Although credit unions could be included in legislation to expand the scope of the Community Reinvestment Act, they weren't criticized much for their record of serving the underserved during last week's House Financial Services Committee hearing on the topic.
A state regulator said a similar law hadn't had adverse effects on credit unions in his state, and a representative of the American Bankers Association said CRA was a good gauge of how well financial institutions were serving the underserved and should be applied to credit unions.
Most of the discussion, however, focused on whether CRA was still needed and what impact CRA's requirements to lend to people in underserved areas had on the subprime crisis.
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The Democrats on the panel cited comments from Federal Reserve Chairman Ben Bernanke and FDIC Chairman Sheila Bair-both of whom were appointed by President Bush-that CRA hadn't caused the crisis. Republicans said the evidence was less clear cut and said Congress should be sure that the measure hadn't done more harm than good before expanding it.
Credit unions were not invited to testify at the hearing though both CUNA and NAFCU submitted comment letters stressing the strong performance of credit unions in making their products and services available to the underserved.
One of the witnesses, housing expert Michael Stegman, said CRA expansion would result in banks being forced to catch up to some credit unions in this area.
"It is no longer acceptable for a handful of credit unions to outshine major CRA-covered institutions as centers of financial services innovation," he told the lawmakers. Stegman was an assistant secretary of housing during the Clinton administration.
The hearing focused on possible efforts to expand CRA, which was passed in 1977. A bill by Rep. Eddie Bernice Johnson (D-Texas) to cover credit unions along with independent mortgage companies, mortgage company affiliates of banks, insurance companies and securities firms as part of a group of "nonbank institutions" was introduced in March.
In her testimony, Johnson focused on the bad practices of bank affiliates and independent mortgage companies and didn't criticize credit unions.
Massachusetts Banking Commissioner Steven Antonakes said credit unions should be included in CRA and cited his state's experience since 1982 of having credit unions there comply with a similar law.
He said extending CRA "is not as simple as cutting and pasting the bank regulations and applying them to credit unions." He noted that the state's regulations allow employer-based credit unions to define their entire membership as their "assessment area" for purposes of CRA.
Antonakes said credit unions there hadn't found the regulatory requirements of the measure to be burdensome. In response to a question from Rep. Randy Neugebauer (R-Texas), he noted that even those state-charted credit unions that converted to federal charters continued to comply with CRA even though they are not required to. Leslie Anderson, president/CEO of the Bank of Bennington (Nebraska) who represented the ABA, said CRA should be expanded to credit unions to provide parity with banks.
"All depository institutions have a responsibility to serve all people in their community. With CRA we know that banks are doing that, but we don't know whether credit unions are," she said.
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