White Hat Still Shines For Lawmakers

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SAN DIEGO-The fact that credit unions increased their lending through the recent financial crisis is being noticed in state capitals and in Washington.

That was the message from Bill Cheney, president and CEO of CUNA, to attendees at the CUNA CFO Council conference. At the same time, he said, credit unions have arrived "at a crossroads," and need to decide what their vision should be.

"There is a lot going on in the credit union movement," he said. "We have been through the most difficult time I can remember in my 25 years. The crossroads is an opportunity, because at a time other organizations have turned their backs on their customers, credit unions have served their members."

The economy is improving-even in the hardest-hit portions of the country, he continued. The good news for CUs is delinquencies and charge-offs are down and net worth and ROA are up, Cheney pointed out. He said unemployment is dropping, albeit slowly, which is increasing consumer loan demand.

"Credit union lending is declining as banks, which basically shut down their lending during the crisis, are coming back into the market," he said. "We should see continued improvement in the economy going forward, so there is reason for optimism in generating loan growth and capital growth."

Exclusive Clubs

On the plus side, credit unions have passion and they have a purpose-to improve the lives of their members, Cheney said. However, he believes the CU community needs a vision.

"Many consumers see credit unions as exclusive clubs that are less sophisticated versions of banks. This is nonsense. Credit unions are every bit as sophisticated as banks.

"The vision needs to include a legislative and regulatory environment in which credit unions can succeed," he added.

To that end, CUNA has been lobbying Congress for an increase on the member business lending cap for several years now. Cheney said there is a bill currently in the Senate that enjoys broad-based support. "Only bankers oppose it," he quipped. "I feel reasonably confident we can get this done. We are looking for a vehicle that has to pass."

Although the bankers have seized upon the failure of Texans CU as a demonstration that credit unions should not be allowed to book more business loans, Cheney insisted this is not the case. He said CU business lending "significantly outperforms" bank business lending.

Meanwhile, Cheney warned the threat level to the credit union tax exemption has been raised due to tax reform. He said all of the CU trade groups are "remaining vigilant" during all meetings that discuss taxation.

CUNA has not forgotten about capital reform, which Cheney noted he stated last fall would be a "big topic" in 2011. While it still is important, Cheney said capital reform has become a "co-priority" with interchange, member business lending and protecting the tax exemption.

"Not every credit union needs supplemental capital, but it should be an option," he said.

Interchange Update

Cheney's address to the CFO Council gathering took place as events related to the proposed cap on interchange fees were flying thick and fast. He said efforts by the credit union lobby, in conjunction with others, are "extremely close" to convincing the Senate to halt implementation of an interchange cap.

Cheney said if the cap, which is mandated by the Durbin amendment to the Dodd-Frank Act, is allowed to stand it will be "a train wreck." He said he feared it could swamp small credit unions because, "there can't be a price set by the Federal Reserve, 12 cents per transaction-that does not consider all costs."

On May 17, the effort to halt implementation had 57 votes, just three shy of the 60 needed, he said. Shortly before taking the stage Cheney was told Sen. Harry Reid (D-NV) would vote with Sen. Richard Durbin against delaying implementation.

"This is not the end of the world but it is disappointing," Cheney said.

The next lobbying targets were Sens. Dianne Feinstein (D-CA), Mike Crapo (R-ID) and Tim Johnson (D-SD). Cheney said CUNA expects to have the necessary votes in the House of Representatives, so the focus remains on the Senate. He added the recent data breaches at Sony and Michaels stores show there "are costs to financial institutions to fix security issues, but costs are not allowed to be considered."

"I am optimistic about the future," Cheney said. "We are emerging from the crisis. And although credit unions never lost focus on their members, they had to focus on surviving. Now we can focus more on our members."

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