As expected, the Iowa Bankers Association, joined by the American Bankers Association, is mounting a challenge to the Federal Reserve application of the Iowa Credit Union League to buy an Arizona bank.The league announced its plan in September to form a bank holding company to buy the CrediCard National Bank of Tucson. The league is seeking approval of the Federal Reserve Bank of Chicago to purchase the $12 million Tucson bank and convert it into a wholesale entity for investment and processing purposes.In separate Oct. 23 letters sent to the Chicago Fed, the IBA and ABA charged that the league's ability to own a bank would provide "a competitive advantage" to its member CUs over banks and "be a burden to taxpayers" by offering broad corporate services to a tax-exempt entity.By owning a bank, the league and Iowa credit unions would operate in an area "beyond the scope of their original purpose" and conduct business "at a significantly lower cost by passing on those advantages to its members," thereby creating "an unlevel playing field," the banking groups said.While displeased with banker opposition, the Iowa league said it remains optimistic that the district bank board will approve the application although it could still face more legal challenges later on from the banking lobby should it clear the initial stage.."We are certainly not discouraged by the bankers' objection. And let me add it should be known that we have followed all the rules even though it is something that we have not tried before," said Pat Jury, president/CEO of the Iowa league.Tracking advice of two consultants, the league said it is seeking a wholesale bank alternative to ensure economical processing and investment services for small Iowa CUs should Iowa Central Corporate CU of Des Moines, one of the smallest corporates in the network, be merged.The NCUA said it expects consolidation after it adopts final rules on the corporate credit union system structure in a decision that is due this month.Just when the Chicago Fed bank board, made up of Midwest bankers and business leaders, might act on the Sept. 18 application remains uncertain. League officials said the process could get dragged out as Fed staffers ask for more information from the applicant regarding the bankers' objections.The 60-day comment period on the application ended last week, officials said.

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