What Have You Done for Me Lately?
While credit unions have been represented at Hill hearings in the past during better times, it seems a lot more now. To be fair, this Congress has been moving at a faster pace than it has in many years, which common sense says might bring up more opportunities for testimony anyway.
But what are credit unions really getting out of it? A public hearing. That's probably all.
Sure expanded member business lending can be packaged and sold to the politicians as economic stimulus. At the same time, bankers and other credit union critics, as well as the general banking crisis, are whispering in the other ear of lawmakers that credit union really don't have enough experience, they don't understand the risks. And looming in the corner is the next major implosion: the commercial real estate market.
But we just want to lend to the little people, like your gardener or day care provider, is credit unions' rallying cry. Certainly, this is true for most credit unions. However, a few outliers that have gotten heavily invested in strip malls and the like and gotten into trouble will serve as the vehicles for the bankers to throw up a roadblock to credit unions' efforts.
In addition, just because credit unions are able to make business loans, does not mean that they will. When the Small Business Administration opened the doors for all credit unions to access its 7(a) program, I think they expected thousands to come rolling in. Now, about three years later, only about 400 are SBA lenders.
Credit unions could handle the compliance, paperwork and due diligence workload associated with business loans through cooperation and CUSOs, but these things just don't work out in reality as often as I used to believe. The industry better wise up though if it wants to survive in a world of bank branches on every corner and the ability for those banks to raise capital at anytime for additional resources and developments.
Expanding credit unions' business lending abilities within the regulatory realm was a key issue for NCUA Chair-Nominee Debbie Matz at the start of her previous term of service. The sequel could promise a rematch for that unwieldy section of the agency's rules and regulations, though it would have to be pretty creative to accomplish much of anything without a change in the law.
Another item that credit unions asked for during their hearing was some relief from burdensome regulations. Good luck with that because credit unions truly need some relief. However, regulatory relief just doesn't fit the tenor of this fix-everything-through-regulation Congress.
There is one regulatory reform measure that does fit pretty well in the Democrats' agenda: restoring the ability of all federal credit union charter types to adopt underserved areas. Be careful what you wish for though, because the regs may not just go back to the way they were. Additional requirements, such as service mechanisms and locations could be a part of the package.
Also, I don't see how expanding service to underserved areas can come up in this Congress without a tie-in to the Community Reinvestment Act to measure such activities. While most credit unions would pass with flying colors (given the law would be tailored to credit unions' unique circumstances), some won't and that would be like waving a fistful of cash in front of a banker-they'll grab hold and won't let go. For them, the exception would become the rule they would use to persuade their friends in Congress and others that credit unions are not serving their intended purpose and therefore should be taxed.
I'm by no means saying all of this would happen or that the trades are doing the wrong thing. My point is to merely extrapolate and expound upon things that credit union executives and board members may not think about on a daily basis because of their many other duties.
When it comes down to it, though, if you ask Congress for something, it's going to ask back: What have you done for me lately?
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