Where'd The Love Go? Banks Press MBL Fight

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WASHINGTON-The schizophrenic relationship between credit unions and banks was on display last week with the two sides lobbying members of the House hand in hand to roll back parts of last year's Wall Street reform bill-while simultaneously bashing each other before the Senate over the proposed increase in member business loans for credit unions.

The rare Jekyl-and-Hyde performance comes just days after credit union and bank executives visited many of the same congressional offices together to lobby against the cap on debit fees.

"When we can we work together we will," is how Paul Merski, senior lobbyist for the Independent Community Bankers of America, which is leading the fight against an increase in member business loan limits, described his group's love-hate relationship with credit unions. He said community bankers remain adamantly opposed to raising the MBL limit because of the advantage the credit union tax exemption provides in lending.

Leaders of the ICBA and the American Bankers Association, both close partners with CUNA and NAFCU in the Electronic Payments Coalition fighting debit caps, testified last week before the Senate Banking Committee against a proposal to raise the current 12.25% of assets limit on MBLs-which they successfully got enacted into law.

"Make no mistake about it," said Stephen Wilson, chairman of the ABA and CEO of LCNB National Bank in Lebanon, Ohio, "(The MBL bill) is nothing less than legislation that would allow a credit union to look and act just like a bank, without the obligation to pay taxes or have bank-like regulatory requirements applied to them."

Testifying beside them at this morning's Senate hearing were representatives of their on-again/off-again partners CUNA and NAFCU, who were decrying the bankers' hypocrisy on the tax exemption.

"What the banking industry conveniently forgets to mention," said Michael Lussier, president of Webster First FCU in Massachusetts and chairman of NAFCU, "is that a large number of banks do not pay corporate federal income tax because of their Subchapter S status...What the banking trades don't want you to know, is that one estimated value of the Subchapter S federal tax break for banks is $2.05 billion for 2010, which is actually greater than the estimated value of the entire credit union tax expenditure ($1.27 billion) for FY2010 as included in the President's FY2012 budget message."

Meantime, on the other side of Capital Hill, another NAFCU representative, Mark Sekula, chief lending officer for Randolph-Brooks FCU, was joining with ICBA and ABA representatives to urge the House Small Business Subcommittee on Economic Growth, Tax and Capital Access to roll back provisions of last year's Wall Street reform bill.

The credit union executive joined the banking representatives in endorsing legislation that would water down the powers of the fledgling Consumer Financial Protection Bureau and also asked for elimination of a new provision that will require small business lenders to collect demographic data on borrowers, as they do for the Home Mortgage Disclosure Act, known as HMDA.

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