WASHINGTON -- In the political equivalent of Ohio State and Michigan setting aside their differences, credit unions and community banks are on the same page in opposing a proposed overhaul of financial regulation put forth by the Treasury Department.
The leaders of trade associations representing those interests--which are at odds on issues such as the tax-exempt status of and regulatory relief for credit unions--are allies on this issue because they see themselves as battlers against investment banks and large commercial banks.
"Sometimes today's enemy is your best friend tomorrow," NAFCU President/CEO Fred R. Becker Jr. said in a conference call last Tuesday with Camden R. Fine, president/CEO of the Independent Community Bankers of America.
Fine, whose organization's lobbying campaign was a key factor in persuading the House leadership to postpone consideration of a measure to grant regulatory relief to credit unions, said community banks and credit unions have a common interest in protecting the concerns of smaller providers of financial services.
The proposal, unveiled in March by Treasury Secretary Henry Paulson, would eliminate the NCUA and bring credit unions under banking regulatory oversight. It would also consolidate federal oversight of how states regulate mortgages under a Mortgage Orientation.
During the conference call, moderated by Fine's predecessor Ken Guenther, Becker and Fine said the plan, which was met with skepticism by the chairmen of the two congressional panels that oversee financial services, would tilt the balance of power even further away from credit unions and community banks. They also say that the plan would decrease competition in the name of efficiency.
Becker, a retired Navy officer, and Fine, a retired army officer, peppered their arguments with historical and military metaphors.
"The Army and Navy are heading in the same direction on this," Becker proclaimed.
Becker also noted that during the 1930s, Germany instituted some government and economic reforms in the name of efficiency "and we saw how well that turned out."
Fine went back even further in history to back up his argument.
"Like the Cyclops, the regulatory system would have only one eye," he noted.
The often rival lobbyists agreed that their respective members should not be punished for the financial and lending sins of larger financial institutions.
When Paulson unveiled the plan, CUNA President/CEO Dan Mica was in the audience and spoke up during the question period and complained that it could put credit unions out of business. Paulson said that would not happen.
Two days later at a hearing, House Financial Services Committee Chairman Barney Frank (D-Mass.) promised that Congress would never eliminate credit unions.
"Before we begin, please convey to Dan Mica, my good friend and former colleague, that we would never abolish credit unions, irregardless of what Mr. Paulson might have recommended," Frank said at a hearing with a credit union representative on the panel earlier this year.
Frank and his Senate counterpart, Banking Committee Chairman Christopher Dodd (D-Conn.) have both said there will be no action taken on the proposal this year because their top priority is dealing with subprime mortgage crisis and because there should not be such a major overhaul this close to a presidential election.
During the conference call, Fine said Paulson's plan was as an "economic Molotov cocktail," because the regulatory structure would be "controlled by fewer and fewer hands."
Becker stated that competition among businesses ensures a better functioning marketplace and competition among regulatory agencies would decrease the likelihood that any one entity would abuse power.
While Becker and Fine are combining forces on this subject, both said the alliance wouldn't preclude their waging intense battles against each other on other issues.