Credit Unions' Push Puts Bankers in Tailspin

Credit unions have a new tactic in their push for a greater slice of the business-loan market: tying the lending-limit increase they want from Congress to other measures that are supported by their rivals in the banking industry.

Their aim is to capitalize on lawmakers' desire to spark economic growth by convincing Congress that increased credit-union lending can create jobs without sucking lending business away from banks.   

But the effort is stirring up the evergreen dispute between two powerful lobbying forces, and that has put lawmakers on edge. Both the banking and credit-union industries contribute mightily to congressional campaigns, and members take pains to avoid picking between them. That's why many pet industry bills have a hard time advancing.

But the credit unions are betting their new approach will change that.

"We are saying the only realistic approach is to let the legislation move in a combination," said John Magill, an executive vice president with the Credit Union National Association. "A lot of the members of Congress are not comfortable picking between two constituencies. ... If it makes them more comfortable by giving something to both, we are comfortable with that."

But the banks aren't comfortable with that. In fact, CUNA and the National Association of Federal Credit Unions set this up in a bid to dare banks to fight their own legislation, and it looks like they will see that wish fulfilled.

Paul Merski, a lobbyist for the Independent Community Bankers of America, said that indeed the group would lobby against its own bill if "the credit unions attach themselves like a barnacle." ICBA has spent years fighting for its bill, known as the Communities First Act.

"We will never let this pass, because you will just be cannibalizing loans made by tax-paying banks with non-taxpaying credit unions," Merski said. "The credit unions are really the skunk in the garden party. They are coming in and destroying long-standing efforts at reg relief by saying, 'Nothing is going to move unless we get our way.' "

The fight is making it awkward for lawmakers, particularly when jobs are at the core of both parties' agenda. House Financial Services Committee Chairman Spencer Bachus, R-Ala., is facing a challenging primary race and is under pressure from all sides. He is debating whether to hold votes on the bills, but nothing has been scheduled so far.

Credit unions under law can only offer business loans up to 12.25 percent of their total assets. The legislation they are seeking would raise that to 27.5 percent of total assets. CUNA and NAFCU want Congress to combine that increase into a package of measures pushed by their banker competitors, including a bill sought by the American Bankers Association to ease bank exams and the other regulatory relief bill sought by the Independent Community Bankers of America.

CUNA will bring 75 small-business leaders to Capitol Hill this week to carry the message and pressure House and Senate members to get behind the lending increase for credit unions. The industry's longtime champion, Rep. Ed Royce, R-Calif., will hold a press conference on Wednesday to draw attention to the effort.