[Congressional Record Volume 144, Number 108 (Tuesday, August 4, 1998)]
[House]
[Pages H7037-H7052]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
CREDIT UNION MEMBERSHIP ACCESS ACT
Mr. LEACH. Mr. Speaker, I move to suspend the rules and concur in the
Senate amendment to the bill (H.R. 1151) to amend the Federal Credit
Union Act to clarify existing law with regard to the field of
membership of Federal credit unions, to preserve the integrity and
purpose of Federal credit unions, to enhance supervisory oversight of
insured credit unions, and for other purposes.
The Clerk read as follows:
Strike out all after the enacting clause and insert:
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Credit
Union Membership Access Act''.
(b) Table of Contents.--The table of contents for this Act
is as follows:
Sec. 1. Short title; table of contents.
Sec. 2. Findings.
Sec. 3. Definitions.
TITLE I--CREDIT UNION MEMBERSHIP
Sec. 101. Fields of membership.
Sec. 102. Criteria for approval of expansion of membership of multiple
common-bond credit unions.
Sec. 103. Geographical guidelines for community credit unions.
TITLE II--REGULATION OF CREDIT UNIONS
Sec. 201. Financial statement and audit requirements.
Sec. 202. Conversion of insured credit unions.
Sec. 203. Limitation on member business loans.
Sec. 204. National Credit Union Administration Board membership.
Sec. 205. Report and congressional review requirement for certain
regulations.
TITLE III--CAPITALIZATION AND NET WORTH OF CREDIT UNIONS
Sec. 301. Prompt corrective action.
Sec. 302. National credit union share insurance fund equity ratio,
available assets ratio, and standby premium charge.
Sec. 303. Access to liquidity.
TITLE IV--MISCELLANEOUS PROVISIONS
Sec. 401. Study and report on differing regulatory treatment.
Sec. 402. Update on review of regulations and paperwork reductions.
Sec. 403. Treasury report on reduced taxation and viability of small
banks.
SEC. 2. FINDINGS.
The Congress finds the following:
(1) The American credit union movement began as a
cooperative effort to serve the productive and provident
credit needs of individuals of modest means.
(2) Credit unions continue to fulfill this public purpose,
and current members and membership groups should not face
divestiture from the financial services institution of their
choice as a result of recent court action.
(3) To promote thrift and credit extension, a meaningful
affinity and bond among members, manifested by a commonality
of routine interaction, shared and related work experiences,
interests, or activities, or the maintenance of an otherwise
well-understood sense of cohesion or identity is essential to
the fulfillment of the public mission of credit unions.
(4) Credit unions, unlike many other participants in the
financial services market, are exempt from Federal and most
State taxes because they are member-owned, democratically
operated, not-for-profit organizations generally managed by
volunteer boards of directors and because they have the
specified mission of meeting the credit and savings needs of
consumers, especially persons of modest means.
(5) Improved credit union safety and soundness provisions
will enhance the public benefit that citizens receive from
these cooperative financial services institutions.
SEC. 3. DEFINITIONS.
As used in this Act--
(1) the term ``Administration'' means the National Credit
Union Administration;
(2) the term ``Board'' means the National Credit Union
Administration Board;
(3) the term ``Federal banking agencies'' has the same
meaning as in section 3 of the Federal Deposit Insurance Act;
(4) the terms ``insured credit union'' and ``State-
chartered insured credit union'' have the same meanings as in
section 101 of the Federal Credit Union Act; and
(5) the term ``Secretary'' means the Secretary of the
Treasury.
TITLE I--CREDIT UNION MEMBERSHIP
SEC. 101. FIELDS OF MEMBERSHIP.
Section 109 of the Federal Credit Union Act (12 U.S.C.
1759) is amended--
(1) in the first sentence--
(A) by striking ``Federal credit union membership shall
consist of'' and inserting ``(a) In General.--Subject to
subsection (b), Federal credit union membership shall consist
of''; and
(B) by striking ``, except that'' and all that follows
through ``rural district''; and
(2) by adding at the end the following new subsections:
``(b) Membership Field.--Subject to the other provisions of
this section, the membership of any Federal credit union
shall be limited to the membership described in 1 of the
following categories:
``(1) Single common-bond credit union.--1 group that has a
common bond of occupation or association.
``(2) Multiple common-bond credit union.--More than 1
group--
``(A) each of which has (within the group) a common bond of
occupation or association; and
``(B) the number of members of each of which (at the time
the group is first included within the field of membership of
a credit union described in this paragraph) does not exceed
any numerical limitation applicable under subsection (d).
``(3) Community credit union.--Persons or organizations
within a well-defined local community, neighborhood, or rural
district.
``(c) Exceptions.--
``(1) Grandfathered members and groups.--
``(A) In general.--Notwithstanding subsection (b)--
``(i) any person or organization that is a member of any
Federal credit union as of the date of enactment of the
Credit Union Membership Access Act may remain a member of the
credit union after that date of enactment; and
``(ii) a member of any group whose members constituted a
portion of the membership of any Federal credit union as of
that date of enactment shall continue to be eligible to
become a member of that credit union, by virtue of membership
in that group, after that date of enactment.
``(B) Successors.--If the common bond of any group referred
to in subparagraph (A) is defined by any particular
organization or business entity, subparagraph (A) shall
continue to apply with respect to any successor to the
organization or entity.
``(2) Exception for underserved areas.--Notwithstanding
subsection (b), in the case of a Federal credit union, the
field of membership category of which is described in
subsection (b)(2), the Board may allow the membership of the
credit union to include any person or organization within a
local community, neighborhood, or rural district if--
``(A) the Board determines that the local community,
neighborhood, or rural district--
``(i) is an `investment area', as defined in section
103(16) of the Community Development Banking and Financial
Institutions Act of 1994 (12 U.S.C. 4703(16)), and meets such
additional requirements as the Board may impose; and
``(ii) is underserved, based on data of the Board and the
Federal banking agencies (as defined in section 3 of the
Federal Deposit Insurance Act), by other depository
institutions (as defined in section 19(b)(1)(A) of the
Federal Reserve Act); and
``(B) the credit union establishes and maintains an office
or facility in the local community, neighborhood, or rural
district at which credit union services are available.
``(d) Multiple Common-Bond Credit Union Group
Requirements.--
[[Page H7038]]
``(1) Numerical limitation.--Except as provided in
paragraph (2), only a group with fewer than 3,000 members
shall be eligible to be included in the field of membership
category of a credit union described in subsection (b)(2).
``(2) Exceptions.--In the case of any Federal credit union,
the field of membership category of which is described in
subsection (b)(2), the numerical limitation in paragraph (1)
of this subsection shall not apply with respect to--
``(A) any group that the Board determines, in writing and
in accordance with the guidelines and regulations issued
under paragraph (3), could not feasibly or reasonably
establish a new single common-bond credit union, the field of
membership category of which is described in subsection
(b)(1) because--
``(i) the group lacks sufficient volunteer and other
resources to support the efficient and effective operation of
a credit union;
``(ii) the group does not meet the criteria that the Board
has determined to be important for the likelihood of success
in establishing and managing a new credit union, including
demographic characteristics such as geographical location of
members, diversity of ages and income levels, and other
factors that may affect the financial viability and stability
of a credit union; or
``(iii) the group would be unlikely to operate a safe and
sound credit union;
``(B) any group transferred from another credit union--
``(i) in connection with a merger or consolidation
recommended by the Board or any appropriate State credit
union supervisor based on safety and soundness concerns with
respect to that other credit union; or
``(ii) by the Board in the Board's capacity as conservator
or liquidating agent with respect to that other credit union;
or
``(C) any group transferred in connection with a voluntary
merger, having received conditional approval by the
Administration of the merger application prior to October 25,
1996, but not having consummated the merger prior to October
25, 1996, if the merger is consummated not later than 180
days after the date of enactment of the Credit Union
Membership Access Act.
``(3) Regulations and guidelines.--The Board shall issue
guidelines or regulations, after notice and opportunity for
comment, setting forth the criteria that the Board will apply
in determining under this subsection whether or not an
additional group may be included within the field of
membership category of an existing credit union described in
subsection (b)(2).
``(e) Additional Membership Eligibility Provisions.--
``(1) Membership eligibility limited to immediate family or
household members.--No individual shall be eligible for
membership in a credit union on the basis of the relationship
of the individual to another person who is eligible for
membership in the credit union, unless the individual is a
member of the immediate family or household (as those terms
are defined by the Board, by regulation) of the other person.
``(2) Retention of membership.--Except as provided in
section 118, once a person becomes a member of a credit union
in accordance with this title, that person or organization
may remain a member of that credit union until the person or
organization chooses to withdraw from the membership of the
credit union.''.
SEC. 102. CRITERIA FOR APPROVAL OF EXPANSION OF MEMBERSHIP OF
MULTIPLE COMMON-BOND CREDIT UNIONS.
Section 109 of the Federal Credit Union Act (12 U.S.C.
1759) is amended by adding at the end the following new
subsection:
``(f) Criteria for Approval of Expansion of Multiple
Common-Bond Credit Unions.--
``(1) In general.--The Board shall--
``(A) encourage the formation of separately chartered
credit unions instead of approving an application to include
an additional group within the field of membership of an
existing credit union whenever practicable and consistent
with reasonable standards for the safe and sound operation of
the credit union; and
``(B) if the formation of a separate credit union by the
group is not practicable or consistent with the standards
referred to in subparagraph (A), require the inclusion of the
group in the field of membership of a credit union that is
within reasonable proximity to the location of the group
whenever practicable and consistent with reasonable standards
for the safe and sound operation of the credit union.
``(2) Approval criteria.--The Board may not approve any
application by a Federal credit union, the field of
membership category of which is described in subsection
(b)(2) to include any additional group within the field of
membership of the credit union (or an application by a
Federal credit union described in subsection (b)(1) to
include an additional group and become a credit union
described in subsection (b)(2)), unless the Board determines,
in writing, that--
``(A) the credit union has not engaged in any unsafe or
unsound practice (as defined in section 206(b)) that is
material during the 1-year period preceding the date of
filing of the application;
``(B) the credit union is adequately capitalized;
``(C) the credit union has the administrative capability to
serve the proposed membership group and the financial
resources to meet the need for additional staff and assets to
serve the new membership group;
``(D) any potential harm that the expansion of the field of
membership of the credit union may have on any other insured
credit union and its members is clearly outweighed in the
public interest by the probable beneficial effect of the
expansion in meeting the convenience and needs of the members
of the group proposed to be included in the field of
membership; and
``(E) the credit union has met such additional requirements
as the Board may prescribe, by regulation.''.
SEC. 103. GEOGRAPHICAL GUIDELINES FOR COMMUNITY CREDIT
UNIONS.
Section 109 of the Federal Credit Union Act (12 U.S.C.
1759) is amended by adding at the end the following new
subsection:
``(g) Regulations Required for Community Credit Unions.--
``(1) Definition of well-defined local community,
neighborhood, or rural district.--The Board shall prescribe,
by regulation, a definition for the term `well-defined local
community, neighborhood, or rural district' for purposes of--
``(A) making any determination with regard to the field of
membership of a credit union described in subsection (b)(3);
and
``(B) establishing the criteria applicable with respect to
any such determination.
``(2) Scope of application.--The definition prescribed by
the Board under paragraph (1) shall apply with respect to any
application to form a new credit union, or to alter or expand
the field of membership of an existing credit union, that is
filed with the Board after the date of enactment of the
Credit Union Membership Access Act.''.
TITLE II--REGULATION OF CREDIT UNIONS
SEC. 201. FINANCIAL STATEMENT AND AUDIT REQUIREMENTS.
(a) In General.--Section 202(a)(6) of the Federal Credit
Union Act (12 U.S.C. 1782(a)(6)) is amended by adding at the
end the following new subparagraphs:
``(C) Accounting principles.--
``(i) In general.--Accounting principles applicable to
reports or statements required to be filed with the Board by
each insured credit union shall be uniform and consistent
with generally accepted accounting principles.
``(ii) Board determination.--If the Board determines that
the application of any generally accepted accounting
principle to any insured credit union is not appropriate, the
Board may prescribe an accounting principle for application
to the credit union that is no less stringent than generally
accepted accounting principles.
``(iii) De minimis exception.--This subparagraph shall not
apply to any insured credit union, the total assets of which
are less than $10,000,000, unless prescribed by the Board or
an appropriate State credit union supervisor.
``(D) Large credit union audit requirement.--
``(i) In general.--Each insured credit union having total
assets of $500,000,000 or more shall have an annual
independent audit of the financial statements of the credit
union, performed in accordance with generally accepted
auditing standards by an independent certified public
accountant or public accountant licensed by the appropriate
State or jurisdiction to perform those services.
``(ii) Voluntary audits.--If a Federal credit union that is
not required to conduct an audit under clause (i), and that
has total assets of more than $10,000,000 conducts such an
audit for any purpose, using an independent auditor who is
compensated for his or her audit services with respect to
that audit, the audit shall be performed consistent with the
accountancy laws of the appropriate State or jurisdiction,
including licensing requirements.''.
(b) Technical and Conforming Amendment.--Section
202(a)(6)(B) of the Federal Credit Union Act (12 U.S.C.
1782(a)(6)(B)) is amended by striking ``subparagraph (A)''
and inserting ``subparagraph (A) or (D)''.
SEC. 202. CONVERSION OF INSURED CREDIT UNIONS.
Section 205(b) of the Federal Credit Union Act (12 U.S.C.
1785(b)) is amended--
(1) in paragraph (1), by striking ``Except with the prior
written approval of the Board, no insured credit union
shall'' and inserting ``Except as provided in paragraph (2),
no insured credit union shall, without the prior approval of
the Board'';
(2) by redesignating paragraph (2) as paragraph (3); and
(3) by inserting after paragraph (1) the following new
paragraph:
``(2) Conversion of insured credit unions to mutual savings
banks.--
``(A) In general.--Notwithstanding paragraph (1), an
insured credit union may convert to a mutual savings bank or
savings association (if the savings association is in mutual
form), as those terms are defined in section 3 of the Federal
Deposit Insurance Act, without the prior approval of the
Board, subject to the requirements and procedures set forth
in the laws and regulations governing mutual savings banks
and savings associations.
