Legislation Impacting CUs Not Likely to Make the Cut This Session, But CUs Have Plenty to Keep Their Eyes On

WASHINGTON – Even with the House expected to beef up its schedule, it is unlikely much beyond appropriations and budgetary bills will make it through Congress, one credit union lobbyist said. The federal government came to a virtual standstill Friday, June 11 out of respect for the passing of former President Ronald Reagan. “But Congress is back and they actually anticipate accelerating their schedule,” CUNA Vice President of Legislative Affairs and Senior Legislative Counsel Gary Kohn said. They had only been working Tuesday through Thursday, he noted, but House members may begin working a full Monday to Friday week. Nothing much directly relating to credit unions was expected in Congress last week. The House Ways and Means Committee did approve the American Jobs Creation Act of 2004 (H.R. 4520), which included expansion of Subchapter S authorities for banks. Under the bill, the cap on shareholders for Sub S banks would increase from 75 to 100, permit Individual Retirement Accounts as shareholders, and three generations of a family would be counted as one shareholder. While not objecting to the bankers seeking tax relief, CUNA President and CEO Dan Mica penned a letter to Speaker of the House Dennis Hastert (R-Ill.) highlighting the bankers’ hypocrisy in trying to reduce their own tax burden while advocating the taxation of non-profit credit unions. “Since 1997, approximately 2,109 banks have taken advantage of the Subchapter S special tax status,” Mica wrote in the June 14 letter. “The American Jobs Creation Act Subchapter S provisions would allow many more banks to elect Subchapter S. The simultaneous effort to tax credit union members is inherently duplicitous.” Leon Peace, CUNA’s legislative affairs manager and resident tax expert, commented, “Even though it looks like there’s a good chance of it passing, the Subchapter S part of that bill may not make it through to the final bill. The Senate bill does not have Subchapter S in it and there’s going to be some question when they get to conference as to how that’s handled.” Even though it is unlikely the Senate will be able to push a financial services regulatory relief bill through before the end of the session, the Senate Banking Committee will proceed with a hearing on the matter June 22. “Senator Crapo has indicated that after this hearing is done he intends to craft a regulatory relief bill for introduction in the Senate,” said NAFCU Director of Legislative and Political Affairs Brad Thaler. “We’re pleased to see that regulatory relief is really going to get the ball rolling in the Senate next week with the hearing.” The hearing could turn into a banker versus credit union blow out, as the banking trade associations have expressed strong opposition to credit union provisions in the House version of the bill. The Financial Services Regulatory Relief Act passed the House March 18 by a resounding 392-25. The credit union provisions of the bill include permitting privately insured credit unions to join the Federal Home Loan Bank System, expanding credit union investment powers in credit union service organizations, increasing the loan maturity limit from 12 to 15 years, excluding member business loans to faith-based organizations from the 12.25% cap, and permitting credit unions to offer check cashing and wire services to nonmembers within its field of membership, and other items. The committee hearing on regulatory relief will consist of three panels: one of lawmakers; one of regulators, including NCUA and NASCUS; and one of trade associations, comprised of CUNA, NAFCU, and some of the banking trade associations. Bank-credit union cooperation is out of the question, Kohn said. “There’s no reason or purpose in talking to the bankers with respect to our stuff in reg relief. It just won’t serve any purpose,” he commented. “They’ve got their job to do and they think that their job is to bash credit unions at every possible point. They have made it very clear to members of the committee that their idea of a reg relief bill is one that does not include credit union provisions in it.” Kohn added that the Industrial Loan Company provisions are another major stumbling block for the bill. “There are a lot of obstacles to surmount over there, not the least of which is still the ILC provision and you’ve got the two most dogmatic members of the Senate sitting on that committee opposite from each other on ILC provisions,” he said. “And Senator Crapo has also indicated that he has an interest in making this a much broader bill, which if he does, I would think would make it even more difficult to put the package together.” Tangential to regulatory relief is the Credit Union Regulatory Improvements Act (H.R. 3579), which recently gained three new cosponsors (See related story on page 1). Credit union lobbyists have said they expect a hearing on the bill to be scheduled for July. Another item that has proven a legislative challenge for credit unions and other lenders thus far is bankruptcy reform, which has passed the House but is still awaiting Senate approval this congressional session. “We’re still trying on bankruptcy. There’s plenty of support for it,” Kohn explained. “If we can find a way to get it done on the Senate floor without taking up too much time, it’s still a possibility. And, we’ve been working for a long time on trying to find a way to get it done and I certainly haven’t given up hope on that. I spent the weekend (June 12-13) with about 25 Republican Senators talking about that very issue.They said that they’re trying too.” Peace added that Congressmen Rob Portman (R-Ohio) and Ben Cardin (D-Md.) are at it again. Pension legislation, known in the halls of Congress as Portman-Cardin III, is expected but on a smaller scale. It will be “targeted toward more moderate income individuals,” Peace said. He pointed out that it would include an enhanced savers credit, but it is not clear whether the legislation could survive the Senate or not. Finally, the Senate Banking Committee held a hearing on the renomination of Alan Greenspan as the chairman of the Federal Reserve Board. The June 10 hearing was postponed, in deference to the ceremonies for the late President Reagan, until June 15. Greenspan’s written remarks for the testimony stated, “The Federal Reserve has been fortunate to have worked in a particularly favorable structural and political environment over the past quarter-century. But we trust that monetary policy has contributed meaningfully to the impressive performance of our economy in those years. I have been extraordinarily privileged to serve my country at the Federal Reserve during most of these years and would be honored if the Senate saw fit to enable me to continue this service.” NAFCU’s Thaler said he expected the nomination to clear the committee, but Senator Harry Reid (D-Nev.) has expressed concerns over the hold-up of the candidate he supports for the Nuclear Regulator Commission and has threatened to hold up other nominations. This situation could also stall a potential NCUA Board nominee, if one is officially named (See related story on page 1). [email protected]