CUNA GAC Michigan Attendee Briefing Hosted by Michigan Credit Union League & Affiliates

1. CUNA GAC Michigan Attendee BriefingHosted by Michigan Credit Union League & Affiliates February 24, 2011

2. Instructions to Access Briefing • Call toll-free: 1-888-742-8686 • Conference ID: 7828473 • Participants can follow along with the PowerPoint.

3. Welcome & Opening Comments Dave Adams MCUL & Affiliates CEO

4. First Time CUNA GAC Attendees • Howard Adams III, EECU (JA) • Frank Allen, Detroit Metropolitan Credit Union (ME) • Dave Brandt, E & A CU (ME) • Kathy Egan, EECU (JA) • Eric Esser, Community Financial CU (MW) • Peggy Hansen, North Central Area Credit Union (BO) • Gerald Hutto, Team One Credit Union (MM) • Bruce Kennedy, Detroit Metropolitan Credit Union (ME) • Vic Marshall, EECU (JA) • Ken Roznowski, Dow Chemical Employees' Credit Union (MM) • Debi Southworth, Omni Community CU (BC) (updated) • Jim Turner, Grand Rapids Family Credit Union (GR)

5. Events for First Time CUNA GAC Attendees • There are some different opportunities this year for first time attendees to learn more about the CUNA GAC with regard to what to expect at the conference and during the Hill visits: • First-Time Attendees “Coffee with Bill Cheney”, CUNA President/CEO on Sunday, February 26 from 2-2:30 pm in Room 202 A-B in the Washington Convention Center • MCUL & Affiliates staff will also be on hand Sunday, February 26 in the Coeur de Lion restaurant at the Henley Park Hotel at 3:00 pm (prior to the 5:00 pm Welcome Reception) to meet with first time attendees. • Veteran attendees that may be willing to be paired with a first time attendee should also consider attending • During the hospitality suite on Tuesday (which runs from 6-7:30 pm), MCUL & Affiliates will again provide information on Hill visit changes and a brief legislative discussion at 6:30 pm • Great opportunity for new attendees and veterans to ask questions and also get the most up to date information on times for Hill visits

6. Project Zip Code • Project Zip Code (PZC) is a user friendly, secure computer program that counts your credit union members and matches them by congressional district, state legislative district and county. • These counts are then uploaded to CUNA’s PZC Web site and combined with data from other credit unions nationwide. • This data aids in federal and state advocacy efforts and participation provides operational benefits. • Credit unions can view credit union members by geographic area, which can be useful in placing ATMs and shared branching. • Your information is safe and secure with PZC. No personally identifiable data or individual information leaves your computer. PZC receives only counts of records successfully matched by the program. All of your data remains confidential and secure with PZC. • Since 2009, 85 Michigan CUs have run PZC identifying 2 million members. • Since 2003, 118 MI CUs have run PZC identifying over 2.7 million members.

7. MI CU Members by Congressional District

8. 2011 PAC Lapel Pins • 2011 MCULAF (State PAC) Lapel Pins will be available for purchase at the CUNA GAC. • Levels of giving are the same as last year: $25, $50, $100, $250 and $500. • As always, a payroll deduction option is available. • Please see MCUL staff at the hospitality suite to purchase a pin. • Get yours for the 2011 CUNA GAC-don’t be caught without a pin in DC!

9. MCUL Staff Contact Numbers • Henley Park Hotel • 926 Massachusetts Avenue, NW • Washington, DC, 20001 • Phone: 202-638-5200   Fax: 202-638-6740 • Dave Adams: 517-304-7777 (mobile) • Drew Egan 517-304-6556 (mobile) • Marcia Hune: 517-281-2915 (mobile) • Jordan Kingdon: 517-614-6758 (mobile) • Jami Meyer: 517-410-8278 (mobile) • Glenn Ray: 517-763-6276 (mobile)

10. Conference Agenda Highlights • Sunday, February 27, 201112:00 - 8:30 p.m. Conference Registration 1:00 - 5:15 pm Small Credit Union Roundtable 5:00 - 7:00 p.m. MCUL Welcome Reception, Blue Bar and the Wilkes Room (lobby), Henley Park Hotel 7:00 - 8:30 p.m. Exhibit Hall Grand Opening 8:30 p.m. Evening Entertainment • Monday, February 28, 20117:00 a.m. – 4:30 p.m. Conference Registration 7:30 – 9:15 a.m. Exhibit Hall Open 9:00 – 10:30 a.m. Opening General Session 10:30 a.m. - 11:30 p.m. CUNA Annual General Meeting11:30 a.m. - 1:30 p.m. Exhibit Hall Open 1:30 - 2:30 p.m. Legislative & Political Update 2:30 - 4:00 pm General Session (Capt. “Sully” Sullenberger)4:00 - 5:30 p.m. MCUL Hospitality Suite Open, Blue Bar and the Wilkes Room (lobby), Henley Park Hotel 5:30 p.m. Herb Wegner Memorial Awards Dinner (Grand Hyatt-Ticketed Event)

