Mark and his two guests, Mike Radway and Todd Harper, go deep with a history lesson on the passing of HR 1151. This legislation paved the way for credit union growth in the past 25 years. Both Todd and Mike worked in the office of Rep. Paul Kanjorski at the time, who spearheaded the legislation. Every credit union employee who hasn't learned about this law should listen to why we have the successful industry we have today.

IN THIS EPISODE:

• (00:00) This special episode is a historical background of the credit union industry
• (03:15) Todd Harper’s his credit union background, noting his work on HR 1151
• (05:59) Mike Radway’s 50-year credit union journey, influencing legislative affairs and HR 1151
• (09:35) Creation of the common bond credit unions, driven by financial services
• (11:55) Explanation of the Supreme Court ruling against the common bond credit unions, leading to HR 1151
• (17:53) Passing a bipartisan bill, establishing a cap on business lending, and providing  consumer choice
• (26:21) Why it’s difficult to pass legislation today
• (33:10) Surprise changes in the credit union industry over the past 25 or 30 years 

KEY TAKEAWAYS:

• HR 1151, the credit union membership access act, was pivotal in allowing common bond expansions, enabling credit unions to serve diverse groups and ensuring consumer choice despite Supreme Court challenges.
• A bipartisan effort by Paul Korski and Steve Ette, supported by Todd Harper and Mike Radway, drove the legislative affairs success of HR 1151, addressing the crisis consensus to protect credit unions.
• The business lending cap, a result of banking committee negotiations, spurred diversification and growth of community charter credit unions, strengthening the financial services industry.

RESOURCE LINKS

Mark Ritter - Website

Mark Ritter - LinkedIn

Todd Harper - LinkedIn

Mike Radway - LinkedIn

BIOGRAPHIES: 

Todd Harper:

Few people know federal financial services laws like me. That’s because I’ve written, explained and implemented them for 25+ years. As an agency executive, policy entrepreneur, political strategist and press pro, I’ve identified emerging issues, shaped public opinion, built bipartisan coalitions and advised lawmakers and presidential appointees before the U.S. Senate twice confirmed me in the Trump and Biden eras. In the words of the American Banker, I’m “the rarest of Washington creatures: A regulator who actually gets along with everyone.”

Mike Radway:

Former Chief-of-Staff to Chairman of the National Credit Union Administration (NCUA).

Former Professional Staff, House Banking/Financial Services Committee.

Former Chairman, Federal Home Loan Bank of Seattle & Council of Federal Home Loan Banks.

Former Chair, Early Care and Education Consortium

Former DNC Member, Biden delegate 2020, Obama 2012, Gore 2000

Former Treasurer, Democratic Party of Oregon

KEYWORDS: Credit Unions, History Lesson, HR 1151, Todd Harper, Mike Radway, Membership Access, Financial Services, Community Charter, Business Lending, Common Bond, Legislative Affairs, NCUA Board, Bipartisan Effort, Consumer Choice, Supreme Court, Banking Committee, Crisis Consensus, Diversification, credit union growth, credit union industry, Common Bond Credit Unions, Financial Services, Credit Union Membership Access Act, Common Bond expansions, Crisis Consensus, Bipartisan Effort, Paul Korski, Steve Ette, Protecting Credit Unions, Business Lending Cap

[00:00:29] And my father, who's a union electrician, he was a union electrician outside at the factory, right outside of Wilkes Bar, told me credit unions are the place that I go when I need help because therefore us. And that always stuck with me, and I always remembered that. And it, it's one of the reasons here at MBFS, you know, we work with inclusive who, who works with all the CDFIs [00:01:00] and I think it's important that all, everybody gets served, all the businesses get served, the communities are served.

[00:01:38] And he was a, he is very passionate. About making sure that I serve our communities and where we were at and, and as we have grown, I wanna keep that spirit alive. And sometimes newer people don't understand where we've been and where we've came from [00:02:00] and why we still exist today. So joining me today are two legends of the credit union industry.

[00:02:34] And, and I thought of two, no, nothing more than two people who could help us understand. But more today's employees, maybe the younger people understand a little bit about where we have been as an industry. But first I'd like you to introduce yourselves and, and a little bit of your background. And Todd, for those people that have been [00:03:00] living under a rock this year.

[00:03:13] Todd Harper: So Mark, first of all, thanks for having me on the show. It's always great to get out and talk about the credit union history mark.

[00:03:42] Nobody told me to save that money, to buy holiday gifts for everybody. And my first loan was from the mom and dad Credit Union in Whiting, Indiana. And it was 0% interest, and I was able to buy Christmas gifts that year for everybody, and it, it, it put me on a path [00:04:00] to where I eventually ended up. And that is working for Congressman Ken Doki closely with Mike Redway.

