Republicans Attack Credit Unions

  Representative Dan LeMahieu (R-Cascade). Poor Rep. Dan LeMahieu (R-Cascade). The four-term lawmaker was asked to be the water boy for a legislative change he barely understands. LeMahieu is listed as sole sponsor of a budget provision that would allow credit unions in Wisconsin to convert to stockholder-owned banks. It is a horrible piece of legislation for reasons I will spell out, and LaMahieu struggled to offer any justification. I’ve rarely interviewed a lawmaker with weaker responses to my questions. For starters, the provision is opposed by The Wisconsin Credit Union League and was actually proposed by their competitors, the…

 
Representative Dan LeMahieu (R-Cascade).

Poor Rep. Dan LeMahieu (R-Cascade). The four-term lawmaker was asked to be the water boy for a legislative change he barely understands. LeMahieu is listed as sole sponsor of a budget provision that would allow credit unions in Wisconsin to convert to stockholder-owned banks. It is a horrible piece of legislation for reasons I will spell out, and LaMahieu struggled to offer any justification. I’ve rarely interviewed a lawmaker with weaker responses to my questions.

For starters, the provision is opposed by The Wisconsin Credit Union League and was actually proposed by their competitors, the Wisconsin Bankers Association. Banks hate credit unions because they are nonprofits that do not pay corporate income taxes and typically charge lower fees to customers. Lobbyists for banks have unsuccessfully pushed for credit unions to pay taxes and have now latched onto this new provision as a way to get rid of some credit unions by turning them into for-profit, stockholder-owned banks.

“Members of the Wisconsin Bankers Association came up with the idea and gave it to me because that’s who they were told to go to,” LeMahieu admits.

LeMahieu says he did talk to a member of the Credit Union League, and “they were not totally supportive of this.” That would be putting it mildly. Tom Liebe, vice president of government affairs for The Wisconsin Credit Union League, calls it an “outrageous proposal.” Brett Thompson, the league’s president and CEO, calls it “a continuation of covert moves by the banking industry to kill” credit unions.

So why support a provision for credit unions, which they oppose and their competitors favor?  “My understanding is some individual credit unions are in favor of this,” LeMahieu answers.

Could he name any? “No,” LeMahieu admits. “But I was told that there were some.”

No one seems to know who these credit unions are. “We’re not aware of any,” says Liebe. “We challenged lawmakers, and they couldn’t come up with any.”

Rose Oswald Poels, president & CEO of the Wisconsin State Bankers Association, says she has talked to individual credit unions that support this provision but “was not at liberty to name any.” Oswald Poels says there have been multiple hearings about this provision in the Wisconsin Legislature over the years but conceded that not one credit union or representative of a credit union has ever spoken in favor of this law. 

Are there any other states that have passed such a proposal, I asked LeMahieu. “I’m not sure,” he answered. According to Liebe, just one state has – Georgia. “But Georgia’s law is far more transparent.”

The league argues the Wisconsin provision would allow a credit union to transform to a bank without the approval of a majority of its members. LeMahieu insists this is wrong. “We were assured this by the Legislative Fiscal Bureau,” he says.

But Sean Moran, the Fiscal Bureau’s expert on this issue, says the provision simply requires notice to members of the credit union of a proposed change to a for-profit company. (And most, we suspect, will ignore any letter that sounds legal and complicated.) “A written ballot is not a requirement,” Moran notes. Meaning the change could happen without the approval of a majority of members.

LeMahieu, however, still has more arguments. He says the state provision will simply echo a federal law that allows conversion of credit unions. In fact, the federal provision is far more detailed and runs 16 pages long. The provision that bears LeMahieu’s name is 2.5 pages long. “The federal law is far more proscriptive,” says Liebe. “If they took the federal guidelines and used them, we’d be perfectly fine with that.”

