WASHINGTON - CUNA's first attempt to block a legislative effortof their for-profit brethren has raised the ire of the bankersconsiderably.

Upon learning that an elimination of the commercial lendingceiling for thrifts was on the table in the regulatory reliefnegotiations between the House and the Senate, CUNA wrote SenateBanking Committee leaders that this would be a deal-breaker fortheir support of the bill that has been about a decade in themaking. The "inclusion of Section 212 among the nine House billsections to be added to S. 2856 makes the proposed compromiseunacceptable to credit unions," CUNA's letter read. "Section 212would eliminate the current 20 percent of assets limitation onbusiness lending by thrift institutions while leaving a morerestrictive 12.25 percent of assets limitation on small businesslending by credit unions. This would severely damage the tenuousbalance between federal thrift and credit union charters withoutcomparable and offsetting benefits for credit unions either in theproposed compromise or in the broader Senate legislation."

Independent Community Bankers of America Senior Vice Presidentand Director of the Congressional Relations Group Steve Verdiersaid CUNA was "a day late and a dollar short on this provision." Hehighlighted that the thrift business lending provision has beenincluded in many iterations of the regulatory relief package. "So,for CUNA to come in and try to de-rail the entire bill over thisone provision because they can't get something-their own businesslending that hasn't been in any of the bills-is just outrageous,"Verdier said.

American Bankers Association Senior Economist Keith Leggett saidhe takes CUNA at its word. "If they make it controversial, theSenate's not going to do anything," he explained. He noted that ifthrifts got this provision into law, it would make it a much moreattractive charter option for credit unions.

Leggett pointed out that there were credit union provisionsincluded in the proffer to help keep the bill balanced, referringto the ability for privately insured credit unions to join theFederal Home Loan Bank System and permitting the Federal TradeCommission to move forward with its private primary depositinsurance disclosure enforcement. A CUNA spokesperson pointed outthat the ABA has pulled its support of the bill in 2002 over thecredit union provisions.

However, Leggett admitted the ABA is also not too thrilled withthe concept of private deposit insurance and the issue has evenbeen controversial among credit unions. Regardless, CUNAemphasized, these thrift and credit union provisions are hardlybalanced to the detriment of credit unions.

According to CUNA, the bankers have fought any expansion ofcredit union powers every step of the way as well as the realtors,farm credit banks, and retailers attempting to start industrialloan companies in an attempt to block any competition. The tradeassociation has indicated it will not back down on thisprovision.

America's Community Bankers wrote its own letter to Senateleaders in response to CUNA's communiqu. ACB President and CEODiane Casey-Landry wrote in her letter that CUNA is wrong in tryingto introduce this "last-minute, unnecessary element ofcontentiousness" into the negotiations on regulatory relief. "ACBcontinues to strongly support easing restrictions on communitybusiness lending conducted by savings associations as contained inthe House bill, and note that this is fully consistent withlongstanding statutory authority that includes small businesslending as part of the Qualified Thrift Lender test for savingsassociations," she stressed. "CUNA has no similar case to make, andthe expansion of credit unions' commercial lending authority wasnot included in either bill."

CUNA's letter to Congress provided data demonstrating thatthrifts have no need to eliminate their current commercial lendingcap of 20% since only 10% of thrifts even have more than 10% oftheir assets in commercial loans. ACB offered no argument againstthese numbers in their letter.

Additionally, contrary to reports, Senate Banking CommitteePress Secretary Andrew Gray said the negotiations on thelegislation were never meant to be kept a secret.

NAFCU has remained much more quiet about the issue, but toldreporters last week that the provision is not something the groupwill oppose the entire legislation over. NAFCU Director ofLegislative Affairs Brad Thaler stated, "If this is in the finalbill, we would be disappointed to see it in there."

He added that NAFCU is continuing to press for modification ofcredit unions' business lending cap. "We are in regular contactwith House and Senate staff working on the reg relief bill and haveshared our concerns with them. NAFCU believes that such a changefor thrifts only widens the discrepancy in restrictions for creditunions, as compared to other financial institutions, in providingneeded capital to their members to support their businesses andcreate jobs for the economy."

ABA's Leggett argued that expanding thrift business lending is anatural evolution for the charter given that it has become more andmore bank-like. Not so for credit unions. If they want to evolve,they should evolve into tax-paying entities, he [email protected]