[Congressional Record Volume 144, Number 98 (Tuesday, July 21, 1998)]
[Senate]
[Pages S8601-S8603]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                   CREDIT UNION MEMBERSHIP ACCESS ACT

  Mr. HELMS. Mr. President, I have asked for this time this morning 
because this is the last week I will be here for a while. As of a week 
from today, I will have traded in my 1921 knees for some 1998 models. 
And during the time that I will be absent, the credit union issue will 
come up before the Senate. Now, I could duck the issue and probably 
make out all right, but I do not operate that way, and I feel I should 
not merely lay out for the record my views about this piece of 
legislation, but I should speak them publicly so that they can be 
known.
  Mr. President, I suspect that most, if not all, Senators will agree 
that a certain type of democracy has, without question, been at work in 
terms of the astounding number of postcards and letters, faxes, 
telephone calls, et cetera, et cetera, et cetera, from representatives 
of the credit union industry at all levels. It would be an 
understatement, in fact, to describe the deluge as merely an impressive 
campaign. It is far more than that.
  I have been around this place for quite a while, and I have spent 
many hours meeting with citizens on both sides of the credit union 
legislation that the Senate will shortly consider. I have seen North 
Carolinians who support H.R. 1151, the Credit Union Membership Access 
Act, and I have seen and visited with North Carolinians who are opposed 
to it.
  In any case, the supporters of this bill are an important segment of 
our community. Credit unions provide basic, efficient, and affordable 
financial services. And I have to say for the record that North 
Carolina's credit unions do good work in providing for the needs of 
countless of their fellow hard-working Tar Heels.
  Mr. President, it may be of interest to Senators from other States 
that this debate began in Randolph County, NC, which is the home of 
Richard Petty. And anybody who does not know who Richard Petty is, see 
me after I finish these remarks and I will fill them in on who Richard 
Petty is.
  In February of this year, after a 7-year court battle, the Supreme 
Court handed down its decision on the case titled National Credit Union 
Administration v. First National Bank & Trust Co., which was a lawsuit 
involving several North Carolina financial institutions.
  It may be that a bit of history will be useful at this point. Credit 
unions, as clarified in the preamble of the Federal Credit Union Act of 
1934, were created by Congress ``to make more available to people of 
small means credit for provident purposes.''
  In order to serve these individuals of ``small means,'' credit unions 
were awarded back then specific benefits that others did not have in 
connection with their carrying out a clearly defined purpose, which was 
to provide essential basic financial services.
  Now then, these benefits, including exemptions from Federal taxes and 
the extraordinarily burdensome Community Reinvestment Act, CRA, as it 
is known around this place--have enabled the credit union industry to 
serve their customers with a marketplace advantage--very clearly an 
advantage--not allowed to other insured depository competitors which 
must pay taxes and which must abide by complex Federal regulations, 
which credit unions do not have to do.

  In the early 1980s, the National Credit Union Administration used its 
regulatory power for significant alteration and expansion of the 
original intent of the Federal Credit Union Act.
  Specifically, in 1982, the NCUA allowed credit unions to expand their 
memberships to include multiple employer groups, an action which 
effectively eliminated the meaning of the common bond. This, in fact, 
was the precise holding of the Supreme Court's February 1998 decision.
  When this debate started, some shrewd Washington lobbyists--and that 
is about the best I can describe them--these lobbyists circulated the 
notion that the Supreme Court's intent was--now get this, Mr. 
President--the intent of the Supreme Court, they said, was to kick 
people out of their credit unions.
  But what happened? Credit union members promptly began calling and 
writing to me, and all other Senators, I am sure, pleading with us to 
protect their right to remain members of their credit unions.
  Mr. President, that of course never was in doubt, and these lobbyists 
knew it. But they struck fear in the hearts of the credit union 
members; hence the deluge of telephone calls and faxes and letters and 
visits and all the rest of it.
  In no way--let me say this as plainly as I can--in no way will these 
membership rights be revoked from citizens who were credit union 
account holders prior to the February 25, 1998, Supreme

[[Page S8602]]