[00:04:29] And I served as a senior policy advisor to both Debbie Matts, who was chairman and then Rick Metzker as chairman. And then I got nominated in my own right and twice confirmed under both the Trump and Biden administration's. To be an NCA Board member, and Biden named me to be the chairman for four years.

[00:05:05] But it's important for the NCA. Board to have a quorum, for example, we have things coming up, uh, in the next six or seven months on the interest rate ceiling that need to be decided. And if there isn't a full quorum on the board of at least two board members, it's going to be difficult for the, uh, the interest rate to stay at 18% and not drop to 15%.

[00:05:42] Mark Ritter - Host: Now, now I'm hoping that I have to go back and edit this episode to do that introduction. So, but Mike, please give your, uh, background and history and then the legislative area in the credit union space.

[00:06:12] Interest in the credit union industry and eventually became chairman of the National Credit Union Administration. And that year I opened up my first credit union account in what was then the Wright Patman Federal Congressional Credit Union. And interestingly enough, one of the first things that that particular Congress did was deposed Wright Patman as chairman of the House Banking Committee because he was a little old and a little senile and very autocratic.

[00:07:09] We were battling the leadership on both sides of the aisle on behalf of, uh, consumers, both in, of credit unions and banks, so that they wouldn't have to have what was really unnecessary and expensive withholding on interested dividends. The, the congressman that I worked for ran for the Senate in 1984 and lost, and as a result, I, in 1985, I started working for a new freshman, Congressman Paul Korski of Pennsylvania.

[00:08:00] Together, I think three times over the last 25 years. First in Congressman Ken Dorsey's office, and then, uh, later when he, he joined NCA to head the Congressional Affairs office and I joined NCA, uh, to become the senior policy advisor and eventually the chief of staff to former board member and chairman Rick Metzker.

[00:08:41] Mark Ritter - Host: Oh, that, that's great.

[00:09:00] So, uh, you guys and, and, and what some people don't realize is, you know, up until the eighties it was a credit union. You know, local factory, federal credit union served local factory people, and if factory across the street wanted to join their credit union, they had to form their own credit union. And in the eighties is when we started to broaden that with what we call the, the multi-employer group Credit Union.

[00:09:32] Todd Harper: You're absolutely on the right track with multiple CommonBond credit unions. That's

[00:09:48] People who were loaning the money, knew the people who were borrowing the money, and that was what gave you confidence that the credit union, uh, would be successful. And then what happened over time as [00:10:00] financial services became automated and, uh, we started getting things like credit reports on people and being able to get things like FICO scores, it became possible for credit unions to serve people where the people loaning the money didn't personally know.

[00:10:23] Todd Harper: And Mike, if I could add one thing there, because I did grow up in, uh, northwest Indiana in the industrial, uh, area that the, you know, spans from Chicago all the way over to Pittsburgh and even up into Wilkes Bury, we saw a number of employers go out of business, which was a death nail.

[00:11:01] The economics were changing not just the financial nature of the industry, as Mike said.

[00:11:24] And then rolling into the nineties, the American Bankers Association decided they didn't like this. They didn't like this. We had 20,000 credit unions, and that's when the court cases began to go after multiple CommonBond credit unions. And from that case, the NCUA took one on the chin and lost, correct?

[00:12:11] But that decision was later overturned by an appellate court. And that then was appealed to the Supreme Court along with a bunch of other cases that had risen up in other jurisdictions. And the Supreme Court eventually decided to consolidate all the cases and issue one ruling. And that ruling came down and it was a very narrow five to four.

[00:12:55] And that basically, uh, was the. [00:13:00] Inspiration and reason for the introduction of the Credit Union Membership Access Act, HR 1151, which basically sought to overturn that Supreme Court decision and allow the credit union to serve multiple groups as long as each group had within itself a common bond.

[00:13:31] You introduced that be even before the Supreme Court. Decided its case 'cause there was a worry that we knew that this case could go the wrong way and we needed to be ready for Congress to act. And rather than waiting, we were prepared in advance.

[00:13:50] But behind the scenes, why, what, why he, he was the credit union congressional champion for a long time. What, what was [00:14:00] important to him? Why was this a big issue for him?

[00:14:14] That is people pulling their resources together in mutual aid to help one another. And he always talked about the importance of democratic capital. It was also important to him because credit unions were serving the communities as he watched industries close, merge, um, fold up. Credit unions were there doing the community work, and he saw that happening firsthand.

[00:14:43] Mike Radway: Now Todd, you nailed it. Precisely. It, it was because he had seen the work that credit unions had done in his district because he was himself a, a credit union member. Uh, he knew that they were responsive to the needs of the people and he believed that consumers deserve the right to [00:15:00] choose a not-for-profit credit union there source of financial services and not simply to have to rely on large multi-state and sometimes national banks.

