What Settling Texas Cases Means To NCUA

Register now

While last week's settlements with Community CU and OmniAmerican CU allowing the two billion-dollar credit unions to convert to banks will help avoid a nasty court battle for NCUA, it also serves another, bigger purpose. It will help reduce some of the tensions the credit union regulator's recalcitrance on the two conversions have caused on Capitol Hill.

The rapid termination of the court battle, in lieu of a long and costly appeal, won't end the enmity caused among some lawmakers-especially members of the Texas delegation who took NCUA to task on the two cases. And Rep. Patrick McHenry, the North Carolina freshman who called NCUA's rejection of the voting in both cases "re-freaking-diculous," is still expected to push forward with his bill to strip NCUA of some of its powers over conversions to mutual savings banks. One Capitol Hill lobbyist said he expects congressional leaders to give the McHenry bill a hearing, even if the bill is not expected to go very far. That could be embarrassing for NCUA, which took a beating during recent hearings on regulatory relief over its actions in the two Texas credit union conversions. But it may satisfy McHenry, especially after NCUA's agreement last week to drop its opposition to the two conversions.

Last week's settlement is also expected to satisfy several in the Texas delegation that were angered by NCUA's denial of the overwhelming vote by members to convert the two credit union giants. "If the agency had gone ahead with the appeal you might have seen people in the Texas delegation get more involved in this. But (now) I think people on the Hill will see this as a step in the right direction by NCUA," said one long-time Washington insider.

What remains to be seen is the affect the Texas controversy and any enmity it may have caused among lawmakers has on credit union efforts at regulatory relief.

One lobbyist insisted the anger at NCUA, especially by Texas Republican Jeb Hensarling, who drafted the Reg Relief bill, had nothing to do with the decision to leave NCUA's chief legislative priority, enactment of a risk-based capital system, out of the bill. Congressional leaders planned to leave risk-based capital and other issues that were not in the bill passed by the House last year, out of the early draft of the bill, the lobbyist said. Those issues will be dealt with when the House Financial Services Committee holds a mark-up, or drafting session.

The credit union lobbyist said they still hope to convince lawmakers to include the risk-based capital provision in the bill during a mark-up, when the committee votes on the bill before the full House.

What happens in the Senate on these issues is even less clear. Other than a critical letter to NCUA from the two Texas senators, Kay Bailey Hutchison and John Cornyn, there has been little interest in the Senate over the controversial conversions. So far, there has been no indication that any senator is considering a bill like McHenry's to trim NCUA's powers.

The Senate has also yet to introduce its version of Reg Relief, which the interested parties have been waiting for the past two years, even as the House easily passed a Reg Relief bill in the last Congress. The Senate Banking Committee is expected to finally introduce its Reg Relief bill soon after Congress returns from its August recess. The credit union lobby is still hoping that bill will include the risk-based capital provision.

Separately, The Senate Banking Committee is expected to wait to hold a hearing on the nomination of Rodney Hood to the NCUA Board until the president makes a nomination to fill the newly created vacancy on the three-person board, created by the end of Debbie Matz's term. This way, the Senate panel can review both nominations together. Long-time credit union operative, Gigi Hyland, is expected to be nominated for the second vacancy.

For reprint and licensing requests for this article, click here.