``(B) Conversion proposal.--A proposal for a conversion
described in subparagraph (A) shall first be approved, and a
date set for a vote thereon by the members (either at a
meeting to be held on that date or by written ballot to be
filed on or before that date), by a majority of the directors
of the insured credit union. Approval of the proposal for
conversion shall be by the affirmative vote of a majority of
the members of the insured credit union who vote on the
proposal.
``(C) Notice of proposal to members.--An insured credit
union that proposes to convert to a mutual savings bank or
savings association under subparagraph (A) shall submit
notice to each of its members who is eligible to vote on the
matter of its intent to convert--
``(i) 90 days before the date of the member vote on the
conversion;
``(ii) 60 days before the date of the member vote on the
conversion; and
``(iii) 30 days before the date of the member vote on the
conversion.
``(D) Notice of proposal to board.--The Board may require
an insured credit union that proposes to convert to a mutual
savings bank or
[[Page H7039]]
savings association under subparagraph (A) to submit a notice
to the Board of its intent to convert during the 90-day
period preceding the date of the completion of the
conversion.
``(E) Inapplicability of act upon conversion.--Upon
completion of a conversion described in subparagraph (A), the
credit union shall no longer be subject to any of the
provisions of this Act.
``(F) Limit on compensation of officials.--
``(i) In general.--No director or senior management
official of an insured credit union may receive any economic
benefit in connection with a conversion of the credit union
as described in subparagraph (A), other than--
``(I) director fees; and
``(II) compensation and other benefits paid to directors or
senior management officials of the converted institution in
the ordinary course of business.
``(ii) Senior management official.--For purposes of this
subparagraph, the term `senior management official' means a
chief executive officer, an assistant chief executive
officer, a chief financial officer, and any other senior
executive officer (as defined by the appropriate Federal
banking agency pursuant to section 32(f) of the Federal
Deposit Insurance Act).
``(G) Consistent rules.--
``(i) In general.--Not later than 6 months after the date
of enactment of the Credit Union Membership Access Act, the
Administration shall promulgate final rules applicable to
charter conversions described in this paragraph that are
consistent with rules promulgated by other financial
regulators, including the Office of Thrift Supervision and
the Office of the Comptroller of the Currency. The rules
required by this clause shall provide that charter conversion
by an insured credit union shall be subject to regulation
that is no more or less restrictive than that applicable to
charter conversions by other financial institutions.
``(ii) Oversight of member vote.--The member vote
concerning charter conversion under this paragraph shall be
administered by the Administration, and shall be verified by
the Federal or State regulatory agency that would have
jurisdiction over the institution after the conversion. If
either the Administration or that regulatory agency
disapproves of the methods by which the member vote was taken
or procedures applicable to the member vote, the member vote
shall be taken again, as directed by the Administration or
the agency.''.
SEC. 203. LIMITATION ON MEMBER BUSINESS LOANS.
(a) In General.--The Federal Credit Union Act (12 U.S.C.
1701 et seq.) is amended by inserting after section 107 the
following new section:
``SEC. 107A. LIMITATION ON MEMBER BUSINESS LOANS.
``(a) In General.--On and after the date of enactment of
this section, no insured credit union may make any member
business loan that would result in a total amount of such
loans outstanding at that credit union at any one time equal
to more than the lesser of--
``(1) 1.75 times the actual net worth of the credit union;
or
``(2) 1.75 times the minimum net worth required under
section 216(c)(1)(A) for a credit union to be well
capitalized.
``(b) Exceptions.--Subsection (a) does not apply in the
case of--
``(1) an insured credit union chartered for the purpose of
making, or that has a history of primarily making, member
business loans to its members, as determined by the Board; or
``(2) an insured credit union that--
``(A) serves predominantly low-income members, as defined
by the Board; or
``(B) is a community development financial institution, as
defined in section 103 of the Community Development Banking
and Financial Institutions Act of 1994.
``(c) Definitions.--As used in this section--
``(1) the term `member business loan'--
``(A) means any loan, line of credit, or letter of credit,
the proceeds of which will be used for a commercial,
corporate or other business investment property or venture,
or agricultural purpose; and
``(B) does not include an extension of credit--
``(i) that is fully secured by a lien on a 1- to 4-family
dwelling that is the primary residence of a member;
``(ii) that is fully secured by shares in the credit union
making the extension of credit or deposits in other financial
institutions;
``(iii) that is described in subparagraph (A), if it was
made to a borrower or an associated member that has a total
of all such extensions of credit in an amount equal to less
than $50,000;
``(iv) the repayment of which is fully insured or fully
guaranteed by, or where there is an advance commitment to
purchase in full by, any agency of the Federal Government or
of a State, or any political subdivision thereof; or
``(v) that is granted by a corporate credit union (as that
term is defined by the Board) to another credit union.
``(2) the term `net worth'--
``(A) with respect to any insured credit union, means the
credit union's retained earnings balance, as determined under
generally accepted accounting principles; and
``(B) with respect to a credit union that serves
predominantly low-income members, as defined by the Board,
includes secondary capital accounts that are--
``(i) uninsured; and
``(ii) subordinate to all other claims against the credit
union, including the claims of creditors, shareholders, and
the Fund; and
``(3) the term `associated member' means any member having
a shared ownership, investment, or other pecuniary interest
in a business or commercial endeavor with the borrower.
``(d) Effect on Existing Loans.--An insured credit union
that has, on the date of enactment of this section, a total
amount of outstanding member business loans that exceeds the
amount permitted under subsection (a) shall, not later than 3
years after that date of enactment, reduce the total amount
of outstanding member business loans to an amount that is not
greater than the amount permitted under subsection (a).
``(e) Consultation and Cooperation With State Credit Union
Supervisors.--In implementing this section, the Board shall
consult and seek to work cooperatively with State officials
having jurisdiction over State-chartered insured credit
unions.''.
(b) Study and Report.--
(1) Study.--The Secretary shall conduct a study of member
business lending by insured credit unions, including--
(A) an examination of member business lending over $500,000
and under $50,000, and a breakdown of the types and sizes of
businesses that receive member business loans;
(B) a review of the effectiveness and enforcement of
regulations applicable to insured credit union member
business lending;
(C) whether member business lending by insured credit
unions could affect the safety and soundness of insured
credit unions or the National Credit Union Share Insurance
Fund;
(D) the extent to which member business lending by insured
credit unions helps to meet financial services needs of low-
and moderate-income individuals within the field of
membership of insured credit unions;
(E) whether insured credit unions that engage in member
business lending have a competitive advantage over other
insured depository institutions, and if any such advantage
could affect the viability and profitability of such other
insured depository institutions; and
(F) the effect of enactment of this Act on the number of
insured credit unions involved in member business lending and
the overall amount of commercial lending.
(2) NCUA cooperation.--The National Credit Union
Administration shall, upon request, provide such information
as the Secretary may require to conduct the study required
under paragraph (1).
(3) Report.--Not later than 12 months after the date of
enactment of this Act, the Secretary shall submit a report to
the Congress on the results of the study conducted under
paragraph (1).
SEC. 204. NATIONAL CREDIT UNION ADMINISTRATION BOARD
MEMBERSHIP.
Section 102(b) of the Federal Credit Union Act (12 U.S.C.
1752a(b)) is amended--
(1) by striking ``(b) The Board'' and inserting ``(b)
Membership and Appointment of Board.--
``(1) In general.--The Board''; and
(2) by adding at the end the following new paragraph:
``(2) Appointment criteria.--
``(A) Experience in financial services.--In considering
appointments to the Board under paragraph (1), the President
shall give consideration to individuals who, by virtue of
their education, training, or experience relating to a broad
range of financial services, financial services regulation,
or financial policy, are especially qualified to serve on the
Board.
``(B) Limit on appointment of credit union officers.--Not
more than 1 member of the Board may be appointed to the Board
from among individuals who, at the time of the appointment,
are, or have recently been, involved with any insured credit
union as a committee member, director, officer, employee, or
other institution-affiliated party.''.
SEC. 205. REPORT AND CONGRESSIONAL REVIEW REQUIREMENT FOR
CERTAIN REGULATIONS.
A regulation prescribed by the Board shall be treated as a
major rule for purposes of chapter 8 of title 5, United
States Code, if the regulation defines, or amends the
definition of--
(1) the term ``immediate family or household'' for purposes
of section 109(e)(1) of the Federal Credit Union Act (as
added by section 101 of this Act); or
(2) the term ``well-defined local community, neighborhood,
or rural district'' for purposes of section 109(g) of the
Federal Credit Union Act (as added by section 103 of this
Act).
TITLE III--CAPITALIZATION AND NET WORTH OF CREDIT UNIONS
SEC. 301. PROMPT CORRECTIVE ACTION.
(a) In General.--Title II of the Federal Credit Union Act
(12 U.S.C. 1781 et seq.) is amended by adding at the end the
following new section:
``SEC. 216. PROMPT CORRECTIVE ACTION.
``(a) Resolving Problems To Protect Fund.--
``(1) Purpose.--The purpose of this section is to resolve
the problems of insured credit unions at the least possible
long-term loss to the Fund.
``(2) Prompt corrective action required.--The Board shall
carry out the purpose of this section by taking prompt
corrective action to resolve the problems of insured credit
unions.
``(b) Regulations Required.--
``(1) Insured credit unions.--
``(A) In general.--The Board shall, by regulation,
prescribe a system of prompt corrective action for insured
credit unions that is--
``(i) consistent with this section; and
``(ii) comparable to section 38 of the Federal Deposit
Insurance Act.
``(B) Cooperative character of credit unions.--The Board
shall design the system required under subparagraph (A) to
take into account that credit unions are not-for-profit
cooperatives that--
``(i) do not issue capital stock;
``(ii) must rely on retained earnings to build net worth;
and
``(iii) have boards of directors that consist primarily of
volunteers.
``(2) New credit unions.--
``(A) In general.--In addition to regulations under
paragraph (1), the Board shall, by regulation, prescribe a
system of prompt corrective
[[Page H7040]]
action that shall apply to new credit unions in lieu of this
section and the regulations prescribed under paragraph (1).
``(B) Criteria for alternative system.--The Board shall
design the system prescribed under subparagraph (A)--
``(i) to carry out the purpose of this section;
``(ii) to recognize that credit unions (as cooperatives
that do not issue capital stock) initially have no net worth,
and give new credit unions reasonable time to accumulate net
worth;
``(iii) to create adequate incentives for new credit unions
to become adequately capitalized by the time that they
either--
``(I) have been in operation for more than 10 years; or
``(II) have more than $10,000,000 in total assets;
``(iv) to impose appropriate restrictions and requirements
on new credit unions that do not make sufficient progress
toward becoming adequately capitalized; and
``(v) to prevent evasion of the purpose of this section.
``(c) Net Worth Categories.--
``(1) In general.--For purposes of this section the
following definitions shall apply:
``(A) Well capitalized.--An insured credit union is `well
capitalized' if--
``(i) it has a net worth ratio of not less than 7 percent;
and
``(ii) it meets any applicable risk-based net worth
requirement under subsection (d).
``(B) Adequately capitalized.--An insured credit union is
`adequately capitalized' if--
``(i) it has a net worth ratio of not less than 6 percent;
and
``(ii) it meets any applicable risk-based net worth
requirement under subsection (d).
``(C) Undercapitalized.--An insured credit union is
`undercapitalized' if--
``(i) it has a net worth ratio of less than 6 percent; or
``(ii) it fails to meet any applicable risk-based net worth
requirement under subsection (d).
``(D) Significantly undercapitalized.--An insured credit
union is `significantly undercapitalized'--
``(i) if it has a net worth ratio of less than 4 percent;
or
``(ii) if--
``(I) it has a net worth ratio of less than 5 percent; and
``(II) it--
``(aa) fails to submit an acceptable net worth restoration
plan within the time allowed under subsection (f); or
``(bb) materially fails to implement a net worth
restoration plan accepted by the Board.
``(E) Critically undercapitalized.--An insured credit union
is `critically undercapitalized' if it has a net worth ratio
of less than 2 percent (or such higher net worth ratio, not
to exceed 3 percent, as the Board may specify by regulation).
``(2) Adjusting net worth levels.--
``(A) In general.--If, for purposes of section 38(c) of the
Federal Deposit Insurance Act, the Federal banking agencies
increase or decrease the required minimum level for the
leverage limit (as those terms are used in that section 38),
the Board may, by regulation, and subject to subparagraph (B)
of this paragraph, correspondingly increase or decrease 1 or
more of the net worth ratios specified in subparagraphs (A)
through (D) of paragraph (1) of this subsection in an amount
that is equal to not more than the difference between the
required minimum level most recently established by the
Federal banking agencies and 4 percent of total assets (with
respect to institutions regulated by those agencies).
``(B) Determinations required.--The Board may increase or
decrease net worth ratios under subparagraph (A) only if the
Board--
``(i) determines, in consultation with the Federal banking
agencies, that the reason for the increase or decrease in the
required minimum level for the leverage limit also justifies
the adjustment in net worth ratios; and
``(ii) determines that the resulting net worth ratios are
sufficient to carry out the purpose of this section.
``(C) Transition period required.--If the Board increases
any net worth ratio under this paragraph, the Board shall
give insured credit unions a reasonable period of time to
meet the increased ratio.
``(d) Risk-Based Net Worth Requirement for Complex Credit
Unions.--
``(1) In general.--The regulations required under
subsection (b)(1) shall include a risk-based net worth
requirement for insured credit unions that are complex, as
defined by the Board based on the portfolios of assets and
liabilities of credit unions.
``(2) Standard.--The Board shall design the risk-based net
worth requirement to take account of any material risks
against which the net worth ratio required for an insured
credit union to be adequately capitalized may not provide
adequate protection.
``(e) Earnings-Retention Requirement Applicable to Credit
Unions That Are Not Well Capitalized.--
``(1) In general.--An insured credit union that is not well
capitalized shall annually set aside as net worth an amount
equal to not less than 0.4 percent of its total assets.
``(2) Board's authority to decrease earnings-retention
requirement.--
``(A) In general.--The Board may, by order, decrease the
0.4 percent requirement in paragraph (1) with respect to a
credit union to the extent that the Board determines that the
decrease--
``(i) is necessary to avoid a significant redemption of
shares; and
``(ii) would further the purpose of this section.
``(B) Periodic review required.--The Board shall
periodically review any order issued under subparagraph (A).