11. Conference Agenda Highlights • Tuesday, March 1, 2011 7:00 a.m. – 5:00 p.m. Conference Registration 7:30 – 8:45 a.m. Exhibit Hall Open 9:00 a.m. – 12:00 p.m. General Session 12:00 – 1:45 p.m. Exhibit Hall Open 2:00 – 3:15 p.m. Breakout Sessions TBDLate Afternoon MCUL Hill Visits 3:30- 4:45 pm Breakout Sessions 4:45 - 6:00 p.m. Reception with NCUA Board of Directors5:00 – 6:30 p.m. Exhibit Hall Closing Session6:00 – 7:30 p.m. MCUL Hospitality Suite Open, Blue Bar and the Wilkes Room (lobby), Henley Park Hotel **Hill visit changes and a brief legislative discussion will occur at 6:30 p.m.** 9:00 - 10:30 p.m. Late Night at the GAC

12. Conference Agenda Highlights • Wednesday, March 2, 2011 8:00 – 9:30 a.m. Michigan Congressional Breakfast (2168 Rayburn House Office Building) 9:00 a.m. - 5:00 p.m. Hill Visits for MCUL Conclude 5:00 p.m. Awards Reception7:00 p.m. Closing Conference Gala Reception/Dance • Thursday, March 3, 2011No General Session-CUNA allowing more time for Hill visits (if needed). Note-the MCUL will not be scheduling visits this day.

13. MCUL Congressional Breakfast & Awards Presentation • Wednesday, March 2nd from 8 am – 9:30 am. • 2168 (Gold Room) Rayburn House Office Building.   • Full hot breakfast will be served. • 2010 MCUL Federal Lawmaker and Staffer of the Year Awards will be presented to: • Congressman Gary Peters (D-Bloomfield Township) • RJ Laukitis, Former Legislative Director for Congressman Pete Hoekstra • Please remember to give yourself extra time to get through security.

14. Capitol Hill Visits • Up-to-date Capitol Hill meeting schedules will be emailed to all Michigan CUNA GAC registrants on Friday, February 25. • Copies will also be available on site with staff at the hospitality suite in the Henley Park Hotel. • The Hill meeting schedules are based on credit union headquarter andbranch locations. • If your Hill schedule permits, please feel free to attend your own (home) representative meeting. • However, because of size limitations, only credit union officials designated to meet with Senators Levin and Stabenow may attend. • The attendees for these meetings will be finalized Friday, February 25 when more Hill visit times have been confirmed.

15. Hill Meeting Tips • Arrive at least 5 minutes early for your Hill visits and wait in the hall until other CU officials arrive. • Provide lawmaker and their staff with a copy of federal legislative issues briefing material included in your packet. • Be prepared – Know the issues! • Remember to take pictures that can be included in your CU newsletter and in Michigan Monitor. • Be sure to follow-up on your meetings with a “Thank You” letter or note. • Please pass along any important information learned in your meetings (and pictures) to MCUL Governmental Affairs staff at govaffairs@mcul.org.

16. Tentative Hill Visit Meeting Schedule(In Order by Date/Meeting Time) Dist.LawmakerDayTimeLocation 5 Dale Kildee Tues. 3 pm 2107 Rayburn 7 Tim Walberg Tues. 3 pm 418 Cannon 3 Justin Amash Tues. 4 pm 114 Cannon (Mtg. w/Couchman) 15 John Dingell Wed. 10 am 2328 Rayburn (Mtg. w/Andrew Woelfling) • Mike Rogers Wed. 10:15 am 133 Cannon (Mtg. w/Megan Drenan) 4 Dave Camp Wed. 11 am 341 Cannon (Mtg. w/Rob Guido) 9 Gary Peters Wed. Noon 1609 Longworth 12 Sander Levin Wed. 12:30 pm 1236 Longworth

17. Tentative Hill Visit Meeting Schedule(In Order by Date/Meeting Time) Dist.LawmakerDayTimeLocation 10 Candice Miller Wed. 1 pm 1034 Longworth 13 Hansen Clarke Wed. 1:30 pm 1319 Longworth 14 John Conyers Wed. 2 pm 2426 Rayburn 2 Bill Huizenga Wed. 2 pm 1217 Longworth Sen. Carl Levin Wed. 3:30 pm 269 Russell (Mtg. w/Tyler) 1 Dan Benishek Wed. 4 pm 514 Cannon 6 Fred Upton Wed. 4:20 pm 2183 Rayburn • Thad McCotter TBD 2243 Rayburn Sen. Debbie Stabenow TBD 133 Hart

