Count down 'til Thomas quits panel

Some executives of credit unions can’t wait until Rep. Bill Thomas (R-Calif.) is finished as chairman of the powerful Ways and Means Committee.

Some executives of credit unions can’t wait until Rep. Bill Thomas (R-Calif.) is finished as chairman of the powerful Ways and Means Committee.

The interests of the credit unions and their banking-industry rivals are expected to clash at a committee hearing today on credit-union oversight, part of the lawmaker’s comprehensive review of the tax-exempt status of nonprofit organizations.

Credit unions, long leery of bankers’ influence on members of Congress, are preparing for the worst.

An advocacy e-mail sent to Texas credit-union CEOs by Dick Ensweiler, head of the state’s credit-union league and a former chairman of the Credit Union National Association (CUNA), and credit-union political consultant Buddy Gill charges that “the banks are egging [Thomas] on enthusiastically.”

“Good news is at the end of next year, Bill Thomas will no longer be Chairman of that Committee (term expires), and a more credit-union friendly face is likely to take his place,” Ensweiler and Gill wrote in the Oct. 27 e-mail. “The bad news is he has a year to pursue CUs [credit unions] if he chooses to.”

The Texas e-mail, which has made the rounds among banking lobbyists in recent days, reflects the mounting apprehension in the credit-union industry — which prefers to call itself a “movement” — about possible legislative curbs on its growth. Thomas’s probe of credit unions’ tax freedom, their most prized asset, has only amplified the speculation.

“It’s extremely clear that he does have concerns about credit unions and their tax status,” said former Rep. Dan Mica (R-Fla.), president and CEO of CUNA, the industry’s leading trade association.

Despite a recent favorable meeting with Thomas, Mica said, credit unions remain unsure as to whether the chairman would evaluate their position fairly. “It depends on who thinks what about whether he’s solidly made up his mind or is willing to look at information in a neutral and biased way. … We don’t blame the committee or the chairman at all, but we know that bankers have stepped up at every turn in the road.”

Brad Thaler, director of legislative affairs at the National Association of Federal Credit Unions (NAFCU), did not dispute the characterization of Thomas as less than a friend to credit unions.

“He has raised issues and reported some statements that we believe are not true about credit unions,” said Thaler, who could not recall a specific example of such statements. “We look forward to responding to those statements and putting the truth out there from the credit-union perspective.”

Ed Yingling, president and CEO of the American Bankers Association (ABA) and formerly the group’s chief lobbyist, warned that credit unions could end up alienating the powerful and prickly Ways and Means chairman.

“I think one would want to be careful about questioning the right of the chairman of the tax committee to look at tax exemptions,” Yingling said. “He certainly has every right to look into this issue. He’s been very consistent.”

Credit unions were further inflamed earlier this week when the ABA filed twin lawsuits against the National Credit Union Administration (NCUA), their government regulator, charging it with flouting existing statutes to help credit unions expand beyond their congressionally created limits.

“Our intention is to use the courts to force the NCUA to follow the law,” Yingling said. The Ways and Means hearing, Yingling added, will be an opening for debate on whether credit unions are still using their tax exemption to serve “people of modest means.”

Credit-union lobbyists have mobilized allies from both sides of the ideological spectrum to support the industry’s tax exemption. NAFCU released letters from the Consumer Federation of America, Americans for Tax Reform, the National Cooperative Business Association and the Military Coalition, while CUNA enlisted its members for last-minute grassroots lobbying.

Hours before the Ways and Means hearing, Rep. Todd Akin (R-Mo.) circulated a “Dear Colleague” letter reiterating lawmakers’ continued affinity for credit-union tax freedom.

“Taxing credit unions would be a tax on consumers,” Akin wrote. “Since credit unions can only generate capital through their earnings, taxation would reduce earnings to the point that many credit unions’ existence would be in severe jeopardy.”

The bad blood between banks and credit unions is a fixture of life on Capitol Hill, with banking lobbyists still referring to lawmakers’ 1951 decision to revoke the tax-exempt status of mutual savings banks.

“The 5 million, 10 million credit unions that are small, run by schools, churches, I don’t think anyone is calling for [a lifting of the] tax exemption for those [entities]. We’re not,” said Diane Casey-Landry, president and CEO of America’s Community Bankers. “But a $1.2 billion credit union is not a small institution.”

Large credit unions are the industry’s fastest-growing segment, according to CUNA, with a 6 percent jump since 2003 in the number of credit unions holding more than $500 million in assets. About 250 credit unions belong to the $500-million-plus club, while more than 1,500 are in the most common area of $20 million to $50 million in assets.

Credit unions made $3.3 million in political contributions for the 2004 election cycle, according to the nonpartisan Center for Responsive Politics, compared with $31 million from banks.

A spokeswoman for Thomas declined to comment on the battle between banks and credit unions in advance of today’s hearing. But Mica, relating his conversations with former House colleagues, gave a glimpse into a politically nightmarish lobbying clash.

“Frankly, what [House members] are saying to me is, ‘For heaven’s sake, do not get us into a situation where there is a major battle between banks and credit unions next year, in an election year. That’s the last thing we need,’” Mica said. “To which we respond, ‘We don’t want to have that battle, but it will be absolutely unacceptable for us to take any change in our tax status.’”