LeMahieu’s final argument – and this is the key one, he stresses – is that without the state law, credit unions that convert to banks under federal law only pay federal corporate taxes.  “This was brought to me as a tax issue,” he says. With the change in state law, “the revenues will go to Wisconsin rather than the federal government.”

Nonsense. Once a nonprofit credit union becomes a stockholder-owned bank, they would naturally have to pay state taxes, like all for-profits. But just to be sure, I called the state Department of Revenue and asked whether the few credit unions that made this conversion are paying state taxes. Department spokesperson Stephanie Marquis checked and got back with this answer: “Yes, they pay state corporate taxes.”

LeMahieu, by the way, is careful to note he isn’t the only sponsor of the provision. “It was a recommendation of all six Republicans,” he says, meaning the six GOP assembly members of Joint Finance. They would also include representatives Robin Vos (R-Burlington), Dan Meyer (R-Eagle River), John Nygren (R-Marinette), Patricia Strachota (R-West Bend) and Joel Kleefisch (R-Oconomowoc). Their names were supposed to be attached to the provision affecting credit unions, but somehow, LeMahieu notes with an embarrassing chuckle, he was the only one listed.

So has the Wisconsin Bankers Association donated to the campaign fund of this group, I asked. “I don’t know about the other members,” LeMahieu says, “but I believe I have gotten contributions.”

Indeed. It turns out banks have contributed $2,650 to LeMahieu, compared to a measly $250 from those pikers at the Wisconsin Credit Union League. All told, the six Republicans on Joint Finance raked in $8,200 from banks and bank associations, and just $2,500 from credit unions or associations. That, however, leaves out many thousands more in contributions from individuals in the banking and finance industry that are less specifically detailed in data at the Wisconsin Democracy Campaign, so the true total from banks is probably considerably higher. Seems like a clear case of “you get what you pay for.”

The Incumbents Protection Plan

Redistricting has always been more about protecting incumbents than serving the voters. Congressman F. James Sensenbrenner once told me he would get together with former Congressman David Obey, and the two senior representatives of each party in Wisconsin would figure out how the redistricting would go. That’s how it worked in 2000 and 1990. The most easily agreed-upon goal: Protect the incumbents in each party.

This year, however, the political power is not split between the parties, so the Republicans alone can redraw the lines of the state’s eight congressional seats. Ironically, they intend to do the same thing: protect incumbents of each party.

As Milwaukee Journal Sentinel reporter Craig Gilbert reports, the party wants to give new Rep. Sean Duffy a safer seat, so it is cutting away some Democratic territory and replacing it with Republican territory in the 7th District. But the only way it can do this is by transforming the 3rd District of Ron Kind into a classically gerrymandered, y-shaped district which will make it more Democratic. This is a seat Republicans held for years before Kind was elected, but they are essentially giving up on it.

In short, the GOP will be helping both Republican and Democratic incumbents get reelected by making the various districts as Republican or Democratic leaning as possible. This is the dirty secret of the two-party system. It’s to the advantage of incumbents to eliminate any swing districts. The result is an ever- more partisan country and increasingly bitter political divisions; ever-less compromise and a continuing decline in leadership on tough issues such as Medicare, Social Security and the deficit. The big losers are the American people. 

The Buzz

-Bucyrus International CEO Tim Sullivan has blamed MATC for failing to train welders, which forced him to move some operations to Texas. The story had a brief response from MATC president Michael Burke, promising to address the situation. But on Sunday, MATC welding instructor Larry Gross wrote a JS op-ed offering an entirely different and quite detailed view of the situation. I don’t know who is right here, but I would hope the newspaper would do a follow-up story that attempts to resolve the issue from both sides. 

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Bruce Murphy is a former editor of Milwaukee Magazine. He has been writing about state and local politics since 1980, which is to say he’s old. His claim to fame, such as it is, is breaking the county pension scandal, which led to resignation of County Executive F. Thomas Ament and the recall of seven county supervisors. Murphy calls himself a fiscally conservative liberal contrarian. Others have shorter, less complimentary ways to describe him.