Credit union officials gird for fight over federal regulation, charters - East Bay Business Times:

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"The word circulating in credit unions today isthat we'rw a little worried about this plan," said Hal president and chief financial officer of , a $115 million-assef institution that counts San Jose firefighter and police among its "If this thing comes down, the industrt as we know it may change dramatically." A reportt by the Treasury Department released in early April suggestexd restructuring financial markets to solve problemx in the mortgage industry, but also proposed big changed to the banking system.
Although this overhaul was in the worksd before the public knew the extenr of themortgage crisis, the proposap is being viewed by some as a reactiob to the credit problemas the mortgage crisis caused. What put credit unionds on edge was the proposal to plac e all financial institutions under federal charter and regulatew them with onefederal agency. Credift unions, which had far less exposure than banks to the subprimdemortgage crisis, view the move as punishment for something they didn't do. "It eliminates state credit union systemz by pulling everyone under afederal regulator," said Bob senior vice president of government affairx for the .
"It eliminates the ( ) as our and the irony is we're part of the economic systemj that gotit right." The sent a letteer last month to U.S. Treasurh Secretary Henry Paulson opposing the The letter contendsa five-membee working group that the Treasury Department is establishing to drive policy changes in the financial markets includeds no representative of NCUA. This isn't surprisinb since the plan would eliminatethe agency, whic has regulated credit unions since 1970. Among other duties, that working group woul decide which credit unions wouldremain tax-exempt nonprofits and whic h credit unions would be deemed too large for that advantag e and taxed like banks.
Credity unions and banks have a longtime feud overcredit unions' untaxed status. Banks say it gives credig unions an advantage inoffering lower-interest loanzs and better rates on But the new federal proposal might put the credigt unions and community bankd for once on the same side. "The big losers in this proposal wouldbe state-chartered, state-licensed credit unions and state-chartered licenserd community banks," Arnould said.
Carroll said that taxinb credit unions would fundamentallychange "If credit unions moved into the same regulation as our focus would shift and we'd be focused on The drive to achieve ever-increasing profits is what led to the subprimer mess, Carroll said. "If we got that cash in, we's be more likely to go out and take a littles more than the assets by making subprime loansw or investmentsthat aren't smart or by buying loan participationx that aren't smart," he said. "Thers was a tremendous amounty of risk being taken by but not bycredirt unions.