18. Hill Meeting Time Confirmation • Any changes in meeting times will be posted in the MCUL’s hospitality suite on Monday and Tuesday night. • Please remember to stop by the hospitality suite to confirm your meeting schedule as well as pick up any additional materials you may need. • MCUL staff will be on hand at the hospitality suite Tuesday night at 6:30 p.m. to go over any last minute changes to Hill visits and conduct another legislative issues briefing for those that are interested. • If you have any questions, please do not hesitate to contact MCUL staff on their cell phones.

19. Legislative Update Federal Legislative Issues: • The Value of the Credit Union Tax Status • Debit Interchange Fee Regulations • The Need for Supplemental Capital • Member Business Lending Legislation

20. The Value of the Credit Union Tax Status 20 • Congress has provided the credit union federal tax-exemption because of the not-for-profit, cooperative structure of credit unions, and the special mission credit unions have to serve consumers. • The credit union tax status is not based on the size of credit unions or the products and services that they offer; it is based on the credit union structure.  • This rationale for the tax-exempt status has been ratified several times by Congress. • We know the Federal government faces a significant budget crisis. A Presidential Commission recently recommended eliminating all tax expenditures.

21. The Value of the Credit Union Tax Status 21 • While the credit union tax expenditure “costs” the federal government approximately $500 million annually, consumers benefit to the tune of $7 billion - $8 billion annually because credit unions are tax-exempt. • Credit union competition helps keep bank and savings and loan prices lower. • Credit unions provide consumers with access to consumer-friendly financial services. • If credit unions were taxed, product pricing would increase, and little incentive for a cooperative-financial institution to exist. • This would leave low to moderate income consumers seeking financial services at for-profit banks.

22. The Value of the Credit Union Tax Status 22 Key messages for your Hill visit: • Even though credit unions were affected by the financial crisis, none of the problems that precipitated the crisis were caused by credit unions because their motives and the incentive structures are different from for-profit financial institutions. • If credit unions are taxed, there is no incentive for credit unions to remain not-for-profit and they could convert to banks. • Our economy would then lose the only sector of the financial industry that is not driven by profit, but rather driven by a dedication to serve its members. • Credit unions are the best choice for consumers to conduct their financial services with lower interest rates on loans and fees on services than other institutions. • Taxing credit unions takes this option away from consumers and will drive up the cost of financial services for all.

23. Debit Interchange Fee Regulations 23 • Credit unions issue debit cards and credit cards to their members and the interchange revenue from the use of these cards is vital to support the administrative expense of card programs. • Interchange fees allow business costs, including operating expenses, fraud risk management, and the risk of consumer nonpayment, to be shared by the payments participants. • Interchange fees are not paid to Visa or MasterCard. • The fees are paid by merchants to credit unions and banks that issue debit and credit cards, and represent the merchants’ fair share of the cost of the payment card system. • Merchants have a choice in what they pay to accept payment cards – thousands of banks and credit unions offer acquiring services (card processing).

24. Debit Interchange Fee Regulations 24 • As part of the Dodd-Frank Act, Congress enacted provisions that regulate the debit interchange rates and give merchants more control over a consumer’s use of debit cards and credit cards at the point of sale and the route through which the transaction is processed. • The Act also prohibits the Federal Reserve from taking into account all of the costs of the payment system when regulating the debit interchange fee to establish a rate that is “reasonable and proportional” to the “incremental” cost of the individual transaction. • The limitations on debit interchange fees and card practices that Congress enacted last year will affect how credit unions and community banks serve their members and customers, driving up the cost of providing checking accounts and debit cards.

25. Debit Interchange Fee Regulations 25 • While Congress intended to carve-out small issuers from the debit interchange provision in Dodd-Frank, the Federal Reserve’s proposed rule on the issue is currently unworkable. • The Fed has not taken into consideration the cost to smaller institutions to provide debit card services as that cost is greater than for larger institutions. • The proposal does not include any provision designed to enforce the carve-out for small issuers. • The failure to protect credit unions and community banks means they will be subjected to the lower interchange rate the Fed must set by taking into account an incomplete set of cost factors.

26. Debit Interchange Fee Regulations 26 Key messages for your Hill visit: • The interchange provision unfairly disrupts a functioning marketplace by requiring credit unions and banks to accept a rate for service that is less than the cost of providing the service. • In Michigan, the provision to limit interchange will result in a loss of $72.5 million of income for credit unions, and will be a total of $1.7 billion hit for credit unions nationally if the carve-out is ineffective. • Credit unions, because of their restrictive capital structure, will be forced to pass along these losses to their members or abandon debit card program. • The bottom line is this will lead to not only increased costs for consumers, but also decreased access to cards with competitive rates and friendly terms.

