During the Jan. 15 NCUA board meeting, Board Member J. MarkMcWatters argued that the proposed risk-based lending rule isillegal.

McWatters' prepared remarks were so dense with legalese, I wasbleeding from the ears after just a few paragraphs. Thankfully, acouple of lawyer friends dumbed it down for me: The gist of theargument was that the Federal Credit Union Act only allows for asingle-tier net worth requirement.

Technically, that may be true, but pursuing a legal way out ofrisk-based capital is a waste of industry resources. Between theNCUA, CUNA, Callahan & Associates and others, it's probably alow estimate the industry spent a quarter of a million dollarsfighting or supporting the regulation.

And for what?

Does anybody really think credit unions can win a battle whenthe almighty Basel Committee on Banking Supervision is involved? Ithink it's a miracle credit unions have managed to avoid Basel'srisk-based capital standards this long.

The Basel Accord requires member countries to implement thegroup's guidelines. Credit unions have already seen liquidity andstress test rules, standards that were outlined in Basel III. BaselIV will impose even tougher standards. It's the stuff ofwhich conspiracy theories are made, this mysterious group inSwitzerland that effectively outranks national governments.

Personally, I've never understood why people fear globalization.Blame a childhood greatly influenced by the first Star Warstrilogy. In space, nobody cares if you're American or Chinese orPersian. You're just another ugly human.

For big banks, consistency in global regulations makes sense.Ratings agencies and the international investors they serve needapple-to-apple comparisons.

Credit unions, however, don't compete much in global financialmarkets. Investments are limited and most can't accept secondarycapital from domestic investors, much less foreign.

Credit unions also struggle to abide by the guidance becauseit's written for for-profit institutions. This is nothing new. Justask World Council President/CEO Brian Branch, who has pressed thatpoint to international regulators and groups like Basel and theInternational Accounting Standards Board so many times he canprobably do it in his sleep.

Occasionally, World Council wins a credit union exemption. Mostof the time, however, credit unions are forced to make theregulation work. Risk-based capital is one of those times.

Either credit unions have a seat at the grown-up table or theydon't. As much as we would like to have our own special set ofcooperative rules while competing in the financial servicesmarketplace with the big boys, it's not realistic. Most of thetime, parity with banking rules makes sense. Again, this is one ofthose times. It's also tough to fight a legal battle against aregulator. When you fight the law, the law usually wins, even whenit's wrong.

CUNA President/CEO Jim Nussle admitted to his board a legalchallenge would be a long shot, saying in a letter that accompaniedthe release of the trade's legal opinion that it's rare for a courtto reverse regulatory authority.

So why solicit a legal opinion in the first place? For lobbyingpurposes, apparently. I'm not sure I follow Nussle's logic thatCUNA's legal opinion pressured the NCUA into lowering the proposedrule's minimum capital requirement and easing risk weights. TheNCUA said it would do those things when it first introduced therule. And the new proposal, while more palatable than the original,doesn't seem to be any closer to meeting the legal requirementsargued by its detractors. However, Nussle has a heck of a lot moreexperience crafting law and policy than I do, so I'll take his wordfor it. I'll also trust that the money CUNA and others spent onthose legal opinions produced enough positive changes in the ruleto make those trade dues worth the cost.

Despite all the legal sabre rattling, the risk-based capitalrule will be finalized this year and life will go on.

But a bigger question remains unanswered: How much does thecredit union charter hamper financial cooperatives? If creditunions have to abide by bank rules and offer commoditized productsand services, why even bother fighting the uphill battle of tryingto jam a not-for-profit square peg into a round regulatory bankinghole?

And, if credit unions are forced to transform their charter intosomething more like a mutual bank, will consumers even care?America has changed. The world has changed. Perhaps it's time toupdate the credit union charter, too.

Heather Anderson is executive editor of CU Times. She can bereached at [email protected].