WASHINGTON - A regulatory reform proposal by the Treasury Department that would combine NCUA with the banking regulators ignited a firestorm last week among the credit union lobby groups, some of whom insisted the plan could mean the end of the credit union movement.
CUNA lobbyists raced to the White House and Capital Hill last Sunday, the day before the plan was even introduced to begin lobbying against the proposal, which CUNA President Dan Mica said would result in the “demise of credit unions as they function today.”
While the plan was prompted by the ongoing turmoil in the financial markets, Mica sent a letter to each member of the House and Senate saying that credit unions should not be singled out for action to deal with the current mortgage crisis because credit unions did not contribute to the crisis. Instead, he suggested that Congress pass the CU Regulatory Improvements Act to emphasize “the important role that credit unions play in helping America’s consumers through these difficult times” referring to CURIA, which has been stalled in Congress for five years.
In the following days, several CUNA-affiliated state leagues echoed Mica’s remarks, suggesting the proposal would entail the death of the federal credit union charter, and of credit unions altogether.
But other credit union representatives counseled restraint on the proposal, which even Treasury Secretary Henry Paulson said would not be taken up this year or in this Congress, or any time soon.
NAFCU President Fred Becker said his group will also fight to retain an independent credit union regulator, but any enactment of the proposal would be far off in the future. In the meantime, said Becker, NAFCU will continue to focus legislation of immediate impact to credit unions moving towards passage, including the mortgage rescue plan, and the CU Regulatory Improvements Act. “Secretary Paulson himself even said he doesn’t see this thing going anywhere soon.”
Members of Congress said the plan would not be introduced this Congress, and some leaders rejected it outright. Senate Banking Committee Chairman Chris Dodd, D-Conn., was quick to denounce the proposal as a “wild pitch” that’s “not even close to the strike zone.” During a hearing last week, House Financial Services Committee Chairman Barney Frank, D-Mass., told a CUNA witness “don’t worry about the Treasury proposal doing away with credit unions. We would never let that happen.”
During a briefing on the plan last week, Treasury Secretary Paulson reassured Mica the plan does not intend to terminate credit unions. “If you read the executive summary, you’ll see it is not our intent and that would not be the effect,” Paulson told Mica.
All aspects of the proposal (detailed at right) are ideas that have been floating around Washington for decades. In fact, the idea of merging NCUA with banking regulators was even proposed by the first Bush administration in 1991, prompting a major lobbying effort by credit unions to retain the independence of NCUA. That proposal never went anywhere.
Of course, both NCUA and the credit union industry were much different at that time, when millions of Americans were moving their savings from troubled S&Ls into credit unions, causing double-digit annual growth for credit unions for several years in a row.
Since then, the number of credit unions has fallen by half, while the amount of credit union assets has more than doubled. NCUA has grown into a $160 million-a-year operation where some of the top executives now earn more than the vice president of the United States, and almost as much as the President.
Bert Ely, a well-respected financial services consultant, said he readily expects the Treasury plan to cause an uproar among the various interest groups that would be impacted. “There are enough people who like what exists that they are going to fight like hell to hang onto it,” said Ely, who insisted there is very little chance of the any of the provisions of the Treasury plan being enacted. “These ideas have been floating around for some time and they haven’t gotten any traction.”
“This is a proposal put on the table in the final year of a presidency that’s lost a lot of its political clout,” said Ely.
The NCUA Board issued a measured response, saying it believes that an independent credit union regulator has great value for America’s consumers and the agency will conduct a full review of the proposal.
“While NCUA agrees with the premise of the report that the ultimate objective of that oversight is a sound and competitive financial services industry grounded in robust consumer protection and stable and innovative markets, we have significant concerns that the many consumer benefits of the credit union system would be threatened by any restructuring proposal that may blur the credit union charter and that eliminates the separate regulatory and insurance function for federally insured credit unions,” said NCUA Chairman JoAnn Johnson.
