To protect their membership base, credit unions are asking for help from Congress-a move that could force a reassessment of their tax-exempt status.

Gleefully, banks are gearing up for a fight.

For years, bankers have insisted that the country's biggest credit unions use their tax-exempt status unfairly and have begged Congress to take action.

Unwilling to rein in the small, but popular, segment of the financial services industry, lawmakers have long ignored bankers' complaints.

Norman, D'Amours, chairman of the National Credit Union Administration, has said he'll push for legislation to roll back a July 1996 court decision barring occupation-basedinstitutions from expanding beyond their original membership group. Mr. D'Amours said credit unions need ulimited authority to add new membership groups.

Any attempt to expand credit union membership opens the door to an examination of the credit unions' tax-exempt status as well, lawmakers said. "The legislative fix they are asking for moves very much in the direction of saying there really is no difference between credit unions and banks," said Sen. Robert Bennett, a senior member of the Senate Banking Committee.

House Banking Committee Chairman Jim Leach promised an "open mind to both sides" when his panel takes up the issue.

Although any move to eliminate the credit unions' tax-exempt status must pass the House Ways and Means Committee, the banking committees are planning to hold the first hearings on the issue.

House Banking's financial institutions and consumer credit subcommittee has tentatively slated a hearing for Feb. 26, and Sen. Lauch Faircloth, chairman of Senate Banking's financial institutions and regulatory relief subcommittee, said he also plans to take up the dispute.

Mr. D'Amours predicted that banks will ultimately lose in Congress and will end up looking greedy to potential customers. "When people find out what's going on they're going to get mad," he said. "Banks are going to squander their goodwill on an issue they can't win."

But bank trade groups insist they can prevail, without appearing villainous. Sensitive to charges that bankers are bullying "tiny" competitors, industry lobbyists will argue that credit unions are major rivals to most community banks and thrifts.

"In Texas, we have a $60 billion community banking industry, compared to $20 billion in credit unions," said Christopher L. Williston, executive director of the Independent Bankers Association of Texas. "If you look at credit union growth, it's been at the expense of auto lending and other niche markets for community banks."

American Bankers Association chief lobbyist Edward L. Yingling said the industry will make a simple request: remove tax-exempt status for any credit union that expands beyond its initial membership group.

"Congress is going to find it difficult to say a tax subsidy that is already close to $1 billion a year should be extended to everyone in the country," he said.

Daniel J. Forte, president of the Massachusetts Bankers Association, agreed. "We must keep a narrow focus and concentrate only on those that have violated the common bond" between the original members.

Those institutions, like thrifts in the 1950s, will thrive despite being taxed, said Robert Schmermund, spokesman for America's Community Bankers.

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