The suit the bankers brought challenged the rule that allows credit unions to have multiple common bonds among their field of membership. Realizing that an unfavorable outcome could cause millions of CU members to forfeit their credit union membership, major industry trade associations NAFCU and CUNA filed amicus briefs to support NCUA's position. Whether or not they knew it, a war had begun. Credit unions fought the bankers at every turn, until eventually the suit ended up in the U.S. Supreme Court, which issued its verdict at the tail end of February 1998.

Eric Richard, senior vice president and general counsel at CUNA recalled, “The decision was due to come down during our Governmental Affairs Conference, our biggest meeting of the year. Sitting Justices for the majority were Justice Clarence Thomas, Justices [William] Rehnquist, [Anthony] Kennedy, [Antonin] Scalia and [Ruth Bader] Ginsburg. Justices for the minority were [Sandra Day] O'Connor, [David] Souter, [Steven] Breyer and [John Paul] Stevens. The general feeling in the movement at the time was that the outcome would be favorable.

The Newt Gingrich Factor

Richard continued to recount what he remembered as a very electric atmosphere. “The day before the ruling came down,” Richard explained, “Newt Gingrich had just announced that he would sponsor H.R. 1151. It's very unusual for the Speaker of the House to co-sponsor legislation.”

Mark Wolff, senior vice president of communications at CUNA, agreed, “It was a turning point for credit union members and underscored the importance of the legislation. People were cheering.”

The next day, however, the Supreme Court ruled against the credit unions in a 5-4 decision, written by Justice Clarence Thomas. “We had a decision to make quickly,” Richard explained. NAFCU's director of regulatory affairs, Tim Pryor, and I were backstage in the Cabinet Room and decided we needed and wanted to make the announcement together. I'd only been at CUNA six or seven months, and we had to walk on stage and make that announcement.” Richard recalled an audible groan that rippled through the audience.

The announcement that the Supreme Court had ruled against credit unions proved to be a defining moment and galvanized an entire industry. “I like to use this analogy,” said NCUA Public and Congressional Affairs Director John McKechnie, then-CUNA senior vice president of governmental affairs. “It's like in the Wizard of Oz when the screen goes from black and white to color. All of a sudden, the lights just went on.”

The War of Will

According to those interviewed for this story, the entire 1996-1998 legislative framework was one of will: the will to cooperate, the will to keep political pressure on the Hill, and the will of the grassroots credit union members not to lose their ability to belong to their credit unions.

“The effort to enact H.R. 1151 was undertaken in an environment of 'life or death' for credit unions. Had we not pushed as hard as we did for this legislation, potentially millions of credit union members could have been thrown out of their credit unions — and millions more denied credit union service at all. The impact on credit unions would have been — as the bankers termed it — Hiroshima,” said Dan Mica, president/CEO of CUNA.

The credit union movement, its allies and key players in Washington (some of whom were not available for this story) began the two-year battle to pass H.R. 1151.

The legislative process is not an easy one. Yet, as McKechnie commented, “The two national trade associations worked in concert. There were some heated discussions between NAFCU and CUNA, but when we went to the Hill, we went with one purpose and one message. There was no disparity in our message. It also showed us the importance of the credit union leagues and the grassroots movement.”

Fred Becker, president/CEO of NAFCU said it was, “a time of adversity for credit unions.” On March 26, 1998, the then-House Banking Committee added 34 pages of amendments to H.R. 1151. The amendment was designed to stop credit union member business lending, but was defeated 27-25, with then-Chairman Jim Leach (R-Iowa) casting the deciding vote in favor of credit unions. The bill then went on to pass the committee unanimously.

The Senate Banking Committee added five more amendments to H.R. 1151 on April 30, 1998; another amendment on the Community Reinvestment Act was also narrowly defeated, 10-9 when the then-Committee Chairman Alfonse D'Amato cast the deciding vote in favor of credit unions, Becker said.

One of credit unions' heroes in Congress was Representative Paul Kanjorski (R-Pa.). He told Credit Union Times, “I've been in Congress for 20 years. I've asked the credit unions to do some very hard things through the years and they've done it. They have lasting legislative clout on the Hill because of it.”

“They're like the Boy Scouts,” he continued, “you call them and they always come and perform.”

The Capitol Steps

Perhaps the most memorable “performance” by the credit unions–and one of the hardest–was a rally on the steps of the Capitol building that Kanjorski requested to demonstrate for the Senate the grassroots support for the bill.

“We only had about a week to put the rally together” said Wolff. “Rallies of this sort take a year or so to organize. It was amazing. We had maybe four or five days and thousands of people showed up.”

“The day was steaming hot–one of those July days Washington is famous for,” said CUNA Mutual Group's Larry Blanchard, then national campaign coordinator for the 1151 movement. “Everyone sweating, cheering and holding up these signs they'd come up with. I still get goose-bumps just thinking of it.”

According to Blanchard, this was the scene on the Capitol steps that greeted D'Amato and Gingrich after a private lunch with credit union movement leaders. Blanchard attributed this rally as a pivotal point in the campaign. He stated that the rally contributed to the good relationships credit union lobbyists and members of the credit union movement enjoy on the Hill today.

With 206 powerful co-sponsors, CUMAA passed the Senate Aug. 4 and was signed into law Aug. 7, 1998. “We turned it around in six months,” Blanchard said. “That is very unusual for legislation of this magnitude.”

Living with the Legacy

Although 1151 was a win for the credit union movement and protected millions of members from losing their membership, CUMAA left a unique legacy in its wake–one the credit union movement continues to deal with today.

“It was a homerun,” said Becker, “but we did not hit it out of the park.” He pointed to the “unfortunate cap” on member business lending and prompt corrective action requirements, characterizing these as unfair and unwarranted regulatory burdens.

Perhaps the most important legacy of 1151, according to Richard, is that “it showed the Congress how powerful we could be. It gave us political capital that we still enjoy today,” he said.

Becker concurred, “We have substantive legislative and political influence today. I would especially note that we need to use that influence to pass [the Credit Union Regulatory Improvements Act] which will provide a legislative fix for the MBL [cap] and PCA.”

Looking ahead Blanchard added, “We are prepared for what is coming in the fight for CURIA, but we need to unite, with our allies and show the same passion for this legislation that we showed for 1151. We need to continue to make it a priority of the first magnitude.”

Becker agreed, “The credit union leadership needs to continue to make CURIA a strategic priority. We do not have access to the capital markets. The only way for a credit union to raise capital is through the balance sheet by commonly accepted accounting principles. We need a legislative fix for PCA.” He noted that in today's economic environment it is very difficult for credit unions to survive if they do not have access to the capital markets.

Brad Thaler, director of governmental affairs and NAFCU added, “That is one of the things that [Hurricane] Katrina taught us. Credit unions must have the freedom to maneuver that CURIA will provide.”

Describing current lobbying activities used by the NAFCU lobbying team today to move CURIA forward, he said, “we continue to urge our members to talk to their representatives. Regulatory relief is our priority.” Thaler continued, “Today CURIA has 143 co-sponsors that are only two away from the one third of the House. It demonstrates this is bi-partisan legislation.”

In Thaler's opinion, credit union lobbyists could see a hearing on CURIA in the House Financial Services Committee as early as this week.

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