``(f) Net Worth Restoration Plan Required.--
``(1) In general.--Each insured credit union that is
undercapitalized shall submit an acceptable net worth
restoration plan to the Board within the time allowed under
this subsection.
``(2) Assistance to small credit unions.--The Board (or the
staff of the Board) shall, upon timely request by an insured
credit union with total assets of less than $10,000,000, and
subject to such regulations or guidelines as the Board may
prescribe, assist that credit union in preparing a net worth
restoration plan.
``(3) Deadlines for submission and review of plans.--The
Board shall, by regulation, establish deadlines for
submission of net worth restoration plans under this
subsection that--
``(A) provide insured credit unions with reasonable time to
submit net worth restoration plans; and
``(B) require the Board to act on net worth restoration
plans expeditiously.
``(4) Failure to submit acceptable plan within time
allowed.--
``(A) Failure to submit any plan.--If an insured credit
union fails to submit a net worth restoration plan within the
time allowed under paragraph (3), the Board shall--
``(i) promptly notify the credit union of that failure; and
``(ii) give the credit union a reasonable opportunity to
submit a net worth restoration plan.
``(B) Submission of unacceptable plan.--If an insured
credit union submits a net worth restoration plan within the
time allowed under paragraph (3) and the Board determines
that the plan is not acceptable, the Board shall--
``(i) promptly notify the credit union of why the plan is
not acceptable; and
``(ii) give the credit union a reasonable opportunity to
submit a revised plan.
``(5) Accepting plan.--The Board may accept a net worth
restoration plan only if the Board determines that the plan
is based on realistic assumptions and is likely to succeed in
restoring the net worth of the credit union.
``(g) Restrictions on Undercapitalized Credit Unions.--
``(1) Restriction on asset growth.--An insured credit union
that is undercapitalized shall not generally permit its
average total assets to increase, unless--
``(A) the Board has accepted the net worth restoration plan
of the credit union for that action;
``(B) any increase in total assets is consistent with the
net worth restoration plan; and
``(C) the net worth ratio of the credit union increases at
a rate that is consistent with the net worth restoration
plan.
``(2) Restriction on member business loans.--
Notwithstanding section 107A(a), an insured credit union that
is undercapitalized may not make any increase in the total
amount of member business loans (as defined in section
107A(c)) outstanding at that credit union at any one time,
until such time as the credit union becomes adequately
capitalized.
``(h) More Stringent Treatment Based on Other Supervisory
Criteria.--With respect to the exercise of authority by the
Board under regulations comparable to section 38(g) of the
Federal Deposit Insurance Act--
``(1) the Board may not reclassify an insured credit union
into a lower net worth category, or treat an insured credit
union as if it were in a lower net worth category, for
reasons not pertaining to the safety and soundness of that
credit union; and
``(2) the Board may not delegate its authority to
reclassify an insured credit union into a lower net worth
category or to treat an insured credit union as if it were in
a lower net worth category.
``(i) Action Required Regarding Critically Undercapitalized
Credit Unions.--
``(1) In general.--The Board shall, not later than 90 days
after the date on which an insured credit union becomes
critically undercapitalized--
``(A) appoint a conservator or liquidating agent for the
credit union; or
``(B) take such other action as the Board determines would
better achieve the purpose of this section, after documenting
why the action would better achieve that purpose.
``(2) Periodic redeterminations required.--Any
determination by the Board under paragraph (1)(B) to take any
action with respect to an insured credit union in lieu of
appointing a conservator or liquidating agent shall cease to
be effective not later than the end of the 180-day period
beginning on the date on which the determination is made, and
a conservator or liquidating agent shall be appointed for
that credit union under paragraph (1)(A), unless the Board
makes a new determination under paragraph (1)(B) before the
end of the effective period of the prior determination.
``(3) Appointment of liquidating agent required if other
action fails to restore net worth.--
``(A) In general.--Notwithstanding paragraphs (1) and (2),
the Board shall appoint a liquidating agent for an insured
credit union if the credit union is critically
undercapitalized on average during the calendar quarter
beginning 18 months after the date on which the credit union
became critically undercapitalized.
``(B) Exception.--Notwithstanding subparagraph (A), the
Board may continue to take such other action as the Board
determines to be appropriate in lieu of appointment of a
liquidating agent if--
``(i) the Board determines that--
``(I) the insured credit union has been in substantial
compliance with an approved net worth restoration plan that
requires consistent improvement in the net worth of the
credit union since the date of the approval of the plan; and
``(II) the insured credit union has positive net income or
has an upward trend in earnings that the Board projects as
sustainable; and
[[Page H7041]]
``(ii) the Board certifies that the credit union is viable
and not expected to fail.
``(4) Nondelegation.--
``(A) In general.--Except as provided in subparagraph (B),
the Board may not delegate the authority of the Board under
this subsection.
``(B) Exception.--The Board may delegate the authority of
the Board under this subsection with respect to an insured
credit union that has less than $5,000,000 in total assets,
if the Board permits the credit union to appeal any adverse
action to the Board.
``(j) Review Required When Fund Incurs Material Loss.--For
purposes of determining whether the Fund has incurred a
material loss with respect to an insured credit union (such
that the inspector general of the Board must make a report),
a loss is material if it exceeds the sum of--
``(1) $10,000,000; and
``(2) an amount equal to 10 percent of the total assets of
the credit union at the time at which the Board initiated
assistance under section 208 or was appointed liquidating
agent.
``(k) Appeals Process.--Material supervisory
determinations, including decisions to require prompt
corrective action, made pursuant to this section by
Administration officials other than the Board may be appealed
to the Board pursuant to the independent appellate process
required by section 309 of the Riegle Community Development
and Regulatory Improvement Act of 1994 (or, if the Board so
specifies, pursuant to separate procedures prescribed by
regulation).
``(l) Consultation and Cooperation With State Credit Union
Supervisors.--
``(1) In general.--In implementing this section, the Board
shall consult and seek to work cooperatively with State
officials having jurisdiction over State-chartered insured
credit unions.
``(2) Evaluating net worth restoration plan.--In evaluating
any net worth restoration plan submitted by a State-chartered
insured credit union, the Board shall seek the views of the
State official having jurisdiction over the credit union.
``(3) Deciding whether to appoint conservator or
liquidating agent.--With respect to any decision by the Board
on whether to appoint a conservator or liquidating agent for
a State-chartered insured credit union--
``(A) the Board shall--
``(i) seek the views of the State official having
jurisdiction over the credit union; and
``(ii) give that official an opportunity to take the
proposed action;
``(B) the Board shall, upon timely request of an official
referred to in subparagraph (A), promptly provide the
official with--
``(i) a written statement of the reasons for the proposed
action; and
``(ii) reasonable time to respond to that statement;
``(C) if the official referred to in subparagraph (A) makes
a timely written response that disagrees with the proposed
action and gives reasons for that disagreement, the Board
shall not appoint a conservator or liquidating agent for the
credit union, unless the Board, after considering the views
of the official, has determined that--
``(i) the Fund faces a significant risk of loss with
respect to the credit union if a conservator or liquidating
agent is not appointed; and
``(ii) the appointment is necessary to reduce--
``(I) the risk that the Fund would incur a loss with
respect to the credit union; or
``(II) any loss that the Fund is expected to incur with
respect to the credit union; and
``(D) the Board may not delegate any determination under
subparagraph (C).
``(m) Corporate Credit Unions Exempted.--This section does
not apply to any insured credit union that--
``(1) operates primarily for the purpose of serving credit
unions; and
``(2) permits individuals to be members of the credit union
only to the extent that applicable law requires that such
persons own shares.
``(n) Other Authority Not Affected.--This section does not
limit any authority of the Board or a State to take action in
addition to (but not in derogation of) that required under
this section.
``(o) Definitions.--For purposes of this section the
following definitions shall apply:
``(1) Federal banking agency.--The term `Federal banking
agency' has the same meaning as in section 3 of the Federal
Deposit Insurance Act.
``(2) Net worth.--The term `net worth'--
``(A) with respect to any insured credit union, means
retained earnings balance of the credit union, as determined
under generally accepted accounting principles; and
``(B) with respect to a low-income credit union, includes
secondary capital accounts that are--
``(i) uninsured; and
``(ii) subordinate to all other claims against the credit
union, including the claims of creditors, shareholders, and
the Fund.
``(3) Net worth ratio.--The term `net worth ratio' means,
with respect to a credit union, the ratio of the net worth of
the credit union to the total assets of the credit union.
``(4) New credit union.--The term `new credit union' means
an insured credit union that--
``(A) has been in operation for less than 10 years; and
``(B) has not more than $10,000,000 in total assets.''.
(b) Conservatorship and Liquidation Amendments To
Facilitate Prompt Corrective Action.--
(1) Conservatorship.--Section 206(h) of the Federal Credit
Union Act (12 U.S.C. 1786(h)) is amended--
(A) in paragraph (1)--
(i) in subparagraph (D), by striking ``or'' at the end;
(ii) in subparagraph (E), by striking the period at the end
and inserting a semicolon; and
(iii) by adding at the end the following new subparagraphs:
``(F) the credit union is significantly undercapitalized,
as defined in section 216, and has no reasonable prospect of
becoming adequately capitalized, as defined in section 216;
or
``(G) the credit union is critically undercapitalized, as
defined in section 216.''; and
(B) in paragraph (2)--
(i) in subparagraph (A), by striking ``In the case'' and
inserting ``Except as provided in subparagraph (C), in the
case''; and
(ii) by adding at the end the following new subparagraph:
``(C) In the case of a State-chartered insured credit
union, the authority conferred by subparagraphs (F) and (G)
of paragraph (1) may not be exercised unless the Board has
complied with section 216(l).''.
(2) Liquidation.--Section 207(a) of the Federal Credit
Union Act (12 U.S.C. 1787(a)) is amended--
(A) in paragraph (1)(A), by striking ``himself'' and
inserting ``itself''; and
(B) by adding at the end the following new paragraph:
``(3) Liquidation to facilitate prompt corrective action.--
The Board may close any credit union for liquidation, and
appoint itself or another (including, in the case of a State-
chartered insured credit union, the State official having
jurisdiction over the credit union) as liquidating agent of
that credit union, if--
``(A) the Board determines that--
``(i) the credit union is significantly undercapitalized,
as defined in section 216, and has no reasonable prospect of
becoming adequately capitalized, as defined in section 216;
or
``(ii) the credit union is critically undercapitalized, as
defined in section 216; and
``(B) in the case of a State-chartered insured credit
union, the Board has complied with section 216(l).''.
(c) Consultation Required.--In developing regulations to
implement section 216 of the Federal Credit Union Act (as
added by subsection (a) of this section), the Board shall
consult with the Secretary, the Federal banking agencies, and
the State officials having jurisdiction over State-chartered
insured credit unions.
(d) Deadlines for Regulations.--
(1) In general.--Except as provided in paragraph (2), the
Board shall--
(A) publish in the Federal Register proposed regulations to
implement section 216 of the Federal Credit Union Act (as
added by subsection (a) of this section) not later than 270
days after the date of enactment of this Act; and
(B) promulgate final regulations to implement that section
216 not later than 18 months after the date of enactment of
this Act.
(2) Risk-based net worth requirement.--
(A) Advance notice of proposed rulemaking.--Not later than
180 days after the date of enactment of this Act, the Board
shall publish in the Federal Register an advance notice of
proposed rulemaking, as required by section 216(d) of the
Federal Credit Union Act, as added by this Act.
(B) Final regulations.--The Board shall promulgate final
regulations, as required by that section 216(d) not later
than 2 years after the date of enactment of this Act.
(e) Effective Date.--
(1) In general.--Except as provided in paragraph (2),
section 216 of the Federal Credit Union Act (as added by this
section) shall become effective 2 years after the date of
enactment of this Act.
(2) Risk-based net worth requirement.--Section 216(d) of
the Federal Credit Union Act (as added by this section) shall
become effective on January 1, 2001.
(f) Report to Congress Required.--When the Board publishes
proposed regulations pursuant to subsection (d)(1)(A), or
promulgates final regulations pursuant to subsection
(d)(1)(B), the Board shall submit to the Congress a report
that specifically explains--
(1) how the regulations carry out section 216(b)(1)(B) of
the Federal Credit Union Act (as added by this section),
relating to the cooperative character of credit unions; and
(2) how the regulations differ from section 38 of the
Federal Deposit Insurance Act, and the reasons for those
differences.
(g) Conforming Amendments.--
(1) Amendments relating to enforcement of prompt corrective
action.--Section 206(k) of the Federal Credit Union Act (12
U.S.C. 1786(k)) is amended--
(A) in paragraph (1), by inserting ``or section 216'' after
``this section'' each place it appears; and
(B) in paragraph (2)(A)(ii), by inserting ``, or any final
order under section 216'' before the semicolon.
(2) Conforming amendment regarding appointment of state
credit union supervisor as conservator.--Section 206(h)(1) of
the Federal Credit Union Act (12 U.S.C. 1786(h)(1)) is
amended by inserting ``or another (including, in the case of
a State-chartered insured credit union, the State official
having jurisdiction over the credit union)'' after ``appoint
itself''.
(3) Amendment repealing superseded provision.--Section 116
of the Federal Credit Union Act (12 U.S.C. 1762) is repealed.
SEC. 302. NATIONAL CREDIT UNION SHARE INSURANCE FUND EQUITY
RATIO, AVAILABLE ASSETS RATIO, AND STANDBY
PREMIUM CHARGE.
(a) In General.--Section 202 of the Federal Credit Union
Act (12 U.S.C. 1782) is amended--
(1) by striking subsection (b) and inserting the following:
``(b) Certified Statement.--
``(1) Statement required.--
``(A) In general.--For each calendar year, in the case of
an insured credit union with total assets of not more than
$50,000,000, and for each semi-annual period in the case of
an insured credit union with total assets of $50,000,000 or
[[Page H7042]]
more, an insured credit union shall file with the Board, at
such time as the Board prescribes, a certified statement
showing the total amount of insured shares in the credit
union at the close of the relevant period and both the amount
of its deposit or adjustment of deposit and the amount of the
insurance charge due to the Fund for that period, both as
computed under subsection (c).
``(B) Exception for newly insured credit union.--
Subparagraph (A) shall not apply with respect to a credit
union that became insured during the reporting period.
