A New Political Landscape
When Congress returns, credit unions can expect fewer consumer bills, tweaking the financial overhaul bill and new leaders of House and Senate committees that oversee credit unions.
With Republicans picking up at least 60 seats in the House and gaining a majority there, the House Financial Services Committee is likely to be chaired by Rep. Spencer Bachus (R-Ala.).
Lobbyists for CUNA and NAFCU said Bachus is sympathetic to and supportive of credit unions, but they added that it's too early to tell how that might translate into getting parts of their agenda through that chamber.
"House Republicans talk about wanting to create jobs while not increasing the deficit. That is something they could accomplish by raising the cap on member business loans," said CUNA Senior Vice President John Magill.
He said they might try to get the cap increased during the upcoming lame duck session, a sentiment echoed by NAFCU Executive Vice President Dan Berger. Both said if that doesn't work, they will try again next year.
However, former NCUA Board Member Geoff Bacino is skeptical that credit unions will be able to overcome the opposition of the banking lobby.
"It's not clear what you can attach it to. They couldn't get it on the small business bill, which would have been a natural place, because the bankers didn't want it. The trades need to find a way to translate the capital they gained from picking many winners during the campaign into more clout. Members of Congress often tell credit unions they have to check with bankers before deciding on an issue, but credit unions don't have the same veto power," Bacino said.
Sen. Tim Johnson (D-S.D.), the likely chairman of the Senate Banking Committee, has been receptive to credit unions but has several large banks that have a big presence in his state. Because Democrats will have a smaller majority in that chamber, he will likely work with Republicans on key issues.
One possible area for bipartisan cooperation is capital reform. The trades and the NCUA have been advocating for capital reform for credit unions. That may be taken up in light of the problems that many financial institutions faced during the recent financial crisis.
"It's in everyone's interest that financial institutions be well-capitalized," said CUNA Vice President Ryan Donovan. "It's not clear how that will be translated into policy."
Berger, Donovan and Magill said the GOP gains in both chambers will likely mean that there will be less emphasis on consumer legislation. All three said it is unlikely that Congress will attempt to expand the Community Reinvestment Act to include credit unions. They said given the GOP control of the House, the issue is a nonstarter.
Magill predicted that the Republicans will hold a lot of hearings to try to influence how the Obama administration implements the financial overhaul bill that was passed earlier this year and the health care bill. He added that there may be opportunities to make some small changes on the financial overhaul bill.
Berger said credit unions will have receptive audiences on both sides of Capitol Hill on these issues. He noted that Republicans are sensitive to the burdens that overregulation places on financial institutions and that Johnson is "especially sensitive to the needs of small financial institutions."
Bachus said in a Nov. 3 interview on CNBC that there will be more oversight than when the Democrats were in charge of the House.
"We're going to have vigorous oversight," he said. "Because you've had Senate and House controlled by Democrats, we've had no oversight. Americans want limited government, more jobs and for their taxes not to increase."
Johnson told Reuters that there will be some "fine tuning" of the bill but that "sweeping change is unlikely."
Another big issue that Congress may tackle is the reform of mortgage buyers Fannie Mae and Freddie Mac. CUNA and NAFCU haven't taken a position on what changes should be made but have said it is important that credit unions continue to have access to the secondary market.
Berger noted that Bachus has expressed strong opposition to keeping business as usual at Fannie and Freddie but hasn't laid out a proposal for changing it.
"He has a strong understanding about how the how the housing finance system works and of the need for a secondary market," Berger said.
Bacino, who has experience dealing with Fannie and Freddie as a result of his experience on the Federal Home Loan Bank Board, said given the divided government. And the upcoming election, he wouldn't be surprised if Congress takes no action.
"The idea of reform will be on everybody's lips, but there won't be enough agreement to do anything about it," he said.