Court decision. I hope I have nailed down that falsehood pretty well.
  Parenthetically, Mr. President, it should be made clear that such 
revocation has never--never--been remotely considered by anybody. It 
would have been fundamentally unfair for anybody to even think of it. 
It should also be emphasized that the banking industry is unanimously 
supportive of the position that it would be unfair.
  Mr. President, I am persuaded that many Senators may have been 
incorrectly persuaded by the deluge of contacts with their constituents 
that small bankers are attempting to take away the account rights of 
credit union members, which, in fairness, Mr. President, is an absolute 
falsehood, and even the lobbyists who contend otherwise are bound to 
have known and know to this moment that it is false.
  Let the record be clear, nobody--nobody--has a membership in a credit 
union where that membership depends on passing legislation that will 
allow the unrestrained expansion of credit unions.
  Now, the fact is, most traditional credit unions were not, nor ever 
will be, affected by the Supreme Court decision of last February. The 
fact is, in that decision the Supreme Court supported the original 
statutory intent of the Federal Credit Union Act of 1934 that credit 
unions must have a common bond, that is to say, some reason to be 
considered as a group. In fact, the Court was unanimous in its 
interpretation of the law, identical in effect to the way it was 
written way back in 1934.
  All right. You see, Mr. President, most credit unions operate under 
the definition of a ``common bond,'' as was clearly the intent of the 
Federal Credit Union Act.

  Mr. President, most credit unions will continue to operate and the 
members will continue to benefit from their regulatory tax-exempt 
status--taxes that their competitors have to pay.
  Now, the point is unmistakably clear. The only credit unions affected 
are credit unions that have expanded, in clear violation of the Federal 
Credit Union Act of 1934 which the Court upheld this year. The 
violation of this Federal Credit Union Act has been done in several 
ways--primarily by the unlawful inclusion of hundreds of groups, large 
and small, and thousands upon thousands of employees of these hundreds 
of groups.
  Now, the change in the National Credit Union Administration 
regulatory policy launched the credit union industry into an era of 
unprecedented growth. For example, in the 8 months following the 
regulatory change, one credit union added more than 1,000 different 
groups. That was done in less than 8 months' time.
  No longer were credit unions required to represent groups of 
individuals with common workplace or geographic interests, but hundreds 
of unrelated groups not joined by any commonality. Larger credit unions 
have used this newfound freedom to an advantage at the expense of their 
financial competitors.
  This legislation--and the name of it, just for the Record, is the 
Credit Union Membership Access Act; the number is H.R. 1151--this 
legislation proposes to codify, to place into law, the NCUA 1982 
regulatory interpretation and thereby invite another major expansion of 
the credit union industry. H.R. 1151 proposes to authorize multibonded 
credit unions to bring in groups of up to 3,000 members--a number, by 
the way, which NCUA can waive at its discretion--and would effectively 
allow credit unions to target every entity in the United States.
  Now, the Bureau of the Census has declared that 99.9 percent of the 
businesses in the United States employ fewer than 3,000 workers. So you 
see the practical effect of allowing multibonded credit unions to bring 
into their membership groups which have less than 3,000 members would 
effectively repeal all limits of expansion on the credit unions which 
pay no taxes.
  In summary, H.R. 1151, the Credit Union Membership Access Act, soon 
to be the pending business in the Senate, is a long way from the 
original concept and intent of the very clear common bond. According to 
the NCUA, to qualify for this tax-subsidized service--and that is what 
it is--one would simply have to walk in and sign up. It follows that 
many credit unions are moving beyond their original purpose of aiding 
individuals of ``small means'' with basic services. In fact, already 
such things as professional sports teams, yacht clubs, law firms, 
country clubs, and many, many others now have their own credit unions. 
I suggest that this exceeds any rational definition of individuals 
living by ``small means.''
  In all fairness, the reason I am here this morning is H.R. 1151 does 
not qualify as simply a pro-credit union bill. It is really, if you 
want to call it what it is, an anti-competitiveness bill. If Congress 
wants to alter the intended dimensions of credit unions, Congress 
should be willing to say so clearly and not hide behind the guise--and 
that is what it is--that the intent of the soon-to-be pending 
legislation is to protect credit unions following the Supreme Court's 
ruling.
  Now, then, in realty, Congress is setting the stage for the expansion 
and growth of the credit union industry into thousands upon thousands 
of new markets well into the 21st century, while continuing to be 
exempt from paying the Federal taxes that the competitors down Main 
Street have to pay.
  If the credit union industry wants to expand its presence in the 
financial marketplace and increase its ability to offer various 
services to more and more groups--in short, if they want to operate 
like community banks--I commend their ambition because I believe that 
the banking industry will and should welcome them into the marketplace 
as long as credit unions are required to live under the very same tax 
structure and the very same regulatory morass that America's small 
community banks and small town bankers live with every day.
  Let me be clear, as I wind up, that I oppose both higher taxes and 
burdensome regulation. If Congress chooses to allow credit union growth 
without taxation and without costly regulations, then let's be fair and 
do the same for America's community bankers, the small bankers who are 
competing for the same core of business without the benefit of a 
Federal subsidy paid by the American taxpayer.
  It is unfortunate that the debate on this legislation up to now has 
pitted the banking interests versus the interests of the credit union 
industry. The debate should be about the willingness of Congress to 
provide a level and fair playing field for all financial interests. Is 
it equitable for credit unions, comprised of countless hundreds of 
groups and assets in the billions, to have a competitive advantage over 
small bankers who are competing for the same business? I am convinced 
the obvious answer to that is no. Unless and until this becomes a 
debate about fairness in the marketplace instead of a politically 
expedient response to a shrewd and energetic lobbying campaign, I 
cannot and will not support such misguided and tragically misunderstood 
legislation.
  In closing, a few personal observations: Earlier, I mentioned the 
enormous public relations campaign crafted by lobbyists for the credit 
union industry. I am confident that every Senator's office has 
experienced this full court press.
  This past week, in fact, a rally was staged right here on Capitol 
Hill by several thousand credit union supporters who had been brought 
to Washington to demand immediate passage of H.R. 1151, without 
amendments.
  Now, I am genuinely impressed by the willingness of the credit union 
industry's supporters to travel to Washington to express their support 
for H.R. 1151. However, I must question the actions of some of the 
lobbyists who staged this demonstration on the Capitol steps and used 
distortion and half-truths and even untruths to get their message 
across. This undermines the integrity of the people who they purport to 
represent. I hope in the future they will use greater care in 
representing their constituencies.
  So this debate boils down to an issue of fairness. Most Senators, 
including myself, have friends on both sides. I take great care in 
trying to ensure that the small guy, whether he is a bank customer or a 
credit union member, is given a fair and equal deal, the level playing 
field that we so often hear so much about. This bill does not represent 
a level playing field. Congress amended the Federal Credit Union Act in 
1937 to give tax-exempt status to federally chartered credit

