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WASHINGTON-CUNA President and CEO Dan Mica has publicly pummeled Federal Deposit Insurance Corporation Chairman Don Powell for stating on more than one occasion that credit unions should be taxed. “There he goes again – Mr. Powell continues to be out of step with the Bush Administration, and out of line as a regulator. It seems to us that the American public deserves something more than a cheerleader for the banking industry at the helm of the fund overseeing the safety of the public’s savings in banks,” CUNA President and CEO Dan Mica said of Powell’s remarks at the Independent Community Bankers of America convention in San Diego last week. During CUNA’s Governmental Affairs Conference at the end of February, Treasury Secretary John Snow reiterated the administration’s position to maintain credit unions’ tax-exempt status. Powell’s prepared remarks for the ICBA convention read, “You face renewed competition – both from large banking organizations eyeing your market share on one side to other organizations like credit unions on the other. “And, by the way, I have a position on that issue: credit unions ought to pay taxes. The playing field has shifted in recent years. We’ve gone from 20 credit unions with assets of more than $1 billion 10 years ago to 83 such institutions today. More and more we’re seeing credit union advertising touting the benefits of membership over doing business with a bank. In my view, if they are going to compete with banks then we should do our best to ensure that the competition is fair.” He also pointed out that taxing credit unions would bring about $2 billion into the Treasury. However, Mica countered that credit unions return $5 to their members for every dollar in tax savings. “That’s because credit unions, large and small, are not-for-profit cooperatives,” he said. “And since that money goes directly to the credit union’s members, it stays (and is spent again) in the community-an important distinction when more consumers must do business with giant out-of-state banking conglomerates.” Mica also said that Powell also ignores the fact that more banks continue to convert to Subchapter S, where the corporate tax is bypassed and are eyeing Limited Liability Corp. status. As banks continue to avoid paying taxes, the lost annual tax revenue will exceed the value of credit unions’ tax exemption by 2006. Over the next 10 years, the lost revenue caused by banks electing Subchapter S status will total $13.5 billion. On March 10, CUNA wrote Chairman Powell following a similar statement he made during the America’s Community Bankers Government Affairs Conference in Washington, D.C. March 9. In the letter, Mica said his statements “place you squarely at odds with President George W. Bush” who has expressed his support of the credit union tax exemption in writing. His statements were also contradictory to those of Secretary Snow, “who even before the same audience, did not back away from the Administration’s policy of supporting the tax-exempt status of credit unions,” Mica wrote. The CUNA leader advised, “Your efforts would be better spent trying to help banks achieve the level of consumer satisfaction that credit unions achieve routinely. Destroying the competitive position of credit unions will not promote this result. “From a public policy standpoint, it is highly questionable for the Chairman of the Federal Deposit Insurance Corporation to take sides in such a public way on an issue that does not affect FDIC. Your comments certainly give the impression that FDIC is placating the banking trade associations and enflaming the charges and demands from the banking groups that credit unions be taxed.” Mica requested that Powell retract his statements and keep the FDIC neutral on the issue. In another controversy with the FDIC over credit unions, the board’s newest member, Tom Curry, reportedly told the ACB conference that he supported credit unions converting to banks. CUNA Associate General Counsel Mary Dunn told reporters last week that Curry is a supporter of credit unions – he’s the former commissioner of banks for Massachusetts’ Division of Banks which regulates that state’s state-chartered CUs – and CUNA has asked him to clarify whether his comments were accurately characterized in a recent report in American Banker. “The independent newspaper reported that in your speech to the America’s Community Bankers, you encouraged credit unions to become banks,” CUNA President and CEO Dan Mica wrote in the letter. “If the report is accurate, those comments were entirely inappropriate for a federal bank safety and soundness regulator. If your comments were not fairly represented, then I respectfully request that you contact the American Banker today to correct the statement.” Curry had not responded to CUNA’s letter as of press time. Mica continued, “There is no question that the banking trade associations have waged war on credit unions and their members. This is truly unfortunate because if they succeed, consumers will pay the price. “That is why I strongly believe that the record should be corrected and that there be no question that it is inappropriate for a bank regulator, whose agency is focused solely on safety and soundness supervision of banks to advocate that another type of institution convert and join the banking industry.” -

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