The economic crisis and bank departures from rural areas were giving credit unions in eight states new hope last week their legislative proposals for deposit of public funds might stand an improved chance of passing this year despite stepped up banker opposition.
State league officials say some hard-pressed municipalities are now eager for CUs to bid on public funds despite resistance from the banking lobby, which was already mounting vigorous campaigns last week to block deposit measures in two states, New York and Washington.
The Washington Credit Union League said it was particularly encouraged that enabling legislation allowing deposit of $100,000 in public funds in CUs could be enacted following support from a key lawmaker.
Under a bill awaiting a Senate committee vote, CUs could accept the $100,000 maximum, an amount seen as a compromise against a league request for unlimited funds opposed by banks.
Supporting the $100,000 limit is state Sen. Jean Berkey (D-Everett), author of the bill and chairman of the Senate Financial Institutions Committee, which held its first hearing on the measure two weeks ago.
In New York, the Credit Union Association of New York said it was expecting legislative traction in Albany for bills with a $1 million maximum following strong support from New York City Mayor Michael Bloomberg and Gov. David Paterson.
"We applaud Mayor Bloomberg for his support of credit unions and recognize his leadership to allow municipalities to have depository choice," said William J. Mellin, president/CEO of CUANY. CUs, he said, "are well-positioned to play a prominent role in the economic revitalization in New York City and to provide enhanced services to New Yorkers."
New York lawmakers are not expected to act on the funds bills until April.
Chris Johnson, CUNA's vice president of state government affairs, said there are currently eight states with bank-CU skirmishes underway over public funds. In addition to Washington State and New York, others with pending bills include Ohio, New Jersey, Colorado, Massachusetts, Nebraska and New Hampshire.
Two strong points in CU favor, said Johnson, have been the low rates banks have been paying in recent months coupled with the closing of branches in rural communities, leaving municipalities in the lurch in dealing with a local financial institution for payroll and other services. "Colorado is a good case in point where municipalities are eager to work with credit unions but can't," said Johnson.
Banker groups have complained that financially weak, small community banks will be injured if public funds are switched to CUs, a point challenged by the league.