Supplementing the Supplemental Capital Effort
Over the last couple of years, a small coalition of credit unions has built up the background and the foot soldiers to help maneuver supplemental capital legislation through Congress.
One can see where this could have been viewed by the trade associations as predatory to their business, but it’s absolutely not, according to The Coalition for Credit Union Access. The group has worked very hard, and wisely I would add, to build consensus among the trades, credit unions and the regulators on what the legislation to allow credit unions to count supplemental capital toward net worth should look like and what it would mean for credit unions.
Building consensus around supplemental capital has taken some doing, as the trades (at one time) and individual credit unions had different views on what form it should take. “It’s tricky. We were pleased the planets aligned,” explained BECU Senior Vice President Parker Cann.
The coalition was only looking to supplement the trades’ lobbying efforts as their attention was dispersed across NCUSIF premiums, interchange and member business lending on top of supplemental capital. The group met with all the interested parties and ensured all were satisfied with the precise wording of the language before it was presented to King, who was insistent upon consensus behind the bill.
According to fellow member Bethpage FCU SVP Linda Armyn, BECU did a lot of the heavy lifting with the wording of the legislation and making sure a consensus could be built around it, while Bethpage worked their relationship with the bill’s sponsor, Financial Services Committee member Peter King (R-N.Y.) to get the solidly bipartisan legislation introduced, which happened about a month ago. Simply getting the right legislation introduced took two years, but the coalition has been busy educating members of Congress as well as many credit unions on the legislation and what it actually does.
That groundwork is paying dividends. In addition to a heavy hitter like King, the bill enjoys bicoastal co-sponsorship from Rep. Brad Sherman (D-Calif.) and 16 other geographically diverse members of Congress. The various representatives signed on from various states demonstrates the support the coalition has, despite its relative small number of official members. The group claims 40 to 45 credit unions of all sizes and trade associations as members, as well as working loosely with many others.
Rep. Joe Baca (D-Calif.) signed on to officially support the legislation March 20 during GAC. The presence of 4,000 credit union leaders in Washington tends to have that effect, and more sign ups can be expected in the near term.
The number of co-sponsors is important to show broad enough support to get a bill to the floor of the House and passed so it can move on to the Senate. But the quality of the co-sponsors is crucial, too, and this bill has the support of many Financial Services Committee members, which is the committee of primary jurisdiction.
As everyone knows from Schoolhouse Rock, the first step in the legislative process is a committee hearing and vote, but the coalition is looking to bypass all that. Having the bill introduced now means it could possibly be added as an amendment to another related bill that’s already moving through Congress.
Election year politics however cannot be ignored. The bipartisan support for the bill is a good sign. When the rubber hits the road though it may not be enough to survive the political quagmire.
The banking lobby is sure to take advantage of that situation. Banks far outspend the credit unions in campaign support, and the banks will threaten to pull support from campaigns if credit unions receive authority for supplemental capital toward their net worth. It’s a consideration for members of Congress looking to hold onto their jobs.
Recently during a Q&A I moderated for the Metropolitan Area Credit Union Management Association, ABA Senior Economist Keith Leggett questioned the NCUA’s ability to regulate to the legislation. To that idea, Armyn responded, “That’s ridiculous.” The coalition representatives pointed out that the NCUA has handled supplemental capital with regard to the low-income credit unions for quite some time. Additionally, the agency could seek counsel from the other banking regulators.
The key thing the bill will not do is, “It will not alter the member ownership. That’s actually in the bill,” Cann emphasized. This is crucial to the potential success of the legislation. First, it’s important intrinsically not to alter member ownership. And, in countering banker attacks to the legislation, maintaining the member ownership of credit unions is a basic tenet that the banking lobbyists would pounce on.
This type of collaboration is an excellent grass-roots effort and exactly the type of cooperative work the credit union community needs and will hopefully spawn more.