Keep Your Friends Close and Your Enemies Closer

Credit unions enjoy solid bipartisan support in Congress. Very few lawmakers would intentionally set out to harm credit unions. On the other hand, no one is going to stake their political career on credit unions.Yet credit unions are on the receiving end of the old one-two punch between unintended consequences at the fore and an uppercut of being loved to death. Ironic since the Dems, who rule Congress now, are supposed to fight for the little guy. More frenemies than friends.An obvious example this week was House Financial Services Committee Chairman Barney Frank’s refusal to exempt credit unions from helping fund the proposed Systemic Resolution Fund. Financial institutions over $10 billion in assets will be required to finance this effort. Not that $10 billion is anything to sneeze at, but are those really the too-big-to-fail institutions that the fund is intended to protect the taxpayers from? The threshold should be based more on market share than a dollar figure that will quickly become obsolete-like $10 billion, which already is.And he confirmed for Credit Union Times that he’s content to leave credit unions over $1.5 billion in assets included under the direct purview of the Consumer Financial Protection Agency. He mentioned throwing some of those over $1.5 billion a skimpy bone that’s hardly worth mentioning.Frank, by position and reputation, is not someone credit unions want to make an enemy of. However, how long will it be before credit unions must say enough is enough? Not only is he aware that certain credit unions that arguably are doing the most to serve the underserved by virtue of their size would be reeled back in this liberal power grab, but he also was a strong supporter of the hastily passed, poorly thought out CARD Act, and backs the equally poorly designed overdraft legislation and CRA requirements for credit unions.Obviously, his fellow members of the House, including Paul Kanjorski and the rest of the House Financial Services Committee members who claim to be credit union friends, aren’t going to stick their necks out too far for credit unions. The Dems are drunk on their still somewhat newfound ruling power and trying to rush a lot of legislative pseudo-fixes through, much of it well intended but not thought through.The road to Hell is paved with good intentions like ensuring financial institutions don’t take ridiculous risks because an executive’s bonus depends upon it or making sure consumers don’t get scammed or providing much needed services in economically distressed areas. However, the Democratic agenda seems to include all stick and no carrot as far as any type of service providers to the American public. What will really be hell is when credit to those very people the Dems were trying to protect dries up because of it or worse yet, the federal government takes over. There are so many happy mediums between make any loan you are willing to put on someone else’s books and government intervention at every step of the way. Congress needs to lose the idea of some kind of mandate coming out of last year’s elections.Just look at last week’s gubernatorial elections in New Jersey and Virginia. It’s not likely a sign of defeat for the Dems, but it should certainly give pause to any moderate Democrats before they think about voting for liberal policy, such as the CFPA. While political pressures are placed on them by the parties, members are going to be out of a job if they don’t please their constituents.On the other hand, look at how NAFCU handled its relationship with Patrick McHenry after he introduced the legislation to dial back NCUA’s authority over credit union to mutual savings bank conversions. McHenry was initially vilified by credit unions, but the root of his problem was NCUA’s attempted overstepping in the Texas credit union conversions. NAFCU invited him to speak at its conference, which he accepted, and turned out to be a popular session. McHenry has been held up as the future of conservatives, and I’m certain as the political pendulum swings back to the right, we’ll be hearing more from him.Keith Leggett, ABA senior economist, is another who’s been persecuted by credit unions. But the fact is, he’s a smart guy and knows banks and credit unions very well. The Metropolitan Area Credit Union Management Association was wise enough to invite him to a Q&A session, with yours truly moderating, to discuss ways that credit unions and banks can work together. We may stray from that exact message, but it’s good to know where a group like the ABA is coming from.Similarly, the Independent Community Bankers of America right now is a group credit unions should be doing business with. The two groups have so much in common, it would be ridiculous not to work together on anything from lobbying to compliance education and training. There’s a lot credit unions can learn from the community bankers; the for-profit mindset doesn’t have to be contagious.–Comments? E-mail [email protected]