a provision that would allow privately insured state-chartered credit unions to join the Federal Home Loan System.

More recently, officials with other groups were pointing the finger at NAFCU for a Government Accounting Office study of the credit union industry that focuses in on many of the issues NAFCU has been pushing for the past few years, specifically enhancing the federal charter and the conversion of federal credit unions to what some have insisted is the more permissive regulatory climate in the states. GAO investigators are also asking questions about the viability of private deposit insurance, an option only available to state charters.

NAFCU President Fred Becker insists his group did not suggest or recommend that Congress order the GAO study, and that it was initiated purely at the behest of Democratic Sen. Paul Sarbanes, the chairman of the Senate Banking Committee. "Anybody who knows how Congress works and the nature of GAO studies knows that these things are ordered every couple of years," he said. "We did not encourage or suggest or even hint that there should be a GAO study. Any study concerns you because you don't know what you're going to get."

Therein lies the worry of other members of the credit union lobby who see the GAO opening up all kinds of issues to Congressional scrutiny that are better left uncovered. They remember the last GAO study 11 years ago that resulted in dozens of credit union reforms being adopted by both Congress and NCUA.

More recently, a bill introduced by outgoing Rep. John LaFalce has NAFCU's fingerprints all over it, even though Becker denies his group had a role in helping LaFalce draft it. But some can't help wondering what role NAFCU's discussions with LaFalce had in the wording of the bill, which would bar state chartered credit unions from doing anything federal charters can't do.

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