``(2) Form.--The certified statements required to be filed
with the Board pursuant to this subsection shall be in such
form and shall set forth such supporting information as the
Board shall require.
``(3) Certification.--The president of the credit union or
any officer designated by the board of directors shall
certify, with respect to each statement required to be filed
with the Board pursuant to this subsection, that to the best
of his or her knowledge and belief the statement is true,
correct, complete, and in accordance with this title and the
regulations issued under this title.'';
(2) in subsection (c)(1)(A), by striking clause (iii) and
inserting the following:
``(iii) Periodic adjustment.--The amount of each insured
credit union's deposit shall be adjusted as follows, in
accordance with procedures determined by the Board, to
reflect changes in the credit union's insured shares:
``(I) annually, in the case of an insured credit union with
total assets of not more than $50,000,000; and
``(II) semi-annually, in the case of an insured credit
union with total assets of $50,000,000 or more.'';
(3) in subsection (c), by striking paragraphs (2) and (3)
and inserting the following:
``(2) Insurance premium charges.--
``(A) In general.--Each insured credit union shall, at such
times as the Board prescribes (but not more than twice in any
calendar year), pay to the Fund a premium charge for
insurance in an amount stated as a percentage of insured
shares (which shall be the same for all insured credit
unions).
``(B) Relation of premium charge to equity ratio of fund.--
The Board may assess a premium charge only if--
``(i) the Fund's equity ratio is less than 1.3 percent; and
``(ii) the premium charge does not exceed the amount
necessary to restore the equity ratio to 1.3 percent.
``(C) Premium charge required if equity ratio falls below
1.2 percent.--If the Fund's equity ratio is less than 1.2
percent, the Board shall, subject to subparagraph (B), assess
a premium charge in such an amount as the Board determines to
be necessary to restore the equity ratio to, and maintain
that ratio at, 1.2 percent.
``(3) Distributions from fund required.--
``(A) In general.--The Board shall effect a pro rata
distribution to insured credit unions after each calendar
year if, as of the end of that calendar year--
``(i) any loans to the Fund from the Federal Government,
and any interest on those loans, have been repaid;
``(ii) the Fund's equity ratio exceeds the normal operating
level; and
``(iii) the Fund's available assets ratio exceeds 1.0
percent.
``(B) Amount of distribution.--The Board shall distribute
under subparagraph (A) the maximum possible amount that--
``(i) does not reduce the Fund's equity ratio below the
normal operating level; and
``(ii) does not reduce the Fund's available assets ratio
below 1.0 percent.
``(C) Calculation based on certified statements.--In
calculating the Fund's equity ratio and available assets
ratio for purposes of this paragraph, the Board shall
determine the aggregate amount of the insured shares in all
insured credit unions from insured credit unions certified
statements under subsection (b) for the final reporting
period of the calendar year referred to in subparagraph
(A).'';
(4) in subsection (c), by adding at the end the following
new paragraph:
``(4) Timeliness and accuracy of data.--In calculating the
available assets ratio and equity ratio of the Fund, the
Board shall use the most current and accurate data reasonably
available.''; and
(5) by striking subsection (h) and inserting the following:
``(h) Definitions.--For purposes of this section, the
following definitions shall apply:
``(1) Available assets ratio.--The term `available assets
ratio', when applied to the Fund, means the ratio of--
``(A) the amount determined by subtracting--
``(i) direct liabilities of the Fund and contingent
liabilities for which no provision for losses has been made,
from
``(ii) the sum of cash and the market value of unencumbered
investments authorized under section 203(c), to
``(B) the aggregate amount of the insured shares in all
insured credit unions.
``(2) Equity ratio.--The term `equity ratio', when applied
to the Fund, means the ratio of--
``(A) the amount of Fund capitalization, including insured
credit unions' 1 percent capitalization deposits and the
retained earnings balance of the Fund (net of direct
liabilities of the Fund and contingent liabilities for which
no provision for losses has been made); to
``(B) the aggregate amount of the insured shares in all
insured credit unions.
``(3) Insured shares.--The term `insured shares', when
applied to this section, includes share, share draft, share
certificate, and other similar accounts as determined by the
Board, but does not include amounts exceeding the insured
account limit set forth in section 207(c)(1).
``(4) Normal operating level.--The term `normal operating
level', when applied to the Fund, means an equity ratio
specified by the Board, which shall be not less than 1.2
percent and not more than 1.5 percent.''.
(b) Effective Date.--This section and the amendments made
by this section shall become effective on January 1 of the
first calendar year beginning more than 180 days after the
date of enactment of this Act.
SEC. 303. ACCESS TO LIQUIDITY.
Section 204 of the Federal Credit Union Act (12 U.S.C.
1784) is amended by adding at the end the following new
subsections:
``(f) Access to Liquidity.--The Board shall--
``(1) periodically assess the potential liquidity needs of
each insured credit union, and the options that the credit
union has available for meeting those needs; and
``(2) periodically assess the potential liquidity needs of
insured credit unions as a group, and the options that
insured credit unions have available for meeting those needs.
``(g) Sharing Information With Federal Reserve Banks.--The
Board shall, for the purpose of facilitating insured credit
unions' access to liquidity, make available to the Federal
reserve banks (subject to appropriate assurances of
confidentiality) information relevant to making advances to
such credit unions, including the Board's reports of
examination.''.
TITLE IV--MISCELLANEOUS PROVISIONS
SEC. 401. STUDY AND REPORT ON DIFFERING REGULATORY TREATMENT.
(a) Study.--The Secretary shall conduct a study of--
(1) the differences between credit unions and other
federally insured financial institutions, including
regulatory differences with respect to regulations enforced
by the Office of Thrift Supervision, the Office of the
Comptroller of the Currency, the Federal Deposit Insurance
Corporation, and the Administration; and
(2) the potential effects of the application of Federal
laws, including Federal tax laws, on credit unions in the
same manner as those laws are applied to other federally
insured financial institutions.
(b) Report.--Not later than 1 year after the date of
enactment of this Act, the Secretary shall submit a report to
the Congress on the results of the study required by
subsection (a).
SEC. 402. UPDATE ON REVIEW OF REGULATIONS AND PAPERWORK
REDUCTIONS.
Not later than 1 year after the date of enactment of this
Act, the Federal banking agencies shall submit a report to
the Congress detailing their progress in carrying out section
303(a) of the Riegle Community Development and Regulatory
Improvement Act of 1994, since their submission of the report
dated September 23, 1996, as required by section 303(a)(4) of
that Act.
SEC. 403. TREASURY REPORT ON REDUCED TAXATION AND VIABILITY
OF SMALL BANKS.
The Secretary shall, not later than 1 year after the date
of enactment of this Act, submit a report to the Congress
containing--
(1) recommendations for such legislative and administrative
action as the Secretary deems appropriate, that would reduce
and simplify the tax burden for--
(A) insured depository institutions having less than
$1,000,000,000 in assets; and
(B) banks having total assets of not less than
$1,000,000,000 nor more than $10,000,000,000; and
(2) any other recommendations that the Secretary deems
appropriate that would preserve the viability and growth of
small banking institutions in the United States.
The SPEAKER pro tempore. Pursuant to the rule, the gentleman from
Iowa (Mr. Leach) and the gentleman from New York (Mr. LaFalce) each
will control 20 minutes.
The Chair recognizes the gentleman from Iowa (Mr. Leach).
Mr. LEACH. Mr. Speaker, I yield myself such time as I may consume.
(Mr. LEACH asked and was given permission to revise and extend his
remarks.)
{time} 1145
Mr. LEACH. Mr. Speaker, before the House today is the Senate
amendment to H.R. 1151, the Credit Union Membership Access Act. If the
House concurs in the Senate amendment, a step I strongly encourage,
this important legislation will be cleared for the President for his
expected signature, thereby ensuring that millions of Americans will
not be forced out of the financial institution of their choice.
This body originally approved the credit union bill on April 1 by a
vote of 411-8 and the Senate last week acted by vote of 92-6. This
legislation is in response to a 5-4 Supreme Court decision earlier this
year which overturned the National Credit Union Administration's
interpretation of the 1934 Federal Credit Union Act on what the
appropriate common bond should be for Federal credit unions. If the
Supreme Court decision were to stand, not only could millions of credit
union members be kicked out of their financial institution, but the
safety and soundness of the entire credit union system would have been
jeopardized.
The Senate amendment generally incorporates the House approach to the
credit union issue, especially as it relates to the common bond issue,
but
[[Page H7043]]
there are four major differences between the House and the Senate
versions. First, the Senate amendment does not impose community
reinvestment-like requirements on State and federally chartered credit
unions. The House version would have. Second, the Senate amendment
limits the total amount of member business loans to approximately 12
percent of a credit union's assets. The House bill would have frozen
current NCUA restrictions on commercial lending for one year. Third,
the Senate amendment expands upon the prompt corrective action
provisions contained in the House bill, which generally would have
called on the regulator to issue regulations comparable to those
imposed on banks and thrifts under the FDIC Act. The Senate version
provides somewhat greater detail. Finally, the Senate amendment struck
the House provisions limiting the economic benefit directors or
officers could receive from a conversion of the credit union to a stock
form of company. These Senate changes, while not in all instances
improvements to the House position, are generally acceptable given that
the broad approach of the House has been maintained.
The Supreme Court case was brought by the banking industry because of
a perceived difference in the regulatory and tax treatment of credit
unions. There is particular angst among bankers that this legislation
does not repeal the tax exempt status of credit unions. However, this
issue was not broached in the Supreme Court and the Banking Committee
from which this bill originated has no jurisdiction over Federal tax
laws. Beyond this, this Congress has little appetite for imposing new
taxes. But taxes aside, the competitive regulatory playing field
between banks and credit unions is pretty well evened out under this
legislation. For instance, the new capital standards and prompt
corrective regulatory requirements imposed on credit unions under this
bill are similar to those imposed on banks and will ensure the
continued safety and soundness of operation of credit unions.
In a financial services world where the big are getting bigger from
the top down, consumers are increasingly showing their desire to
maintain the option of being served by community-controlled
institutions, whether they be community banks, savings and loans or
credit unions.
It is therefore critical that this Congress do everything in its
power to ensure that smaller, community-controlled institutions are
provided the means to compete and prosper in the marketplace.
Credit unions, just one part on the cooperative movement side which
have so advantaged American society, represent democracy at work in the
marketplace. In protecting them, in legitimizing them, this legislation
deserves support. I would strongly suggest a ``yes'' vote on accepting
the Senate amendment. I would also strongly urge that the President
sign this important legislation.
Mr. Speaker, I reserve the balance of my time.
Mr. LaFALCE. Mr. Speaker, I yield myself such time as I may consume.
(Mr. LaFalce asked and was given permission to revise and extend his
remarks.)
Mr. LaFALCE. Mr. Speaker, in February, the Supreme Court challenged
the Congress to answer a difficult policy question, whether to uphold
the narrow interpretation of the 60-year-old Federal Credit Union Act
or expand the scope of the act to permit credit unions to serve a
broader segment of the American public. Today we are giving a
definitive answer to that question. I am pleased to say the answer is a
resounding ``yes'' to credit union expansion, ``yes'' to preserving the
membership rights of all current credit union members, and ``yes'' to
making credit union services available to even greater numbers of
American families.
The Senate-passed bill we are considering today incorporates
virtually every single one of the key elements of the bipartisan
compromise that we passed on April 1 in the House of Representatives
with an overwhelming 411-8 vote. First and foremost it protects the
membership of every current credit union member and every group within
a credit union. It also permits common bonds credit unions to continue
to expand their field of membership by including new occupation and
association based groups. The bill limits this expansion, however,
first by requiring the creation of new separate common bond credit
unions wherever feasible; secondly, by limiting the size of new groups
to under 3,000 members; and, third, by requiring that these smaller
groups be included within a credit union that is located within
reasonable proximity to the group, thus reinforcing a geographic common
bond. This proximity requirement is extremely important, one that I
insisted upon, to ensure that we could maintain to the maximum extent
feasible the closest practicable geographic common bond. These core
elements of this legislation, I am proud to say, follow the basic
outline of a set of proposals I circulated last November to encourage
discussion of a compromise on the field of membership issue. And like
my original proposal, this legislation balances expansion of credit
union membership with preservation of the traditional credit union
values of common bond and common community.
While this legislation answers the question raised by the court and
resolves several other key credit union issues, it does include two
Senate changes that House Members should be aware of. It deletes House
language reaffirming the credit union's obligation to serve persons of
modest means within their field of membership. Let me emphasize that
this House provision only restated a long-understood obligation of
credit unions to serve all potential members, and it attempted to
provide greater parity in regulatory treatment between credit unions
and other financial institutions. The provision should not have been
dropped, but the regulators should enforce its existing law,
understanding that we simply attempted to reaffirm existing law.
A second change in the Senate amendment is the weakening of current
regulatory and voting requirements for credit union conversions to
mutual savings institutions. Currently a credit union cannot convert
its charter without an affirmative vote of the majority of all its
members. The Senate changed this to require only a majority of the
members who participate in a conversion vote. The Senate made no
provision to assure adequate and effective notice for a conversion
vote. Thus under the Senate provision, it is conceivable for a small
fraction of a credit union's membership either by manipulation or
inadequate notice to convert a credit union and deprive the
overwhelming majority of members of their ownership rights and credit
union services. This is an inappropriate change that could without very
strict regulation and supervision facilitate the slow undoing of our
credit union system. I intend to work with the gentleman from Iowa (Mr.
Leach) to address this issue within another context, and I call for the
maximum reasonable regulation and supervision permissible by the
regulator.
While these aspects of the bill continue to concern me, they are
clearly outweighed by the significant improvements the bill makes in
the Credit Union Act and by the need for immediate action to resolve
the pressing issues raised by the Supreme Court. I believe this is one
of the most important bills Congress will consider this year, an
important victory for the credit unions and most importantly a
tremendous victory for the American consumers.
Mr. Speaker, I reserve the balance of my time.
Mr. LEACH. Mr. Speaker, I yield 2 minutes to the honorable gentleman
from Ohio (Mr. LaTourette) whose leadership on this issue has been
unparalleled. It is his bill and to him a principal amount of the
credit for its being brought to the floor is due.
Mr. LaTOURETTE. I thank the gentleman for yielding me this time. Mr.
