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Scandals continue to surface at a record clip throughout Corporate America. With each new disclosure, the comment is made that the relatively few individuals making negative headlines have also badly tainted the reputations of all those with whom they have come in contact in their various dealings. Thinking about the recent debt episode involving a Virginia Congressman and MBNA, best known as a leading national credit card issuer, makes me wonder if that same guilt by association logic can be applied to the nation’s lawmakers, various types of financial institutions, and even those individuals and trade groups that must work with them. Congressman Jim Moran (D-Virginia) somehow managed to rack up a debt totaling $450,000. Included in this amount is $30,000 in credit card outstandings which appeared to be where MBNA came into the picture. According to press reports, Moran became the lead Democrat co-sponsor of the bankruptcy reform bill, currently bogged down in the legislative process, only four days after MBNA, a major bankruptcy reform supporter, refinanced that $450,000 debt. The terms were very favorable, certainly more favorable, it has been reported, than the average, less influential, person might expect to receive. According to press reports, the massive debt was converted into a low interest mortgage package (first and second) on a $275,000 home. The new deal reportedly saved Moran $800 a month in interest charges. Some observers have pointed out that it appears to be quite a coincidence between the timing of the refinancing and the high-profile and very strong pro bankruptcy reform position suddenly taken by Moran. An even further coincidence is that several weeks later, again according to media reports, both Moran and an executive in charge of MBNA’s loan department, testified on the same day in favor of the bankruptcy reform bill which was then before a House of Representatives subcommittee. There are other details, some quite personal, not yet published being buzzed about inside the D.C. Beltway, but they are not as important as some related facts. Such as a publicized comment made by Moran’s former colleague, former NCUA Chairman Norm D’Amours, cited as one of two financial specialists that Moran enlisted to explain that his financial dealings weren’t all that unusual. Said D’Amours: “There’s no question this is not an everyday loan. On the other hand, it’s not unheard of. I would say this is a loan that while it might raise an examiner’s eyebrows, it might, would, very well could pass muster.” Huh? What kind of gobblygook is that? Is D’Amours saying that the average Joe could expect and get the same treatment from MBNA? Not likely! If a credit union and one of its members had been involved in such financial fancy footwork during D’Amours’ watch, he would have hammered them. Besides, this is the guy who basically had only one item on his NCUA agenda, serving the underserved. Some close to the scene have speculated that with Moran’s $140,000 Congressional salary, D’Amours would have probably said, at least about anyone else in that pay bracket, he doesn’t need a loan. Besides D’Amours, there’s another credit union connection of sorts. MBNA is becoming a household word in credit union circles, especially among credit unions looking to sell off their credit card portfolios. MBNA has been very successful in taking over the credit card business for a growing number of credit unions, some of them quite large and high profile. Could MBNA’s involvement cast a shadow of sorts on their dealings with credit unions? Time will tell as will any further explanations by the involved parties. Even closer to home, credit union trade group executives have weighed in with comments in response to direct questions from a Credit Union Times reporter. John McKechnie, CUNA senior vice president for government affairs, was asked what impact, if any, all of this might have on the bankruptcy reform bill long supported by CUNA. After all, a big part of his job is working with politicians like Moran in an effort to gain support for credit union friendly legislation. McKechnie responded that the Washington Post had run similar stories about the funding of bankruptcy reform supporters, but didn’t run any about the bill’s opponents. Based on his past experience in observing how similar examples played out, McKechnie concluded that the Moran/MBNA situation would probably not have any adverse effects on the pending bill’s chances for passage. NAFCU’s spokesperson, senior vice president and general counsel Bill Donovan, pretty much agreed with McKechnie’s conclusion. In response to the same question, he said that Moran was only one of 306 supporters of the bill in the House. Donovan pointed out that Moran can’t single handedly sway the bill one way or another. Neither McKechnie or Donovan were asked directly, nor did they offer any opinions, on the ethics of how Moran’s debt difficulty was resolved with the help of MBNA, but perhaps they should have been even though such a question would have put them in a sensitive position. For the record, no one is accusing Moran or MBNA of doing anything illegal. Nor am I saying that the credit union trade associations are deliberately looking the other way when situations like this surface so as not to offend a supporter and risk losing that support. Nor am I saying the CU trade groups are duty bound to make ethical judgments about powerful people not known for setting a standard in ethical behavior. However, in a world where perception counts for everything, there may come a time when credit unions will have to make an effort to somewhat distance themselves from some of their supporters. Maybe the time has already come for credit unions to choose influential “friends” in high places by something more substantial than solely how they expect them to vote on important credit union issues? Or am I being too nave?

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Peter Westerman

Credit Union Times

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