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The simmering battle between banks and credit unions is heating up again, as credit unions revive their push in Congress to allow their industry to make more small business loans.
February 8
WASHINGTON — A long-standing legislative priority of many community banks has become tangled up in their never-ending tussle with the credit union industry.
At issue is a bill that would increase the 500-shareholder threshold that requires a small bank to register with the Securities and Exchange Commission. The bill is a particular priority of the Independent Community Bankers of America, which says that SEC registration can cost small banks approximately $100,000 in the first year and $50,000 in each subsequent year.
The bill passed the House with broad bipartisan support, and the Senate Banking Committee is now considering whether to include it in a larger legislative package, designed to spur small business growth, that Majority Leader Harry Reid signaled Tuesday will get a floor vote.
But according to two bank industry sources, Sen. Mark Udall, a Colorado Democrat, has placed a hold on the community bank bill. Udall is conditioning his support on the inclusion in the broader legislative package of a separate bill that would raise the cap on credit union member business lending, the sources said.
The two sources added that Sen. Carl Levin, a Michigan Democrat, has also placed a hold on the community banking bill. They said that Levin's concerns involved the measure itself, and were not tied up with the credit union bill.
Spokespeople for Udall and Levin did not respond to requests for comment.
The holds are not necessarily insurmountable, but they complicate the process of passing a bill through the Senate, where a single member can hold up business.
The latest skirmish between the banking and credit union industries came to light as the outlook brightened for whatever package of bills emerges from the Senate Banking Committee.
Speaking on the Senate floor, Reid indicated that he will carve out time for the Senate to vote on the package.
"I look forward to moving these measures and our economy forward with the help of my Republican colleagues," he said Tuesday.
Later in the day, Banking Committee Chairman Tim Johnson, a South Dakota Democrat, announced that the committee will hold a hearing on the bills next Tuesday. The hearing is expected to influence the shape of the legislative package, which may also include a measure to make it easier for start-up companies to raise capital from small investors.
"I thank Leader Reid for his leadership," Johnson said Tuesday in a press release, "and I look forward to working with him and my colleagues on the Banking Committee as we aim to help grow small businesses and put Americans back to work."
The ICBA has been pushing for several years to increase the number of bank shareholders that requires SEC registration. The legislation, co-sponsored by Sens. Kay Bailey Hutchison, a Texas Republican, and Mark Pryor, an Arkansas Democrat, would raise the threshold from 500 to 2,000.
But Paul Merski, chief economist for the ICBA, said Tuesday that his group will withdraw its support for the entire small business package if the credit union bill gets included.
Merski criticized Udall for trying to include the credit union bill, which would raise the cap on loans to member businesses from 12.5% of assets to 27.5%, a change that banks have vowed to fight.
"He's mucking it up, trying to attach like a barnacle to the legislation, which is going to divide support for it," Merski said.
James Ballentine, executive vice president for congressional relations and political affairs at the American Bankers Association, offered a similar perspective.
"It would cause us a great deal of concern if this credit union bill were attached to it. These are two totally unrelated measures and should in no way be linked to one another," Ballentine said.
The credit union industry sees the matter differently. John Magill, executive vice president of government affairs at the Credit Union National Association, said that his group would support a legislative package that includes a priority of both the banking and credit union industries.
"If that's what it takes to move it, we favor it," Magill said. "That would be fine by us."
Although the community bank bill has already passed the House by a 420-2 margin, it is being repackaged by Majority Leader Eric Cantor as part of a small business jobs package.
The original bill was sponsored by Democratic Rep. Jim Hines, but Cantor's package includes a slightly altered version sponsored by Republican Rep. Ben Quayle.
"I guess imitation is the sincerest form of flattery," Himes told Roll Call this week.
It is unclear just how many community banks might benefit from an increase in the SEC's registration threshold. The ICBA has conducted an internal survey that found that 15%-20% of publicly traded banks that belong to the organization are concerned about the 500-shareholder threshold.
