Let’s See Banks Convert to CUs
I'm writing in response to the letter, "CU's Fundamental Injustice" by Paul G. Merski, executive vice president, Independent Community Bankers of America, in April 11 issue.
While I think his flower shop metaphor is cute, I also find it fundamentally inaccurate.
I'm sure Merski understands that credit unions are not-for-profit organizations owned by their members and that banks are for-profit entities in business ultimately to maximize profits. No sense in re-hashing old arguments
Still, just for fun I'll play the flower shop game with Merski. (We'll leave Subchapter S flower shops out of the discussion for the sake of simplicity.)
Say I was the one who owned the flower shop that was paying taxes. Instead of being mad at the shop not paying taxes and calling them un-American, I think I'd make whatever changes I needed to make so I wouldn't pay taxes either.
So, Merski, please consider having your community banks convert their charters to become community credit unions. You'd rid them of that unfair tax burden and receive all the other aspects of being a credit union that you find to put your banks at a disadvantage.
Of course, you'd need to go from being a for-profit entity to not-for-profit, likely exchanging your investors for ownership by depositors, with one vote per depositor regardless of deposits held. You'd need to restrict your customer base to only folks living in your regulator-approved field of membership. You'd need to switch regulators and live with higher capital requirements, with earning your way to sufficient capital the only way of maintaining your financial strength. You'd stop paying directors and make dozens of other changes, too.
But, it is possible for you to convert your banks to credit unions? And if the credit union advantage is so great, I wonder why you won't? (Indeed, I've never heard of a bank becoming a credit union, but there are all sorts of examples of credit unions throwing away all their supposed advantages to become banks, which kinda makes you wonder. But that's a different letter.)
The point is, all the reasons you wouldn't convert your community banks to credit unions are the very same reasons America's not-for-profit credit unions enjoy the public policy treatment, including tax treatment that they do. It really is that simple.
Respectfully, come join us if you think the water is fine in the land of credit unions. Or not. But please don't say banks and credit unions are really just the same thing, when the fundamental differences between banks and credit unions go far beyond your flower shop analogy.
Wright-Patt Credit Union