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FAQ: Why the Credit Union Lending Bill Likely Won't Pass This Year

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WASHINGTON — Bankers received a rare gift this week after Sen. Charles Schumer, a member of the Senate Democratic leadership, revealed that a vote on a bill to allow credit unions to expand their business lending had been indefinitely postponed.

The unexpected delay is good news for the banking industry, which had vigorously opposed the bill, because one of the most effective ways to kill legislation in Congress is simply to delay it.

Still, the fight is not over.

In order to cut through the fog of Capitol Hill, we offer this guide to frequently asked questions about the credit union bill.

Just what is going on?
Up until last week, the Senate had been expected to vote on the bill either this month or in early May. But as the lobbying from both banks and credit unions began heating up, Senate Democratic leadership started having second thoughts about holding a vote prior to the November elections.

Democrats — or anyone on Capitol Hill — would like to avoid tough votes for members of their party. Fifteen Senate Democrats are running for re-election in 2012, versus just eight Senate Republicans.

The credit union bill is a classic example of a difficult vote, since it forces members of Congress to choose sides in a fight between two groups whose support they have been cultivating.

As a result, Senate Majority Leader Harry Reid decided to delay consideration of the legislation.

So is the credit union bill dead?
Consider it on life support, but not quite dead.

Credit unions' best hope of enactment was to have the bill pass quickly so they could amp up pressure on House Republicans to follow suit. That is now off the table and the longer it takes for the Senate to vote, the less likely enactment becomes.

Officially, a spokesman for Schumer has ruled out a vote in May or June, meaning it won't happen until the second half of the year. Unofficially, however, the vote won't happen until after Nov. 6.

Can a vote on this actually hurt a lawmaker?
Absolutely. Perhaps the best illustration is Democratic Sen. Jon Tester, who faces a tight re-election race in Montana against GOP Rep. Denny Rehberg.

Tester built up a great deal of goodwill with both banks and credit unions for leading the ultimately unsuccessful fight against Sen. Richard Durbin's proposed cap on debit card interchange fees.

During the 2012 election cycle, Tester is number two on the list of senators who have raised the most campaign cash from commercial banks, and he's number four on the list of senators who've raked in the most money from credit unions, according to the Center for Responsive Politics.

The credit union bill would force Tester to choose between two allies. Reid looks poised to do whatever he can to prevent that kind of tough choice prior to Election Day.

Does the bill have any chance at all?
In Washington, it's a mistake to rule out the possibility a bill can quickly be enacted. The past decade has shown time and again that bills that had no chance — including new anti-money laundering restrictions in mid-2001 or new accounting rules prior to Enron's collapse — can suddenly become law given the right set of circumstances.

Credit unions still have a slim shot to pass the bill, primarily because Reid has backed himself into a corner on the issue. Reid is a co-sponsor of the bill, but it's never been clear that the issue is a big priority for the Nevada Democrat.

Last month, however, the bill's sponsor, Colorado Sen. Mark Udall, tried to attach the measure as an amendment to another green-lighted piece of legislation. Reid refused to allow that, fearful that doing so would imperil or at least complicate passage of the bipartisan JOBS Act.

But as a consolation prize, he promised Udall a separate vote on the measure.

Reid needs to follow through on that promise, or he risks a sharp backlash from the credit union industry and its supporters in the Senate.

So this bill will still get a vote?
Yes. Like so much on the congressional agenda, the issue appears headed to the lame-duck session that follows the Nov. 6 elections. In less than two months before Dec. 31, Congress will have to decide whether to extend the Bush tax cuts, whether to raise the debt ceiling again, and whether to allow the scheduled budget cuts that were part of last summer's debt ceiling deal, along with a host of smaller issues that require action before the end of the year.

The dynamics of that session are unpredictable, given all the possible election outcomes. Will Democrats be in their last days in charge of the Senate? Will Republicans be preparing to cede control of the House? Will Mitt Romney be preparing for his first 100 days in the White House?

Does a vote in the lame-duck session matter?
Depends on the form of the vote. At least at the moment, credit union lobbyists believe they will have the 60 votes necessary to ensure passage of the bill in the Senate.

The key question, then, is whether the Senate bill gets a stand-alone vote or a vote as an amendment to a must-pass piece of legislation. In the latter scenario, it becomes more difficult for bankers to stop the legislation from passing.

Why does the Senate bill's form matter so much?
It's really all about the House.

The House Republican leadership, led by Speaker John Boehner, hasn't shown any greater inclination than Senate Democrats to hold a vote on the credit union bill.

So if the Senate passes the credit union bill as a stand-alone measure, Boehner can just sit tight and run out the clock. Once the next congressional session begins in January, the entire legislative process would have to start over again.

But if the credit union bill gets attached to a larger Senate measure that Congress needs to pass before the end of the year, the House Republican leadership will be in a tougher spot. It would then have to choose between stripping the credit-union bill out of the measure, and then fighting to keep it out in negotiations between the two chambers, or acquiescing to the Senate's wishes.

Although it happened in a somewhat different manner, this is how the Durbin amendment was attached to Dodd-Frank. After a fierce battle between retailers and bankers, merchants won enough votes in the Senate to make the provision part of the overall bill. Even though the measure was not popular among House lawmakers, they were unable to get it removed when the two chambers hashed out a final bill.

Is such a scenario likely in this case?
No, but it's not impossible. Keep in mind, however, that the bill is controversial. If the Senate attaches the credit union legislation to another must-pass bill — like reauthorization of the Bush tax cuts, for example — that may make it harder for Senate Democrats to get the 60 votes. If, in a net calculation, attaching the bill to a broader piece of legislation will cost votes, Democrats won't do it. It's far easier — and more politically expedient — to give credit unions a separate vote on their issue and then be done with it.

Will the issue come back next year?
Count on it. Assuming the bill is not enacted this year, this issue is certain to come up again in the next Congress. Credit unions have been pushing it for years as their top priority and will be undeterred if they fall short this year.

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