27. Debit Interchange Fee Regulations 27 Key messages for your Hill visit: • Congress should not enact any additional legislation affecting debit or credit interchange fees. • While our preferred remedy would be to repeal the recently enacted interchange provision, we know this may not be politically feasible. • However, even as repeal of the interchange provision is possibly considered, Congress should exercise diligent oversight of the implementation of this provision to ensure that the carve-out for credit unions and community banks is meaningful.

28. The Need for Supplemental Capital 28 • Credit unions remain the most highly regulated and restricted of all insured financial institutions • They are the only depository institutions in the US without the ability to issue some form of capital instruments to augment retained earnings to build capital. • Credit unions historically have had the lowest default/delinquency rates in virtually all categories of loans and have maintained average net worth ratios well in excess of those held by banks. • By law – not regulation, as is the case for other insured depositories – credit unions must maintain a 7% net worth (or leverage) ratio in order to be considered “well capitalized.” • The law also specifies that only retained earnings constitute net worth for credit unions.

29. The Need for Supplemental Capital 29 • The recent financial crisis led to a substantial drop in the average credit union capital ratio from 11.4% at the end of 2007 to 9.9% as of the end of 2009. • While the credit union movement as a whole remains very well capitalized, a number of credit unions are close to or past the prompt corrective action (PCA) triggers as a result of the financial crisis. • These credit unions will need to raise capital at a time when the outlook for credit union net income is not particularly strong. • Net interest income (the difference between what credit unions earn in interest on loans and investments and what they pay in interest and dividends on savings) has been on a long-term downtrend which will only be exacerbated by the likelihood of interchange income diminishing as well.

30. The Need for Supplemental Capital 30 Key messages for your Hill visit: • As credit unions battered by the financial crisis recover in the coming few years, rebuilding capital ratios will be paramount. • With earnings power facing headwinds, credit unions and their members will face a protracted period of reduced member service, disadvantageous member pricing, and very slow growth, unless Congress allows access to supplemental forms of capital. • Supplemental credit union capital will reinforce and strengthen the regulatory incentive for credit unions to remain exceptionally safe and sound, and, will allow credit unions to do even more to serve all their members. • Congress should modify the definition of credit union net worth to include supplemental forms of capital for credit unions.

31. Member Business Lending Legislation 31 • America’s small businesses are the engine of growth of our nation’s economy and the effects of the financial crisis of the past few years have spread to all types of lending, resulting in a reduction in the availability of business credit. • Credit unions have been making member-business loans (MBLs) since their inception in the early 1900s. • In the first 90 years of their existence, there was no MBL cap on credit unions and the current cap is an arbitrary limit imposed by Congress in the Credit Union Membership Access Act of 1998 (CUMAA). • The cap on credit union member business lending (currently 12.25% of the total assets of the credit union) has no economic, safety and soundness or historical rationale.

32. Member Business Lending Legislation 32 • In fact, credit unions have been lending to their business-owning members for a century and their loan losses (net charge off rates) for business loans are much lower than those for business loans made by banks. • At a time when banks are withdrawing credit from America’s small businesses, credit unions have actually been expanding credit to small businesses, but with more credit unions approaching the cap, this growth is threatened. • It makes economic sense to restore credit unions’ full ability to lend to their business-owning members.

33. Member Business Lending Legislation 33 Key messages for your Hill visit: • Most credit union loans are what are generally considered small business loans-the average credit union business loan is approximately $220,000. • Therefore, when a credit union lends to one of its business owning members, that money stays in the community the credit union serves and helps employ area residents. • Banks have been reducing credit availability, and even after receiving $30 billion of taxpayer money, banks still are not meeting the demand for small business loans. • However, in the next year, credit unions could lend small businesses an additional $10 billion, helping them to create over 100,000 new jobs if Congress increases the statutory cap on credit union business lending.

34. Member Business Lending Legislation 34 Key messages for your Hill visit: • Congress should enact legislation which increases the credit union member business lending cap from 12.25% of assets to 27.5% for well-capitalized credit unions and adds significant safeguards to ensure that qualifying credit unions do this additional lending safely and soundly. This approach has been endorsed by the Obama administration. • This can be done without costing the taxpayers a dime and without increasing the size of government. • Unlike banks, credit unions do not need taxpayer assistance to encourage them to do more business lending; credit unions only need authority from Congress.

35. Questions?

36. CUNA GAC Michigan Attendee BriefingHosted by Michigan Credit Union League & Affiliates February 24, 2011