Credit Union Business Lending Bill Headed for Senate Showdown
With the Senate expected to introduce legislation soon, the two rival industries are looking to have their priorities addressed.March 6
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 — With the Senate nearing a vote on a bill to allow credit unions to offer more business loans, the lobbying war between banks and their long-time enemies is heating up.
Although banks were able to successfully block the bill's inclusion in the recently-enacted JOBS Act, Senate Majority Leader Harry Reid has promised it will come up for a vote on the Senate floor soon.
The vote, which may come shortly after Congress returns from recess next week, appears likely to favor credit unions. Banking trade groups, however, are making every effort to prevent credit unions from obtaining the 60 votes necessary to ensure passage.
The brewing battle has led to ongoing sniping between the two sides, with each accusing the other of distortions.
"What I'm very certain of is that the credit unions have tried to emotionally hijack members of Congress in an election year under the guise of creating jobs," said James Ballentine, executive vice president of congressional affairs at the American Bankers Association.
Fred Becker, president of the National Association of Federal Credit Unions, responded: "The bank trade associations are continuing to spread what I'll call a lot of malarkey on the off chance that someone will believe it."
But the fight is only partially about wrangling votes — it's also about what form the Senate vote takes.
If the Senate votes on the credit-union bill as a stand-alone measure, bank industry lobbyists are relatively confident about their chances of killing the measure in the House, regardless of the final tally in the Senate.
But if the Senate attaches the credit-union bill to another piece of legislation, particularly one that is seen as likely to become law, bank lobbyists would have a harder time getting the credit-union bill removed.
For now, all eyes are on Reid, who last month promised the credit union bill's sponsor, Democratic Sen. Mark Udall, an upcoming floor vote. Reid is using a procedural maneuver to bypass the Senate Banking Committee, where the bill has been stalled.
"There will be people coming to me, 'Why are you doing this?' Reid said in March 15 remarks. "We're going to have a vote on this. Democrats and Republicans are going to have to make a decision on where they stand for American credit unions."
As Reid's comments suggest, the vote is one that that many members of Congress would like to avoid, since it requires them to pick sides in a battle between two influential groups.
The credit unions are pitching the bill, which would raise the member-business lending cap from 12.25% of the credit union's assets to 27.5%, as a way to help small businesses and create jobs.
"This isn't about banks and credit unions," said Bill Cheney, president of the Credit Union National Association, in a video on the group's website. "This is about small businesses that desperately need access to capital."
To bolster their case, the credit union trade groups are encouraging their members to ask small businesses to contact their senators. The goal is to shift the debate from a zero-sum squabble between two competing industries to a positive-sum discussion about how to boost the economy.
Banks are having none of it, though.
"So we're making it extremely clear, on the record, that a vote for this bill is a vote against community banks," Ballentine said.
The banking trade groups are quick to point out that only a very small number of large credit unions are near the 12.5% cap on business lending. Those credit unions, the bank groups say, are growth-hungry institutions that have strayed from their mission of allowing a close-knit group of people to pool their savings and provide loans to one another.
"Now the credit unions basically want to become commercial banks," said Camden Fine, president of the Independent Community Bankers of America, "but still retain their tax exemption with no common bond."
The credit union trade groups respond that with the cap at 12.5%, it doesn't make economic sense for some credit unions to make small business loans at all, but that more institutions will enter the commercial lending market if the cap is raised.
These well-rehearsed arguments go round and round, but bank industry groups got some new ammunition on March 23 when Telesis Credit Union in Chatsworth, Calif., failed.
According to the ICBA, Telesis had received special permission to exceed the 12.25% cap and was making multi-million commercial loans in different parts of the country, including a failed shopping center development in Orlando, Fla. The ICBA argues that the legislation would encourage credit unions to take on more risk by entering businesses in which they have little expertise.
"Allowing credit unions to expand their member business lending parameters could put many smaller credit unions into precarious situations, which could lead to failure," the ICBA said in a recent press release.
The vote on Udall's bill has yet to be scheduled. But the credit union trade groups sound optimistic about their chances.
"Our interest right now is making sure that when it happens, that we have the votes. And we're going to get there," said Ryan Donovan, CUNA's senior vice president of legislative affairs.
Ballentine, of the ABA, argued that the credit unions do not have 60 Senate votes locked down at this time, but he did not so far as to predict that they will fall short in the end.
If the bill does pass the Senate, especially if it does so as a stand-alone measure, the House could serve as a firewall for the banking industry.
The credit-union bill has 128 House co-sponsors, but the chamber's Republican leadership has not expressed interest in holding a floor vote on the measure.
"We know that there's no desire to bring this issue up this year," Ballentine said before adding a note of caution. "But we don't know where politics are, and whether politics overwhelm this issue."