[00:15:38] I wanna introduce this legislation, but he also knew that at that time the Republicans controlled the House of Representatives and therefore it was important to have a Republican as the lead sponsor for the legislation. And it took actually some time to find a Republican who is willing to stand up to the bankers, uh, and agree to be the sponsor.

[00:16:25] And they formed a, a wonderful, bipartisan cooperative, uh, agreement. And, uh, that sort of set the tone that it was okay for members of both parties to get behind this effort and to stand up for their constituents and the cooperation. I think also. Fourth, an important precedent that helped us end some of the past infighting between the trade association groups and get them to agree to form a joint effort to the campaign for consumer choice and not each to.

[00:17:04] Mark Ritter - Host: Now I know the schoolhouse rock version of how a bill becomes a law, but behind

[00:17:18] Don't want us to

[00:17:22] Mark Ritter - Host: So I was actually talking to a few of my credit unions where they had. Booth set up in the credit union to write pe write their local legislator campaign. You know, this was rally the troops, but what's going on behind the scenes congressionally and, and politically to get this moving forward?

[00:17:49] Well, and first of all it was the, okay, let's make this a bipartisan bill and not a partisan effort where one's party is trying to blame the other. And that sort of gave [00:18:00] cover for members from both parties to sign on to the bill and become sponsors. And I, I believe we eventually ended up with a majority of the House of Representatives, the sponsors of the bill, which is why we knew it was, you know, ultimately gonna at least pass the house.

[00:18:30] That also helped for a, a, a lot of people. And, you know, the, the version of the legislation that was introduced was literally two pages long and it just corrected that one provision. But that was also, that

[00:18:47] Mike Radway: What ended up. Happening.

[00:19:09] And the administration started laying out some of the things that they thought were necessary to include in the legislation if we were going to revise the credit union membership. And that's how the bill even essentially got from two pages to. Uh, roughly 26 or 30 pages long was, uh, we had to make sure that we had buy-in from the administration and we had to address concerns that folks on the Senate side had.

[00:19:45] Todd Harper: And Mark, if I could just add a little bit there, mark, I've long believed that Congress acts in two situations.

[00:20:19] But you also, as Mike said, uh, noted, we were working behind the scenes to build consensus across the party lines. We were working to build consensus with the administration, and we were working to build that together. A very big part of that consensus effort was the day that new Gingrich. Who was Speaker of the House came on board as a sponsor of co-sponsor of the legislation, which was a signal to all Republicans that it was fine to get on board with this and move it.

[00:21:12] And they were telling those stories over and over again, not just in the letter writing, but in political advertisements and holding rallies on the hill. And all of that came together to make 1151 happen.

[00:21:44] It was framed in terms of let's make sure consumers have a choice, and that's a much more popular. Position to take then, okay. Should I side with the credit unions or the bankers? Why shouldn't consumers be allowed to choose a credit [00:22:00] union instead of a bank?

[00:22:10] That seemed like the easy one. But to get people on board, we had to turn the two page bill into a 26 page bill. Now I'm gonna have the airing of the grievances. So before this, there was no business lending cap. Now be what I have been. I joined the credit union space a year after this bill was in place.

[00:22:56] Mike Radway: Uh, I wouldn't say that it was necessarily to soften banker objections. They were [00:23:00] still always going to object. Uh, but it was to assuage certain members of the Senate banking committee, particularly Senator Richard Shelby of Alabama, who was the prime, uh, sponsor of that provision to be, for him to be able to say, okay, I got, I'm gonna vote for this bill because my constituents want it, but I got you something.

[00:23:24] Mark Ritter - Host: What? I look back at in is in history, is that that cap jumpstarted so many credit unions because it jumpstarted the QSO industry because we couldn't build scale individually. Now. And it brought to the, to the attention for the first time ever that you could do business lending in this, in this small business lending in the industry.

[00:24:32] You would, it would definitely have grown a little bit, but the formation of QSOs and lifting that up. And it also got credit unions working together because they had a fixed cap. So me personally, I'm thankful for that cap because I've been able to help so many businesses across the country who, with some credit unions that they might not have, they might [00:25:00] not have been in the business otherwise.

[00:25:07] Mike Radway: I think that's what we call the law of unintended consequences. Absolutely. You put in place a limit thinking that you're gonna stop something bad from happening and all of a sudden you're waving a red flag that says, Hey, this is a good thing to do.

[00:25:24] Todd Harper: And Mike, if I can also add one other point on it. Not only were, were we raising the flag on it to note making notice of it, this was an acceptable procedure, but it's also a great way for a credit union to diversify its portfolio.

[00:25:55] Mark Ritter - Host: What, what I have always said is, your members own [00:26:00] businesses. They just might not be going through it through you, and it's been a prosperous for the credit union. And helps keep that capital in the community, so. So yes. Thank you for helping the cap get into

[00:26:14] It's more why did you put the cap in place. So

[00:26:44] So from, from your perspective. You know, I, I look at the, the vendor authority, Todd, we've swapped messages on this. I'm one of the few vendors that's for vendor authority and it seems like kind of a no-brainer to me, but there's so much, it seems like [00:27:00] everything is a divisive issue versus a consensus issue.

