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<p>WASHINGTON-The credit union provisions included in the regulatory relief legislation (H.R. 3951) survived markup last week by a House subcommittee unscathed. The managers amendment added credit union governance provisions. It was approved by the Subcommittee on Financial Institutions and Consumer Credit by voice vote and takes a step toward full committee approval. Section 309 was added regarding credit union governance. Under this provision, federal credit unions would be permitted, providing a simple majority of a quorum of the directors, to adopt a policy with 30 days notice prior to its effective date to expel members for just cause. Also under this section, federal credit unions can impose term limits on board members and may offer board members `reasonable’ compensation for lost wages in pursuit of credit union business. Secondary capital use in net worth calculations is not included in the package. Following the managers amendment’s release, the American Bankers Association (ABA) pulled its support for the bill, specifically because of the relief provided to credit unions. House Financial Services Subcommittee Chairman Spencer Bachus (R-Ala.) recently lectured the banking trade groups during a subcommittee hearing not to attack the credit union provisions. ABA’s Ed Yingling wrote that some of the bill’s provisions are truly regulatory relief for financial institutions and their customers. “Unfortunately,” he continued, “the bill also contains provisions that are not directed at reducing red tape, but enhance the competitive position of credit unions over taxpaying banks.” ABA specifically noted their opposition to provisions pertaining to increasing credit union investment authority in CUSOs, excluding loans to faith-based organizations from the business lending cap, and allowing voluntarily merging credit unions credit unions to continue to serve their previous fields of membership (FOMs). “These provisions enhance the competitive position of credit unions over taxed financial competitors and expand the credit union subsidy,” according to the letter. The lobby group reiterated its opposition to credit unions using secondary capital as well. ABA said it could accept the 15-year loan maturity and additional credit union investment authorities. “I think it’s very disappointing the ABA chose to respond in this way, particularly after Chairman Bachus suggested what they were doing is not constructive,” CUNA Vice President and Senior Legislative Counsel Gary Kohn said, adding he was not surprised. CUNA and NAFCU lobbyists said they were unconcerned about the bankers’ letter because the committee is familiar with the bankers’ attacks on credit unions. While it has expressed its concerns with credit union provisions, the Independent Community Bankers of America (ICBA) has not taken a stance on the overall bill, according to ICBA Director of Legislative Affairs Ron Ence. “We choose our battles very carefully and this legislation has a long way to go in this process,” he said. American Community Bankers (ACB) seems to have learned its lesson from Bachus’ reprimand. ACB Director and Legislative Counsel Steve Verdier said, “In this bill, the important thing from our point of view is to make those improvements for our members and the banking industry in general.” He added they are concerned about some of the credit union provisions, but are focusing on the entire bill. NAFCU, unlike CUNA, does not support all the credit union provisions in the bill. In response to being publicly chastised by House Financial Services Committee Chairman Mike Oxley (R-Ohio) for what he perceived as NAFCU’s opposition to the Federal Home Loan Bank (FHLB) provision in the regulatory relief package, NAFCU fired a letter off to Oxley, Financial Services Ranking Member John LaFalce (D-N.Y.), House Financial Institutions and Consumer Credit Subcommittee Chairman Spencer Bachus (R-Ala.), and Ranking Subcommittee Member Maxine Waters (D-Calif.) in an effort to clear up what the organization feels are some misconceptions. The letter, signed by NAFCU President and CEO Fred Becker, clarified that NAFCU felt a study must be performed to determine the wisdom of allowing privately insured credit unions into the FHLB System. Oxley’s comments appeared in his prepared opening statement for the most recent regulatory relief bill hearing by the subcommittee. “NAFCU believes that the best course of action to address this issue at this time would be a study by the Federal Housing Finance Board and/or the National Credit Union Administration on what the potential impacts of enacting this provision would be,” Becker wrote. He pointed to a study already included in the deposit insurance reform legislation (H.R. 3717) on moving to an entirely private insurance system “may be an ideal vehicle for commissioning such a study.” In the prepared statement, Oxley stated, “I think that the Ney-Oxley legislation would help a small number of privately-insured credit unions by allowing them to apply to become a member of a Federal Home Loan Bank, and as the state credit union supervisors testified at our last hearing, it would present no safety and soundness risk. It is fully consistent with current federal law..” He and Congressman Bob Ney (R-Ohio) had earlier introduced this portion as a stand-alone bill. “As the chairman (Oxley) has repeatedly pointed out, this measure strengthens the dual chartering system and has no bearing on safety and soundness,” CUNA Senior Vice President of Government Affairs John McKechnie said. “We think having the Federal Housing Finance Board or NCUA study the issue, as NAFCU now proposes, would be a needless expenditure of time, resources, and would only further delay extension of an affordable homeownership option to the 1.3 million credit union members who belong to privately insured credit unions.” Section 308 of the bill provides for voluntary mergers regardless of the number of potential members in the FOMs. According to NCUA Director of Public and Congressional Affairs Cliff Northup, this provision is “catching a lot of flack from the Democrats.” NAFCU Director of Legislative and Political Affairs Brad Thaler admitted that some Democrats have expressed concerns about this provision pertaining to the unlimited number of potential members, but they are not totally opposed to the idea. Still, Thaler explained, no one has offered up a practical method of limitation. [email protected]</p>

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