Financial panel approves credit unions’ carve-out, Rep. Paul’s Fed audit

Credit unions and small banks on Thursday won a major carve-out from financial overhaul legislation over the objections of powerful House Financial Services Committee Chairman Barney Frank (D-Mass.).

The committee also approved a long-sought-after provision sponsored by Reps. Ron Paul (R-Texas) and Alan Grayson (D-Fla.) that subjects the Federal Reserve to heightened audits. The audit amendment advanced on a 43-26 vote.

The amendments were two of the most closely watched developments in sweeping financial overhaul legislation that aims to regulate the industry for systemic risks.

Frank delayed the panel’s final vote after Congressional Black Caucus members said they would withhold their votes. “It has nothing to do with the underlying bill,” said Steve Adamske, Frank’s spokesman. “It has to do with larger economic issues with the African American community.”

Rep. Brad Sherman (D-Calif.) sponsored the amendment that benefits small banks and credit unions by curtailing the number of firms federal regulators can assess to raise money for a fund to cover the costs of dissolving failing firms.

The amendment allows regulators to assess only financial firms with at least $50 billion in assets.

The committee approved Sherman’s amendment on a 52-17 vote, with Frank voting against.

Frank had supported a $10 billion threshold and wanted to give regulators the ability to assess fees based on a firm’s riskiness.

The amendment was a major victory for small banks and credit unions, which lobbied heavily for an exemption. The National Association of Federal Credit Unions (NAFCU), the Credit Union National Association (CUNA) and the Independent Community Bankers of America (ICBA) were the strongest lobbies pushing for the carve-out.

“On behalf of our 90 million credit union members, NAFCU thanks amendment sponsors Reps. Sherman and [Dan] Maffei [D-N.Y.] and all the committee members that voted for it and for continuing to recognize that credit unions didn’t cause this crisis,” said Dan Berger, executive vice president at NAFCU.

Dan Mica, president and CEO of CUNA, noted that lawmakers voted by a three-to-one margin for the exemption.

“Lawmakers, in our view, were signaling strongly that credit unions should never have been included under this requirement in the first place,” Mica said in a statement.

The committee debate leaves the biggest banks responsible for paying for the fund.

According to a September report from SNL Financial, a market research firm, there are roughly 30 banks and thrifts with assets in excess of $50 billion.

Other financial firms apart from banks will also pay into the fund.

The Financial Services panel also on Thursday approved an amendment that would give a new council of federal regulators ability to have input on accounting standards.

But the amendment was a much more muted version than an earlier effort to have regulators weigh in with the Financial Accounting Standards Board (FASB), the non-governmental body that sets accounting rules.

The the stronger version ran into stiff opposition from the U.S. Chamber of Commerce, Investment Company Institute (ICI) and American Institute of Certified Public Accountants (AICP), among others.