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WASHINGTON-The credit union lobby has heaped a lot on their plates for the New Year, double dipping on a number of oldies, but stomachs on Capitol Hill are already filling up fast. A favorite perennial of credit unions and other lenders has been bankruptcy abuse reform legislation, aimed at curbing borrower scamming of the protection. Credit unions have worked hard to include provisions for a meaningful means test for Chapter 7 filers, who are permitted to keep certain assets while others are sold off to pay creditors. Credit union lobbyists have also fought to include mandatory financial education prior to filing and to allow voluntary reaffirmations for credit union members. Initial word from insiders on the Hill was that a new bankruptcy abuse reform bill for the 109th Congress was going to be introduced as early as the day Congress convened, but House Judiciary Committee Chairman Jim Sensenbrenner (R-Wis.) has decided to hold off for the time being. NAFCU Director of Legislative and Political Affairs Brad Thaler said the bill would be introduced at the end of January at the earliest. “Bankruptcy reform is certainly something that remains a high priority for us and we’re in the middle of discussions on how to proceed,” CUNA Vice President for Legislative Affairs and Senior Legislative Counsel Gary Kohn explained. “It’s just not clear yet, what may or may not work.” Kohn noted that some observers have said that more Republicans in the Congress could make it easier to get reform through. However, he said, that may not necessarily be the case. Some of the Democrats, such as former Senate Majority Leader Tom Daschle (S.D.), who were replaced by Republicans, would have voted for the bill anyway. Additionally, the new Democratic leadership in the Senate includes a number of staunch opponents to last year’s bill, including Senator Richard Durbin (Ill.) in the No.2 spot for the Democrats, as well as Senators Barbara Boxer (D-Calif.) and Russ Feingold (D-Wis.). And, no follower of bankruptcy reform could forget Senator Charles Schumer’s (D-N.Y.) efforts to introduce the abortion issue into the bill by introducing an amendment to prevent those found guilty of violence against abortion clinics to escape their fines through bankruptcy procedures; Schumer is now the Democratic Senate Campaign Committee chairman, wielding even more influence than before. The Senate Judiciary Committee also says goodbye to former chairman Orrin Hatch (R-Utah) and welcomes in Arlen Specter (R-Pa.). “The big difference now as opposed to last year is the increased majority in the Senate,” NAFCU Senior Legislative Representative Murray Chanow noted. “It’s 55-45, which means to break a filibuster the Republicans only need to get five Democrats to split away as opposed to last year when they would have to get nine or 10 to split away. So that is a huge difference.” He admitted that Schumer’s rise in rank could present issues. “Either way, we’re still in for a battle once we get to the point of passage and conference but, I think, with the majority, it makes it just a little bit easier for the Republicans to get it through,” Chanow said. “Also there’s going to be a lot of fights going on on a lot of issues.immigration bills.Social Security. So the bankruptcy bill may not be the sticking point for people, it may be other issues.” A bill is expected relatively early in the session but with the move of chief sponsor Representative Shelley Moore Capito (R-W.V.) from the House Financial Services Committee to the Rules Committee, the bill could be delayed some, Thaler indicated. Financial Services was upgraded to an `A’ committee, as is Rules, and members cannot serve on two of these highly desirable committees at one time. Moving on, CUNA’s Kohn commented, “Certainly one of the higher profile [issues], one of the more important ones will be regulatory relief. (Senator Mike) Crapo (R-Idaho) has been working on trying to figure out what to put in a bill; he hasn’t quite gotten there yet because he has not figured out how to resolve some of the controversial issues, particularly the ILC [Industrial Loan Company] issue, but he has indicated that he does intend to do something early on. He believes that he has a commitment to hold hearings and a markup and he’s going to just put something out there and figure let the chips fall where they may.” A bill is expected relatively early in the session but with the move of chief sponsor Capito (R-W.V.) from the House Financial Services Committee to the Rules Committee, the bill could be delayed some, Thaler indicated. The lobbyists also noted that Government Sponsored Enterprise issues will dominate the committee and could slow up the regulatory relief process. Credit union provisions in the bill include expanded investment opportunities, governance issues, and broadened member business lending opportunities. CURIA Cometh in `05 Closely related to the regulatory relief bill for credit unions is the Credit Union Regulatory Improvements Act, which includes most of the credit union-related provisions from the overall regulatory relief bill plus some other charter improvements. In addition to the provisions in reg relief, CURIA would also permit credit unions to lease out unused office space in low-income areas, increase the member business lending cap from 12.25% to 20%, and create a risk-based capital structure for credit unions. “We’ll have a newly introduced CURIA bill with some slight modifications,” Kohn said. “I wouldn’t anticipate that until the end of this month, the beginning of February.” He said he is not ready to discuss any possible changes yet, except that he would consider them all “clarifications and enhancements to the bill” rather than backing down from the original bill. NAFCU’s Thaler said, “We continue to work with Congressman Royce, Congressman Kanjorski, and their staffs on getting a version of the CURIA bill in the 109th Congress.” Both are still interested, he added but nothing is final at this point. One possible amendment, according to Thaler, would be to add a provision changing the definition of `net worth,’ in response to anticipated merger accounting changes by the Financial Accounting Standards Board, from `retained earnings’ to `equity.’ FASB plans to introduce an exposure draft, similar to a proposed rule, this year eliminating the pooling method of accounting in favor of the purchase method. Under the purchase method in business combinations, the surviving credit union in a merger could not count the merging credit union’s net worth towards it own, which could place the institution in hot water with Prompt Corrective Action. Regarding the tax issue, Kohn said he has not heard one way or the other whether House Ways and Means Committee Chairman Bill Thomas (R-Calif.) will hold hearings this session on the societal value of the credit union tax exemption. He did initiate a series of hearings last year on a number of non-profits and specifically noted hospitals and credit unions. Kohn said he had heard Thomas’ office has contacted NCUA and he expects they did it for a reason. Thomas’ press office would only say that they announce hearings typically a week in advance. NCUA Director of External Affairs and Special Assistant to the Chairman Nicholas Owens said he was not aware of any contact from Chairman Thomas’ office to the agency. Lawmakers are already eyeing GSE legislation, Social Security reform, and governance for the insurance industry in 2005, which could impact the progress of other legislation. A scaled down version of deposit insurance reform is even possible for the House Financial Services Committee. A tax overhaul will likely wait until 2006 or 2007 while a commission is established to study the issue. NAFCU General Counsel Bill Donovan pointed out, “Some of the items that are on the president’s agenda certainly are going to be items that we anticipate not only monitoring but in all likelihood, being involved in as well.” For example, he said credit unions would likely get involved in Social Security reform if it were to include private accounts for individual tax payers to ensure credit unions could hold the accounts, among other items. -

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