The Rundown

• Bipartisan reg relief bill includes exclusive bankprovisions, but no parity for credit unions.
• CUNA reports record net PAC gains, but feels no pressure todeliver an exclusive legislative win.
• Banking trades say credit unions try to disguise charterenhancement as reg relief.

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

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

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

Granted, political candidates aren't supposed to exchange favorsfor campaign donations. But if trade associations can't leveragePAC donations into support on Capitol Hill, are credit unionsgetting enough bang for their bucks?

CUNA Vice President of Political Affairs Trey Hawkins announcedJuly 29 that CUNA raked in $1.06 million in PAC contributions in2013 as of June 30. When taking into account fundraising costs, theresult is a record setting net gain, he said. The largest increasein donation sources has been credit union employees makingcontributions through payroll allotment. More than 500 creditunions currently offer the PAC payroll allotment program, Hawkinssaid.

Despite the increase in PAC participation, CUNA Senior VicePresident of Legislative Affairs Ryan Donovan said his trade is notbeing pressured by its members to deliver credit union-specificvictories on Capitol Hill.

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

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

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

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

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

But that's exactly what the sponsors called in a July 24 pressrelease posted on Moran's website that announced the bill'sintroduction. The release mentions banks 22 times, but does notonce mention credit unions.

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

The PATH Act coming out of the House Financial ServicesCommittee would primarily reform the secondary mortgage market butalso includes regulatory relief measures that would ease CFPB ruleson all community lenders.

However, while the bill includes Basel III capital easing forcommunity banks, there is no capital reform parity, likesupplemental capital, for credit unions. Rep. Peter King (R-N.Y.),who sponsored a stand-alone supplemental capital bill, said duringa July 18 legislation briefing he would ask committee leadership toadd a supplemental provision to the PATH Act. That bill has beenpassed by the committee, but supplemental capital was neverincluded.

Next Page: Bank Lobbyists 'SplainHow

Why can't credit unions get their interests advanced inCongress, while banks can? The answer is strategy, banking tradeassociations said.

“The big distinction between the credit union effort and whatwe're doing on regulatory relief is that they are seeking toexpanding their powers, while we are attempting to reduceregulations that are already on the books,” said Paul Merski,executive vice president of congressional relations and chiefeconomist for the Independent Community Bankers of America. “It'sdifferent to get sympathy for regulatory relief versus adding toyour powers, particularly since Congress is focused on tax reform.Any tax-exempt entity asking for new powers in this Congress, it'snot the best timing.”

Merski added that the banking sector asks for expanded powerstoo, but it doesn't pretend such requests are regulatoryrelief.

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

ABA Senior Economist Keith Leggett, who authors the criticalblog Credit Union Watch, said he agrees with Merski that creditunion lobbyists erroneously attempt to pitch what he called charterenhancements under the regulatory relief umbrella.

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

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

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

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

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

State Employees' Credit Union President/CEO Jim Blaine isn'tbuying it. The supplemental capital supporter said a failure toadvance legislation on that issue is a political failure, plain andsimple.

“How do you go to Congress and say you'd like to do somethingthat increase safety and soundness, and they won't buy it?” hesaid. “I find that astounding, that the trade associations and eventhe regulator would say that, and Congress would respond, 'no, wedon't want that.' There's something wrong, if that's truly where weare. This isn't a banking rivalry, this is a safety and soundnessissue.”

The $27 billion SECU is currently a CUNA member, but Blaine saiddue to differences in opinion over legislative priorities, leadersand volunteers at the Raleigh, N.C.-based credit union have hadearnest discussions over the past three or four years aboutdisaffiliating. Because of its state charter, he said SECU wouldnot transition to NAFCU like fellow big credit unions Navy FederalCredit Union and Pentagon Federal Credit Union did.