The Rundown

Bipartisan reg relief bill includes exclusive bank provisions, but no parity for credit unions.
CUNA reports record net PAC gains, but feels no pressure to deliver an exclusive legislative win.
Banking trades say credit unions try to disguise charter enhancement as reg relief.

Sen. Jerry Moran (R-Kan.), Sen. Jon Tester (D-Mont.) and Sen. Mark Kirk (R-Ill.) introduced a regulatory relief bill for community banks July 24 that includes four provisions. Two of those exclusively benefit community banks, and two would benefit both community banks and credit unions.

However, the CLEAR Act contained no credit union-exclusive regulatory relief provisions.

The snub by Tester is particularly painful because the Montana Credit Union Network contributed $49,233, and CUNA another $11,000, toward his successful re-election in 2012, according to Federal Election Commission records.

Granted, political candidates aren't supposed to exchange favors for campaign donations. But if trade associations can't leverage PAC donations into support on Capitol Hill, are credit unions getting enough bang for their bucks?

CUNA Vice President of Political Affairs Trey Hawkins announced July 29 that CUNA raked in $1.06 million in PAC contributions in 2013 as of June 30. When taking into account fundraising costs, the result is a record setting net gain, he said. The largest increase in donation sources has been credit union employees making contributions through payroll allotment. More than 500 credit unions currently offer the PAC payroll allotment program, Hawkins said.

Despite the increase in PAC participation, CUNA Senior Vice President of Legislative Affairs Ryan Donovan said his trade is not being pressured by its members to deliver credit union-specific victories on Capitol Hill.

“If you look at it through that very narrow lens of what will only affect credit unions, you are missing the forest for the trees,” Donovan said.

He pointed out that despite a lack of success in raising the member business lending cap or passing legislation that would permit credit unions to collect supplemental capital, industry executives are telling CUNA they're more concerned about easing CFPB mortgage rules and protecting the credit union tax exemption. CUNA is delivering on those promises, Donovan said. And he said issues within the credit union industry are also feeling the impact of CUNA lobbying efforts.

“We've been on the Hill talking about how the NCUA budget has increased over the last five years, while other financial regulators haven't increased theirs,” he said. “When the NCUA announced their budget reduction, that's the result of CUNA on the Hill having a meaningful conversations with Members of Congress.”

Executive Vice President of Government Affairs John Magill said increased PAC contributions are a sign CUNA members have confidence in the trade's work in Washington.

Magill also said he wouldn't call the CLEAR Act a community bank regulatory relief bill and added, “I don't think the sponsors would call it that, either.”

But that's exactly what the sponsors called in a July 24 press release posted on Moran's website that announced the bill's introduction. The release mentions banks 22 times, but does not once mention credit unions.

“Montana families and small businesses rely on their local community banks for the financing they need to support their families and grow their businesses,” Tester said in the release. “We need to make sure community banks have the flexibility to continue supporting our economy with their unique brand of relationship-based lending, and that's what this bipartisan bill does.”

The PATH Act coming out of the House Financial Services Committee would primarily reform the secondary mortgage market but also includes regulatory relief measures that would ease CFPB rules on all community lenders.

However, while the bill includes Basel III capital easing for community banks, there is no capital reform parity, like supplemental capital, for credit unions. Rep. Peter King (R-N.Y.), who sponsored a stand-alone supplemental capital bill, said during a July 18 legislation briefing he would ask committee leadership to add a supplemental provision to the PATH Act. That bill has been passed by the committee, but supplemental capital was never included.

Next Page: Bank Lobbyists 'Splain How

Why can't credit unions get their interests advanced in Congress, while banks can? The answer is strategy, banking trade associations said.

“The big distinction between the credit union effort and what we're doing on regulatory relief is that they are seeking to expanding their powers, while we are attempting to reduce regulations that are already on the books,” said Paul Merski, executive vice president of congressional relations and chief economist for the Independent Community Bankers of America. “It's different to get sympathy for regulatory relief versus adding to your powers, particularly since Congress is focused on tax reform. Any tax-exempt entity asking for new powers in this Congress, it's not the best timing.”

Merski added that the banking sector asks for expanded powers too, but it doesn't pretend such requests are regulatory relief.

“The stalemate for credit unions has really been their attempt to disguise their expanded authorities as reg relief,” he said. “Maybe if they're honest and try to get that passed straight up … I don't know, maybe they can't, so that's why they try to attach those items like barnacles to our regulatory relief measures.”

ABA Senior Economist Keith Leggett, who authors the critical blog Credit Union Watch, said he agrees with Merski that credit union lobbyists erroneously attempt to pitch what he called charter enhancements under the regulatory relief umbrella.

That's not so, Donovan said. In fact, legislative attempts to increase the members business lending cap stem from 1998's H.R. 1151, which for the first time set a limit on credit union MBLs.

“I think there's a strong argument that we are seeing this correctly, seeking to reverse a law that has already been put on the books,” he said.

NAFCU Vice President of Legislative Affairs Brad Thaler agreed, and further pointed out credit unions have had plenty of exclusive victories in Congress recently. Corporate stabilization and the drastic increase in the Central Liquidity Fund borrowing ability, language in the CARD Act that continued to allow credit union members to select their own due dates and an improved definition of net worth for merging credit unions were three he cited as examples of exclusive victories.

“There's this perspective that credit union wins that are industry specific have to be member business lending or supplement capital, but there's more to it than that,” he said.

And, Thaler said, the CLEAR Act has only been introduced. Bills that would grant supplemental capital authority and provide other regulatory relief measures have also been introduced, he said.

State Employees' Credit Union President/CEO Jim Blaine isn't buying it. The supplemental capital supporter said a failure to advance legislation on that issue is a political failure, plain and simple.

“How do you go to Congress and say you'd like to do something that increase safety and soundness, and they won't buy it?” he said. “I find that astounding, that the trade associations and even the regulator would say that, and Congress would respond, 'no, we don't want that.' There's something wrong, if that's truly where we are. This isn't a banking rivalry, this is a safety and soundness issue.”

The $27 billion SECU is currently a CUNA member, but Blaine said due to differences in opinion over legislative priorities, leaders and volunteers at the Raleigh, N.C.-based credit union have had earnest discussions over the past three or four years about disaffiliating. Because of its state charter, he said SECU would not transition to NAFCU like fellow big credit unions Navy Federal Credit Union and Pentagon Federal Credit Union did.

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