Frustrated by what they consider unequal treatment, credit unions are agitating for representation on Federal Home Loan bank boards.
Credit unions make up roughly 10% of the more than 8,000 institutions in the Home Loan Bank System, according to the National Association of Federal Credit Unions, but not a single credit union representative occupies a seat on any of the 12 banks' boards.
"Credit unions are involved and active participants in the Federal Home Loan Bank System, and yet their representation is woefully inadequate," said Mary Dunn, the senior vice president and associate general counsel for the Credit Union National Association.
The trade groups say representation for their members would provide equality for credit unions while strengthening the Home Loan Bank System by exposing boards to a broader range of ideas.
"I think you'd be hard pressed to find a board that thinks diversity is a bad thing," said Carrie Hunt, the senior counsel and director of regulatory affairs at the NAFCU.
The credit unions' cause appeared to get a boost last week when President Bush nominated Geoff Bacino, a former National Credit Union Administration board member, for the fifth seat on the Federal Housing Finance Board, the Home Loan banks' regulator. He would succeed Franz Leichter.
Mr. Bacino said Friday that even though he would serve independently, his understanding of credit unions may help the industry achieve its goal of representation on Home Loan bank boards.
"Maybe my nomination will further the cause," he said.
Credit union trade groups applauded his nomination, though Patrick Keefe, a CUNA spokesman, said it is too soon to declare victory.
"What we're really looking for is members on the local Home Loan banks [boards], and we're going to continue to push for that," he said.
Board members are either appointed by the Federal Housing Finance Board or elected by the membership to three-year terms. The 12 Home Loan banks have a total of 200 board seats, though a majority of the appointed seats are vacant.
The credit unions requested representation in comment letters filed this month in response to a Finance Board proposal that would give the individual Home Loan banks a more active role in selecting board candidates.
Officials from the Finance Board would not discuss the comment letters. But the American Bankers Association argued that until credit unions contribute more to the capital pool, their executives do not deserve board seats.
As of June 2004 credit unions had contributed just $1.6 billion, or 4%, to the Home Loan banks' $40.5 billion capital pool, according to the Federal Housing Finance Board's most recent publicly available data. Banks and thrifts had contributed $36.9 billion, or 91% of the total.
"We're not opposed to credit unions being on the boards, but they have to do it the old-fashioned way - they have to win elections," said Keith Leggett, an ABA senior economist.
Ms. Dunn, though, said that since the Home Loan Bank System was originally designed as a thrift-based organization, "there hasn't been the interest from the leadership to ensure that all institutions have equal representation."
In its June 1 comment letter, the CUNA suggested that Congress pass a law that sets aside a specific number of board seats for institutions that hold a smaller proportion of Home Loan Bank stock.
Mr. Leggett's response: "They want affirmative action for credit unions to ensure that a certain number of slots are set aside for them. That's not how our society works."
Banks are "the primary source of capital in the system," he said. "The board should reflect who is putting the money at risk."
Ms. Dunn said that her trade group has been pursuing a legislative solution to this issue for five years. "At the very least, we want a dialogue to begin about how we can get equal representation," she said. "If we can make some headway on that, it will be a good thing not just for credit unions but for the whole … system."
