Allies and adversaries, sometimes simultaneously. That's the relationship between credit unions and community bankers. To get the perspective of community banks on key issues facing the financial services industry, Credit Union Times interviewed Ronald K. Ence, vice president, government relations of the Independent Community Bankers of America. A former congressional staffer, Ence has worked for the Washington-based trade association since 1990.
Credit Union Times: Your organization has fought very hard against efforts by credit unions to get the cap on member business loans raised to 25%. What's your biggest objection?
Ronald K. Ence: Credit unions have been pushing for this for a long time, but before they get more rights, they should demonstrate their ability to follow the mandates of their charter. They were chartered to serve the underserved, and study after study shows that credit unions don't do that as well as others, such as community banks. Also, community banks have money to lend, but the loan demand isn't there. If credit unions do more of that, it will be at the expense of community banks and make them less safe and sound.
CU Times: Why do you think the demand for loans isn't there? What do businesses tell your members?
Ence: Well, it's clear that helping small businesses is the way to generate new jobs. And hopefully the demand will increase among those businesses for money to help them expand. But there is an uncertainty about the economy, and small businesses want to be assured that the economy will improve
CU Times: One of things that community bankers often say when making their case is that the administration and Congress should lift credit unions' tax-exempt status. Why is that such a sticking point?
Ence: Credit unions already have a tremendous advantage in that they are tax exempt. And given the government's need for new revenue, now would be a good time to change that given they could raise $10 billion over a six- to 10-year period if they taxed credit unions. If credit unions were taxed they wouldn't disappear, they would just have to do things differently.
CU Times: But don't many credit unions use their advantage to go into areas where some financial institutions, especially the big banks, don't serve?
Ence: The evidence in many studies is that the clientele of the average credit union has a higher income and education level than the average clientele of a community bank. Credit unions were chartered for specific things, if they want to do more than that, convert to a community bank or thrift.
CU Times: The economic crisis, combined with the Democratic control of Congress and the White House have created a climate of activist policymaking. Do you think the worst of that is over or are you expecting to still have to play defense for a while?
Ence: Community banks have been very conservative lenders, and for the most part, didn't make the loans or engage in the other practices that caused the economic crisis. But like everyone else, our members are struggling through the after effects. But our goal is to make sure that community bankers aren't swept up in the undercurrent of rules and regulations implemented and aimed at the big banks and Wall Street. I certainly hope that the worst is behind us.