Speaker, today's floor activity brings to conclusion hopefully a long
journey for H.R. 1151, the Credit Union Membership Access Act, although
I suppose in legislative or dog years it is rather a quick journey. For
that I take to the floor today and I want to thank a number of people,
the gentleman from Georgia (Mr. Gingrich), the Speaker of the House,
for getting behind this bill, the gentleman from Iowa (Mr. Leach) for
his guidance and leadership throughout the course of this legislative
process, the gentleman from New York (Mr. LaFalce), the gentlewoman
from New Jersey (Mrs. Roukema) and
[[Page H7044]]
also the gentleman from Minnesota (Mr. Vento) for all of their hard
work, and without a doubt the original cosponsor of this bill the
gentleman from Pennsylvania (Mr. Kanjorski).
In the early part of the year, those were lonely times. Although we
were aided by powerful allies on both sides of the aisle, the minority
whip the gentleman from Michigan (Mr. Bonior) on his side and such
powerhouses on our side as the gentleman from New York (Mr. Solomon),
the chairman of the Committee on Rules, and the gentleman from
Louisiana (Mr. Livingston), the chairman of the Committee on
Appropriations, it was a long process.
Credit unions should also be thankful for the quick action, Mr.
Speaker, taken by the more deliberative body on the other side of the
Capitol which has a history of not moving as quickly as it has in this
particular instance. I am particularly thankful to the chairman of the
Senate Banking Committee. Although the rules of the House prohibit me
from naming him by name, I would suggest that his surname rhymes with
``tomato.''
Although every bill has blemishes, Mr. Speaker, upon which each of us
might wish to apply some astringent, H.R. 1151 in its current form is a
good bill that needs to move forward before the end of this session.
The reason that baseball is America's pastime is that it has no clock.
It is over when the 27th out is recorded. Football and basketball have
a clock. The clock is ticking on this session of the Congress. We need
to get this bill on the President's desk. The millions of depositors
and share account owners of credit unions need this matter resolved
today.
Concerns about CRA type requirements and charter conversions can be
addressed in other legislation. The gentleman from New York (Mr.
LaFalce) has already so eloquently addressed that in his statement. But
today is the day, Mr. Speaker, that Clarence the angel who helped
George Bailey in It's A Wonderful Life should get his wings and credit
union members across this country should get relief.
Mr. LaFALCE. Mr. Speaker, I yield 3\1/2\ minutes to the
distinguished gentleman from Pennsylvania (Mr. Kanjorski), the
principal author of the original version of H.R. 1151.
Mr. KANJORSKI. Mr. Speaker, in order to ensure that provisions of
this legislation are understood and future lawsuits are prevented, I
would like to engage in a colloquy with my distinguished colleague from
Iowa.
Is it the gentleman's understanding that the definition of a single
common bond credit union does not preclude a credit union from having
subgroups in its field of membership as long as the subgroups share the
same common bond of association or occupation?
Mr. LEACH. Mr. Speaker, will the gentleman yield?
Mr. KANJORSKI. I yield to the gentleman from Iowa.
Mr. LEACH. The gentleman is correct. The definition of a single
common bond credit union does not preclude subgroups, but all such
subgroups must have the same common bond of occupation or association.
Mr. KANJORSKI. The bill includes language grandfathering persons and
groups which were members of a credit union or eligible for membership
in a credit union prior to the Supreme Court decision. Is it my
understanding that these grandfather provisions apply to community
credit unions as well as to multi-group and single group credit unions?
Mr. LEACH. That is correct. Let me just add one thought, that I want
to thank the gentleman personally for his leadership on this issue. He
played a very extraordinary role.
Mr. KANJORSKI. I thank the gentleman. I have a colloquy I would like
to engage in with my colleague from New York. It is my understanding
that if a business sells off or spins off an operating unit or
subsidiary, both current and future employees of the operating unit or
subsidiary remain eligible for membership in a credit union, is that
correct?
Mr. LaFALCE. Mr. Speaker, will the gentleman yield?
Mr. KANJORSKI. I yield to the gentleman from New York.
Mr. LaFALCE. That is my understanding, yes, I believe the gentleman
is correct. The definition of a single common bond credit union does
not preclude subgroups, but all such subgroups must have the same
common bond of occupation or association. Furthermore, nothing in H.R.
1151 was intended to preclude new employees of companies that have been
spun off from a credit union's original sponsoring group from becoming
eligible for membership in the original parent company's credit union.
Mr. KANJORSKI. Mr. Speaker, I rise today to thank all of my
colleagues and most especially the gentleman from Ohio (Mr.
LaTourette). It is very seldom in this House that through the
participation in the process of legislation, one forms a friendship and
a common bond and not unlike a friendship I developed with a colleague
many years ago in first coming to this House, I have found the
beginning of that type of friendship with the gentleman from Ohio. I
cherish it, I cherish the process and the experience we have had.
{time} 1200
I also want to thank the chairman of the committee, the gentleman
from Iowa (Mr. Leach), the ranking member, the gentleman from New York
(Mr. LaFalce), the subcommittee chairman, the gentlewoman from New
Jersey (Mrs. Roukema), and the ranking member, the gentleman from
Minnesota (Mr. Vento). With all these individuals, and many more, it
was their work product that brought this legislation forth today.
It would be remiss of me also not to make mention of the chairman and
ranking member of the Senate. They took our text basically as their
markup vehicle, worked from it and kept 75 percent of it, and the
portions they added were good portions except for the two minor parts
that the gentleman from New York (Mr. LaFalce) identified, and we will
work with him in the future to correct them.
Finally, Madam Speaker, the people who really should be thanked the
most are the 70 million members of the credit movement across this
country. Truly in a very cooperative effort they came together,
contacted their representatives in this body and the Senate, and
prevailed upon them to pass this enlightening legislation. I would say
it was a victory of David over Goliath. Indeed it proves that a
cooperative effort in America can win, and I would like to apologize to
Abraham Lincoln, but I would like to say that today in the spirit of
credit unions, it is of the people, by the people and for the people,
that they, through this legislation, shall not perish from the earth.
Mr. Speaker, in order to expedite consideration of this important
legislation, it is being considered today under suspension of the
rules, which limits total debate time to 20 minutes on each side of the
aisle. As a result, it is not possible to address all of the issues we
would like to address if we had additional time.
I have already expressed my deep appreciation and thanks to my
colleague from Ohio (Mr. LaTourette) who had the courage to join me in
sponsoring this legislation when many of our colleagues thought we were
titling against windmills.
I have also expressed my appreciation to the distinguished Chairman
of the Committee, (Mr. Leach) who was at all times fair, courteous and
supportive. I also want to thank the ranking Democratic Member (Mr.
LaFalce), the Chairwoman of the Financial Institutions Subcommittee
(Mrs. Roukema), the ranking Democratic Member of the Subcommittee (Mr.
Vento), and all of their staffs, who worked long and hard to help
produce the bipartisan legislation we are considering today. All of
their leadership is greatly appreciated.
Also making a major contribution today's bill is Assistant Secretary
of the Treasury Rick Carnell who helped perfect the title of the bill
strengthening capital requirements for credit unions, the credit union
share insurance fund, and the authority of the National Credit Union
Administration to take prompt corrective action against troubled credit
unions.
National Credit Union Administration Chairman Norm D'Amours, and the
members of the board, also provided their unwavering support for our
legislation.
The members of the other body, particularly the chairman and ranking
Democratic member of the Banking Committee, must also be commended for
acting so promptly on the House-passed bill, and for making only a few
changes in it.
And last, and certainly not least, I want to thank the millions of
Americans across our national who took the time to explain to their
Congressmen and Senators how important their credit union was to them.
It is their hard work that made this victory possible.
[[Page H7045]]
It is their hard work that demonstrates what being a member of a
voluntary, not-for-profit, cooperative means.
It is their hard work that demonstrates the strength of the
cooperative movement.
Mr. Speaker, the court decision we overturn today threatened
financial accounts held by tens of millions of average American working
families. It also jeopardized the safety and soundness of thousands of
credit unions and the National Credit Union Share Insurance Fund.
In my home state of Pennsylvania alone the safety and soundness of
367 credit unions serving nearly two million members and their family
were endangered by the court decision.
In addition, if allowed to stand the court decision would have
discriminated against the employees of small businesses who would have
been effectively denied the right to choose a credit union for their
financial services. Yet employees of small businesses are among the
persons of small means most likely to benefit from credit union
membership.
Mr. Speaker, as the co-author of the Credit Union Membership Access
Act, there are a number of technical provisions contained in it which
need elaboration, particularly since there will be no formal conference
report on the bill.
One amendment added by the other body provides a specific retroactive
exception from the multiple common bond requirements for a specific
voluntary merger that was in progress when the court decision took
effect.
I want to make it clear that in granting this specific retroactive
exception from the multiple common bond requirements we are not in any
way diminishing the existing authority of the National Credit Union
authority under section 205 of the Federal Credit Union Act to grant or
withhold approval for voluntary mergers of credit unions.
All of the federal banking regulators, including the National Credit
Union Administration, have broad authority to approve and disapprove
mergers of institutions under their jurisdiction, and this legislation
is not intended to obstruct that authority in any way.
Another important provision in this bill explicitly authorizes
multiple group credit unions to include underserved areas in their
field of membership. This is a provision which incorporates the
principles of legislation originally introduced by the gentleman from
Texas (Mr. Frost).
Providing service to underserved areas, which are defined in the bill
and by NCUA regulations, helps all credit unions fulfill their mandate
to serve persons of small means. It is integral to the spirit of the
credit union movement.
By including explicit language authorizing multiple group credit
unions to include underserved areas in their field of membership, we
are not in any way restricting the ability of the National Credit Union
Administration to allow community and single group credit unions to
include underserved areas in their fields of membership.
Precluding community credit unions from serving underserved areas
would be contrary to their reason for existence.
Similarly, precluding single group credit unions from serving
underserved areas makes no sense and would only add paperwork and
regulatory burden for both credit unions and the NCUA since virtually
any single group credit union can apply to add an additional group to
its field of membership, thus becoming a multiple group credit union.
Single group credit unions are a subset of multiple group credit unions
and it was never intended, and would make no sense, for multiple group
credit unions to have this authority, and for single group credit
unions not to have similar authority.
In the area of member business loans, the Senate amendments also
provide an important exception to the limitation on member business
loans for credit unions that are chartered for the purpose of, or have
a history of, primarily making member business loans to their members
as determined by the National Credit Union Administration.
Under the bill the NCUA has broad authority to determine whether a
credit union is chartered for the purpose of, or has a history of
primarily making, member business loans to its members. This broad
authority is important because member business loans need not be the
largest category of loans in order for a credit union to qualify for
this exception.
Member business lending merely needs to constitute a significant
portion of the portfolio or a significant number of loans in order for
the NCUA to determine that a credit union is eligible for this
exception.
Secretary of the Treasury Robert Rubin has confirmed to us that
member business loans by credit unions are not a safety and soundness
problem. Quite to the contrary, member business loans are an important
authority for community credit unions, and all credit unions, as they
attempt to meet all of the credit needs of their members and their
communities. More competition in this area, where many persons of small
means have difficulty obtaining credit, must be encouraged by the
Congress and the National Credit Union Administration.
Finally, Mr. Chairman, there are two changes made by the Senate
amendment which I hope we will be able to revisit at some point in the
future. By a relatively narrow margin the other body voted to delete
from bill provisions strengthening the obligation of credit unions to
meet the financial services needs of persons of modest means. This
deletion was unfortunate because this provision in the House bill
helped to keep credit unions focused on their primary purpose.
Similarly, I was extremely disappointed by the deletion of the
provisions drafted by Chairman Leach designed to prevent insider self-
dealing when a credit union converts to a mutual savings bank and from
a mutual savings bank to a stock institution. This same amendment also
greatly weakened the safeguards that exist in current law to prevent
quickie conversions without approval by a reasonable, and informed,
proportion of the membership.
These changes open the door to the kind of fraud and abuse that we
saw all too often during the savings and loan debacle. I hope that
federal and state banking regulators will use their oversight authority
over any proposed conversions to ensure that consumers are not
defrauded and insiders are not enriched. I also look forward to working
with the Chairman and ranking Democratic member to correct these
provisions in future legislation.
Mr. LEACH. Madam Speaker, I yield 2 minutes to the gentleman from New
York (Mr. Solomon), our distinguished chairman of the Committee on
Rules.
Mr. SOLOMON. Madam Speaker, I thank the gentleman from Iowa for
yielding me this time, and I certainly salute him for his stewardship
over this legislation; and I want to salute the gentleman from Ohio
(Mr. LaTourette) and the gentleman from Pennsylvania (Mr. Kanjorski)
for having the courage to introduce this legislation, first of all, and
then drive this legislation through the Congress. It was a time when
many, in my opinion rather arrogantly, tried to keep this legislation
from even reaching the floor, and I was pleased to assist these two
fine gentlemen in making sure that that did not happen.
Madam Speaker, following the Supreme Court's February ruling relating
to membership in the Nation's credit unions this issue has been among
the most pressing this Congress has had to address in many years, and I
am pleased that the Congress has acted in a bipartisan fashion to
preserve current and future memberships in credit unions. Credit union
members have looked to this Congress for a long time now to end any
uncertainty which may have resulted from the Supreme Court decision.
This legislation guarantees that millions of credit union members,
including me and probably you, Madam Speaker, will not be turned away
from their credit unions.
And, Madam Speaker, these cooperative organizations count some 70
million Americans as members. There are over 200,000 members in the
Hudson Valley of New York State alone, where I happen to reside and
represent.
As chairman of the House Committee on Rules, I am often suspicious of
the other body and its lack of rules, but in this case, Madam Speaker,
the other body I think has improved the legislation. The Senate has
produced a consensus product which removes the unfair CRA-like
provisions but puts restrictions on business lending, and that is as it
should be. And, Madam Speaker, compromise is critical in this
legislative process, and I believe that this legislation is an
appropriate and fair compromise, and I hope Members will come over and
unanimously support it. It is a good piece of legislation.
Mr. LaFALCE. Madam Speaker, I yield 2 minutes to the distinguished
gentleman from Minnesota (Mr. Vento), the ranking Democrat on the
Subcommittee on Financial Institutions and Consumer Credit.
