In an unprecedented counterstroke in the ongoing fratricidal feud between the nation?s for-profit and not-for-profit financial services firms, the cooperative banking movement?s largest trade association is calling on Congress to investigate some of the practices of the federal Office of Thrift Supervision, which the association says “failed to safeguard consumers? interests.”
In a statement for the record to a recent House oversight subcommittee?s hearing into the office?s regulation of the savings and loan industry, the Credit Union National Association said certain “inaccurate statements” made by OTS Director John M. Reich were “tantamount to an admission that OTS is not fulfilling its responsibility as a federal regulator.”
“I think it?s a crock,” America?s Community Bankers spokesman Bob Schmermund said of the CUNA filing. “I think it is nothing more than a weak, unfounded, ill-conceived attempt to discredit a solid banking agency in the false hope that Congress will no longer shine its spotlight on their own troubled regulator.”
Reich?s comments concerned the current legislatively charged, intra-industry issue of credit union-to-mutual savings bank conversions and conveyed the impression that the difference between federal tax-exempt, not-for-profit, cooperative credit unions and taxpaying, for-profit mutual savings banks were “insignificant.”
Credit unions that convert to thrifts can then, under less-than-democratic OTS conversion rules, become stock institutions where stock offerings can be lucrative to those positioned to take advantage of multimillion-dollar initial public offerings.
Decrying Reich?s statements as so ill-informed of the “material and readily identifiableownership differences between credit unions and thrifts” that “willful ignorance ? [or, at worst,] ? willful disregard of reality” was suggested, CUNA called for a Government Accountability Office inquiry into “whether [OTS?] charter conversion process adequately protects the members/shareholders of the converting institutions.”
Such a study requires the direct intervention of a friendly lawmaker, which CUNA reportedly is moving to secure.
Amid a continuing stream of banker lawsuits against credit unions and their regulatory agency, the National Credit Union Administration, congressional jousting over bank- and credit union-friendly bills, and two recent banker-inspired GAO investigations of credit unions and the credit union administration, the CUNA broadside insisted that democratically run credit unions? assets belong to members and that OTS? conversion rules ignore this fact in a process that is often motivated by insider enrichment.
Milestones in the Banking Conversion Clash
» 1998: Congress passes the Credit Union Membership Access Act, overturning a banker victory in the U.S. Supreme Court banning federal credit union membership for multiple employee groups. The law also liberalizes the federal credit union-to-mutual savings bank conversion process.
» 2003: The American Bankers Association launches “Operation Credit Union,” sending anti-credit union “tool kits” to every FDIC-insured bank with instructions to urge their state and federal legislators to tax credit unions.
» 2004: NCUA tightens its credit union-to-mutual savings bank conversion voting rules against “insider enrichment.” Banking trades object; bank-friendly Coalition for Credit Union Charter Choice emerges to champion conversion process.
» 2005: After some 90 credit unions in the preceding 10 years convert to mutual savings banks, $2 billion-asset Texas credit unions vote to convert. NCUA overturns the votes on procedural grounds, saying members were inadequately protected; NCUA loses lawsuit filed in the matter, gets high-profile flak from members of Congress.
» 2005: Credit Union Charter Choice Act (H.R. 3206) ? a bank-backed bill restricting NCUA?s authority in the conversion voting process ? is introduced by two lawmakers. Harris Simmons, a Utah banker with an announced strategy of getting large credit unions to convert to banks, becomes chairman of the ABA. House Ways and Means Committee Chairman Bill Thomas, R-Calif., calls for GAO study of NCUA and its processes.
» 2006: House Financial Services Committee conducts hearing into H.R. 3206. OTS director testifies before House oversight committee on conversions. CUNA files statement for record asking for inquiry of OTS.
