What Will Happen to CUs if There's an Elephant Stampede?
What if the opposition party gains control of parts of government?
Congressional Republicans have spent the past three-and-a-half years trying their best to prevent what they see as bad things from happening. If some of the early handicappers are correct, however, the GOP may win majorities in one or both chambers of Congress and therefore will have to accept responsibility for helping run things. They might have to reconsider their (Groucho) Marxist approach: "Whatever it is, I'm against it."
CUNA and NAFCU have both been ramping up contributions to Republicans as a way to hedge their bets, though they are still giving more to Democrats.
That's a safe approach and will allow them to have allies in high places regardless of which party controls Congress. However, as the fight over raising the cap on member business lending has shown, even having the support of key senators, such as Senate Majority Leader Harry Reid (D-Nev.), doesn't guarantee success.
In fact, the Senate's unusual method of operating and the ability of a minority members to slow down the process prompted former Senate Majority Leader Bob Dole to describe his job as that of "majority pleader."
NAFCU Executive Vice President Dan Berger contends that if the Democrats had a smaller majority-let alone became the minority-it would be easier to negotiate better deals for credit unions.
"I'd like to see at least one of chambers with narrower numbers," Berger said during a discussion of current legislative and political climate at NAFCU's Annual Conference. "The Democrats definitely take a more activist, pro-consumer approach."
CUNA Vice President Ryan Donovan agreed with that but also noted that the impending 2012 presidential election may make it harder for Congress to achieve a great deal in 2011 and 2012.
"When you see the margins narrow or flip, there will be more room for moderates to maneuver," Donovan said. "But the presidential election will drive almost everything that happens."
The Senate has 57 Democrats, two independents who caucus with Democrats and 41 Republicans. There are 37 Senate seats that will be decided in November.
The House has 256 Democrats, 178 Republicans and one vacancy. All 435 House seats are up this November as they are in every even-numbered year.
Washington's conventional wisdom-sometimes more conventional than wise- is that there is a better chance of the GOP taking over the House than the Senate. However, if the public's discontent with President Obama and the Democratic Party remains strong, all bets could be off.
If the GOP gains control of one chamber, it will likely put the brakes on some of Congress' regulatory zeal. Businesses and financial services providers, who regularly lambaste the current Congress and administration as being anti-business, see the prospect of a GOP takeover as the political equivalent of manna from heaven. However, as long as President Obama is in the White House, the existence of divided government is likely to result in policies that neither party is wildly enthusiastic about.
For credit unions, it means there would be less of chance for the expansion of the Community Reinvestment Act, which is a key priority for many of the Democrats on the House Financial Services Committee.
However, other issues are likely to be high on the agenda of both the House and Senate, regardless of which party gains control. These include reform of government-sponsored enterprises Fannie Mae and Freddie Mac and reform of capital rules.
Credit unions have a keen interest in GSE reform because Fannie and Freddie often buy their mortgages. The capital reform issue is important because many credit unions believe that being able to raise member capital-which could be counted toward net worth requirements-is key to their financial well being.
Regardless of which party controls Congress, there will be changes at the helm of at least one of the two key committees that oversee financial services.
Senate Banking Committee Chairman Christopher Dodd (D-Conn.) isn't seeking re-election. Sen. Tim Johnson (D-S.D.) is in line to chair the panel if the Democrats keep control. Although many large banks have operations in his home state, he's been supportive of some credit union priorities.
The panel's top Republican, Richard Shelby of Alabama, has not always been a huge fan of credit union, but he isn't an implacable foe either.
House Financial Services Committee Chairman Barney Frank (D-Mass.) is expected to keep the post if his party is in the majority.
The GOP leadership on the panel is less clear. Rep. Spencer Bachus (R-Ala.), the panel's top Republican is likely to face a challenge for the chairmanship. Those who could make a race for it include: Rep. David Drier (R-Calif.), Rep. Jeb Hensarling (R-Texas) and Rep. Edward Royce (D-Calif.)
Royce has been a strong supporter of credit unions and sponsored legislation that the movement has pushed for, such as a hike on member business lending. The others have been generally supportive of the financial services industry but haven't bent over backwards to help credit unions.
Combine new leaders, controversial issues and an imminent presidential election and the result is the continuation of a volatile political environment.
Fasten your seat belts. We're in for a bumpy ride.