The Mother of All Mandates
by Henry Meier
Good luck and Godspeed to the credit union witnesses including Melrose Credit Union’s General Counsel Mitch Riever at today’s Congressional hearing on mandate relief for credit unions. God knows there’s enough regulatory burden to be shed and even talking about doing something about it is better than nothing.
But how do you explain to Congress that the biggest regulatory burden credit unions face is Congress. Specifically, a political system which is hell-bent on treating credit unions like for-profit banks when it comes to imposing mandates, but at the same time is all too willing to cut special deals for banks including the sainted community banks with which we ostensibly have so much in common.
The latest example of the uneven playing field on which credit unions find themselves comes in the form of a report by the Special Inspector General for the Troubled Asset Relief Program (TARP). TARP was the emergency line of credit Congress passed to give banks loans to get through the financial crisis they created. Credit unions were not eligible for TARP funds, but, to be fair, we were only able to fund the continuing obligations resulting from the bad investments of the Corporates with the support of the Treasury. Last I checked, not only were credit unions dutifully paying an assessment to pay back that loan, they weren’t getting government money to do so.
As you may remember, Congress passed legislation authorizing community banks with $10 billion or less in assets to get front money from TARP in return for making loans to small businesses. The idea makes sense in theory. With the support of the Obama Administration, community banks with $10 billion or less in assets would make government subsidized loans to small businesses. But a funny thing happened on the way to the loan fund. Most of the eligible community banks took the money and didn’t increase small business lending, but instead used it to pay off TARP funds they had taken from the federal government in the first place. I would say this is robbing Peter to pay Paul, but there was nothing in the law that made this shell game unlawful.
continue reading »