"Safety" Issue Emerges in Utah Bank-Credit Union Spat
SALT LAKE CITY - That bank-credit union fight in Utah over taxing CUs has shifted this time to "safety and soundness," underscored by a request from the Utah League of Credit Unions to the state's top financial regulator to halt what the ULCU calls an attempt to undermine the financial...
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SALT LAKE CITY – That bank-credit union fight in Utah over taxing CUs has shifted this time to “safety and soundness,” underscored by a request from the Utah League of Credit Unions to the state’s top financial regulator to halt what the ULCU calls an attempt to undermine the financial condition of CUs. As the bank-CU rhetoric continued to build over the Thanksgiving holidays, the League in a Nov. 25 letter demanded the state enforce the banking code making it a crime to make “false” or derogatory statements about financial institutions that injure public trust. The League specifically took issue with statements made in the Salt Lake City media over the last six months by representatives of the Utah Bankers Association and the fledgling, bank-supported, “Resolution Alliance for Strong Banks and Credit Unions” about CUs operating illegally and as “corporate shams.” The media blast from UBA representatives also had singled out the state’s largest CU, America First Credit Union of Riverdale, for its active role in a U.S. House race during the last election. The UBA accused the CU of a “despicable” campaign of avoiding an obligation to help Utah school children because it pays no income taxes. The banking lobby has urged the state legislature in the 2003 session to look at taxing CUs as means of helping Utah schools which are in deep deficit. The League’s request to the state to take “appropriate action to enforce” the Utah code was directed to G. Edward Leary, commissioner of the Utah Department of Financial Institutions, who last week was attending a meeting of the Conference of State Bank Supervisors, which he is a director of. Deputy Commissioner Paul Allred said a response to the Nov. 25 letter was sent Dec. 9 to Scott Earl, president of the Utah League, and that it would be up to the association to release the contents since “we feel this is the type of thing that is better resolved privately.” It was unclear how the issue could remain private for long considering the super-charged rhetoric that has filled the Utah air waves and taken up newsprint over the last three months, sources noted. A spokesman for the League said comment on Leary’s reply would be forthcoming later in the week “after we consult with our public relations advisor.” League government affairs officials have pointed out that the League’s decision to seek regulatory action now follows the same pattern the banking lobby took more than two years ago when it got Leary to order the League to pull humorous ads which poked fun at the numerous mergers among Utah banks. The UBA charged then that CUs were undermining the safety and soundness of banks through “disparaging” ads. “This is a lot more serious now since if you take a look at what happened to Enron when it was charged with breaking the law, the company stock plunged as the public lost confidence,” noted one League government affairs staffer who cited the parallels with what banks are doing today to destroy public trust in CUs. In his three-page Nov. 25 letter to Leary, Earl wrote the Utah Bankers Association and its president, Howard Headlee, have “persisted in false statements about credit unions.” The letter specifically cited comments and inferences made that CUs have found “loopholes” in the law allowing them to expand through field of membership rules. The “inferences” are made “that there is something wrong with credit unions advertising to the general public.” Earl wrote that CUs that advertise “are not violating the law.” Earl also refuted another media statement made by Headlee in October that CUs had no business being involved in political campaigns and compared their tax status to the Girl Scouts. “The tax status of credit unions is not the same as the tax exempt status of the Girl Scouts,” Earl wrote. In his letter, Earl also cited Leary’s own comments in March 2001 when the dispute broke out over the League’s ads allegedly making fun of bank mergers. Earl noted that Leary was quoted in a Salt Lake Tribune article as saying that any person who engages in “sending a statement construed as derogatory regarding the condition” of financial institutions is of “great concern to the department.” “We trust that the statements of the Utah Bankers Association and the Resolution Alliance are of great concern to the department,” concluded Earl in his letter. -
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