Gary Kohn, the senior legislative counsel for the Credit Union National Association, says he received a piece of advice from Senate aides a week or so ago: don't bring up the topic of credit union-to-bank conversions during any regulatory-relief hearings.
The credit union industry's legislative agenda includes several measures that would make it harder for a credit union to become a mutual savings bank. They were written into the Credit Union Regulatory Improvement Act that was introduced in the House of Representatives this year. Credit unions had hoped to get similar language into broader regulatory-relief bills under consideration in the House and currently being drafted in the Senate.
But given the criticism leveled against the National Credit Union Administration for trying to block two Texas credit unions from converting, Senate aides are telling credit union lobbyists not to bring up the issue. "It would just inject controversy" into any deliberations, Mr. Kohn said Monday on a conference call with reporters.
Mr. Kohn said Congress' attitude toward the credit unions remains positive, but it is clear the industry is on the defensive over conversions.
In the late spring members of Community Credit Union in Plano, Tex., and OmniAmerican Credit Union in Forth Worth approved charter changes by wide margins, only to have the NCUA invalidate the votes. The agency claimed that disclosure documents mailed to members along with their ballots were folded improperly.
Both credit unions sued, and this month a federal magistrate ruled that the NCUA overstepped its authority when it rejected Community's member vote. In his written decision the magistrate, Don Bush, characterized the regulator's objection to how the disclosure document was folded as "silly."
Hearings on OmniAmerican's suit were scheduled to begin today in the same court that heard the Community case, the U.S. District Court for the Eastern District of Texas in Sherman.
Keith Leggett, an economist with the American Bankers Association, said the issue has become a "poison pill" for credit unions.
"What they've been told is, 'If you want to kill a bill, put conversion in there,' " Mr. Leggett said. "It would be like throwing gasoline on an open fire.
