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Forget Desperate Housewives, CSI or whatever show you’re watching these days, the recent House Ways and Means Committee hearing on the credit union tax-exemption was more entertaining than any of those. I watched online from the committee’s Web site. With today’s technology, there’s no reason credit unions and credit union organizations around the country can’t tune in for important hearings like this one. Credit union leaders are more worried about the current round of banker attacks than they’ve been in years. In recent months, many have expressed to me that this is the most organized the bankers have been in their fight against credit unions. Their fears are worsened by the fact that such a hearing was even held on Capitol Hill. Sure bankers have been saying the same old thing for a long time, but it looks like this effort has a coordinated, efficient lobbying push behind it. The banker trade associations are starting to sing from the same sheet of music. Fortunately for credit unions, the credit union lobby is still far out in front. Just look at the Credit Union Regulatory Improvements Act and the 100-plus backers it has. Credit unions are not new to lobbying, they do it both on the state and federal levels. They still have the advantage, but it’s hard to deny that the bankers are getting more traction on Capitol Hill. I’m not one to be swayed by one event, but the hearing on the credit union tax-exemption has to wake the credit union industry up. The message coming from Congress is loud and clear – credit unions need to document how they are serving their membership, especially those of modest means. If they don’t, the taxation issue is going to continue to come up and credit unions falling under CRA may be a sort of compromise Congress opts for. We all remember the Community Action Plan that regulated some of this documentation, though it was only for community charters. The industry trade associations and individual CUs attacked the provision and it was ultimately repealed. I’m not a believer in burdensome regs, but I think for the sake of the tax-exemption and to avoid any type of CRA, the time has come for credit unions to bite the bullet and document what they’re doing to serve those of modest means. Now how this is done I don’t know, but if I was a credit union CEO I’d make sure not only that my house was in order, but that I could prove it. How are my payday lending loan programs doing? Do I even have a payday loan program? Are my delinquencies so ridiculously low (as some CUs are) that it appears I can’t be taking much risk by lending to B,C and even D paper? Do I have a well-outlined low-income member outreach program? Do I have a low-income lending program on the books? CUNA’s new low-income mortgage program is certainly something positive CUs can point to. My concession to more documentation doesn’t mean the bankers’ arguments are any better than yesteryear. They’re still off on many fronts. Some of them seem to believe credit unions should only serve those of modest means, that’s preposterous and I think Congress understands that. Bankers also keep hammering away on business loans when the facts show credit unions are filling a void left by bankers. Not to mention, bankers still don’t comprehend the structural difference of credit unions, or choose not to acknowledge it And while watching the bankers testify I couldn’t help think of the old adage, “be careful what you wish for.” Could you imagine what would happen if some of this nation’s savvy credit unions were suddenly able to access the capital markets? Credit unions have been thriving on retained earnings, give them access to capital, and I wouldn’t want to compete with them. But bankers seem to think the tax-exemption is so valuable, it’s worth it to give CUs more capital options. They should think that through. This is an old story, but still valid – if the credit union charter is so great, why aren’t banks converting to it left and right? Maybe their boards don’t want to give up their compensation, or maybe losing access to the capital markets is just too much to bear? The bankers do however have some firmer ground to stand on these days with their arguments. I think credit unions brought these recent attacks on themselves by doing things such as adopting multi-million resident community charters. That didn’t help this industry any and many of the CUs that received these mega charters will never penetrate them to any great level. Is L.A. county really a well-defined community? During her testimony, NCUA Chairman JoAnn Johnson pointed to an “articulated” field of membership as one of the industry’s differentiators. That claim is getting tougher to defend. “Interestingly, a number of sources have said credit union leaders were unhappy with Johnson’s performance in front of the committee. Like it or not, Johnson’s role as regulator is not to champion the industry, or “cheerlead” as the bankers say. Maybe these disappointed CU leaders should consider that her demeanor and performance could have been just right. You certainly wouldn’t want a “new breed”, “expansive-minded” regulator testifying. I think you can cut through the hundreds of pages of testimony with just this one line which was part of ABA testimony: “Credit unions that have abandoned their core mission should be taxed or required to convert to bank charters.” That’s the rub folks, banks see their opening with the conversion issue and are doing everything they can to bring CUs into the banker fold. And despite the hearing, I just don’t think Congress is ready to be responsible for the conversion of hundreds perhaps thousands of CUs into banks, which is what would happen if CUs were taxed. -Comments? E-mail [email protected]

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