Norton at Press Conference Opposes Ballots First - Education Later to Convert a Credit Union to a Bank

Norton at Press Conference Opposes Ballots First - Education Later to Convert a Credit Union to a Bank

Congresswoman Eleanor Holmes Norton (D-DC) spoke at a press conference in front of the Ronald Reagan Building today to support her constituents and other members of USAID, the Peace Corps, and the Small Business Administration, who are member/owners of the Lafayette Federal Credit Union facing conversion to a bank. Norton called for the distribution of ballots for the vote after, not before, education and feedback from members to avoid "the functional equivalent of passing out ballots now for the upcoming November elections."

In an August 21, 2006 letter released today, Norton and Congressman Chris Van Hollen (D-MD) asked the Lafayette Federal Credit Union board to follow proposed regulations that would require the education and disclosure they requested. They asked for a written response that never came. Instead, CEO Michael Hearne issued a release, citing their authority to proceed.

The full text of the Norton statement and joint letter with Congressman Van Hollen follow.

Perhaps the best way to understand why we are here today is to focus on a close, commonly understood analogy. We are asking that ballots be distributed after the issues have been aired, not before. Instead, the Lafayette Federal Credit Union Board wants to ask their member/owners to vote first and to discuss the matter openly after the decision has been made. That's the functional equivalent of passing out ballots now for the upcoming November elections.

I am happy that in our marvelous diverse and productive system, both banks and credit unions are accommodated and welcomed by the American people. In the District, business is booming, residents are remaining and moving here, and banks and credit unions are both coming to town in greater numbers. I especially appreciate being regularly summoned these days to help cut the ribbon on a new bank or bank branch here, downtown and in neighborhoods alike, and just yesterday, I helped cut the ribbon for a new Treasury Department credit union branch.

I am here, as they say in the streets, not because I have a "dime in this dollar," or money in this credit union, although in the spirit of the same full disclosure I am asking from the Lafayette Federal Credit Union, I am a member of the Wright Patman Congressional Federal Credit Union, like most members of the House and Senate.

I, therefore, approach this issue as a neutral on the final bank or credit union outcome. I am never neutral, however, on process when transparency and full disclosure involving money is concerned, especially the money and ownership of D.C. residents and of federal employees. To their credit, our constituents have not tried to involve Rep. Chris Van Hollen and me in the decisions, but they have asked our assistance concerning process. We, therefore, examined their concerns and past experience regarding conversion and attempted conversions where full disclosure had been an issue, and discovered very disturbing examples, including personal enrichment by insider directors and staff.

Apparently, this experience has come to the attention of the agency charged with regulation, the National Credit Union Administration (NCUA). The NCUA is poised to issue regulations (12 U.S.C. 1785 (b) (2); 12 CFR Part 708 (a)) that will allay many of the concerns raised by our constituents. Particularly considering that the comment period closes next week about the time that ballots may be sent out by Lafayette, we based our request largely on this regulatory change. Particularly considering past abuses elsewhere, Rep. Van Hollen and I in a letter of August 21, 2006, which we are releasing today, we asked that the spirit of these important changes be recognized and incorporated by Lafayette. We have no way of knowing whether the timing of the proposed Lafayette conversion is coincidental or, as some fear, an attempt to affect the conversion before the regulations become final. However, we could see no harm to affected class of member/owners of a delay. On the other hand sending ballots immediately, while permitted (although contrary to the new proposed regulations), would foreclose information, education, discussion and feedback from many members that could inform the board and help them meet their fiduciary obligations to all member/owners.

The difference between banks and credit unions rests largely on how ownership is defined and acquired. Credit unions are cooperatives, and therefore, the distribution of earnings is often through benefits to members, while corporations, including banks, reward shareholders with cash or the equivalent from profits. Both arrangements are of great benefit to all who can participate and many of us are glad to be both shareholders and member/owners. Obviously, however, conversion from one form to the other involves a fundamental transformation. Returning to my opening analogy, many credit union members may know who they are going to vote for in November. It is unlikely that just as many member/owners would already know enough upon receiving a ballot without more to make an informed decision to convert their credit union to a bank - or not.

Washington is not a good city to rush a conversion of a credit union to a bank at this time. First, federal workers here, especially USAID, Peace Corps, Small Business Administration and other federal employees are among the best educated and most sophisticated Americans. They should never been underestimated. Second, this is the nation's capital where the Congress of the United States sits. Already 123 members of the House, including me, are sponsors of H.R. 2317, the bipartisan Credit Union Regulatory Improvements Act, which would change the number of credit union members necessary for a bank conversion to 20% of membership, the previous standard, instead of a majority of members voting under present law and regulations. The Lafayette case here, where Congress sits, could result in conversion without fair and informed notice with less than 1% of the member/owners voting. H.R. 2317 can only be spurred by such an attempt. This is the wrong place and the wrong time to attempt a rushed conversion short of total transparency and maximum fairness.

BREAK IN TRANSCRIPT

http://www.norton.house.gov/index.php?option=com_content&task=view&id=421&Itemid=6