[[Page S8603]]

unions to serve a narrow purpose, not to give a distinct market 
advantage over their competition with the small bank down the street.
  Now, it must be said that many credit unions such as the U.S. Senate 
Federal Credit Union, right here on Capitol Hill, have used this 
advantage judiciously in serving their clearly defined customer base.
  The employees of the Senate are their customer base. They won't lose 
their membership. Nobody is about to lose their membership. That is all 
hogwash. Unfortunately, too many other large credit unions have 
expanded the reach of their tax-exempt status far beyond the original 
congressional intent--extending their Government-subsidized services to 
include hundreds upon hundreds of unrelated groups and businesses.
  I say again, as a result of this tax-free status and their exemption 
from Federal regulations that require other financial institutions to 
reinvest in low-income areas, credit unions are able to offer deals on 
loan rates and checking accounts that most community banks simply 
cannot match.
  It gives me no pleasure to stand here and take this stand, Mr. 
President. I could have kept silent and gone on down to North Carolina 
to have my sore knees fixed. But I am obliged to say, in conclusion, 
that if we allow credit unions to expand tax free and act more and more 
like banks, then we should at least try to ensure that there is a level 
playing field for all similar financial institutions. If we tax the 
banking industry, the small bankers, we should tax the credit unions--
but I don't think we should tax either one of them. If we are to force 
banks to function under burdensome community reinvestment regulations, 
shouldn't we support equally demanding regulations for credit unions? 
Is this not, in the final analysis, just an issue of fairness? It would 
be simpler and easier for me to keep silent, but my conscience would 
not let me do so. I cannot engage in that luxury. I felt obliged to 
take my stand and I have done so.
  Thank you, Mr. President, I yield the floor.
  Mrs. FEINSTEIN addressed the Chair.
  The PRESIDING OFFICER. The Senator from California is recognized.
  Mrs. FEINSTEIN. Mr. President, I ask unanimous consent for 15 minutes 
to speak in morning business.
  The PRESIDING OFFICER. Without objection, it is so ordered.

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