McHenry Faces Polite But Reserved NAFCU Audience; Some Pleased at Willingness to Hear Their Points

WASHINGTON – Representative Patrick McHenry (R-N.C.), the freshman author of the Credit Union Charter Choice Act, received polite but reserved treatment from the roughly 500 credit union directors and executives before whom he spoke on September 20 in the nation’s capital. The Credit Union Charter Choice Act is a piece of legislation which would restrict some of NCUA’s authority to regulate conversions of credit unions to mutual banks. Credit unions around the country have opposed the proposed law and some in his home state have been both vocal and thorough in making their opposition known. Addressing the attendees of NAFCU’s Congressional Caucus as the first speaker of the day, McHenry acknowledged the diligence and energy in the lobbying effort when at the beginning of the question and answer period he recognized Marcus Schaefer, CEO of the $1 billion Truliant Federal Credit Union, headquartered in Winston-Salem, N.C. as he approached the microphone. Schaefer had been among those lobbying McHenry heavily about credit union issues in the last few months during his town hall meetings during August. During his address McHenry reviewed the Community Credit Union controversy that led to his writing his act, citing newspaper accounts for sparking his interest in it and neglecting to disclose the visit to his office of Gary Base, CEO of Community, and banking lobbyists to discuss the issue. The $1.4 billion Community Credit Union had begun the charter change process and was just over two thirds into it when NCUA challenged the deployment of the credit union’s previously accepted disclosure documents. Community and the $1.2 billion OmniAmerican Credit, whose disclosures had also been challenged, took NCUA to court where a magistrate judge sided with the credit unions and forced the agency to admit defeat and settle the case. McHenry pointed to the judge’s opinion in the Community decision as justification for his opinion that NCUA’s position in the matter was “whacky” and that the agency had acted in an “arbitrary and capricious” manner during the controversy. “Everyone here might disagree with my take on what happened in this case,” McHenry said, referring to the Community case, “but everyone here will also agree that the regulator should be like the umpire and not play ball.” The point, McHenry said, should be to clarify the laws on the books to make sure that the disclosures are clear and “not speculative,” a term he mentioned several times and which he clarified to mean that, in his view, the NCUA has no business requiring converting credit unions to tell their members of any plans to convert to a stock issuing institution, whether as a direct stock institution or through a mutual holding company structure. But to the surprise of many in the audience, McHenry signaled that he would be open to including some of NAFCU’s conversion policy suggestions into his legislation. Specifically, a member of the audience rose during the question and answer period to question McHenry’s umpire analogy, pointing out that an umpire makes decisions on conflicts between two groups of players. In a charter conversion situation, the questioner pointed out, currently there is only one set of players on the field, the advocates of the conversion, and that the opponents had no real way to organize to oppose it. McHenry agreed with the questioner and recognized the need NAFCU lobbyists had pointed out in the association’s new conversion policy; to make sure that both sides of any conversion decision, that of the leadership which approved the charter change and that of members who opposed it, had an opportunity to make their best case before credit union members who were making the decision. He also indicated strong support for a risk-based capital standard, calling it a good updating of capital related regulations that would be good for all financial institutions including credit unions. He did not endorse CURIA however, noting that he still opposed the bill’s business lending provisions and requirement that there be 20% participation of a credit union’s membership in order for a charter change ballot to succeed. In the wake of the speech, McHenry drew appreciative comments for his willingness to come to speak to an audience which largely disagreed with him. Murray Chanow, senior legislative representative for NAFCU, said that he admired McHenry for being willing to come to NAFCU to speak “as soon as he was asked” and said the interplay between McHenry and members asking questions had been the best he had ever seen. “I think our people really appreciated his coming and being willing to hear their comments and that he appeared open to working with us,” Chanow noted. But in the wake of Hurricane Katrina and the impact the storm has had on the congressional calendar it is unlikely that anything will happen with the legislation in this Congress. Speaking to reporters after the presentation, McHenry said that he had commitment from the Financial Services Committee for a hearing on his legislation, but no hard commitment for a date for it. “In the wake of Hurricane Katrina,” he said, “everything is up in the air.” -