Legislation easing restrictions on credit union membership garnered 411 votes in the House last week. Only eight congressmen-all Republicans-voted against the measure.
Though agreeing with their colleagues that credit unions should be able to continue to accept members from companies already served, most of the naysayers argued that the competitive advantage credit unions have over banks has grown too large.
If approved by the Senate and signed by President Clinton, as expected, the bill would reverse the Feb. 25 Supreme Court decision requiring credit union members to share a single, common bond.
Under the House bill, occupation-based credit unions could accept members from unrelated companies as long as those firms employ fewer than 3,000 people.
Credit unions could continue serving existing members and add members from groups they already serve. The bill places some limits on commercial lending by credit unions and subjects them to more bank-like regulation.
Though Rep. Bill Paxon, R-N.Y., would not explain his vote, here is what the other seven had to say:
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Rep. Spencer T. Bachus 3d said he voted against the credit union bill because his proposal to lighten Community Reinvestment Act requirements on banks with less than $250 million of assets was rejected.
The Alabama Republican argued that the bill's provisions requiring credit unions to serve people of "modest means" are weaker than fair- lending mandates on banks.
"If you are going to put CRA-lite on the credit unions, put CRA-lite on the small banks," the Banking Committee member said. "They compete for basically the same business."
But Rep. Bachus' proposed amendment was lost in the political shuffle when House Republicans aborted their plan to roll the credit union and financial reform bills together.
"I felt like the credit union bill was a real opportunity to get equity for the small banks with some regulatory relief," he said. "It was an opportunity we lost."
Rep. Bachus said that credit union members in his district had already phoned to complain about his vote and that he expected his opponent to use the issue against him in elections this fall.
- Dean Anason
Rep. Wes W. Watkins said he opposed the credit union bill because it would drain deposits from community banks and, in turn, hurt small-business lending.
"Deposits need to be kept strong so they can be loaned back out into the community," the Oklahoma Republican said. "If you have strong deposits in the community, there can be more loans made to help businesses expand, grow, and develop."
Rep. Watkins said credit unions do have a role in providing banking services to consumers.
But he complained that credit unions are using their tax advantage to target commercial bank customers.
"Credit unions should be protected in their areas," he said. "But I felt that the banking institutions should be left as strong as they can to serve the people in those small communities across Oklahoma."
The bill would freeze for one year current rules barring credit unions from making business loans larger than $50,000 without meeting stringent reporting requirements, or lending more than 15% of reserves or $75,000 per business borrower.
Rep. Watkins said he found the lobbying by both banks and credit unions ineffective.
He noted that many credit union members who called his office mistakenly believed they would lose their accounts without the legislation.
"That was never the case," he said. "It was an emotional issue for folks."
- Jaret Seiberg
Rep. Paul E. Gillmor said he opposed the bill because it failed to differentiate between small credit unions deserving of government protection and larger ones that more closely resemble commercial banks.
"In terms of the traditional, small credit union, they should be permitted to operate the same as they are," the Ohio Republican said.
"But when you have very large institutions, some of which have hundreds of millions of dollars in assets and act like a bank, then they should be treated like what they are, which is a large banking institution.
"My problem was the bill did not make that distinction."
Rep. Gillmor said he had hoped the House would impose more bank-like regulations such as safety-and-soundness and community reinvestment obligations.
Without the added regulations, credit unions have a big competitive advantage over banks, he said. "Financial institutions in a like situation ought to be treated in a like manner," he said.
Rep. Gillmor said the battle is not over, predicting Congress would require large credit unions to pay taxes. "Eventually, there is a good chance that on the giant credit unions that Congress will reexamine the tax situation," he said.
Rep. Dan L. Schaefer said he also believes big credit unions have an unfair advantage.
"I opposed the bill because it authorized continued expansion of large bank-like credit unions and their growing tax subsidy," the Republican from Colorado said.
"I do not believe large credit unions that act like banks should be able to retain their tax-exempt status."
Rep. Schaefer said he would have favored a scaled-down bill that would prevented protected credit unions from losing any existing members.
"I belong to a credit union and I strongly believe that current credit union account holders who could be affected by the Supreme Court decision should be permitted to maintain eligibility," he said.
- Bill McConnell
Rep. Joe E. Barton declined to be interviewed, but in a one-paragraph statement the Texas Republican said he objected to restoring credit unions' ability to accept new member groups, saying it went "too far" in light of the Supreme Court's decision.
"Had it simply included a grandfather clause for all old members, I would have supported it," he said.
- Scott Barancik
Rep. John N. Hostettler, R-Ind., voted "no" because he is concerned that passage of the pro-credit union bill would "lay the groundwork for the savings and loan crisis of tomorrow," according to his spokesman.
Though the bill includes some new safety and soundness regulations, Rep. Hostettler says he does not believe they go far enough to justify continued expansion of credit union membership.
"He wants to protect existing credit union members, but if we start expanding the scope of credit unions without the same regulation that's applied to banks, he fears we will have a repeat of the S&L crisis," the spokesman said.
- Bill McConnell
Rep. Ron E. Paul, a member of the House Banking Committee, said he believes credit unions' tax-free and CRA-free status gives them an "unfair advantage" over banks.
But the Texas Republican's fix for the parity issue would not include additional regulations on credit unions, like those the House bill would impose. If credit unions do not have to pay taxes or comply with the Community Reinvestment Act, then small banks ought to get the same breaks, he said.
"My solution, coming from a free-market viewpoint, is that we ought to give those same privileges to the banks," particularly small ones, he said.
Rep. Paul called the CRA harmful and said safety-and-soundness laws have never prevented institutions from failing and costing the deposit insurance funds money.
"Now they're going to pretend that they can protect credit unions as well," he remarked.
Rep. Paul supports allowing credit unions to add new member groups. In fact, a bill he introduced would have done that and also repealed CRA and cut taxes on some banks.
Rep. Bachus was a co-sponsor of the bill. -- Scott Barancik