Mr. VENTO. Madam Speaker, I thank the gentleman for yielding this
time to me and for his work on this measure, as well as the chairman,
the gentleman from Iowa (Mr. Leach), and of course congratulate the
principal sponsors, the gentleman from Ohio (Mr. LaTourette) and the
gentleman from Pennsylvania (Mr. Kanjorski) for their marshaling of
effort and their willingness to work with others to bring us to
hopefully final passage and sending this to President's desk today.
This is an urgent problem. This spring, when the court case came out,
I think all of us were aware that there had been a back and forth
disagreement about what the meaning of the
[[Page H7046]]
1934 law is. But what worked in the 1930's in terms of credit unions,
and other financial institutions, for that matter, does not fit the
needs of the 1990's, of this decade 60 years later. We need to
modernize our financial institution laws.
Now there is obviously this law, and the effect of the court decision
affected up to 20 million members of credit unions who would have been
adversely impacted in terms of having to change memberships and divest
and go through that process. So it became of paramount importance that
we act quickly to eliminate any uncertainty because these lines of
credit are fundamental to our economy.
As was mentioned by our chairman of the Committee on Rules, 70
million credit union members are a viable part of providing for the
services and the needs of people across this Nation, especially in
locations that are often remote, often not served by other financial
service entities. In fact, of course, people have a strong affection
for any of those that are able to give them credit because they, of
course, facilitate our successful attainment of ownership of cars, of
being able to provide a college education, being able to do many of the
things that we need through credit extension in our mixed economy
today.
This bill is a fine work product. I regret that the Community
Reinvestment Act provisions, or similar provisions that were put on in
the House, were taken off. But frankly most of the other work that we
achieved in the House in terms of the Committee on Banking and
Financial Services and the principal Members, the gentlewoman from New
Jersey (Mrs. Roukema) who also worked with us there, is retained in
this, so they used our foundation. We are happy to send it along and to
have this good measure serve the needs of the people of this country.
Mr. LEACH. Madam Speaker, I yield 2 minutes to the gentlewoman from
New Jersey (Mrs. Roukema), our distinguished chairman of the
Subcommittee on Financial Institutions and Consumer Credit.
(Mrs. Roukema asked and was given permission to revise and extend her
remarks.)
Mrs. ROUKEMA. Madam Speaker, I think I will make three direct points:
First, I think this is a good example of how this Congress can work
forthrightly and diligently and on a bipartisan basis to deal with a
pressing economic issue and avoid partisan bickering, and I want to
commend all my colleagues for that. We have really worked hard on this.
Secondly, there are 20 million credit union members at thousands of
credit unions across the country that have been wondering since late
February this year whether or not they would be thrown out of their
credit unions. We got to say here, at last, we are protecting those
innocent people. I am proud to say that the bill makes it very clear
that they can remain in the institution of their choice, and that is
very important.
And then, too, we are putting, and it is important to me, in place
many of the Treasury Department's recommendations on safety and
soundness. These changes are extremely important. Credit unions will
have prompt corrective action applied to them, and that means that
bank-like capital and net worth requirements will be applied to credit
unions. That is very important.
In addition, large credit unions will be required to have annual
audits performed by licensed CPAs, just like banks and savings
associations have. Other safety and soundness provisions improvements
are important and are made to the share insurance fund which will
ensure the solvency and safety of the fund for years to come.
Finally, Madam Speaker, I want to recognize that the CRA provisions
were lifted from the credit union bill, and I think that was the
correct choice. No question about that. I do look forward to attempting
to provide small community banks and savings associations with similar
relief at the appropriate time, but this is not the time today.
We are commending the work of this Congress and the other body for
all those millions and millions of credit union people.
Mr. Chairman, thank you very much.
I rise today in strong support of this Credit Union bill.
I want to make 3 points.
First, we have worked forthrightly and diligently to work in a bi-
partisan way to deal with this pressing economic issue and avoided
partisan bickering.
Secondly, we are protecting innocent people. 20 million credit union
members at 3,600 Federal Credit unions have been wondering since late
February of this year whether they will be thrown out of their credit
union. I am proud to say that this bill makes it clear that they can
remain members of their financial institution of choice.
Thirdly, we are putting in place many of the Treasury Department's
recommendations on safety and soundness. These changes are extremely
important. Credit Unions will have prompt corrective action applied to
them--this means that bank like capital and net worth requirements will
be applied to credit unions. In addition, large credit unions will be
required to have annual audits performed by licensed CPAs just like
large banks and savings associations. Other safety and soundness
improvements are made to the share insurance fund which will ensure the
solvency and safety of the fund for years to come. These new
requirements, along with the limits on commercial lending, will assure
that credit unions are safe in the years to come. The Senate improved
the bill in this area.
Finally, Mr. Chairman, I recognize some members and groups may be
disappointed with the final product. I know that some are upset that
the CRA provisions were lifted from the Credit Unions. I believe that
was the correct choice, and look forward to attempting to provide small
community banks and savings associations with similar relief at the
appropriate time. In addition, I would have liked to see tighter
restrictions on the expansion of multiple common bond credit unions. I
believe that we should promote the formation of new credit unions
whenever possible as opposed to permitting large, multiple common bond
credit unions to expand. That is the correct public policy.
Mr. Chairman, I know that we have made an honest attempt to be fair
in this legislation. I urge my colleagues to support this bill.
Mr. LaFALCE. Madam Speaker, I yield 2 minutes to the distinguished
Independent gentleman from Vermont (Mr. Sanders).
Mr. SANDERS. Madam Speaker, first I want to congratulate the
gentleman from Iowa (Mr. Leach) and the ranking member, the gentleman
from New York (Mr. LaFalce) for their very hard work on this important
legislation.
As a member of the Committee on Banking and Financial Services and an
original cosponsor of this bill, I rise in strong support of H.R. 1151,
legislation which will nullify a recent Supreme Court decision by
ensuring that Federal credit unions can serve multiple groups and that
no current credit union members will be forced out of their accounts.
Large corporate banks have been trying for years to shut out their
credit union competition. In recent years they have filed 19 separate
lawsuits in 12 States, and now five Supreme Court Justices say the law
is on their side. Very simply, we must change the law and ensure that
Americans have choices in banking, and today we will do just that.
At a time of increasing bank fees, ATM surcharges, high credit card
fees, increasing minimum balance requirements and the loss of many
locally-owned banks to large, multi-billion dollar corporate
institutions, credit unions today are more important than they have
ever been. I have been a long-time supporter of credit unions because
they are managed by their members and not by a high-priced board of
directors. Credit unions, therefore, are more concerned about the
financial needs of their own membership and not the profits of the
owners of the institution. Credit union profits do not go to pay high
executive salaries; they are directed back to customers in the form of
lower fees and higher rates of return.
In Vermont, where 170,000 people are members of credit unions and
where the membership has played a very, very active role in determining
that this legislation will be passed, credit unions provide important
benefits such as lower loan rates, lower minimum balances, free ATM use
and free credit cards.
Madam Speaker, it is incumbent upon Congress to pass this important
legislation, and I urge all of our Members to support it.
Mr. LEACH. Madam Speaker, I yield 2 minutes to the distinguished
gentleman from Texas (Mr. Archer),
[[Page H7047]]
chairman of the Committee on Ways and Means.
Mr. ARCHER. I thank the gentleman for yielding this time to me, Madam
Speaker, and I reluctantly rise in opposition to this bill.
I voted for the first bill that came through the House, and I am not
here to in any way criticize the detailed compromises made with the
Senate, but what I am here to state as, I think, a fatal flaw in this
bill is it is scored as losing $150 million in revenue over the next 5
years which is not paid for. We are supposed to operate under rules
that no suspension can be brought on the floor if it involves over $100
million. This $150 million of scored revenue loss is the result of
expansion of credit unions operating on a tax-free basis and therefore
costing revenue to the Treasury. It has been used already, this money
has been used already to pay for the health bill that passed this
House. It redounds to our score card on Ways and Means as a tax loss,
and therefore on the score card will reduce the amount of revenue that
we have already used to offset the health care bill.
Madam Speaker, this is not the way this House should do business, and
I must oppose this bill so that it can come back in a form where it is
appropriately paid for.
Mr. LaFALCE. Madam Speaker, I yield 2 minutes to the gentleman from
New York (Mr. Hinchey).
Mr. HINCHEY. Madam Speaker, I, too, want to strongly support H.R.
1151, the Credit Union Membership Act of which I am an original prime
sponsor.
The credit union movement has distinguished itself over the years by
providing its members with good quality, low cost financial services.
As nonprofit cooperatives managed by their members, credit unions excel
at providing the services families and small businesses need most.
Study after study shows that from home mortgages to student loans to
start-up financing for small businesses, credit unions beat the
competition in terms of service and customer satisfaction.
Credit unions have also taken the lead in communities that are all
but ignored by the banking industry. In many distressed urban and rural
areas a community development credit union is often the only
conventional financial institution to be found. In my district a group
of public housing tenants formed a credit union when they were unable
to interest a bank in their financial goals. We need to encourage these
types of institutions to bring more low-income individuals into the
financial mainstream.
The credit union movement deserves much of the praise for this
legislation. Like everyone here, I heard from people in my district who
are passionate about their credit unions, not just the officers and
directors and employees, but the men and women and families and
businesses who are affiliated with these institutions. Not only did
they take the time to call and write, but they also came here to
Washington and to my district offices to tell me in person how
important their credit unions are to them.
So, Madam Speaker, on behalf of the 3.3 million New Yorkers who are
credit union members, I urge the suspension of the rules and the
passage of H.R. 1151.
{time} 1215
Mr. LEACH. Madam Speaker, I yield myself 1 minute.
Madam Speaker, I would simply respond to a previous intervention. Let
me just say the CBO has estimated a revenue loss of $143 million for
this bill, but it is important to note that there will be a $510
million increase in revenues to the credit union fund. But because of
budget rules, the $510 million cannot be used as an offset to this
revenue loss. Instead, the $143 million revenue loss must be absorbed
through other tax accounts under the budget rules.
I will say in the Senate, the Senate balanced this revenue loss with
their IRS reform bill. We have formally by letter informed the
Committee on Ways and Means of this circumstance, but I recognize it
does produce certain difficulties for the distinguished chairman of the
Committee on Ways and Means.
All I can say is this is not a surprise. It has been dealt with
appropriately in the Senate, it has been flagged here in the House, and
there is an offset of approximately three times the revenue loss, but
it occurs in another account of the Federal budget.
Mr. LaFALCE. Madam Speaker, I yield 3 minutes to the gentleman from
Massachusetts (Mr. Kennedy) in opposition to the bill.
Mr. KENNEDY of Massachusetts. Madam Speaker, I rise today as a strong
supporter of nonprofits, as a strong supporter of credit unions, but a
strong opponent of this bill.
The truth of the matter is that the politics that went on in the
formation of this bill would make the bankers, the insurance industry
and all of the special interests that normally come before the
Committee on Banking salivate. They went into the back room of the
Senate and they knocked out all of the provisions that are supposed to
protect the consumer, particularly the poor consumer.
These credit unions come into our offices and pretend they are taking
care of the poor. They pretend that the Congress established them to go
into underserved areas, where bankers would not go. The fact of the
matter is, if you look at their records, the credit unions have an
abominable record of lending to the poor, the worst record of any of
the banks, of any of the S&L's. They have a worse record in lending to
people of color, the minorities, blacks.
In the Navy Credit Union, the Navy, which prides itself on bringing
in minorities into the Nation's service, you are 11 times more likely
coming from the same neighborhood with the same income levels to be
turned down for a home mortgage loan if the color of your skin was
black versus if it was white.
The truth of the matter is the credit unions ought to be held to the
Community Reinvestment Act. We could not get that through. But what we
could get through is the fact that they would have to publicly report
exactly what their record of lending to the minority communities and
the low income communities have been. It is 5.4 percent today, with the
information we get, much lower than any of the other financial services
industries that we collect data on, and 16.5 percent in terms of the
minority community loans.
Madam Speaker, these numbers are an indictment of an industry that
comes before each and every Member of Congress, parades before us a
bunch of little folks that have deposits in credit unions, and then
tells us there is a terrible attack taking place on credit unions by
the big banks and insurance companies, so therefore we should give them
everything they want.
That is not how it is supposed to work. We are supposed to stand for
some principles. And if these folks that run these credit unions,
particularly the very large ones, which are much bigger than many
banks, think they can just come in and roll right over the Congress of
the United States, roll right over the United States Senate, have
everybody come marching on up here saying what a great job they do, and
sweep under the rug how they treat the poor, how they treat minorities,
we ought to be ashamed of ourselves.
We have to stand up every once in awhile and try to do what is right.
We are not asking the credit unions to lose money. What we are saying
is that if somebody who is a member of that credit union comes in and
the color of their skin happens to be black, they ought to be treated
the same way as somebody who is a member of that credit union whose
color of their skin happens to be white, and that does not happen in
today's America. It ought to happen. We ought to defeat this bill. We
ought to stand up to the credit unions and do what is right.
Mr. LEACH. Madam Speaker, I yield 2 minutes to my distinguished
colleague, the gentleman from Texas (Mr. Paul).
(Mr. PAUL asked and was given permission to revise and extend his
remarks.)
Mr. PAUL. Madam Speaker, I thank the gentleman for yielding me time.
Madam Speaker, today I rise in support of this bill. I do not support
legislation casually here, and have thought this through. I voted
against this bill the first time it went through, and I was one of a
few. But it is a better bill now than it was before.
I am a supporter of the free market, and I do not believe you can
achieve equity by raising taxes and putting
[[Page H7048]]
more regulations on those who do not have regulations and who do not
have taxes.
For this reason, I argued the case that instead of equity being
achieved by taxing credit unions or making it more difficult for them
to survive with more regulations, the best thing we should do now is
talk about at least the smaller banks that compete with credit unions,
to lower their taxes, get rid of their taxes and get rid of the
regulation.
Precisely because we dealt with the CRA function in the Senate is the
reason that I can support this bill. CRA does great deal of harm to the
very people who claim they want CRA to be in the bill. CRA attacks the
small, marginal bank that is operating in communities that have poor
people in them. But if you compel them to make loans that are not
prudent and to make loans that are risky, you are doing precisely the
opposite of what we should do for these companies.
We should work to lower taxes, not only on the credit unions, and
lower regulations. We must do the same thing for the banks. We must
lower the taxes and get rid of these regulations in order for the banks
to remain solvent and that we do not have to bail the banks out like we
have in the past. But the regulations do not achieve this.
