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WASHINGTON-During the American Bankers Association’s Annual Convention last week in New York, outgoing Comptroller of the Currency John D. Hawke recommended that banks worry about lightening their own regulatory load rather than seeking to tax credit unions and add to their regulatory burdens. Hawke noted bankers’ many complaints about credit unions’ tax advantage and lack of CRA, but also pointed out, “On the other hand, studies have consistently showed that credit unions offer their customers higher rates on deposits and lower rates on loans than commercial banks – a fact that accounts for the incredible customer loyalty that credit unions have skillfully capitalized on in their legislative battles with the banks,” he said. He then went on to say that while credit unions do have tax and regulatory advantages, bankers’ strategy to ask Congress to take these advantages away from credit unions is flawed. “Just think for a moment of the implications of this strategy: You are asking members of Congress to vote to deprive credit unions of the very advantages that you say enable them to offer services to consumers at better rates than you can offer. Not many members of Congress are likely to agree to such a proposition, and it’s no wonder that you have been losing this battle on the Hill. You are not going to win this contest by hoping that Congress will cut back on the powers of credit unions or deprive them of the very benefits that may allow them to offer more advantageous terms to consumers.” However, he said, “you may be successful in securing for banks – particularly community banks – some relief that will enable you to compete more effectively.” “It’s important in considering the credit union issue to keep in mind that this is not just a legislative battle,” Hawke continued. “How does one explain the near-fanatical devotion of credit union members that makes them such a potent political force and that makes credit union powers one of the untouchable `third rails’ of U.S. politics? For some I suspect the answer is philosophical. They have a commitment to the cooperative movement and to the concept of mutuality. But for most, the answer is that they feel more comfortable with their credit union, and they see a superior commitment to customer service.The place to start may not be in Congress or state legislatures, but in bank lobbies and teller lines and telephone call centers, and in those offices where new products and services are developed. The more that banks try to achieve operating efficiencies by depersonalizing their service, the more attractive they make credit unions seem to customers.” “It sounds to me like he’s trying to convert banks to credit unions,” NAFCU President and CEO Fred Becker commented on Hawke’s remarks, adding, “Anyone who comes to the end of their term becomes more forthright.” Though Hawke is well respected in banking circles, Becker said he did not expect the banking trade associations to change their tune, but he gave the bankers “something to think about.” CUNA President and CEO Dan Mica said, “Mr. Hawke’s description of credit unions as a `threat’ rings shallow to us, particularly in light of record profitability of the banking industry, dominance of market share and other key factors. On the other hand, like Mr. Hawke, we have been saying for some time that bankers would be much better advised to focus on improving their service to customers, lowering their rates and cutting their fees if they really are concerned about leveling the playing field.” Regarding banker-credit union talks on a combined regulatory relief effort, NAFCU’s Becker said he had been invited to talk to a banking group on this subject. Becker declined to name the group, but said they thanked him for presenting a new perspective for them and that the two groups may be able to work together in the future on regulatory relief efforts. [email protected]

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