WASHINGTON-As more interested parties are able to sift through the 183-page report from the U.S. General Accounting Office on credit unions, a variety of responses are coming to light, and predictably everyone is putting their own spin on things. American Bankers Association Executive Vice President Edward L. Yingling latched on to the division between small and large credit unions noted in the report and commented on the similarities between large credit unions and banks. "In its new report on the credit union industry, the GAO has documented an important fact about large credit unions: that they are very similar to community banks in the products they offer. What's equally important are the differences GAO notes between large credit unions and small banks," he said. He pointed to the government data used in the report, which found that banks are more likely to provide mortgages to low- and moderate-income consumers. However, the GAO report indicated that this data was inadequate to make a judgment since smaller institutions, including many credit unions, are not required to report their mortgage demographics. GAO recommended that more data be collected on credit union service to the low-income and underserved. The GAO study also recommended that Congress consider internal control and attestation rules for credit unions, which the banks already have to follow and Yingling discussed. "Such differences raise the question of why large credit unions continue to enjoy special tax and regulatory treatment, while community banks – their direct competitors – do not." he said. "Policy makers should ask themselves: when is a credit union not a credit union? GAO's report, in our view, provides some answers." Independent Community Bankers of America President Ken Guenther also used the report to attack credit unions' tax-exempt status and ask, "Why are credit unions tax-exempt organizations? This excellent report provides evidence that credit unions are losing sight of their statutory mission which is to provide financial services to people of small means," he continued. Guenther also emphasized the risk to the National Credit Union Share Insurance Fund with the concentration of assets in large credit unions. CUNA, on the other hand, provides a strikingly different analysis of the report. Credit unions' largest trade association highlighted that the report acknowledges the credit union community's financial strength, recommends no major changes, accepts NCUA's field of membership authority, and recognizes banks' growth and concentration of assets, which CUNA says raises the issue of whether mergers between the largest banks are in consumers' interests and whether they should receive oversight from Congress or Treasury. "We're very pleased by the content and the tone of the report," CUNA Senior Vice President of Governmental Affairs John McKechnie said. However, CUNA admits that the report "does include recommendations for irksome and annoying reporting requirements." CUNA did raise some concerns with the report and topping that list was that it "parrots banker rhetoric." CUNA's analysis states, "The study is based on the premise that recent legislative and regulatory changes have `blurred some distinctions between credit unions' and others, such as banks. This is typical banker rhetoric that purposefully ignores the fundamental structural differences between credit unions, banks and other financials to muddle and blur the uniqueness of credit unions." McKechnie told reporters on a later conference call, "I think that comes from the fact that they, in my opinion, made an error in judgment by consulting the ABA for this study in a way that I think is highly inappropriate. We've conveyed that to GAO before and we're going to be conveying that to lawmakers as well. The ABA really has no business being asked to comment on the credit union movement anymore than anybody else." The trade association also took GAO to task for making a distinction between small and large credit unions but ignoring the fact that the trend has been occurring for 30 years across all types of financial service providers at a greater pace. CUNA also points out that despite consolidation, credit unions are still the most successful in member satisfaction. Additionally, CUNA said that the report "perpetuates a misinterpretation" of the Credit Union Membership Access Act that NCUA must encourage the formation of a new credit union where possible. According to CUNA, the U.S. Court of Appeals for the District of Columbia said credit unions were allowed to add groups to the FOMs. CUNA also said the report relied too much on incomplete data regarding the Federal Reserve's Survey of Consumer Finances, to which GAO conceded. The report also "glosses over" credit unions' FOM restrictions, which has affected who they serve. The report also ignores credit unions' success in business lending, according to CUNA. McKechnie said he had not heard that current Senate Banking Committee Chairman Richard Shelby (R-Ala.) wants a hearing as a result of the study, which was requested by then-Committee Chairman Paul Sarbanes (D-Md.). Though NAFCU is still digesting all of the information from the report, Communications Manager John Zimmerman stressed that it needs to be taken in the big picture of things. "That is, the report gives very good marks to the federally insured credit union universe on safety and soundness. That assessment is critical and shows that credit unions have adapted well to an ever-changing financial market place," he said. Zimmerman continued, "Absent any urgency on the safety and soundness front, we don't see any urgency in Congress to pick up this report and run with it and that is our most important consideration." He added that NAFCU lobbyists are keeping their ears open on Capitol Hill in case lawmakers choose to move forward with the results. NAFCU will also be meeting with NCUA during their review and looks forward to providing input. The report entitled "Credit Unions: Financial Condition has Improved, but Opportunities Exist to Enhance Oversight and Share Insurance Management" is available at www.gao.gov. [email protected]

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