This is a bill that I think really comes around to achieving and
taking care of a problem and protecting everybody interested. But I am
quite convinced that this is still not a fair bill, a fair approach,
because we have not yet done enough for our community bankers. We must
eventually apply these same principles of less regulations and less
taxes to the small banker. Then we will provide a greater service to
the people that are their customers, and we will certainly be allowing
the poor people a greater chance to achieve a loan.
Since I strongly support the expansion of the field of membership for
credit unions and was the first one in this congress to introduce
multiple common bonds for credit unions in the Financial Freedom Act,
H.R. 1121, I am happy to speak in support of the passage of H.R. 1151
here today. Having argued forcefully against the imposition of new
regulations imposed upon credit unions, I congratulate the senate for
not increasing the regulatory burden on credit unions in an attempt to
``level the playing field'' with banks and other financial
institutions.
A better approach is to lead the congress toward lower taxes and less
regulation--on credit unions, banks and other financial institutions.
H.R. 1151, The Credit Union Membership Access Act, as amended by the
senate, takes us one step in the right direction of less government
regulation restricting individual choice. We must continue on the path
of fewer regulations and lower taxes.
These regulations add to the costs of operations of financial
institutions. This cost is passed on to consumers in the form of higher
interest rates and additional fees. These regulations impose a
disproportionate burden on smallers institutions, stifles the
possibility of new entrants into the financial sector, and contributes
to a consolidation and fewer market participants of the industry.
Consumers need additional choices, not congressionally-imposed limits
on choices.
The estimated, aggregate cost of bank regulation (noninterest
expenses) on commercial banks was $125.9 billion in 1991, according to
The Cost of Bank Regulation: A Review of the Evidence, Board of
Governors of the Federal Reserve System (Staff Study 171 by Gregory
Elliehausen, April 1998). It reports that studies estimate that this
figure amounts to 12 percent to 13 percent of noninterest expenses.
These estimates only include a fraction of the ``most burdensome''
regulations that govern the industry, it adds, ``The total cost of all
regulation can only be larger . . . The basic conclusion is similar for
all of the studies of economies of scale: Average compliance costs for
regulations are substantially greater for banks at low levels of output
than for banks at moderate or high levels of output,'' the Staff Study
concludes.
Smaller banks face the highest compliance cost in relation to total
assets, equity capital and net income before taxes, reveals Regulatory
Burden: The Cost to Community Banks, a study prepared for the
Independent Bankers Association of America by Grant Thornton, January
1993. For each $1 million in asset, banks under $30 million in assets
incur almost three times the compliance cost of banks between $30-65
million in assets. This regulation almost quadruples costs on smaller
institutions to almost four times when compared to banks over $65
million in assets. These findings are consistent for both equity
capital and net income measurements, according to the report.
We need to work together now to reduce the regulatory burden on all
financial institutions. The IBAA study identified the Community
Reinvestment Act as the most burdensome regulation with the estimated
cost of complying with CRA exceeding the next most burdensome
regulation by approximately $448 million or 77%. Respondents to the
IBAA study rated the CRA as the least beneficial and useful of the
thirteen regulatory areas surveyed. We need to reduce the most costly,
and least beneficial and useful regulation on the banks.
Let's all work together now, credit unions, banks and other financial
institutions, to reduce their regulatory burden. Credit unions have
demonstrated that fewer regulations contribute to lower costs passed on
to consumers and greater consumer choice. Let's extend that model for
banks and other financial institutions.
Mr. LaFALCE. Madam Speaker, I yield 1 minute to the gentleman from
California (Mr. Filner).
Mr. FILNER. Madam Speaker, I rise today also to herald the final
passage of H.R. 1151, the Credit Union Membership Access Act. Our vote
today for H.R. 1151 is a vote of confidence in the 71 million Americans
who are member-owners of more than 11,000 credit unions throughout the
Nation.
I do not often differ with the gentleman from Massachusetts, but I
represent a fairly low income district in Southern California, 75
percent of which are people of color. My district supports the credit
unions. They are working in our neighborhoods and supporting our
neighborhoods.
I want to praise the grassroots efforts of millions of credit union
members for rising to the defense of their credit unions and fighting
the battle until it was won. This bill is needed to protect them, and
it provides guidance on how they can expand.
We are guaranteeing credit union members, every day workers in our
Nation, the ability to choose low-cost higher returns and greater
convenience. With final passage, we will be giving credit union
members, everyday Americans who believe in democracy, the victory they
so richly deserve.
Marla, this one's for you.
Mr. LEACH. Madam Speaker, I yield 1 minute to the distinguished
gentleman from New York (Mr. Quinn).
Mr. QUINN. Madam Speaker, I want to congratulate the gentleman from
Iowa (Mr. Leach), and my good friend, the gentleman from Buffalo (Mr.
LaFalce), on their work on this, and I want to speak about this great
American success story that we heard about this morning, the Nation's
credit unions.
Of course, credit unions are far different from banks. They are
democratically owned and primarily engaged in consumer loans, and,
Madam Speaker, I believe it is this simplicity that is the secret to
their success.
Credit unions are not in the business to buy other banks, they are
not there to sell insurance or to acquire commercial affiliates. More
importantly, they are not for profit. Credit unions have all of the
revenues funneled back into the members for low cost loans.
I am a proud sponsor of the Credit Union Membership Access Act to
preserve credit unions in their current status. The many differences
between credit unions and banks are what make credit unions so
valuable. Even bankers admit that there is a certain percentage of the
population that banks cannot serve. Low wage workers oftentimes cannot
afford high bank fees or loan rates. Without credit unions, these
people would be forced to turn to check cashers or to pawn brokers or
any number of different kinds of facilities.
I know that my district in western New York, thousands of people have
come to rely on credit unions. I have constituents tell me all the time
how much they mean to them, and many claim they would not be able to
afford their own home, a loan to start a new business, or, in my case,
attend college. It is clear to me credit unions are critical for
thousands of Americans, and I urge Congress to help credit unions play
an important role, now and in the future.
Mr. LaFALCE. Madam Speaker, I yield 1\1/4\ seconds to the gentleman
from Michigan (Mr. Dingell), the distinguished ranking member of the
Committee on Commerce.
(Mr. DINGELL asked and was given permission to revise and extend his
remarks.)
[[Page H7049]]
Mr. DINGELL. Madam Speaker, I rise to, first of all, commend the
leadership on both sides, the distinguished gentleman from Iowa and the
distinguished gentleman from New York, for this legislation.
I rise to offer my unequivocal support for the legislation, and also
to praise credit unions, which are dedicated to the communities and the
people they serve. These institutions provide low-cost consumer credit
to American families and small businesses, and they provide a fine
opportunity for the American people to work together for their own
common good. I urge support of H.R. 1151.
As a freshman Congressman in 1934, my dad worked on the Federal
Credit Union Act. The committee in its report on that legislation,
which happened in one of the darkest times in American financial
history, said this: That the credit unions have, and I now quote,
``come through the depression without failures, when the banks have
failed so notably, is a tribute to the worth of cooperative credit.''
That is as clear today as it was then. Credit unions are a vital part
of our community and our Nation. They serve the people, and they serve
them well.
Strong consumer support for credit unions does not surprise me. Over
the past year, people have come to me at town hall meetings, pancake
breakfasts and other events, and said to me, ``Congressman, you have to
help the credit unions, because they work for us.''
While some of the provisions in the House bill are different than I
would have had, H.R. 1151 is a good bill. It will help credit unions
continue to provide high-quality low-cost services to the members and
to the communities which have made them so popular with the families
across America.
I urge support of the legislation, and I commend my colleagues who
have worked on it.
Mr. LEACH. Madam Speaker, I yield 30 seconds to the gentleman from
New York (Mr. LaFalce).
Mr. LaFALCE. Madam Speaker, I thank the gentleman very much for this
time.
Madam Speaker, I want to take this opportunity to thank the chairman,
to thank majority and minority Members, to thank the majority and
minority staff. This has been truly a bipartisan, a collegial effort.
I think we have an excellent bill before us today. It is not 100
percent that either the chairman or I would like, but it is pretty
close. I would have preferred that we had a slightly different process
of going to conference with the Senate, but there were circumstances
which made that difficult, and it was expedient to obtain final passage
before the recess. I certainly understand the judgment that was made.
I hope that we can go forward in a similar fashion on other
legislation, whether it is the IMF legislation, whether it is the
financial services modernization. I hope in financial services
modernization we will not receive something from the Senate the day
before we are about to leave, so that we have to consider that on a
take-it-or-leave-it basis also. But I look forward on all of these
issues to working with the chairman, as we have on this particular
bill.
Mr. LEACH. Madam Speaker, I yield myself the balance of my time.
Madam Speaker, I thank the gentleman from New York (Mr. LaFalce). Let
me just say a couple comments about the process. For a deliberative
body, we have moved quickly on this legislation. Within two weeks of
the Supreme Court ruling, our Committee on Banking and Financial
Services had a comprehensive hearing on the subject. Two weeks later we
marked up a bill, and one week later brought it to the floor. Once the
Senate has acted, we have responded again within a two week time frame.
This is testament, I believe, to cooperation between the parties, as
the gentleman from New York (Mr. LaFalce) has mentioned. I think it is
very important that I particularly extend my appreciation to the
gentleman from Ohio (Mr. LaTourette), the gentleman from Pennsylvania
(Mr. Kanjorski), the gentleman from New York (Mr. LaFalce) and the
gentleman from Minnesota (Mr. Vento), who have played just an
extraordinarily critical role in the legislation. But this is not
abstract legislation.
{time} 1230
It is, most of all, a testament to the role of credit unions in
American society and the allegiance which they have obtained.
What we have here is an industry that has served its members, served
its members well. It has brought services at a competitive rate to
people who have controlled their own financial destiny in ways they
never have been able to before. It has also brought competition to
other kinds of private sector institutions that are not part of the
cooperative movement.
This is a very fundamental role of cooperatives, to serve members and
people who are nonmembers, because of the competition that is implicit
within this particular kind of cooperative structure.
Finally, I would also stress that this body should above all respect
choice, the choice of the individual Americans. Approaches that are
designed to deny choice to the individual American in finance, to force
Americans by default into institutions that may be beyond their
control, is a mistake.
What the credit union movement symbolizes is an option for the
average American, an option that is a community-controlled
circumstance, an option that has served the public historicly
exceptionally well. I am confident it will in the future. I am proud of
this legislation. I believe it is common sense. I also believe that it
is deeply legitimizing of a movement that deserves every aspect of
legitimacy that it can muster. I urge my colleagues to support this
legislation, and I also urge the President to promptly sign it.
Ms. KAPTUR. Mr. Speaker, I rise in support of H.R. 1151, the Credit
Union Membership Act.
This has truly been a classic ``David-versus-Goliath'' confrontation
between widely different interests. The ``Davids'' in this instance are
the thousands of not-for-profit small credit unions throughout the
nation, such as Little Flower Parish Federal Credit Union in Toledo.
Little Flower has 1,700 members, with total assets of $5 million. I'm
proud to be one of those members.
This is a confrontation that pits member-owned credit unions that are
not-for-profit cooperatives against banks that often place the
interests of shareholders and profits over and above the need of
consumers and communities. With higher fees becoming more prevalent and
banking options shrinking for many consumers, there can be little doubt
that credit unions have helped to keep banks in check by being viable
financial alternatives for millions of Americans. America's consumers
will now be guaranteed more options and alternatives when it comes to
conducting their financial business and transactions.
As was stated in an editorial in the Toledo Blade earlier this year,
``Credit unions are about local folks helping local folks.'' I'll
continue to support the ``local folks'' who place community and family
over profits only and will continue to fully support America's credit
unions and the rights of all Americans to join and belong to their
local credit union.
Mr. Speaker, H.R. 1151 is right for all Americans.
Mr. CUNNINGHAM. Mr. Speaker, I rise once again in support of the
Credit Union Membership Access Act (H.R. 1151). While the Senate has
made a couple of minor changes to the legislation the House passed
earlier this year, the substance of this legislation remains the same.
H.R. 1151 will reverse the February 25, 1998, Supreme Court ruling
(AT&T Family Federal Credit Union et al. v. First National Bank & Trust
Co.) which sent shockwaves through this nation's 70 million credit
union members. That decision threatened the future financial safety of
our nation's credit unions. The 51st District in California, which I
represent, is served by more than 230 different credit unions with more
than 305,000 members. By passing this legislation, we will ensure that
not a single credit union member will lose their choice of financial
service provider.
This legislation affirms the commitment of this Republican Congress
to keep a healthy, competitive financial service industry in America. I
call on all my colleagues to join me in support of credit union members
and to vote for H.R. 1151, with the Senate Amendments.
Mr. BENTSEN. Mr. Speaker, I rise today in support of H.R. 1151, the
Credit Union Membership Access Act. This legislation is necessary to
ensure that credit unions can continue to accept new members and
consumers continue to have the freedom to select the financial
institutions of their choice. I am pleased that Congress has acted so
quickly to reverse the February Supreme Court decision ruling that
credit unions were illegally allowed to form bonds between unrelated
groups.
[[Page H7050]]
As a member of the House Banking Committee, where this legislation
originated, I am pleased that Congress has acted in a prudent manner to
ensure that credit unions can continue to accept new members. For many
consumers, credit unions offer low-cost, well-managed financial
institutions to serve their needs including checking and savings
accounts. I believe that many Texans will benefit from this
legislation.
This legislation would overturn this Supreme Court ruling and allow
credit unions to serve all consumers. This measure would establish
three different types of credit unions, including single common bond,
multiple common-bond, and community credit unions. Single common bond
credit unions would be formed around one single company. Multiple
common-bond credit unions would include groups of up to 3,000 that are
in ``reasonable proximity'' to each other. Larger groups could also
join multiple common-bond credit unions, as could persons in under
served areas, through a formal review process at the National Credit
Union Association (NCUA), the federal agency responsible for overseeing
credit unions. Community credit unions would be based on a distinct
community.
This measure would also limit the amount that credit unions can
provide for commercial business loans to their members. The bill
includes a provision to limit commercial business loans to 12.25% of
the credit union's assets. Any credit unions that currently exceed
these limits would have three years to come into compliance. For any
undercapitalized credit unions, new loans would be restricted until
their capital levels are increased to proper levels.