[00:27:05] Todd Harper: So I think first of all, it is harder to pass legislation these days because there is less and less of a center within Congress, and by that there used to be the National Journal. Would rank every Congress the most liberal to the most conservative member of Congress. And back when Mike and I were working on the hill, like the most liberal member, uh, on the Republican side of the aisle was like number 396, uh, or or 496 out of, uh, 3 96 outta 435.

[00:28:06] So I think that is one of the major reasons why it's hard to pass legislation. Second of all, having been the staffer who, you know, after we did the Credit Union Membership Access Act, we followed that up five years later with Ed Royce and Paul Korki came together to write, um, the Credit Union's Regulatory Improvements Act, Curia.

[00:28:49] Ultimately small pieces of that bill over time have gotten folded into different pieces of legislation. For example, the one to four unit, uh, family [00:29:00] housing originally that was, uh, uh, a non-owner occupied housing originally that was part of the member business loan calculation. And eventually over time we've been able to say no, that is not counted towards the member business loan calculation, freeing up a little bit.

[00:29:22] Mike Radway: And I would go back to something Todd said earlier, which is that the majority of the time financial services legislation tends to pass when there's a crisis.

[00:29:57] And in between those major [00:30:00] crises, it's usually like pulling teeth to get little changes.

[00:30:24] Mike Radway: No, that has changed dramatically, I think since the eighties. And I, uh, I attribute it frankly to some of the changes in attitude from when, uh, Newt Grich became speaker, because he really started the, uh, the. Polarization and politicization. And he also eliminated, or, or instituted the first, uh, restriction on the ability of lobbyists to take people out to lunch.

[00:31:11] And there's definitely been, Todd, you can speak to it since you were on the hill after I was, but I, I think the atmosphere today is dramatically different from the atmosphere when, when I was there, I mean. I had a very good relationship with my counterpart on the Republican side of the aisle on the committees that I staffed.

[00:31:37] Todd Harper: And Mike, you know, there was another contributing factor too. That is more and more members are choosing not to move their families to Washington and therefore, uh, they, they are going back to their districts and that creates less of an opportunity for social interaction to occur because they are on the road going back to their districts.

[00:32:28] One was Democrat, one was a Republican, uh, and supported each other. You don't see that type of cooperation happening anymore.

[00:32:56] Or you would've just never guessed? Is going [00:33:00] on or what the credit union industry is like today? What, what, what, when you look at today, do you say, wow, I just would've never predicted that?

[00:33:17] I mean, I, I would've felt multiple common bond coming out of 1151. But I think if you look at the data you see quite a bit. It's really more the community charters growing in size and, and, and difference that is, you know, one thing 30 years ago that I certainly would not have seen predicted. Another thing that I certainly would not have seen, uh, predicted are credit unions that are dropping their name, credit union.

[00:34:13] I would expect them to be out there helping their members, doing individualized mailers to their potential members, getting out there and doing not just broad scale advertising, but micro advertising to grow their membership base. Mike, you probably have a few ideas too, so I

[00:34:32] I did foresee the growth of community charters. I didn't foresee the growth of multi said credit unions with an association. To make it easier to expand to a variety of states. That, and, and that surprised me more than anything else. And I also ex, I sort of expected more interstate compacts amongst groups of states to encourage credit unions in their states.

[00:35:19] The fact that they can add in more member business loans, the fact that they have more home loans than they used to have. These are all things that will help credit unions, weather, economic storms in the future. 'cause we know there's always gonna be another storm. We just don't know. Where or when and precisely how.

[00:35:45] Mark Ritter - Host: W when? When I started, well, when I was at Members first, Bob Marquette always told me we were the biggest credit union, one of the biggest in the state, biggest in the region. He said, any credit union that needs help, they come [00:36:00] in here.

[00:36:24] Todd Harper: No. And, and Mark, you know, during the, uh. COVID-19 crisis. As we went through that pandemic, one of the things that was a real pleasure to see is not only did Congress pass legislation to increase the capacity of the central liquidity facility, but we saw some of the very largest credit unions join the central liquidity facility so that they knew that they could be that liquidity provider for other credit unions.

[00:37:04] Mike Radway: I frequently get asked, how can credit unions compete with banks, many of whom are much, much larger than they are?

[00:37:28] Mark Ritter - Host: Well, Mike and Todd, thank you for your service to the industry. Thank you for everything you've done, and thank you for the things that you can do in the future that we won't name yet. So I appreciate your time. We, I think we could do this for hours, but talk about the old days and, and the good times. So.