ABA war of words against credit union expansion targets California CUs

WASHINGTON-Likening the granting of large community charters to credit unions in the Golden State to the Gold Rush of 1849, an economist for the American Bankers Association hurled another salvo in the war against credit unions here recently. Keith J. Leggett is an ABA economist who specializes in research on credit unions. He recently wrote a column in the ABA Bankers News, headlined under a regular department captioned "Credit Union Monitor," that may well strike a nerve with ABA members, especially in California. And it's sure to win the ire of credit union trade officials as well. Staking claim now, said Leggett, some 150 years after the first time the phrase "There's gold in them thar hills," are prospectors of a different sort. credit unions. And they are seeking, not that valuable vein that glitters underground, but come in search of new members, and as one credit union takes on an enlarged community, others follow, in what Leggett describes as a new "land grab." "This land grab race is fueled by the ambitions of the large credit union CEOs as they seek to expand their empires," he wrote. And that's not all he wrote. Leggett offered examples like Wescom CU, Pasadena, and USE CU, San Francisco, which added an estimated 10 million residents in Southern California. He stoked the fire more by citing Telesis CU's approval for the "most expansive community field-of-membership ever, encompassing a whopping 15 million people within a 150-mile radius of Los Angeles," to make his point, and he was off and running. Citing Patelco CU's addition of 15 small cities in the state, numbering some 800,000 residents, Leggett finally got to his target: the CU tax exemption. He termed the regulator's approval (the California Department of Financial Institutions) assent of these expansions as an "abuse" of their authority. Then he got real mad, calling them names (politely, of course). The CU tax exemption "permits faceless state bureaucrats to give away federal tax revenues on a wholesale basis. It hurts community banks and small credit unions alike, the latter soon to go the way of the dinosaurs-extinct," Leggett said. Leggett asked some questions that are right now front and center in the credit union movement, and in at least one form, are before the NCUA as well. Chief among them: "How can the credit union industry, and its regulators, justify granting large community-wide credit unions tax exempt status?" Furthermore, Leggett asks "How are these big, multi-area credit unions any different from community banks?" His answer is that they are not. Except for the tax exemption. Promising to "explore all options," he vowed to "shut this down." Then, offering a peek at strategy, he went on to admit that Congress seems uninterested in revisiting the CU tax exemption right now, so the ABA will have to "think of other ways to get at this." One of those other ways may be to start harping on community credit unions' exemption from having to deal with service to the entire community. Banks have CRA says Leggett, credit unions don't. NCUA Board Member Yolanda Wheat's proposal for a limited reporting of a business plan and service data (the CAP, or community action plan proposal) is getting a lot of criticism from CU trades and members of Congress alike, but may gain one influential supporter in Washington: the American Bankers Association. Leggett's promise is to find a way, because as he said, "like in the 1800s...nothing lasts forever." -caburger@cutimes.com