WBA exec keeps eye on smoldering credit union fight

Northwestern Financial Review, Mar 15, 2001 by Bengtson, Tom

Q:

I sense bankers are rallying around the credit union issue again. Is that right?

As credit unions are taking advantage of the commercial lending authority under H.R. 1151, banks are starting to see some of their commercial customers drawn away by credit unions. Some credit unions are starting to go after their good commercial credits. And we are seeing credit unions lobbying in Congress to increase the limit on commercial loans. They are now saying the 12 1/4-- percent-of-capital limit is not enough and they want more opportunities. Yes this is starting to raise some concerns.

What's the banking industry strategy? Should all the credit unions be taxed, or only the largest ones?

You make a good point. So often we talk about the banks having major competitive concerns with the credit unions but it's not the majority of credit unions. Banks don't have any problem with credit unions that truly serve members with a common bond, or those that are designed for the members of a select company or a fraternal group. It's those credit unions that offer services in such a way that they are indistinguishable from a bank - except that they don't pay federal income taxes and they avoid CRA - that we have a problem with. These are the credit unions we are seeking to bring under common regulation, taxation and accounting standards.

Is Congress interested in addressing this?

Unfortunately not. We had heard from many members of Congress that when credit unions moved into commercial lending they would then look to treat them in the same manner as banks. Suddenly those members of Congress don't seem to recall ever having said that.

The Wisconsin Department of Financial Institutions convened a task force of representatives from the banking, insurance, securities, mortgage and finance industries to look at the future of the financial services industry in the state. WBA, along with credit unions and consumers groups, also participated. Was that a worthwhile experience?

Yes it was. Certainly, in any effort like that you learn you have more in common with some of these financial providers than you might imagine. It's the same thing we learned last year when we worked on an effort to pass compromise legislation with the credit unions - something that is very much alive this year. And we are working with them on some other areas, such as the state wage lien legislation, as well as bankruptcy on the federal level. But we also know that we have very distinct differences. Certainly, with some of the more aggressive consumer groups we all have the best intentions of the general public in mind. Where the divergence of opinion comes in is how we each believe those objectives can best be accomplished.

Another big issue in banking is deposit insurance reform. What's your sense of where Wisconsin bankers are on that?

There is consensus on raising the coverage level, and there is very strong consensus that the excess dollars paid into the fund need to come back to the banks that paid. It should not go for other appropriations bills within the Congress and we believe that in some manner it should be used to either increase the frequency of the payments on the FICO debt or to cover the increased ratio that would be necessary if coverage levels were to be increased. We do have a divergence of opinion among our members on how much good an increase to $200,000 or even $140,000 or $150,000 might do. But it's something that they would like to see as long as there is not a high price tag attached in terms of both an actual payment of premiums and some type of exchange on other legislative action such as ATM fees or an opt-in on privacy.

What is the most important thing trade associations can do to remain relevant to the banking industry?

Associations are going to have to change very rapidly, particularly in the key areas of government relations and education. This is an integral part of WBA's strategic plan that we are, in fact, in the midst of making modifications to. Our goals and objectives are focused on the future and yet we find that when we pull the plan out after six months, it always needs updating.