Credit unions, banks join forces for now

A modest yet carefully crafted package of regulatory tweaks has the rival credit union and banking lobbies working toward the common goal of Senate floor consideration before the legislative calendar runs down.

It’s a rare moment for the two industries. And the détente will be short-lived: The credit unions intend to seek broader changes next year — reforms the bankers will do everything they can to block.

In the meantime, though, the shortened election year legislative calendar has both sides lobbying senators to take up a modest House-passed measure containing long-sought regulatory changes for each industry.

Lobbyists don’t want the measure to slip into next year, when they would have to start all over again — no easy task for such rivals.

Normally, the Senate Banking, Housing and Urban Affairs Committee would hold a hearing on the legislation and then a markup.

But the credit unions and bankers both believe the legislation’s industry backing and strong vote in the House will help it bypass the snarls of the committee process and go straight to the Senate floor.

“If ever there was an opportunity to try to fast-track something, this is it,” said former Rep. Dan Mica (D-Fla.), president and CEO of the Credit Union National Association. “We’re going to do our best. The enemy for us is time.”

The bill’s path thus far is a prime example of the two-steps-forward, one-step-back dance of Washington policymaking.

For years, credit unions have asked Congress to lighten their regulatory burden. This year, the Holy Grail appeared within reach: The Credit Union Regulatory Improvements Act garnered more than 140 co-sponsors. And powerful House Democrats, now in the majority, seemed sympathetic to credit unions’ plight.

Then, the lead sponsor, Rep. Paul E. Kanjorski (D-Pa.), decided to jump-start the process by moving a scaled-down version first, excluding the regulatory changes most contested by the bankers.

It wasn’t enough. When Democrats tried to consider the smaller credit union bill on the House suspension calendar in April, the bankers howled that the bill still went too far. A full-out lobbying effort ensued, and lawmakers yanked the bill from consideration.

Kanjorski introduced a slightly altered version that appeased the bankers’ concerns. The changes included a narrower definition of “underserved areas” in which credit unions could set up shop. The bill, however, still would allow all credit unions to expand their services to these high-unemployment, low-income areas; only credit unions with certain charters can do so now. The expansion was a top priority for the credit union industry.

Kanjorski combined the credit unions’ provisions with a series of regulatory changes sought by banks and thrifts to win support from both sides.

“In developing this bill, we have sought to identify an appropriate balance between competing interests,” Kanjorski said in a floor speech.

It worked. Neither industry actively supported the other side’s provisions, but neither side objected, either. The House passed the bill by a voice vote on June 24. Even if the scaled-down bill makes it to President Bush, two of the credit union lobby’s three objectives remain elusive.

Credit unions want policymakers to do away with their strict capital reserve requirements and allow their regulator to use a flexible, risk-based standard to determine them. They also want Congress to raise their current 12.25 percent cap on assets from business loans.

Banks say the changes would give credit unions — whose status affords them special regulatory benefits — an unfair competitive advantage.

“We’ll be continuing to push against those provisions from CURIA that didn’t make it in,” said Steve Verdier, senior vice president and director of congressional relations for the Independent Community Bankers of America. “That battle will continue.”

The banks intend to lobby hard against those credit union changes, but Mica saw the smaller regulatory package as a victory for his group’s goal that credit unions get the same respect on Capitol Hill as banks.

The banks have been trying for years to get their provisions passed, he noted, but they couldn’t get it done this time without working with credit unions on the broader legislation.

The bill’s passage demonstrated the recognition that credit unions needed to be treated fairly and with parity, said Mica, who hopes it will be followed by “serious and active consideration” of credit unions’ capital reserve and business lending needs.

“The bankers have started to realize that it’s not just a one-shot playing field for them,” he said. “We’re going to have to work together or nothing is going to happen.”