Letter: On LICUs Bankers Are Ludicrous
Banker opposition to NCUA’s LICU program is ludicrous.
Why do I call it ludicrous? Because their opposition would have to step up several notches on the reasonableness scale to even come close to their normal anti-credit union position of hypocritical.
The banker outrage over NCUA’s streamlined low-income credit union program application process is certainly expected, but it is truly laughable that they would be so upset about such a simple streamlined approval process. [See Editor’s Column in the Aug. 15 issue.]
There are several key factors the ABA and the ICBA conveniently overlooked when they self-righteously accused the NCUA of going beyond statutory intent when the agency chose to allow already qualified LICUs to receive their designation through an expedited process.
No previously unqualified credit unions were made LICUs. The NCUA expedited application process simply allowed 1,003 federal credit unions already meeting the statutory definition of a low-income credit union to apply for a designation they already had the legal authority for which to apply.
While it could reasonably be argued that requiring over half of a credit union’s members to reside in low-income census tracts is within itself an overly strenuous requirement and that having over one-third of its members would be much more appropriate and financially well balanced, the reality is that–even under those tough 50.1% standards–if any or all of the 1,003 credit unions allowed to apply through the expedited process had chosen to apply through the previous paperwork-laden process to become a LICU, they would have been approved.
The federal law allows the low-income designation for credit unions and has made LICU designation possible since passed by Congress in 1994. The law allows those LICUs to make more business loans, receive nonmember deposits and issue supplemental capital instruments. There is no new authority granted that was not already in the law.
All the NCUA did was to remove regulatory burden and costly application process for credit unions that were already qualified, something the ABA and ICBA fawns with praise all over the Fed, FDIC and OCC whenever such burden is removed from the banking industry.
The LICU designation is more established in federal law than the MBL cap. The bank lobby cried foul as if the granting of the low-income designation was being used by the NCUA as some newly crafted loophole to enable these LICUs to skirt around the statutory 12.25% member business lending cap.
A quick history lesson. The LICU authority has been in the law since passed by Congress in 1994, a full four years before the bankers lobbied Congress to include the MBL cap in the Credit Union Membership Access Act.
And, in passing that monumental 1998 legislation, Congress expressly exempted LICUs from the MBL cap. Not a loophole by any stretch. Instead, it is a twice-validated congressional recognition of how credit unions are indeed serving the lower income and underserved Americans being often left behind by the same banking industry howling about this NCUA streamlining action to recognize more LICUs.
In lieu of actual lending in low-income communities, banks can receive credit under the Community Reinvestment Act for investing capital and nonmember deposits in low income credit unions.
To oppose the NCUA making it easier for more federal credit unions to receive a LICU designation for which they already qualified and, in doing so, will now enable banks to get CRA credit by making a simple deposit in one of these credit unions is why I maintain the bank lobby would have to step up several levels on the reasonableness chart to get to hypocrisy on this one.
Easing regulatory burden and streamlined approvals is good public policy. When it is expedited approval for TARP funds or over-the-weekend mergers of troubled institutions, the bank lobby is a loud and effective voice for streamlined process. When it comes to making it easier for credit unions serving over half of their members in low-income census tracts to achieve a LICU designation for which they already qualify, it seems that streamlined process becomes in the eyes of the bank lobby nothing but a mere loophole. Not a very convincing double standard.
The NCUA may not always be right. But it is right on this one.
Opposition to facilitating more extension of service to residents of low-income census tracts is ludicrous in today’s economy.
Dollar Associates LLC