<p>MONTEREY, Calif. – It was billed as "the Great Debate" – pitting two economists, one an outspoken critic of the credit union industry from the American Bankers Association, the other a strong credit union industry advocate – but in the end, it was pretty much the same old, same old. Despite moderator Matt Davidson putting on his best World Wrestling Federation announcer voice and declaring at the outset, "Let's get ready to rumble," the hour-long debate March 16 at the California/Nevada Credit Union League's Big Valley Educational Conference here was more of a ramble. On one side of the debate was Keith Leggett, senior economist with the ABA and a longtime critic of credit unions and their tax exempt status. On the other side was Bill Hampel, chief economist with CUNA & Affiliates. Leggett scored some points by simply showing up and voicing his message, long anathema to credit unions, before a large crowd of credit union leaders. He was as well received by the crowd as was Hampel. The debate format allowed each man to give an eight-minute presentation, then a four or five minute rebuttal followed by a two-minute closing statement. They addressed their comments to the audience, not each other. The audience then had a chance to ask questions of both participants. Following the debate, consultant Michael E. Dunn of Michael E. Dunn & Associates, Inc., outlined the political tactics that credit unions would have to follow in order to press their case in Congress. His presentation, which lasted 50 minutes, outlined what anyone who has even the most rudimentary knowledge of politics already should know: In order to curry favor with elected officials, people need to give their money, their time and effort and their vote to those officials and get others to do the same. "This (credit union tax exemption) is a battle that is beginning and will continue to go until somebody resolves this thing finally with an act of Congress of the United States," Dunn predicted. "It is not going to be the American Bankers Association that determines whether or not credit unions preserve their tax exempt status. It's going to be the people in this room and your colleagues all across this nation joining together to support credit unions that are going to determine what the future of the credit union movement is and what the perceptions of credit unions are within the Congress." Michael Dunn is the husband of CUNA Associate General Counsel Mary Dunn. Those perceptions were made clear during the debate between Leggett and Hampel. Their debate, which centered on whether credit unions should continue to enjoy their tax exempt status, broke no new ground and there were no surprises or fireworks. It was clear at the end that neither side was swayed by what the other said. Leggett, who spoke first, was quick to set out the bankers' position. "We as banks are not going to allow you to just expand your power and authorities and at the same time preserve your tax exemption," he vowed. On the other hand, he stressed, if credit unions agreed to give up their tax exempt status, it would set them free to expand their operations and services. "Credit unions are spending enormous amounts of time, energy and resources to preserve their tax exemption which could be better used to serve your members," Leggett insisted. "The key point is that your tax exemption and the preservation of it is imposing a cost on your institution," he said. "You have an outdated regulatory structure which is impinging upon your ability to serve your customer. What's happening is you'll be freed up to best serve your customer if you give up your tax exemption." He also argued it would be unfair to allow credit unions to modernize their charter while simultaneously preserving the tax exemption. "We as bankers often make the argument that your tax exemption gives you an unfair advantage," he said. "This is especially true for institutions which are defined as growth-oriented credit unions. "In many markets where you have these growth-oriented credit unions, they are the Goliath and community banks are the David," he contended, adding, "The banking industry welcomes competition, but fair competition." At one point, Leggett asked audience members to raise their hands if they thought their credit unions could compete head-to-head with banks if they did not have a tax exemption. Only a few hands went up. "I would have anticipated that almost everybody's hand would have gone up because you always talk about what a good job you're doing with regard to customer service," he said. "I think that you may view that your tax exemption is more important than it actually is." Hampel countered that bankers had a basic misunderstanding of credit unions and the role they play. "The basic (ABA) position is that credit unions should remain small, limited service institutions serving only those folks the banks would just as soon not see in their lobbies anyway," he said. "I'm not sure that many bankers hold that position but some do and they're spurred on by fairly relentless propaganda pumped out by their national trade association." Hampel said one problem was that bankers viewed credit unions that grow and expand the same as banks except for the fact that the credit unions don't pay taxes, giving them what bankers believe is an unfair advantage. "Actually, there are other substantial differences that have a huge effect on how banks and credit unions operate," he said. He cited such things as the fact that credit unions were cooperatives, were democratically controlled and were not-for-profit. "The competitive advantage or power of credit unions does not derive solely from the tax exemption," he said. "In fact, the tax exemption plays a relatively minor role in the big scheme of things in a financial sense." Responding to Leggett's claim that credit unions were spending valuable resources trying to maintain their tax exempt status, Hampel said it was the ABA that was forcing the issue. "Congress doesn't feel we should be subject to taxes, so we're certainly not wasting any resources defending ourselves from the wisdom of Congress. The only reason we are spending any resources on the tax exemption is because the banking industry is spending far, far, far more resources than that trying to end the tax exemption," he said. Leggett suggested that the matter could easily be resolved. All it would take would be for credit unions to give up their tax exemption and in exchange the banking industry would not block the ability of credit unions to expand their range of products and services. "This would allow you to better serve your members," he contended. "Clearly there is a cost associated with taxation," he added. "But there is an even greater cost in preserving the tax exemption." Hampel dismissed Leggett's idea, saying it was up to Congress, not the ABA, to determine what powers credit unions had in the future. "We honestly feel that the way credit unions serve people is consistent with the intent of Congress and that we should be able to serve more people," Hampel said. He also noted that banks were seeking their own form of tax exemption through sub-chapter S status. "We estimate that by the year 2006 or 2007, the cost to the Treasury in the form of reduced tax revenues (from banks) would exceed the then annual cost to the Treasury of the credit union tax exemption," he said. Leggett pressed his case to the end, insisting that taxation would be a benefit for credit unions. Agreeing to end the tax exempt status would not only allow credit unions to make critical decisions for the future, but would "get us awful bankers off your back." Hampel offered another alternative for the bankers. "In light of the record profits that bankers have been making for the last few years, I wish they would quit complaining about us and go about competing," he said. "Or if credit unions have such an advantage, they (banks) can just flip charters and become credit unions." -</p> <p>[email protected]</p>