WASHINGTON - CUNA's first attempt to block a legislative effort of their for-profit brethren has raised the ire of the bankers considerably.
Upon learning that an elimination of the commercial lending ceiling for thrifts was on the table in the regulatory relief negotiations between the House and the Senate, CUNA wrote Senate Banking Committee leaders that this would be a deal-breaker for their support of the bill that has been about a decade in the making. The "inclusion of Section 212 among the nine House bill sections to be added to S. 2856 makes the proposed compromise unacceptable to credit unions," CUNA's letter read. "Section 212 would eliminate the current 20 percent of assets limitation on business lending by thrift institutions while leaving a more restrictive 12.25 percent of assets limitation on small business lending by credit unions. This would severely damage the tenuous balance between federal thrift and credit union charters without comparable and offsetting benefits for credit unions either in the proposed compromise or in the broader Senate legislation."
Independent Community Bankers of America Senior Vice President and Director of the Congressional Relations Group Steve Verdier said CUNA was "a day late and a dollar short on this provision." He highlighted that the thrift business lending provision has been included in many iterations of the regulatory relief package. "So, for CUNA to come in and try to de-rail the entire bill over this one provision because they can't get something-their own business lending that hasn't been in any of the bills-is just outrageous," Verdier said.
American Bankers Association Senior Economist Keith Leggett said he takes CUNA at its word. "If they make it controversial, the Senate's not going to do anything," he explained. He noted that if thrifts got this provision into law, it would make it a much more attractive charter option for credit unions.
Leggett pointed out that there were credit union provisions included in the proffer to help keep the bill balanced, referring to the ability for privately insured credit unions to join the Federal Home Loan Bank System and permitting the Federal Trade Commission to move forward with its private primary deposit insurance disclosure enforcement. A CUNA spokesperson pointed out that the ABA has pulled its support of the bill in 2002 over the credit union provisions.
However, Leggett admitted the ABA is also not too thrilled with the concept of private deposit insurance and the issue has even been controversial among credit unions. Regardless, CUNA emphasized, these thrift and credit union provisions are hardly balanced to the detriment of credit unions.
According to CUNA, the bankers have fought any expansion of credit union powers every step of the way as well as the realtors, farm credit banks, and retailers attempting to start industrial loan companies in an attempt to block any competition. The trade association has indicated it will not back down on this provision.
America's Community Bankers wrote its own letter to Senate leaders in response to CUNA's communiqu. ACB President and CEO Diane Casey-Landry wrote in her letter that CUNA is wrong in trying to introduce this "last-minute, unnecessary element of contentiousness" into the negotiations on regulatory relief. "ACB continues to strongly support easing restrictions on community business lending conducted by savings associations as contained in the House bill, and note that this is fully consistent with longstanding statutory authority that includes small business lending as part of the Qualified Thrift Lender test for savings associations," she stressed. "CUNA has no similar case to make, and the expansion of credit unions' commercial lending authority was not included in either bill."
CUNA's letter to Congress provided data demonstrating that thrifts have no need to eliminate their current commercial lending cap of 20% since only 10% of thrifts even have more than 10% of their assets in commercial loans. ACB offered no argument against these numbers in their letter.
Additionally, contrary to reports, Senate Banking Committee Press Secretary Andrew Gray said the negotiations on the legislation were never meant to be kept a secret.
NAFCU has remained much more quiet about the issue, but told reporters last week that the provision is not something the group will oppose the entire legislation over. NAFCU Director of Legislative Affairs Brad Thaler stated, "If this is in the final bill, we would be disappointed to see it in there."
He added that NAFCU is continuing to press for modification of credit unions' business lending cap. "We are in regular contact with House and Senate staff working on the reg relief bill and have shared our concerns with them. NAFCU believes that such a change for thrifts only widens the discrepancy in restrictions for credit unions, as compared to other financial institutions, in providing needed capital to their members to support their businesses and create jobs for the economy."
ABA's Leggett argued that expanding thrift business lending is a natural evolution for the charter given that it has become more and more bank-like. Not so for credit unions. If they want to evolve, they should evolve into tax-paying entities, he stated. -scooke@cutimes.com