This legislation would also provide important new protections to
ensure that credit unions are financially sound. These provisions
include a requirement that credit unions larger than $10 million in
assets must prepare a financial statement based upon generally accepted
accounting principles and that credit unions larger than $500 million
or more in assets must have an independent audit of their financial
statements. This legislation also establishes new credit union capital
requirements that would determine the financial status of credit
unions. The legislation also requires that the National Credit Union
Share Insurance Fund (NCUSIF), the federal deposit insurance fund for
credit unions, must maintain a minimum of 1.2 percent of insured
deposits in order to save for future losses at credit unions. If the
NCUSIF drops below this level, this legislation would require the NCUA
to increase assessments to reach this level.
As a supporter of the House version of this bill on April 1, 1998, I
am pleased that the Senate has also acted to approve this bill. The
bill being considered today would resolve this matter and ensure that
credit unions can continue to grow and prosper. I urge my colleagues to
support this critical banking legislation.
Mr. LaFALCE. Mr. Speaker, in February the Supreme Court challenged
Congress to answer a difficult policy question--whether to uphold its
narrow interpretation of the 60-year-old Federal Credit Union Act or
overturn the Court and expand the scope of the Act to permit credit
unions to serve a broader segment of the American public.
Today, we are giving a definitive answer to that question. I'm
pleased to say the answer is a resounding ``yes'' to credit union
expansion, ``yes'' to preserving the membership rights of all current
credit union members, and ``yes'' to making credit union services
available to even greater numbers of American families.
The Senate-passed bill we are considering today incorporates
virtually every single key element of the bipartisan compromise that
passed the House on April 1st with an overwhelming 411-to-8 vote. First
and foremost, it protects the membership of every current credit union
member and every group within a credit union. It also permits common
bond credit unions to continue to expand their field of membership by
including new occupation and association-based groups. The bill limits
this expansion, however--first, by requiring the creation of new,
separate common-bond credit unions wherever feasible; second, by
limiting the size of new groups to under 3,000 members; and third, by
requiring that these small groups be included within a credit union
that is located within reasonable proximity to the group--thus
reinforcing a geographic ``common bond''.
This ``proximity'' requirement is extremely important, and I insisted
on its inclusion in the bill to ensure that we maintain, to the maximum
extent practicable, the closest feasible geographic common bond. It was
my intent in offering this provision that NCUA give a conservative
interpretation to the term ``reasonable proximity'', allowing credit
unions located in a larger city to incorporate only common bonds groups
located within nearby sections of that city. This would mean, for
example in my own Congressional district, that a credit union located
in Rochester could incorporate an eligible common bond within the
Rochester area. It should not be able to incorporate groups in outlying
counties or in a nearby city such as Buffalo, except in instances where
there is no local credit union capable of expanding its services to
serve these groups. Similarly, credit unions based in smaller cities or
towns, like Lockport or Niagara Falls in my district, also should be
able to incorporate new groups only from within, or in close proximity
to, those jurisdictions. However they should also have priority in
serving local groups ahead of any credit union based outside the area.
This is an area where NCUA will not to provide detailed guidance to
credit unions.
The core elements of this legislation, I'm proud to say, follow the
basic outline of a set of proposals I circulated last November to
encourage discussion of a compromise on the field of membership issue.
Like my original proposal, this legislation balances expansion of
credit union membership with preservation of the traditional credit
union values of common bond and community.
While this legislation adequately answers the questions raised by the
Court and resolves several over key credit union issues, it includes
two Senate changes that House Members should be aware of. It deletes
House language reaffirming the credit unions' obligation to serve
persons of modest means within their field of membership. Let me
emphasize that this House provision only restated a long-understood
obligation in current law that credit unions must serve all potential
members, and it attempted to provide greater parity in regulatory
treatment between credit unions and other financial institutions. This
provision should not have been dropped. I strongly encourage NCUA to
continue enforcing current law with the understanding that this
legislation merely attempted to reaffirm and clarify this existing
obligation . . . it does not negate or eliminate it.
A second change in the Senate amendments is the weakening of current
regulatory and voting requirements for credit union conversions to
mutual savings institutions. Currently, a credit union can not convert
its charter without an affirmative vote of a majority of its members.
The Senate changed this to require only a majority of the members who
participate in a conversion vote. The Senate made no provision to
assure adequate and effective notice for conversion vote. Thus, under
the Senate provision it is entirely possible for a small fraction of a
credit union's membership, either by manipulation or inadequate notice,
to convert a credit union and deprive the overwhelming majority of
members of their ownership rights and credit union services. This is an
inappropriate change that could, without very strict regulation and
supervision, facilitate the slow undoing of our credit union system. I
intend to work with Chairman Leach to address this issue within another
context. In the meantime, I urge NCUA to exercise the maximum feasible
regulation of credit union conversions permissible under this
legislation.
While these aspects of the bill continue to concern me, they are
outweighed by the significant improvements the bill makes in the Credit
Union Act and by the need for immediate action to resolve the pressing
issues raised by the Supreme Court. I believe this is one of the most
important bills Congress will consider this year. It is an important
victory for the credit unions and, most important, it is a tremendous
victory for American consumers.
I am proud of the significant work and bipartisan cooperation that
went into the development of this legislation. It is good public
policy. I urge the House to suspend the rules and adopt H.R. 1151.
Mr. THOMPSON. Mr. Speaker, I rise today in support of the final
passage of H.R.1151, the ``Credit Union Membership Access Act.'' I was
proud to be an early co-sponsor of the original House version of this
bill, and I am glad to see the final product we will send to the
President's desk includes most of the provisions in that bill.
Last year the Supreme Court ruled the members of a federal credit
union must be organized on the basis of a common occupational bond,
which threatened the viability of federal credit unions across the
nation. This suit was filed by one of the largest banks in the nation
out of fear that credit unions were encroaching on business services
which traditionally have been offered by banks. I find this fear
irrational, especially when one takes into account the overall
characteristics of the two industries. For example, the $5.4 trillion
U.S. banking industry grew by more than $300 billion last year, an
amount almost as great as the total assets of all American credit
unions combined. Moreover, the average credit union has less than $28
million in assets--less than one sixteenth the size of the average
banking institution.
The bill we are voting on today expressly protects the structure of
all existing credit unions and permits future credit unions to gather
members from multiple groups. Despite the previous disagreements
between the banking and credit union industries, I believe this design
will permit both credit unions and
[[Page H7051]]
banks to continue to prosper by correcting the flaws in existing law
the Supreme Court has unearthed. Most importantly, the bill will ensure
each working American is free to obtain services from whatever type of
financial institution he or she considers best.
I am pleased to join with my colleagues on both sides of the aisle in
support of the Credit Union Membership Access Act, and I look forward
to watching the President sign it into law.
Mr. DAVIS of Illinois. Mr. Speaker I rise today to express my
concerns regarding H.R. 1155, The Credit Union Membership Access Act,
as amended by the Senate on July 27, 1998. While I recognize the
important and necessary role credit unions play in our economy, it is
my understanding that their creation was expressly premised upon the
dire need to serve low-income communities and groups. It was out of
recognition of this unique obligation that I worked to preserve the
tax-exempt status for credit unions. The inclusion of an express
requirement that credit unions serve economically disadvantaged groups
appears to be a consistent, if not superfluous, corollary to these
originally stated goals. Unfortunately, changing times has not ushered
in an era where the need for financial institutions that serve
underserved communities has dissipated.
In fact, the need to provide financial services to low-income
communities is as compelling today as it has ever been. There are
endless accounts of individuals with limited financial means who have
been unable to purchase a home, unable to buy a car, unable to by other
necessities of life simply because they cannot find financing in the
private sector. Obviously, it is proper and fitting to require credit
unions--who receive a subsidy from the government by virtue of their
tax-exempt status--to serve these underserved communities and groups.
It is quite ironic that the rationales offered in debate on the House
floor in support of H.R. 1151 were based upon the unique obligation
credit unions have to serve lower-income groups. Yet, this version of
H.R. 1151 deletes any express requirement that credit unions serve
these communities or groups. This irony is further underscored by the
fact that it has been an unwritten policy of the National Credit Union
Administration that credit unions must significantly endeavor to serve
low-income groups. Nevertheless, I am hopeful that this unwritten
policy will continue.
Mr. VENTO. Mr. Speaker, I rise today in support of this urgently
needed legislation for current credit unions and their members who have
been jeopardized by the Supreme Court's decision in February. The House
passed this bill in April and the other body finally sent our bill back
to us last week with some changes.
This bill will protect the ten to twenty million credit union members
that could be affected by the Supreme Court ruling this past Spring.
H.R. 1151 as passed by the House earlier and now as passed by the
Senate with amendment should also assist future credit unions and their
members by providing additional statutory direction that can hopefully
immunize the credit union industry from future law suits.
Following the lead provided by our good work in the House Banking
Committee, the Senate made limited and mostly positive amendments to
H.R. 1151. I support the changes made to the Prompt Corrective Action
provisions of the bill along with the strengthening of the capital
standards for credit unions. I am concerned, however, and want to note
here for the record that the Community Reinvestment Act (CRA)-like
requirements were stricken from the bill. These were a positive
addition to the bill and one that I believe would have served credit
unions and their members well. The loss of this provision, however,
should not jeopardize the work of the NCUA in providing some kind of
community service test in regulation for credit unions that are
community based by their very name. Such a regulatory test, focused on
actual performance in their own community is important when credit
unions form in order to serve specific communities and is a fair test
of the strength of a community credit union's charter. Despite my
reservations about the loss of the CRA-like provision, I recognize the
importance of acting and acting now to resolve the membership issues
for credit unions and do not want to hold up the good in pursuit of the
better.
Mr. Speaker, credit unions are a vital part of so many communities,
neighborhoods, workplaces and towns across this great land. They
provide needed financial services sometimes in special locations and
places where affordable, good services and credit is scarce. For all of
those communities and members, Congress needs to modernize the 1934
credit union law and field of membership definitions which certainly do
not fit the socio-economic reality of the 1990's. Credit unions have
been in a straight-jacket even before the February court ruling because
of the caution their regulator had to take in light of all the court
actions.
We have reached a point when credit union law must move credit unions
from the strict interpretation of the ``common bond'' and ``field of
membership'' law so that the economic realities of the world of
business and employment today: divestitures, mergers or closings of
businesses, doesn't result in the double whammy of the loss of
financial services through credit unions. The model that served in the
1980's does not fit the 1990's anymore than the laws governing other
financial institutions fit.
By creating a new mechanism for adding so-called select employee
groups, basically allowing multiple common-bond credit unions, we are
revamping and facilitating the federal credit union law and empowering
credit unions to adapt to the 1990's market place. Once law, the
provisions of H.R. 1151 will provide clear direction to the National
Credit Union Administration (NCUA) including a 3,000 field of
membership guideline and a reasonable proximity test. It also affords
the regulator with flexibility to accommodate groups that may not meet
this test but that would find it difficult to form a single-bond credit
union of their own.
We will now have a significantly strengthened regulatory foundation
for credit unions, the regulator and the insurance fund by adding
capital and net worth requirements to be established by the National
Credit Union Administration. The NCUA will be empowered with important
prompt corrective action powers, like those that have been established
to govern the banks and thrifts. These important safety and soundness
provisions should not be overlooked.
The Senate has added a further limitation on member business loans,
based on a net worth for a well-capitalized credit union so that total
member loans for business purposes would be limited to 12.25%.
Importantly, however, exceptions are provided along with a three year
transition period for credit unions who do not immediately comply and
special exception for credit unions established for such expressed
purpose as fits the entity activities. For example commercially,
fisherman loans for their enterprise remain an appropriate activity.
Mr. Speaker and Members of this House, we need to pass this bill
today so that this corrective legislation with regards to credit unions
can make its way to the President as soon as possible and become law.
Credit unions have been faced by the same competitive pressures,
changing technology, and the evolution in products and services that
other financial institutions are facing. In order to meet the
challenges of the 21st Century, credit union law, regulation and
operation must modernize and grow responsibly. I urge my Colleagues to
support H.R. 1151, the Credit Union Membership Access Act.
Mrs. MINK of Hawaii. Mr. Speaker, today is a great day for credit
unions and the concept of grassroots movements in this nation. With
this bill, H.R. 1151, we are beating back efforts of the big banks to
limit access to non-profit, community-oriented credit unions.
With the unanimous support this bill received in the House, I have no
doubt that this Senate version will pass today, and very soon the
President will sign it into law.
H.R. 1151 is necessary because in February of this year, credit
unions were dealt a severe blow by the Supreme Court, which upheld a
ruling prohibiting the practice of multiple-group federal credit
unions. In multiple-group credit unions, membership can consist of more
than one distinct group so long as each group has its own common bond.
This practice maintains the long standing practice of a credit union
that its members have a common bond, yet allow credit union membership
to continue to grow and thrive in our communities throughout the
nation.
H.R. 1151, overturns the Supreme Court ruling and allows credit
unions to expand membership outside of their original group, as along
as new members share common bond with each other.
This is a particular victory for smaller communities and
organizations that cannot maintain a credit union on their own. This
bill will allow them to join existing credit unions. This is especially
important in the rural areas of my state where groups may be too small
to start their own credit union. Financial institution options are
often limited in rural communities; this bill will help assure that
individuals and families in rural communities have access to credit
union alternatives.
I was told that without this bill up to 69 of Hawaii's 113 credit
unions could have been affected by the Court decision to limit credit
union membership.
Credit Unions are unique financial institutions built upon the idea
of members in a community helping one another. It is the concept that
collectively we can do more for each other than on our own. We need to
preserve this unique nature of credit unions and support membership
access to our credit unions.
I urge my colleagues to join me in supporting the Credit Union
Membership Access Bill. Let's send this bill to the President today!
[[Page H7052]]
Mr. LEACH. Madam Speaker, I yield back the balance of my time.
The SPEAKER pro tempore (Mrs. Emerson). The question is on the motion
offered by the gentleman from Iowa (Mr. Leach) that the House suspend
the rules and concur in the Senate amendment to the bill, H.R. 1151.
The question was taken; and (two-thirds having voted in favor
thereof) the rules were suspended and the Senate amendment was
concurred in.
A motion to reconsider was laid on the table.
____________________