Bankers have been upset for the past 20 years about what they consider unfair competition from credit unions. They're angry that credit unions increasingly look and act like banks but are not subject to the same taxes and regulation.

Not much has come of the bankers' complaints for a couple of reasons. First, banks have had a number of items on their legislative agenda. Interest rate deregulation, interstate banking, Glass-Steagall reform, deposit insurance and taxation issues, and battles with the insurance agents have kept the industry's lobbyists occupied.

Second, credit unions seemed nearly invincible on Capitol Hill. They didn't need legislation and could put all of their energy into defeating legislation they didn't like. Defense is much easier to play in Washington than offense.

The political landscape looks very different today. Banks have achieved many of their priorities through court decisions, regulatory actions, and legislation. They're now in the enviable position of not needing much from Congress.

Credit unions, on the other hand, have suffered a grievous loss in the U.S. Court of Appeals.

The case involved the so-called "common bond" of the AT&T credit union. When Congress first passed the Federal Credit Union Act in 1934, it assumed that credit unions would be formed among small groups of people having a common bond. The idea was to make credit available to people of limited means who were not served elsewhere in the financial system.

But at AT&T, the credit union had become so diverse and so large, the common bond among its members was questioned.

The AT&T credit union and the National Credit Union Administration argued that a common bond among all members was no longer necessary for the establishment of a credit union. But the court ruled otherwise.

Assuming the decision stands, the credit unions will likely seek legislative relief.

Originally, Congress envisioned credit union members borrowing money from friends, neighbors or co-workers. In theory there would be a great deal of peer pressure and moral suasion to repay the loan. It worked, and credit union failures were rare.

But when credit unions got deposit insurance in 1970, the common bond requirement became less critical. If a credit union failed, the losses were borne not by its members but by a fund overseen by the NCUA.

The regulatory agency became more acutely interested in preventing failures. It decided that credit unions would be less prone to fail if their activities and membership were more diversified - in short, more like banks.

The NCUA launched a frontal assault on the common bond requirement through regulatory interpretations. Unfortunately for the NCUA and credit unions, the common bond requirement remained in the statute.

The AT&T credit union was chartered in 1952 to serve "employees of the Radio Shops of Western Electric Co., who work in Winston-Salem, Greensboro, and Burlington, North Carolina." It has grown to 112,000 members in more than 150 disparate occupational groups spread across all 50 states.

The NCUA's interpretation of the law was that a credit union could have many disparate groups, each with its own common bond. The Court of Appeals rejected the NCUA's position unanimously.

The legislative battle that is brewing over this issue will involve some fascinating dynamics. For one thing, many smaller, more traditional credit unions will not be keen on eliminating or changing dramatically the common bond requirement. If the common bond is put on the table, the credit unions know full well the banking industry will raise the tax and regulatory issues.

Credit unions will have their work cut out for them in defending against the bankers' arguments. The American Bankers Association has compiled an impressive set of statistics to demonstrate that credit unions are no longer occupying the special niche assigned to them.

Credit unions have enjoyed explosive growth, from $25 billion in assets in 1970 to nearly $350 billion today. They offer, quite profitably, a full range of banking services. Their customers are better educated and wealthier than the general population.

If credit unions are indistinguishable from banks in terms of the customers they serve and the services they offer - a case the banking industry is eager to make - they run a huge risk of losing the special status they have been accorded.

Mr. Isaac, former chairman of the Federal Deposit Insurance Corp., is chairman and CEO of Secura Group, Washington.

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