Attendees of CUNA's Governmental Affairs Conference last weekwere spared a winter storm, but there was a flurry of activity.

One of the primary topics of speeches and Capitol Hill visitsduring the GAC was expected to be expanding credit unions' memberbusiness lending authorities and the crystal ball did notdisappoint. Credit unions certainly got an earful from the NCUABoard members and pro-credit union lawmakers about pushing throughlegislation to raise the member business lending cap from thecurrent 12.25% to 25%.

At the same time, Federal Reserve Chairman Ben Bernanke told theHouse Financial Services Committee that credit unions should havesome activities restricted, such as member business lending,because they are tax exempt, which gives them competitiveadvantages. Agree with him or not on various policies, Bernanke isa very intelligent man and to hear him speak with such greatignorance is somewhat surprising. Obviously, he has many otherissues of greater influence before him but to hear of himregurgitating banking trade association rhetoric was appalling.This is exactly why credit union executives need to floodWashington at least once a year. While Bernanke doesn't have anyvote on legislation, his opinion certainly can carry a lot ofsway.

NAFCU has long had a strong working relationship all the way tothe top ranks of the Federal Reserve, including a meeting with atleast one sitting board member every year. The group needs to workto pin down Bernanke and tell him how it is.

The idea that credit unions have competitive advantages overbanks is laughable. First, it's been shown time and again that morethan 1,000 banks don't pay any income taxes at all. Second, creditunion directors are unpaid volunteers so it can be very difficultto recruit qualified individuals to do the same work bank board do.Third, credit unions, except for those designated low-income, canonly raise capital through retained earnings. They can't just gooff and sell some stock if they want to grow or need quick cash;credit unions need to earn it through lending and investments.Which brings me to my fourth point, Chairman Bernanke: creditunions are very limited in what they can invest in. Fifth,regardless of the tax exemption, small businesses are begging forcapital that they aren't getting anywhere else. If this economy isto recover it will be up to the small businesses to expand and theycannot do that without the necessary capital. Instead of handingout hundreds of billions in support for the poor banks that havesuch a competitive disadvantage, why not help out the Americans inthis country who actually work for a living at no expense to themwithout griping about the miniscule credit union tax exemption.Instead the Fed doled out TARP money for the banks to sit on orjust buy up other banks, which does no one any good other than thebanks' executives and board members.

House Financial Services Committee Chairman Barney Frank toldGAC attendees that member business lending is controversial andwon't move unless there's a prospect for progress in the Senate. InWashington, Frank is known as the consummate legislator, and if hewants to get something done, he gets it done. He's not alwaysaligned with credit unions but has been generally supportive oftheir work. Obviously, though he's not going to stick his neck outfor credit unions or that legislation would be a done deal bynow.

Someone will stand up and defend credit unions though. Last weekafter press time, two credit union representatives were scheduledto testify before Congress on the member business lendinglegislation and back credit unions' founding right to offer memberbusiness loans. Hopefully there will be some GAC hangers on tostack the room with credit union executives to further drive homethe point with Congress.

The banks have argued that credit unions don't have theexperience or wherewithal to handle business lending in addition tothe tax exemption. My answer to that is if you want to be able tobetter measure the risk in a credit unions' portfolio then allowcredit unions to use a risk-based capital framework. Credit unionsreally need to push this point in addition to the member businesslending expansion, but the issue seems to have been lost in thecurrent legislative snowstorm.

Here again the administration, not necessarily Congress thoughit does its part, is holding up progress The Treasury Departmenthas long held reservations regarding risk-based capital for creditunions. I admit risk-based analysis of assets is part of what gotus in this financial crisis because at the time, a 30-year mortgagewith a decent amount of equity paid in was considered safe.However, our current economic crisis is a once in 80 yearsphenomenon, concentration risk wasn't considered (at least incorporates), and lenders and investors are not supposed to avoidrisk but measure and hedge for it. We just need a new way ofmeasuring risk.

NCUA Chairman Debbie Matz vowed strict regulation in a letter toTreasury Secretary Tim Geithner on the heels of Bernanke's remarksif the legislation passed. This isn't just in reaction to Bernankethough because it's something she's stated before as has NCUA BoardMember Gigi Hyland, who is a proponent of greater disclosure on theloans.

Of course in the halls and the breakout sessions at the GAC,much of the talk was about the corporate community. Many peoplecontinue to hold on to the raging anger that really is veryunconstructive to moving forward. U.S. Central and WesCorp havebeen under conservatorship for nearly a year now. It's time to stopgrieving and move forward.

Many have been disappointed with the NCUA's proposed regulationon corporates stating that they cannot continue to operate underthat rule. Still more were angry about CUNA's corporate task forcereport stating the corporate model is not viable. I have to tellyou all, something has to happen and not everybody's going to likeit. The credit union community needs resolution and it needs itnow, including what the NCUA plans to do with the legacy assets,which must be the first problem solved. Then the market needs towork out the rest.

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