"Eastern was the poster child of credit union abuse," said Alex Sanchez, president/CEO of the banking group, of Eastern Financial Florida Credit Union. "If they do merge, all the luck in the world to them because that's a bad situation going worse."
Sanchez said Eastern Financial's troubles are the result of what happens when large credit unions "go way out of bounds." He emphasized that he does not have a problem with the 90% of credit unions that are "fulfilling their missions."
"Regulators need to seriously think about this. These are tax-exempt banks masquerading as credit unions," Sanchez said. "Look at what happened with Suncoast and GTE."
In March, $5.9 billion Suncoast Schools Federal Credit Union and $1.9 billion GTE Federal Credit Union announced their intent to merge. Like many in the industry, both have been grappling with a sharp rise in loan losses.
Meanwhile, given the economy, Sanchez posed two questions to the credit union industry: "In this struggling, why should a family of four struggle to pay state and federal taxes of a billion dollar credit union? Why should a small business struggling to meet payroll on Friday pay more in federal and state income taxes than a credit union?"
The Florida Credit Union League said Eastern Financial's situation is "an anomaly in the credit union movement" and is "not reflective of credit unions as a whole."
"What happened at Eastern Financial is not costing taxpayers one penny in terms of bailout or subsidy," wrote Guy Hood, president/CEO of the Florida league, in a response to the FBA. "Can that be said about banks caught in similar situations?"
Hood pointed out that the credit union industry's loan delinquency rates and charge-off rates are 1.37% and 0.84%, respectively. Commercial banks are 2.93% and 1.28%, respectively, he added.
"Credit unions are extremely responsible lenders. The Florida Bankers Association's agenda toward credit unions clearly nullifies any opinion they might offer concerning credit unions," Hood wrote.