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Life is full of contradictions. So is the world in which credit unions operate. Here are just a few of the many out there. Banking industry lobbyists would have everyone within earshot believe that the dramatic growth of credit unions has severely impacted banks. The wildest accusations against credit unions would have you believe that unless credit unions (at least the 500 largest that serve 50% of the industry’s 84 million members) are taxed, or otherwise restricted, legions of banks may go belly up. The most obvious contradiction is that the banking industry continues to rack up obscene profits regardless of anything credit unions are supposedly doing on the so-called un-level playing field. And what credit union CEO earned $32 million last year in salary, bonuses, and stock options? Isn’t it a major contradiction to think that if credit unions were taxed out of existence that bank profits, compensation packages, and payouts to directors and stockholders would rise substantially? Another contradiction is that mega banks are more of a problem to their smaller brethren, community banks, than credit unions ever will be. Wouldn’t it be an interesting contradiction if community banks and credit unions teamed up against the big banks? Far fetched? Also, it is these super colossal banks that are contributing to the ranks of the unemployed. Not because they aren’t making enough money to support a massive staff structure. Not because of credit unions walking like a duck in a goose’s skin (structure). Why then? The recently approved Bank of America, FleetBoston merger is expected to result in over 13,000 staffers from the two formerly separate banks getting pink slips. Upcoming mega bank mergers are expected to also produce bad news for many more thousands of employees of the banks involved in hooking up. An even further contradiction is that to my knowledge, not a single credit union employee has ever been laid off due to a merger, or for any other reason for that matter. Speaking of mega banks, isn’t it a rather obvious contradiction that banking industry lobbyists moan and groan non-stop about “Congress never intended credit unions to get so big” as they put together trillion dollar banks? By the way, exactly when and where did Congress ever make such a statement? Apparently it is written somewhere that credit unions must never grow beyond a certain asset figure, but that banks have no such restrictions? Whom do you believe? At the very same America’s Community Bankers Government Affairs Conference held recently in Washington, D.C., ACB officials charged that, “Today, virtually every American qualifies for membership in a credit union.” Meanwhile, Office of Thrift Supervision Deputy Director Rick Riccobono said, joining a credit union “is not as easy as everyone thinks” citing the inability of his army veteran father to gain membership in Navy Federal Credit Union. Another contradiction at that same conference involves an outspoken banking industry regulator, FDIC Chairman Don Powell, and a highly placed Bush Administration official, Treasury Secretary John Snow. Powell, a former banker, said in off the cuff remarks regarding credit unions “It is no secret where I stand.they should be paying taxes.” And NCUA is accused of being a “cheerleader” for credit unions? I wonder what the reaction of the banking industry would be if safety and soundness regulator Dennis Dollar, lame duck Chairman of NCUA, would speak out against the massive conversions by banks to tax-saving S-Corporation charters and possibly LLC’s (Limited Liability Companies)? Meanwhile, Snow reiterated his “the Administration does not support taxation of credit unions” statement made at the CUNA GAC by saying to the bankers “we are not in favor of new taxes on business.” The statements by Powell and Snow are even more of a contradiction because both officials are part of the same (Bush) Administration. The $964 million Lake Michigan Credit Union (formerly Grand Rapids Teachers Credit Union) is just starting to make headlines, as it becomes the latest and largest credit union making moves to convert to a bank charter. Here’s some of what the CU CEO said to the local paper: “Fees will increase, interest on accounts decline, and loans will become more expensive if the credit union does not become a bank.” Strange! From my experience and readily available comparison data, fees would actually escalate in amounts and types (see most recent banks versus credit union fees study), loan rates would rise considerably, and interest rates would drop significantly if a credit union becomes a bank. “Nothing is being taken away from the members,” said the CEO. A contraction? In all capital letters! In fact, adding to the contradictory claims, this rhetoric flies in the face of the banking industry’s assertion that CUs offer a better deal than banks. Somewhat related, CUNA CEO Dan Mica has rightly pointed out the contradiction of the banking industry charging NCUA with deliberately making converting from a credit union to a bank more difficult while a national banking trade group opposes mutual-to-stock bank charter conversion legislation in the state of Connecticut. Which brings up another interesting state of affairs. A coalition has been formed and a high-powered lobbying firm employed to counteract what the new group terms as an effort by the credit union industry and its regulators to prevent credit union-to-bank charter conversions. While the loosey, goosy group’s principals are still not even sure who belongs to it, a spokesperson nevertheless said this: “NCUA has been holding up recent conversion filings and has actually overturned a legal vote in favor of conversion.” This is of course a direct reference to the questionable voting procedures NCUA and the Washington state regulator uncovered in the Columbia Credit Union’s conversion attempt. Maybe this development is not so much a contradiction as a flat out lie? There are so many more contradictions involving credit unions. If readers know of any, how about sharing them? Comments? Call 1-800-345-9936, Ext. 15, or Fax 561-683-8514, or E-mail [email protected]

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Peter Westerman

Credit Union Times

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