Lawmakers Flash Yellow Light On Credit Union Measure.

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Author: Swindell, Bill

Finance

Top lawmakers told credit union officials today that they advocated a go-slow approach for legislation allowing credit unions to offer more services in direct competition with banks. House Financial Services Chairman Oxley and Senate Banking ranking member Paul Sarbanes, D-Md., told 4,000 people at the annual government affairs conference of the Credit Union National Association that it would be an uphill battle this year for a bill to reduce capital requirements for credit unions to put them on par with banks. The House measure, known as the Credit Union Regulatory Improvement Act, or CURIA, also would ease restrictions on credit union business loans, allowing up to 20 percent of an institution's total assets to be used for them. The current limit is 12.25 percent.

Oxley said his first priority was to pass legislation to ease regulations on banks, thrifts and credit unions. That bill, sponsored by Rep. Jeb Hensarling, R-Texas, is moving through the House. The Senate is working on its version. "To put it in the simplest terms, right now I am focused on the regulatory relief legislation. It is a project that we have been working on for five years," said Oxley, who is retiring after this year. "Let's do [regulatory] relief, then follow up with CURIA." Sarbanes told those at the conference that the more they pushed to offer bank-like services, the more they risked jeopardizing their tax-exempt status, which banks complain provides credit unions with an unfair advantage. "I think it's important to remind ourselves that this difference in treatment â€" both under the tax status and in terms of regulatory requirements â€" relates back to the difference in purpose and function of the credit union movement," Sarbanes said. "The fact of the matter is I think the credit union movement is very sensitive to this."

On other issues, Oxley said he backed a recent decision by the Office of the Comptroller of the Currency to allow national banks to invest in real estate projects such as office buildings, hotels, condominiums and windmill farms. The National Association of Realtors recently criticized the OCC decision, saying it would allow banks to become more involved with real estate development and brokerage, thus increasing the risk of bank failure that could threaten the safety and soundness of the overall system. "If we do not back up regulator decision authority, as with this case with the OCC, then we are in danger of having Congress forced to step into every dispute," Oxley said. "We need strong regulators to make decisions and stick to them."

Assistant Treasury Secretary Emil Henry outlined the Bush's administration's stance for data protection legislation to combat identity theft, siding more with the views of financial services sector rather than consumer groups. Henry said the White House wanted a uniform standard across the country that includes a notification trigger for a security breach that was not unduly burdensome on business. "We must balance the needs to take all reasonable steps to ensure that people are not unnecessarily vulnerable to identity theft-related frauds, with the need to ensure that government requirements don't inhibit innovation by our free enterprise system," Henry said. He also said that any new measure should take into account that financial services firms were already regulated on data protection standards under the 1999 Gramm-Leach-Bliley Act.

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By Bill Swindell