The banking industry had little chance to celebrate its Supreme Court victory over credit unions.
In the aftermath of the decision last Wednesday, the battle shifted immediately to Capitol Hill. Credit unions began lobbying hard for a bill introduced in the House last year that would let them serve multiple employee groups.
The number of co-sponsors has swelled to 164, including House Speaker Newt Gingrich-a rare gesture that indicates a high level of leadership interest in an issue.
Many observers said the shift of venue hurts banks because Congress is sympathetic to credit unions. Most lawmakers belong to congressional credit unions and are responsive to the popularity of these institutions with their 70 million members.
"It will be difficult to beat this bill back," said Karen Shaw Petrou, president of ISD/Shaw Inc., a Washington-based consulting firm.
Edward L. Yingling, chief lobbyist for the American Bankers Association, said the banking industry recognizes the influence of credit unions and always viewed the Supreme Court case as just the beginning of the fight.
"We have always known the credit unions would have a very formidable grass-roots organization," he said. "We were under no illusion on that."
The banking side has said it will not seek to kick any current members out of their credit unions. It has asked that occupation-based credit unions be prevented from adding new employee groups or members from unrelated groups already served. The banks will lobby Congress to make large credit unions pay taxes and comply with community reinvestment requirements.
The bank strategy "is going to be to cut the baby in half," said Marcus B. Schaefer, president of AT&T Family Federal Credit Union, the institution at the center of the Supreme Court case. "Then the baby dies."
Bankers should take time to "shine a bright light on the differences between the big credit unions and the little credit unions," said Robert M. Pribble, a KPMG Peat Marwick consultant. "In time, it is going to be clear the bankers' arguments have merit."
What the final legislation will say is unclear.
The bill backed by the credit union industry, introduced by Rep. Steven C. LaTourette, R-Ohio, and Rep. Paul E. Kanjorski, D-Pa., would let credit unions keep adding new groups. Rep. Christopher B. Cannon, R-Utah, introduced a bill last week that would grandfather anyone who belonged to a federal credit union as of Feb. 25.
Rep. John J. LaFalce, D-N.Y., said he would like to jointly introduce a bill with House Banking Committee Chairman Jim Leach and have it ready to go to the floor by April. The committee's senior Democrat last fall suggested letting occupation-based credit unions add employee groups but set limits on their size.
No senators have stepped forward with legislation, but credit union forces are reportedly lobbying Senate Banking Committee Chairman Alfonse M. D'Amato.
Credit unions and banks alike worry about a statement by Rep. Leach that House leaders are seriously considering combining credit union and financial reform legislation. Bankers' opposition to both could doom that strategy.
"We would be very nervous about tying the two together," Mr. Yingling said.
Combining credit union and reform legislation would create "a jumbled mess," a Senate aide said. "It will jeopardize everything."
