WASHINGTON - Reversing its position on a controversial issue, the Credit Union National Association now opposes a Senate bill that would increase federal authority over state-chartered institutions.

The industry's largest trade group decided last Monday to abandon a May 19 commitment to support the legislation. The affiliated state leagues said the proposed Credit Union Reform and Enhancement Act would kill the dual- chartering system.

For a while, CUNA leaders argued that supporting the bill was the best option, because the association could tinker with it and avoid angering the bill's powerful sponsor, Senate Banking Committee Chairman Alfonse M. D'Amato, R-N.Y.

An Aug. 2 statement by CUNA president Ralph S. Swoboda revealed that this argument had exhausted itself.

"CUNA, as the only trade group representing state and federally chartered credit unions, cannot support legislation that would turn credit union decision-making over to NCUA, and so must oppose the bill," Mr. Swoboda said.

Industry lobbyists said the reversal ruined the industry's white-hat credibility on Capitol Hill. Angered Banking Committee aides, who feel betrayed by CUNA, have vowed that no industry-specific language will appear in any regulatory relief bill, industry sources said.

In an Aug. 1 statement, Sen. D'Amato, R-N.Y., reminded CUNA of its commitment.

"The most recent communication the committee has received from CUNA expresses support" for the legislation," he said. "We have been working productively with CUNA, other trade associations, and the regulators to address the serious problems in the credit union industry and to protect the taxpayer-backed insurance fund from losses caused by speculative activities."

The wide-ranging bill would ban federally insured credit unions from investing in noninsured corporate credit unions; would increase the NCUA's conservatorship and liquidation powers over federally insured state- chartered credit unions; and would allow the NCUA to establish lending, investment, and capital requirements for corporates.

The bill's most controversial provision would have banned federally insured state-chartered institutions from investment and credit activities forbidden to federal charters. But exceptions would be granted if the practice was permitted by the state and in use on May 1, 1995, or if the NCUA board decided the activity poses no threat to the insurance fund.

By working with the committee, CUNA was able to add the May 1 grandfather clause to the legislation - a victory it said justified supporting the bill.

In any event, the Washington office argued that one way or another, the regulator already had the powers in the bill, because it oversees the federal insurance fund.

In a June letter to the Indiana Credit Union League, CUNA lobbyists said supporting the bill - which sailed unopposed through the committee last month - was preferable to opposing Sen. D'Amato.

"We know that Sen. D'Amato can be either a powerful ally or a mortal enemy - he has a long memory and is slow to forgive," the memo said. "Our support of his efforts will ensure that he remains an ally."

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